Delay and Disruption in Construction Contracts (Construction Practice Series) [5 ed.] 1138940666, 9781138940666

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DE L AY A ND DIS RU PTION IN CON S TR UCTION CO NTRACTS FIFTH EDITION

CONSTRUCTION PRACTICE SERIES Adjudication in Construction Law Darryl Royce (2016)

Remedies in Construction Law Roger ter Haar QC and Camilla ter Haar (2010)

Chern on Dispute Boards: Practice and Procedure Third Edition Cyril Chern (2015)

The Law of Construction Disputes Cyril Chern (2010)

Construction Contract Variations Michael Sergeant and Max Wieliczko Holman Fenwick Willan LLP (2014) Construction Law Julian Bailey (2011)

FIDIC Contracts: Law and Practice Ellis Baker, Ben Mellors, Scott Chalmers and Anthony Lavers (2010) Construction Insurance and UK Construction Contracts Marshall Levine and Roger ter Haar QC (2009)

DEL AY AND DI SR U P T I O N I N C ONSTRU C TI O N C O N T R AC T S ANDREW BURR (MA) (Cantab), ACIArb, FFAVE, Barrister, Adjudicator and Arbitrator with editorial assistance from Annabella Matute Castro

FIFTH ED IT I O N

Fifth edition published 2016 by Informa Law from Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Informa Law from Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2016 Andrew Burr The right of Andrew Burr to be identified as author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. First edition published by LLP Professional Publishing 1997 Fourth edition published by Sweet and Maxwell 2010 British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Delay and disruption in construction contracts. — Fifth Edition. pages cm. — (Construction practice series) ISBN 978-1-138-94066-6 (hbk) — ISBN 978-1-315-67395-0 (ebk) 1. Construction contracts. 2. Construction contracts—England. I. Burr, Andrew editor. K891.B8D449 2016 343.07′862—dc23 2015033967 ISBN: 978-1-138-94066-6 (hbk) ISBN: 978-1-315-67395-0 (ebk) Typeset in Plantin by Apex CoVantage, LLC

CONTENTS

Preface to the fifth edition Acknowledgments to the fifth edition Editorial team biographies for the fifth edition Table of acronyms Table of case report references Table of cases Table of legislation Table of contract clauses Online Resources List of figures

xx xxiii xxv xxvii xxxi xxxv lxvii lxxi xcix ci

CHAPTER 1 INTRODUCTION AND TERMINOLOGY Introduction Terminology The contractor The developer The contract administrator The works Programme and schedule Critical path Delay Disruption

1 1 6 6 6 7 8 8 9 10 12

CHAPTER 2 THE RISK OF DEVELOPMENT Introduction Standard form provisions Allocation of risk Project planning and programming risk Legal risk Dispute risk Design risk Buildability risk Biddability risk Construction risk Financial risk

13 13 18 23 26 29 36 39 43 43 46 50

v

CONTENTS

Political risk Insurable risk Consumer Insurance (Disclosure and Representations) Act 2012 Tortious and statutory duties Introduction The importance of the statutory framework Private nuisance Utilities and statutory undertakers Building control Development control

53 53 57 58 58 66 67 67 68 69

CHAPTER 3 PROJECT PROCUREMENT Introduction CIOB Contract for Use with Complex Projects (CPC 2013) Types of contract Traditional “build-only” contracts “Design and build” contracts “Construction management” contracts “Management contracting” contracts Procurement arrangements Guaranteed maximum price and target costs Partnering and alliancing Private finance initiative and public private partnership

71 71 73 74 74 78 80 83 86 86 87 88

CHAPTER 4

STANDARD FORM PROVISIONS FOR TIME AND COST

Introduction Classification of change Standard clauses of delay Acts and/or omissions of the developer Failure to pay Circumstances beyond C’s control Special circumstances Force majeure Errors and inconsistencies Instructed variations and changes Weather Unforeseeable physical conditions Access, ingress and egress Postponement Acts of third parties Nominated subcontractors and suppliers Delay in receiving instructions Quality control Strikes and civil commotion Health and safety Damage caused by carrying out the works vi

91 92 94 100 100 103 105 107 107 113 119 126 131 135 137 139 144 147 153 156 159 160

CONTENTS

Catastrophes Antiquities Standard provisions for recovery of loss or expense Introduction Compensable events Claims procedure Compensation for disruption to progress Cost and time management in the JCT Major Projects Contract and the CIOB Complex Projects Contract – a comparative analysis MPC CPC Differences between MPC and CPC

181 181 188 192

CHAPTER 5 NOTICES, CLAIMS AND EARLY WARNINGS Introduction Early warnings Notices Nature of the notice Form of notice Constructive notice Contents of notice Period of notice Second notices Waiver of notice Service of notice Notice as a condition precedent Extension of time conditional upon notice Compensation conditional upon notice

196 196 197 198 199 202 204 205 210 215 217 219 224 224 234

CHAPTER 6 EXTENSIONS OF TIME AND TIME AT LARGE Extensions of time Introduction The role of the contract administrator Likely and actual delay to the completion date Forming an opinion Negotiating an award The timing of an award Reviewing an award Developer’s time risk event occurring in period of culpable delay to the completion date Time at large Where there is no contract Where there is no contract completion date under the contract When completion is prevented Where there is no power to extend time Where the power to extend time is inoperable Assessing a reasonable time to complete

238 238 238 241 245 249 257 259 263

vii

163 164 165 165 168 175 180

265 268 268 270 270 277 278 281

CONTENTS

Where there is no contract Where there is no completion date under the contract Where there is a stipulated contract period

285 287 289

CHAPTER 7 PLANNING AND PROGRAMMING Introduction Planning Familiarisation Outline plan Strategic plan Detailed plan Programming Varieties of programme Introduction Baseline and target programmes The development programme The tender programme The working programme The occupational programme The as-built programme Subcontractors’ programmes Programme preparation The critical path method The contract period Early completion Milestones, key dates and sectional completion Work content Logical relationships Activity durations Calculating durations Project planning method statements Standard form requirements for programmes The programme as a contract document Specifying the programme requirements Pricing the programme requirements

290 290 295 297 297 297 298 298 299 299 300 304 304 305 307 308 309 311 311 316 317 320 323 325 330 333 338 343 354 356 360

CHAPTER 8

PRESENTATION AND APPROVAL OF PROGRAMMES

Introduction Bar chart Flow chart Line-of-balance chart Time chainage diagram Milestone programme and chart Network diagrams

viii

363 363 366 368 368 370 370 371

CONTENTS

Arrow diagram Precedence diagram Cascade diagram Standard form provisions The initial programme Programme approval, acceptance and rejection CHAPTER 9

REVISING, UPDATING, MONITORING AND REPORTING

372 373 374 374 374 375

Introduction Standard form provisions Programme revision Programme updating Progress monitoring Target CPM programme monitoring Resource monitoring Cash flow monitoring Cost monitoring Earned value monitoring Milestone monitoring Bar chart monitoring Count the squares chart monitoring Jagged line monitoring Work content monitoring Progress reporting Visual aids

385 385 393 400 405 410 411 412 414 415 417 417 418 419 420 422 424 426

CHAPTER 10 PROJECT CONTROL Introduction Forecasting delay The SCL Protocol The change management supplements The management information structure Definitions The programme Electronic submittals Progress records Key dates Roles and relationships Managing the effect of change First step – programme update Second step – programme review for better information Third step – recovery Potential fourth step – event impacting Potential fifth step – acceleration

429 429 431 432 442 443 443 444 445 446 446 447 449 451 452 452 453 453

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CONTENTS

Calculating time-related compensation Identifying the cost of project controls Redress for a failure to comply

454 454 455

CHAPTER 11 MITIGATION, RECOVERY AND ACCELERATION Introduction Standard form provisions Constructive acceleration Constructive acceleration as a legal doctrine Initiation of grounds for construction acceleration Conduct requiring acceleration The mechanics of constructive acceleration Methods of recovery and acceleration Omissions Changing the sequence of activities Other logic changes Using a different method of working Increasing motivation Increasing resources Increasing the working time Failure to recover or to accelerate

457 457 463 480 481 483 484 489 493 495 496 498 499 499 499 500 503

CHAPTER 12 VARIATION AND CHANGE Introduction Standard form provisions The bill of quantities Ambiguities, discrepancies and divergences Omissions Value engineering Constructive change Constructive change of quality Constructive change of quantity Consequential changes

509 509 516 528 536 543 546 547 552 555 556

CHAPTER 13 CONSTRUCTION RECORDS Introduction Record keeping Progress records Change control Record retrieval Electronic data exchange Building Information Modelling The acronym Definition What’s involved and how does it differ from “conventional” practice?

557 558 558 562 564 568 569 573 574 574 575

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CONTENTS

Levels of BIM maturity What is arguably not BIM? Perceived benefits of working in a BIM environment Perceived barriers against BIM adoption Collaboration Legal, contractual and insurance issues Use and management of information Investment Overcoming the barriers Key documents Case studies Standard forms of contract What does BIM mean for claims and disputes? Retrieval of information Communication of information Case law Conclusion Independent information management Standard form provisions Presentation of evidence Oral evidence Documentary evidence Database records Computer generated evidence Factors influencing the evidentiary strength of records Getting at the facts of delay Retrospective assembly of evidence Manual sorting of evidence Multi-volume collections Single-volume tagged collections Sorting evidence on databases Discovery, disclosure and inspection Disclosure of electronic documents Disclosure of experts’ documents Disclosure of privileged communications

576 576 577 577 578 578 579 579 580 580 580 581 583 583 584 584 584 585 588 595 595 596 598 600 602 603 603 605 605 606 607 611 616 618 619

CHAPTER 14 CAUSE AND EFFECT Introduction The three-part chain of causation Primary causation – occurrence of a causal event Voluntary or implied variations and other instructed changes Expenditure of prime cost and provisional sums Developer’s acts or omissions Acts or omissions of third parties

623 624 630 631

xi

632 633 636 639

CONTENTS

Other occurrences Secondary causation – a delay to progress of the works Instructed variations Suspension of the works Failure to perform Tertiary causation – delay to completion of the works Proof of causation Introduction The terms of the contract Completion is likely to be delayed Completion is likely to be, or has been, delayed Completion has been delayed Whatever is fair and reasonable The subject-matter of the proof The factual materials available Proportionality Illustrating inference Introduction Cause and effect matrix Scott Schedules Graphs and histograms Bar charts As-planned versus as-built Collapsing technique Visualisations Smoke and mirrors

641 641 645 646 647 649 654 654 655 656 657 658 659 660 662 663 668 668 671 672 674 675 677 681 682 682

CHAPTER 15 FORENSIC PROGRAMME ANALYSIS Introduction Preparing the materials The planned programme Correcting the planned programme Updating the planned programme with progress The as-built schedule Analytical methods As-planned versus as-built As-planned updated versus as-planned updated As-planned impacted Collapsed as-built Time impact analysis Windows and watersheds

687 687 693 693 694 698 700 703 703 706 708 716 723 727

CHAPTER 16 FLOAT AND TIME CONTINGENCIES Introduction Float Free float Independent float

730 730 732 733 734

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CONTENTS

Interfering float Total float Negative float Time contingencies Standard form provisions Who owns the float? Potential ambiguities between free float and contingency Ad hoc creation of total float Interpretation of total float as contingency Example 1 – absence of completion constraint on planned work Example 2 – applied completion Example 3 – non-driving link between applied constraints Example 4 – applied fixed lag between unconstrained milestones Example 5 – time contingency activity Example 6 – contract duration bar Total float belongs to D Total float belongs to C Total float belongs to the first to get to it CHAPTER 17 DISRUPTION TO PROGRESS AND LOST PRODUCTIVITY Introduction Productivity Resource-based planning The importance of records Conditions causing lost productivity Staffing Variations Recovery and acceleration Errors and omissions Partial possession Adverse weather Loss of morale Extended working hours Reassignment of manpower Dilution of supervision Learning curve Logistics and site restrictions Ripple Trade stacking The analysis of lost productivity A worked example Planned versus actual Industry productivity norms versus actual Historic versus actual Benchmark data versus actual xiii

734 735 739 739 743 745 746 749 751 752 752 752 753 753 754 754 755 757 762 763 765 768 770 771 772 773 775 777 777 778 780 780 781 783 783 784 785 786 786 787 789 790 792 793

CONTENTS

Actual impacted versus actual unimpacted The basic approach Modified measured mile approach Accounting for the effects of separate events Judicial consideration of the measured mile approach Expert opinion

794 795 796 797 799 802

CHAPTER 18 CONCURRENCY, PARALLELISM AND PACING Concurrency Introduction The parties Entitlement Distinguishing a delay to progress from a delay to completion Distinguishing primary, secondary and tertiary causation Distinguishing concurrent and parallel delays Distinguishing concurrent and sequential delays Distinguishing concurrent and pacing delays to progress Distinguishing the timing of primary cases Legal concepts of relief and compensation Distinguishing delay and financial loss Concurrency and delay to progress Concurrent delays to progress Sequential delays to progress Parallel delays to progress Concurrency and extensions of time Concurrent delays to completion Sequential causes of delay to completion C must pay liquidated damages for all the delay to completion, if it cannot show for which part, if any, C is not responsible D is not entitled to any liquidated damages at all, because it is, at least in part, responsible C must pay all the liquidated damages, unless it can show for which part of the delay to completion D was responsible D is not entitled to any liquidated damages at all unless it can show for which part of the delay to completion C is responsible Parallel cause of delay to completion Concurrency and prolongation Concurrent causes of prolongation Sequential causes of prolongation Parallel cause of prolongation Concurrency and pacing

803 804 804 806 807 807 807 808 809 809 810 810 812 812 812 814 817 818 818 821

CHAPTER 19 TOTAL TIME, TOTAL LOSS AND GLOBAL CLAIMS Introduction Total time claim Defence to a total time claim

833 833 837 838

xiv

821 821 822 823 824 825 825 827 827 828

CONTENTS

Total loss claim Defence to a total loss claim Global claims Defence to a global claim

838 841 844 850

CHAPTER 20 APPORTIONMENT Introduction Apportioning delay to completion Apportioning loss and/or expense Methods of apportionment of loss or expense The tortious solution The burden of proof approach The Devlin approach The dominant cause approach Jury verdict approach The modified “global claim” approach The “A/B estimates” approach The “delta estimates” approach The modified “total cost” approach The “City Inn” approach The net effect approach

855 855 859 864 865 866 866 867 867 869 869 870 870 870 871 873

CHAPTER 21 DAMAGES Introduction Entitlement to compensation Potential heads of claim Direct labour costs Non-productive overtime Staff costs Management costs Goods and materials Plant and equipment Loss of productivity Temporary works Preliminaries Head office costs Insurances Financing costs Profit on costs Loss of future profits Unabsorbed overheads Formula adjustments 1. The contractor has actually suffered loss, or expense 2. The loss or expense has not been recovered elsewhere 3. The loss or expense incurred during the period of delay has remained unabsorbed

874 875 878 884 885 887 890 892 894 895 897 898 898 901 903 903 908 908 910 914 918 919

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CONTENTS

4. It is impossible, or unreasonably burdensome, to calculate the loss or expense without resorting to a “formula” approach The Eichleay formula The Hudson formula The Emden formula Other formulae Quantum meruit Developer’s damages Liquidated damages Standard form provisions An exclusive remedy Penalties Failure to quantify Quantifying predictive loss Exclusion clauses CHAPTER 22 SETTLEMENTS AND DISPUTE RESOLUTION Introduction Costs Claim preparation In-house Claims consultants Experts Settlement Duress Misrepresentation and fraud Dispute resolution Non-binding Mediation Conciliation Non-binding or final and binding Expert determination Adjudication Final and binding Arbitration Litigation Statements of case Claim Defence Counterclaim Reply and defence to counterclaim Amendment of statements of case Request for further information Striking out statements of case

xvi

919 921 923 923 923 924 931 936 938 939 940 944 946 953 961 961 963 965 966 967 968 979 982 985 988 989 990 991 992 992 997 1002 1002 1004 1011 1013 1015 1015 1017 1017 1019 1019

CONTENTS

CHAPTER 23 ADJUDICATION IN THE UNITED KINGDOM Introduction Update on adjudication in the United Kingdom Limitation periods Complex decisions and human rights aspects Costs and interest Definition of a construction contract Sequential adjudications and single disputes Complex decisions and human rights aspects Costs and interest Definition of a construction contract Residential occupiers Sequential adjudications and single disputes Recovering adjudication costs

1023 1023 1024 1024 1024 1024 1025 1025 1025 1029 1031 1034 1035 1039

CHAPTER 24 DISPUTE BOARDS Introduction Dispute boards in context The advantages of dispute boards Standing or ad hoc dispute boards DRBs, DABs and CDBs Dispute board rules Independence of the dispute board members Dispute board operations Enforcement of dispute board decisions Referral to a dispute board prior to arbitration Costs of dispute boards National and international developments

1043 1043 1044 1046 1048 1051 1052 1053 1054 1056 1058 1059 1060

CHAPTER 25 MANDATORY LAWS IN INTERNATIONAL CONSTRUCTION CONTRACTS Introduction Private international law Time-bar clauses Liquidated damages Taking-over (practical completion) Decennial liability

1062 1062 1064 1066 1067 1068 1070

APPENDIX 1 GLOSSARY OF TERMS AND DEFINITIONS

1073

APPENDIX 2 TYPES OF DOCUMENT

1097

APPENDIX 3 THE SOCIETY OF CONSTRUCTION LAW DELAY AND DISRUPTION PROTOCOL: A RETROSPECTIVE ANALYSIS

1103

xvii

CONTENTS

APPENDIX 4 SELECTING THE APPROPRIATE DELAY ANALYSIS METHODOLOGY: A DECISIONMAKING MODEL FOR FACILITATING THE PROCESS

1127

Index

1137

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Per Alexander Matteo, Thomas Jacopo e Alice

PR E FAC E TO T H E FIFT H ED IT ION

The fourth edition of Delay and Disruption in Construction Contracts by Keith Pickavance LLB (Hons), Dip Arch, Dip IC Arb, RIBA, PPCIOB was published by Sweet and Maxwell/Thomson Reuters (Legal) Limited in 2010, with editorial assistance from Andrew Burr MA (Cantab), ACI Arb, Barrister, Nick Lane (then at Olswang, London) and David Tyerman MBA, LLM, Planning Director. Since that time, a considerable amount of water has flowed under the construction law bridge. A number of important judgments have been handed down in the Technology and Construction Court (TCC) (both in London and throughout England and Wales), the Scottish judiciary (thankfully, still within a part of the United Kingdom!) have remained active in the field and civil courts worldwide appear ever more acutely aware of the necessity to develop a coherent body of case law, which can be accessed by an increasingly “interweb savvy” global construction bar, ever eager to draw cross-legal–cultural comparisons, where appropriate and relevant (hence the conscious decision to appoint several civil lawyers and international correspondents to the team of specialist advisory editors). We have endeavoured to reflect case law developments by the use of illustrations throughout the text. Probably the most significant construction law decision in England and Wales in the last five years has been Akenhead J’s 660 paragraph tour de force in Walter Lilly and Co Ltd v Mackay1, which merits detailed consideration for its masterful dissection of the JCT standard form of building contract 1998 edition private without quantities (incorporating various specific amendments), as modified by the contractor’s designed portion supplement without quantities 1998 edition (revised November 2003) as amended ([102]–[126]), the JCT extension of time provisions ([362]–[392]), including a discussion of “criticality” [379], “prospective” versus “retrospective” analysis [380] and the carrying out by experts of “cross checks” [381], the quantification of loss and expense under the JCT contract ([461]–[473]), “global” (or “total”) cost claims ([474]–[508]), head office overheads and profit ([540]–[554]), reasonable settlement ([562]–[569]) and contractual and statutory interest ([650]–[657]). As observed by the learned judge at first instance2, the project in question was almost certainly a “disaster waiting to happen” and the Court of Appeal paid notably short shrift to the subsequent attempt to overturn Akenhead J’s sterling judgment3. 1 [2012] EWHC 1773 (TCC). 2 [2012] EWHC 1773 (TCC), at [1]. 3 By way of postscript, the London Evening Standard reported on 9 April 2015 that the site upon which Mr Mackay’s property was built was purchased in 2001 by three developers (including Mr Mackay) for £13m. They accepted Walter Lilly & Co’s tender to build three houses on the site for £15.3m. In December 2014, one of the three houses was sold to a Bermuda-registered company for £51.17m (with stamp duty of £7.6m and an Annual Tax on Enveloped Dwellings of £218,000).

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PREFACE TO THE FIFTH EDITION

Of similar (but perhaps marginally less well-publicised) intensity and scholarship is Ramsey J’s decision in Vivergo Fuels Ltd v Redhall Engineering Solutions Ltd 4. Again, the following paragraphs of his judgment should probably be required reading for any serious practitioner, or student, of construction law: [343]–[375] (material breach: programming), [376]–[407] (failure to proceed regularly and diligently), [408]–[420] (notices: the law), [421]–[498] (notices: failure to proceed regularly and diligently), [504]–[513] (repudiatory breach) and [514]–[519] (acceptance thereof ). As regards recent amendments and revisions to the standard forms of construction contract so comprehensively reviewed and analysed by Mr Pickavance in the fourth edition, there has been insufficient time in which to update his masterful cross-referencing service. This will be attempted for the Supplement to the fifth edition, but, meantime, Mr Pickavance (together with Mr Lane) has himself kindly provided a comparison of the CIOB Complex Projects Contract (the CPC) (drafted by himself, Mr Lane and others) with the JCT Major Projects Form (the MPF). This follows their Construction Law Journal article5, comparing and contrasting the CPC with the MPF, which article also comes highly recommended. As regards other contracts, the following table may assist readers:

Contract

Website

Publisher

ECC3 – April 2013 update

http://www.netcontract.com/ products/bookshop_main.asp?page= Bookshop_main.asp&ISBN=9780727 758675&NEC=True&UK4TJTV63Y D2CH5XUFYH=.aspx?page=1

Institute of Civil Engineers

ICE7 – now equals ACE/ CECA Infrastructure Conditions of Contract (2011)

www.acenet.co.uk/infrastructureconditi CECA onsofcontract/65f

IChemE – now 5th edition, 2013 (the International Red Book,1st edition was 2007, but that is not mentioned in the table)

www.icheme.org/shop/books/contracts/ printable%20forms-of-contractelectronic-redbook-uk5th-edition.aspx

Institute of Chemical Engineers

IGBW09

http://constructionprocurement. gov.ie/contracts/

Construction Procurement NPPU, Department of Public Expenditure and Reform

JCT 2011 revisions

http://www.jctltd.co.uk/cdmamendment-sheets.aspx

JCT

MF/1 – Revision 5,2010

http://www.theiet.org/resources/books/ model/mf1-explanation.cfm?type=pdf

Institute of Engineering and Technology

NZ03- NZS 3910 2013

http://shop.standards.co.nz/catalog/ 3910:2013(NZS)/view

New Zealand Standard Council

SGC95–6th edition, December 2008

http://www.bca.gov.sg/PSSCOC/ others/1_psscoc_ConstnWks.pdf

Building and Construction Authority, Singapore

SIA80–9th edition, September 2010

http://www.sia.org.sg/buildingcontracts/109-main-contract-lump-sg

Singapore Architects Association

4 [2013] EWHC 4030 (TCC). 5 (2015) 31 Const LJ 295.

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PREFACE TO THE FIFTH EDITION

This fifth edition also includes a significantly expanded section on “Building Information Modelling”, contributed by David-John Gibbs, an up-and-coming expert in the field (and which has also appeared recently as an article in Construction Law Journal 6). February 2013 saw the publication by the Task Force of Building Information Modelling of a range of contractual and related documents relevant to the United Kingdom government’s intention to require the use of collaborative 3D BIM on all its projects by 2016. These documents include the CIC Building Information Model (BIM) Protocol (CIC/BIM Pro, first edition February 2013), a supplemental document to be incorporated into professional services appointments and construction contracts: see the website7 for the Task Force’s guidance on the use of the protocol8. The BIM protocol creates an Information management role and a Scope of Services for Information Management was also published (again, see the website9). Careful consideration needs to be given when incorporating the protocol into standard form contracts in order to ensure consistency with existing terms. The Task Force has also published the BIM Employer’s Information Requirements (EIR), which are intended to form part of the appointment and tender documents on BIM projects: see the website for the EIR to cover the employer’s technical, management and commercial requirements for a project10. BS1192:2007 (entitled “Collaborative Production of Architectural, Engineering and Construction Information” in its 2012 update) is a Code of Practice providing guidance on the technical aspects of the structuring and exchange of CAD data, as well as how to implement collaborative work. The Task Force has publisher the PAS1192-2 Specification for information exchanges specific to a BIM environment to supplement the BS1192:2007: see the website for further guidance11. Due to uncertainties as to how existing professional insurance arrangements may respond to projects using collaborative 3D BIM to maturity level 2, the Task Force also published a Best Practice Guide for Professional Indemnity Insurance when using Building Information Models (CIC/BIM Ins, first edition February 2013): again, see online12. It is recommended that policyholders should check their cover with their broker prior to entering into contracts where BIM processes are being used. Furthermore, there is an expanded commentary on adjudication in the United Kingdom (again in a new chapter), a new chapter on dispute boards (by Chris Miers) and a new chapter on the civil law dynamic (by Wolfgang Breyer). Finally, there are two new appendices, comprising Julian Bailey’s seminal analysis of the SCL Protocol and Nuhu Braimah’s excellent discussion of his model for the selection of an appropriate method of delay analysis. As Keith Pickavance put it so eloquently in his Introduction to the third edition of this book: “The result has been a team effort but, in the event that nonetheless it could be improved upon, then that is my fault.” Put another way, as Simon and Garfunkel might have sung (back in the day): “All my words come back to me, in shades of mediocrity”. Atkin Chambers, 1 Atkin Building, Gray’s Inn, London, WC1R 5AT, 31 December 2014, Andrew Burr, [email protected] 6 (2015) 31 Const LJ 167 7 BIM Task Group: www.bimtaskgroup.org/ 8 Protocol: www.bimtaskgroup.org/bim-protocol 9 Scope of Services for Information Management: www.bimtaskgroup.org/bim-protocol 10 EIR cover: www.bimtaskgroup.org/bim-eirs 11 PAS: www.bimtaskgroup.org/pas11922-overview/ 12 Best Practice Guide: www.bimtaskgroup.org/professional-service-indemnity-insurance-guidance/

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AC KN OW LED G M EN T S TO T H E F I F T H ED IT ION

In his effusive review13 of the fourth edition of this publication, John Dorter (the renowned Australian construction lawyer and editor of Building and Construction Law Journal (BCLJ)) wrote as follows: “What a wonderful, well-rounded and in-depth work this very authoritative text has matured into. The very learned author has given the profession a splendid encyclopaedia on not just his vast expertise in respect of delay and disruption but also in respect of the several relevant risk categories… The treatment of time and cost is far from just theoretical; quite to the contrary, there is very helpful advice on the necessity for appropriate and proper drafting, well illustrated by quotation from Pascal, viz: ‘words differently arranged have a different meaning, and meanings differently arranged have different effects…’ The treatment of authorities is both well up to date and extensive… Construction lawyers and others will be greatly helped in the fundamental issues of cause and effect… Similar significance in more recent times of proportionality is recognised and well covered. The author’s great expertise in respect of float is not only well known but exemplified in almost every aspect… The ripple effect is dealt with, including the healthy reminder that the ‘ripple effect works both ways’. The fine analysis of the many aspects of delay includes the reminder of the distinction between concurrency and parallelism. Global claims and their related ones are also well analysed… Technically, the publication is very considerably enhanced. For example, despite the unfortunate modern trend to a brief and mechanical index, this one is detailed and very helpful”.

Keith Pickavance is an extremely “hard act” to follow, but the new editorial team wish him all the very best in his well-deserved retirement with Roz on Providenciales, Turks and Caicos, and will do their level best to emulate the breadth and depth of his coverage of the above topics, which are central to every commercial construction lawyer, both in the United Kingdom and abroad (as so eloquently described by Mr Dorter). The “new kids on the block” are led by Andrew Burr (barrister, arbitrator and adjudicator, at Atkin Chambers, Gray’s Inn, and general and articles editor of Construction Law Journal), assisted by Annabella Matute-Castro (a qualified foreign lawyer, with the right to advocate at the Supreme Court in Peru). The expert team of specialist advisory editors now comprises Francis Barber (insurance) (of Cunningham Lindsey, London), Wolfgang Breyer (civil law) (of Breyer Rechtsanwälte, Stuttgart), Steve Briggs (time) (of Hill International, London), Joe Castellano (North

13 (2013) 29 Const LJ 186, first published in BCLJ and reprinted with kind permission.

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ACKNOWLEDGMENTS TO THE FIFTH EDITION

America) (of FTI Consulting, New York), David-John Gibbs (BIM), Wendy MacLaughlin (Pacific Rim) (of Hill International, Perth), Chris Miers (dispute boards) (of Probyn-Miers, London), Robert Palles-Clark (quantum) (of Blackrock PM, London) and Keith Pickavance (of Providenciales, Turks and Caicos). Stuart Wilks (of Hill International, London) has provided invaluable administrative support, as has Andrew Burrows, Mr Burr’s Practice Manager at Atkin Chambers. Joshua Wells at the new publishers has given first-rate encouragement. Last (but by no means least), Freda Broderick and Doreen Bruce (of Atkin Chambers, Gray’s Inn) have managed (as always) to decipher Mr Burr’s hieroglyphics in order to produce the manuscript, any and all remaining errors being those of him alone.

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E DI TO R I A L T E A M B IOG R A P HIES FO R T H E F I F T H ED IT ION

Francis Barber is a chartered civil engineer and chartered insurance loss adjuster, who has worked in the field of engineering insurance for over 30 years and has written and lectured extensively on the topic of delay insurance. Steve Briggs is a Senior Vice President with Hill International (London), having over 30 years of consulting experience. He has completed over 200 appointments as expert witness on planning- and delay-related issues and has written and presented a variety of published articles on these subjects. Steve was one of the leading protagonists in the Great Delay Analysis Debate, first held at King’s College, London. Wolfgang Breyer is the founder of Breyer Rechtsanwälte in Stuttgart, Germany. He specialises in international construction law and has lectured and written extensively on this topic, with a particular emphasis upon the civil law approach and FIDIC contracts. Andrew Burr is a barrister, arbitrator and adjudicator, having been a member of Atkin Chambers since 1983. He specialises primarily in construction and technology matters and is also an affiliated foreign lawyer with Varul (Vilnius, Lithuania). Andrew is a past chair of the European Branch of the Chartered Institute of Arbitrators and has worked throughout Europe and internationally on a wide range of construction and infrastructure matters. He is general and articles editor of Construction Law Journal and recently sat on the advisory committee for the revision of the ICC’s Dispute Board Rules. Andrew is a listed arbitrator at the Beijing Arbitration Commission and the Vilnius Court of International Arbitration and is a member of the Independent Standards Board of the International Mediation Institute. Andrew was assistant editor of the third and fourth editions of this publication. Joe Castellano specialises as expert witness in the proof of quantum claims, working out of the New York office of FTI Consulting. He has many years’ experience in the field. David-John Gibbs holds a master’s degree in civil engineering and is undertaking an engineering doctorate at Loughborough University, with industrial support from DAQS Ltd and Hill International. His research investigates how BIM can assist with the proactive management and retrospective analysis of delays on construction projects. Wendy MacLaughlin is a forensic delay analyst, based at the Hill International office in Perth, Australia. Wendy has extensive experience of giving expert testimony before dispute boards and international arbitration tribunals, under the ICC, LCIA and other institutional rules.

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EDITORIAL TEAM BIOGRAPHIES FOR THE FIFTH EDITION

Chris Miers is principal of Probyn-Miers, one of the UK’s leading firms of forensic architects. Chris has many years’ experience in expert witness work, sits on the DRBF Council and practises extensively on dispute boards, particularly in South America. Rob Palles-Clark is a director of Blackrock Project Management in London and has a broad practice as an independent expert on time and money issues, having particular expertise in the analysis and proof of quantum claims. Keith Pickavance is a chartered architect with over 40 years’ experience in construction management, risk management and delay and disruption analysis in various industries. He is a past President of the CIOB, for whom he recently authored the Complex Projects Contracts. Keith was the author of the first four editions of this publication.

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TA B L E O F AC RON Y M S

A201/07 A201/97 A201SC/07.07 AACE ACA ACA82 ACA98 ADM ADR AIA AS2124 AS4000 ASCE BOO BOOT BOT C C21/03 C21/09 CA CDM CE06 CIOB CM08 CMS CPM CPR CTS DAB DB05

AIA Standard Form of Building Contract, 2007. AIA Standard Form of Building Contract, 1997. AIA Federal Supplementary Conditions of Contract, 2007. Association for the Advancement of Cost Engineers International. Association of Consultant Architects. ACA Building Contract 1982 Edition, 1992 Revision. ACA Building Contract, 1998 Edition, 1999 Revision. Arrow Diagramming Method. Alternative Dispute Resolution. American Institute of Architects. Australian Standard Conditions of Contract 4th Edition. 1992 Edition, 2000 Revision. Australian Standard Conditions of Contract 1997 Edition, 2000 Revision. American Society of Civil Engineers. Build, Own and Operate, a form of arrangement for securing private finance for public projects. Build, Own, Operate and Transfer, a form of arrangement for securing private finance for public projects. Build, Operate and Transfer, a form of arrangement for securing private finance for public projects. Contractor (and, where the context requires it, the claimant). Government of New South Wales, General Condition of Contract. New South Wales Government GC21 (Edition 1) General Conditions of Contract July 2003 including revisions to October 6, 2009. Contract Administrator. Construction, Design and Management Regulations, 2007. JCT Constructing Excellence Contract, 2006 Edition, 2009 Revision. Chartered Institute of Building. JCT Construction Manager Appointment, 2008. PFE Change Management Supplements, for use with the 1998 Edition of JCT contracts, 2003, Pickavance Consulting and Fenwick-Elliott. Critical Path Method. Civil Procedure Rules. “Count the Squares”, The Central Unit on Purchasing Guidance No 7, Project Sponsorship: Planning and Progress (1986, Central Unit on Purchasing, HM Treasury). Dispute Adjudication Board. JCT Standard Form of Design and Build Contract, 2005 Edition, 2009 Revision.

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TABLE OF ACRONYMS

DBFO DCMF DOM/1 DRB ECC2 ECC3 Eng EVA EVM FIDIC FIDIC/Build98 FIDIC/Build99 FIDIC/DB95 FIDIC/DB99 FIDIC/M&E87 FIDIC/PD + B99 FIDIC/SF98 FIDIC4 GC/Works/1 GC/Works/1/98 GC/Works/1DB GC/Works/1DB98 GC/Works/2 GC/Works/2/98 GMP HGCRA HK05 HK86 HKGC99 HMSO

Design, Build, Finance and Operate, a form of arrangement for securing private finance for public projects. Design, Construct, Manage and Finance, a form of arrangement for securing private finance for public projects. JCT Standard Form of Sub-Contract for Domestic Subcontractors for use with JCT98 Dispute Review Board. NEC Engineering and Construction Contract, 2nd Edition 1995, 1998 Revision. NEC Engineering and Construction Contract, 3rd Edition. 2005. Engineer Earned Value Analysis. Earned Value Management. Fédération Internationale des Ingénieurs-Conseils. FIDIC Conditions of Contract for Building and Engineering Works Designed by the Employer, Test Edition 1998 (the “Red Book”). FIDIC Conditions of Contract for Building and Engineering Works Designed by the Employer, 1st Edition 1999 (the “Red Book”). FIDIC Conditions of Contract for Design-Build and Turnkey, First Edition, 1995 (the “Orange Book”). FIDIC Conditions of Contract for Design Build and Turnkey, First Edition, 1999 (the “Silver Book”). FIDIC Conditions of Contract for Electrical and Mechanical Works, 3rd Edition, 1987, 1988 Revision (the “Yellow Book”). FIDIC Conditions of Contract for Plant and Design-Build for electrical and mechanical plant and for building and engineering works (the “Yellow Book”). FIDIC Short Form of Contract for projects of relatively small value (the “Green Book”). FIDIC Conditions of Contract for Works of Civil Engineering Construction, 4th Edition 1987, 1992 Revision, (the “Red Book”). General Conditions of Contract for Building & Civil Engineering – Lump Sum with Quantities, 3rd Edition. 1989, 1990 Revision, Department of the Environment. General Conditions of Contract for Building & Civil Engineering – Major Works with Quantities, 1998. Property Advisers to the Civil Estate, Central Advice Unit. General Conditions of Contract for Building & Civil Engineering – Design & Build Version, 1993. Department of the Environment. Contract for Building & Civil Engineering – Design & Build Version, 1998. Property Advisers to the Civil Estate, Central Advice Unit. General Conditions of Contract for Building & Civil Engineering – Minor Works, Second Edition, 1980 (revised 1989). Department of the Environment. General Conditions of Contract for Building and Civil Engineering – Minor Works, 1998. Property Advisers to the Civil Estate, Central Advice Unit. Guaranteed Maximum Price. Housing Grants, Construction and Regeneration Act 1996. Hong Kong Special Administrative Region of the People’s Republic of China, General Conditions of Contract for Building Works, 2005. Standard Form of Building Contract with Quantities, 1986, 1999 Revision, RICS Hong Kong, Hong Kong Special Administrative Region of the People’s Republic of China, General Conditions of Contract for Civil Engineering Works, 1999. Her Majesty’s Stationery Office.

xxviii

TABLE OF ACRONYMS

ICE ICE/DC ICE/DC01 ICE/MW95 ICE6 ICE7 IChemE ID IFC05 IFC84 IFC98 IFWCD/05 IGBW/09 IGCE/09 IGCEDB/09 IGDB/09 IGMW/09 IRS JCT JCT05 JCT63 JCT80 JCT98 JCTSub/05 LNG M&E MC MC08 MC87 MC98 MF/1 MP05 MTC08 MTC89 MWA05 MWA80 MWA98

Institute of Civil Engineers. ICE Design and Construct Conditions of Contract, 6th Edition, 1993, 1998 Revision. ICE Design and Construct Conditions of Contract, Measurement 2nd Edition, 2001. ICE Conditions of Contract – Minor Works, 2nd Edition, 1995, 1998 Revision. ICE Conditions of Contract, 6th Edition, 1991, 1998 Revision. ICE Conditions of Contract, Measurement Version, 7th Edition, 1999. Institute of Chemical Engineers lump sum contract, 4th Edition, 2001 (the “Red Book”). Identity Data. JCT Intermediate Building Contract, 2005 Edition, 2009 Revision. JCT Intermediate Form of Building Contract, 1984 Edition, 1995 Revision. JCT Intermediate Form of Building Contract, 1998. JCT Intermediate Building Contract, With Contractor’s Design, 2005 Edition, 2009 Revision. Irish Government Public Works Contract for Building Works Designed by the Employer, 2009. Irish Government Public Works Contract for Civil Engineering Works Designed by the Employer, 2009. Irish Government Public Works Contract for Civil Engineering Works Designed by the Contractor, 2009. Irish Government Public Works Contract for Building Works Designed by the Contractor, 2009. Irish Government Public Works Contract for Minor Works, 2009. Information Release Schedule (issued by D), or Information Required Schedule (issued by C), as the sense requires it. Joint Contracts Tribunal. JCT Standard Form of Building Contract – Private with Quantities, 2005 Edition, 2009 Revision. JCT Standard Form of Building Contract, Private Edition with Quantities, 1963, 1976 Revision. JCT Standard Form of Building Contract, Private Edition with Quantities, 1980, 1995 Revision. JCT Standard Form of Building Contract, Private Edition with Quantities, 1998, 2003 Revision. JCT Standard form of subcontract, 2005 Edition, 2009 Revision. Liquefied Natural Gas. Mechanical and Electrical. Management Contractor. JCT Management Building Contract, 2008. JCT Standard Form of Management Contract, 1987. JCT Standard Form of Management Contract, 1998. Institution of Engineering and Technology, Model Form 1, lump sum contract, 4th Edition, 2000. JCT Major Projects Construction Contract 2005 Edition, 2009 Revision. JCT Standard Form of Measured Term Contract, 2008. JCT Standard Form of Measured Term Contract, 1989 Edition 1994 Revision. JCT Agreement for Minor Building Works, 2005 Edition, 2009 Revision. JCT Agreement for Minor Building Works, 1980 Edition, 1994 Revision. JCT Agreement for Minor Building Works, 1998.

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TABLE OF ACRONYMS

NEC NEC/SF99 NEDO NPO NRM NS NZ03 OGC PCC06 PCC92 PCC98 PDM PERT PFI PM PMI PMICoS PPC2000 PQS QS RFI RIBA RICS RP/FSA SC SCL SGC95 SIA80 SMM7 SPV TC08 TQ VAT VO WBS WC WC/08 WC/87 WC/98 WCD81 WCD98

An ICE form of contract written in the present tense, in which the parties agree to work in a spirit of mutual trust and good faith. NEC Short Form 1999. The National Economic Development Office. Non-Productive Overtime. RICS, New Rules of Measurement: Order of Cost Estimating and Elemental Cost Planning, 2009. Nominated Subcontractor New Zealand Standard Form of Contract for Building and Civil Engineering Work, NZS 3910:2003. Office of Government Commerce. JCT Prime Cost Building Contract, 2006, Revision 2, 2009. JCT Standard Form of Prime Cost Contract, 1992 Edition, 1995 Revision. JCT Standard Form of Prime Cost Contract, 1998. Precedence Diagramming Method. Programme Evaluation and Review Technique. Private Finance Initiative. Project manager. Project Management Institute. Project Management Institute, College of Scheduling. ACA Standard Form of Contract for Project Partnering, 2000, 2008 Edition. Private Quantity Surveyor (the QS employed by D used to distinguish from the QS employed by C). Quantity Surveyor. Request For Information. Royal Institute of British Architects. Royal Institution of Chartered Surveyors. AACE, Forensic Schedule Analysis, International Recommended Practice No. 29R-03 (2009). Subcontractor. Society of Construction Law. Singapore Public Sector Standard Conditions of Contract for Construction Works, 1995, March 2005 Edition. Singapore Institute of Architects Lump Sum Contract (1980) 1999 Revision. RICS, Standard Method of Measurement, 7th Edition, 1998. Special Purpose Vehicle. JCT Construction Management Trade Contract, 2008 Edition. Technical Query. Value Added Tax. Variation Order. Work Breakdown Structure. Works Contractor. JCT Management Works Contract, 2008. JCT Works Contract Conditions (Works Contract/2), 1987. JCT Works Contract Conditions (Works Contract/2), 1998. JCT Standard Form of Building Contract With Contractor’s Design, 1981 Edition, 1995 Revision. JCT Standard Form of Building Contract With Contractor’s Design, 1998.

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TABL E O F C A S E R EP O RT R EFER EN CES

A.C. A.C.W.S. Ad.&EI. Admin. L.R. Admlty ADRLJ. AGBCA. A.L.J.R. All ER. All E.R. (Comm) A.L.R. A.M.C. App. Cas. App. Div. ASBCA BCA BC Ct. App. B.C.L. B.C.L. B.C.L.C. B.C.L.R.S. BC SC Bing. B.L.R. B.T.C. Bus. L.R. CA Cal. Cal..2d. Cal..3d. Cal.4th Cal. App. Cal. Rptr. Can Sup. Ct. CCH Ch. Ch D

Official Law Reports Appeal Court All Canada Weekly Summaries Adolphus & Ellis’ Queens Bench Reports, New Series Administrative Law Reports Admiralty Court Arbitration and Dispute Resolution Law Journal Department of Agriculture Board of Contract Appeals Australian Law Journal Reports All England Law Reports All England Reports (Commercial) Australian Law Reports American Maritime Cases Official Law Reports Appeal Cases Appellate Division Armed Services Board of Contract Appeals Federal Board of Contract Appeals British Columbian Court of Appeal Building and Construction Law Butterworth’s Current Law Butterworth Company Law Cases Building and Construction Legal Report Service British Columbia Supreme Court Bingham Building Law Reports British Tax Cases Business Law Reports Court of Appeal California Reports California Reports, Second Series California Reports, Third Series California Reports, Fourth Series California Apellate Reports California Reporter Canadian Supreme Court Commerce Clearing House Official Law Reports Chancery Division Official Law Reports Chancery Division

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English Canadian English English English English American Australian English English Australian American English American American American Canadian Australian New Zealand English Australian Canadian English English English English English American American American American American English Canadian American English English

TABLE OF CASE REPORT REFERENCES

C.I.L.L. Cl. Ct. C.L.C. C.L.D. C.L.L. C.L.R. C.L.R. C.L.R. C.O.D. COFC. Conn. Con. L.R. Const. L.J. Const. L. Rep. Costs L.R. C.P. Rep. CSOH Ct. Cl. D.L.R. DOTBCA EBCA E.G. E.G.C.S. E.G.L.R. E.L.R. Emp. L.R. ENGBCA Env. L.R. E.R. EWCA EWCA Civ EWHC Ex. F. F.2d F.3d F. (H.L.) Fam. Law FCA F.C.R. Fed. Cir. F.L.R. F.S.R. GSBCA G.W.D. H.B.C. HKCFI H.K.L.R. HL

Construction Industry Law Letter United States Claims Court Commercial Law Cases Construction Law Digest Construction Law Letter Canadian Law Reports Common Law Reports Commonwealth Law Reports Crown Office Digest Court of Federal Claims Connecticut Reports Construction Law Reports Construction Law Journal Construction Law Reports Costs Law Reports Civil Procedure Reports Court of Session (Outer House) Federal Court of Claims Dominion Law Reports Department of Transportation Board of Contract Appeals Department of Energy Board of Contract Appeals Estates Gazette Estates Gazette Case Summaries Estates Gazette Law Reports Education Law Reports Employment Law Reports Department of Energy Board of Contract Appeals Environmental Law Reports English Reports England and Wales Court of Appeal England and Wales Court of Appeal (Civil Division) England and Wales High Court Official Law Reports Exchequer Cases Federal Reporter Federal Reporter, Second Series Federal Reporter, Third Series Fraser’s Session Cases (HL) Family Law Journal Federal Court of Australia Family Court Reports United States Circuit Court, Federal Circuit Family Law Reporter Fleet Street Reports General Services Board of Contract Appeals Green’s Weekly Digest Hudson’s Building Contracts Hong Kong Court of First Instance Hong Kong Law Reports House of Lords

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English American English English Canadian Canadian English Australian English American American English English Canadian English English Scottish American Canadian American American English English English English English American English English English English English English American American American Scottish English Australian English American English English American Scottish English Hong Kong English English

TABLE OF CASE REPORT REFERENCES

H.L.R. H.&N. IBCA I.C.R. IH Info. T.L.R. I.P.D. I.R.L.R. J.P. J.P.L. K.B. Ky. L.G.R. L.J.R. L.J.C.P. Ll. L. Rep. Lloyd’s Rep. Lloyd’s Rep. P.N. L.R. App. Cas. LR L.R.C.P. L.R. Exch. L.R. P.D. L.S.G. L.T. M.&W. Med. L.R. Mo. NE.2d NE.2d N.L.J. NSWCA NSWLR N.W. NW.2d NY NY.2d NY App. Div. NYS.2d. N.Z.L.R. P.2d PC P. & C.R. PD P.I.Q.R. P.N.L.R. PSBCA Q.B. Q.B.D.

Housing Law Reports Hurlston and Norman Department of Interior Board of Contract Appeals Industrial Cases Reports Inner House Information Technology Law Reports Intellectual Property Digest Industrial Relations Law Reports Justice of the Peace Reports Journal of Planning Law Official Law Reports King’s Bench Division Kentucky Reports Local Government Reports Law Journal Reports Law Journal Reports Common Pleas Lloyd’s Law Reports Lloyds Law Reports Lloyd’s Professional Negligence Reports Law Reports Appeal Cases Lloyd’s Reports Law Reports Common Pleas Cases Exchequer Cases Law Reports Probate Division Law Society Gazette Law Times Reports Meeson and Welsby Medical Law Reports Missouri Supreme Court North Eastern Reporter North Eastern Reporter, Second Series New Law Journal New South Wales Supreme Court New South Wales Law Reports North Western Reports North Western Reports, Second Series New York Reports New York Reports, Second Series New York Appellate Division New York Supplement, Second Series New Zealand Law Reports Pacific Reporter, Second Series Privy Council Property and Compensation Reports Official Law Reports Probate Division Personal Injury & Quantum Reports Professional Negligence and Liability Reports Postal Services Board of Contract Appeals Official Law Reports Queen’s Bench Division Official Law Reports Queen’s Bench Division

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English English American English Scottish English English English English English English American English English English English English English English English English English English English English English English American American American English Australian Australian American American American American American American New Zealand American UK English English English English American English English

TABLE OF CASE REPORT REFERENCES

Q.J.P.R. QSC R.T.R. R.V.R. S.C. S.C.L.R. S.C.R. SE. S.J. S.J. S.J.L.B. S.L.T. S.R. SW.2d TASSC TCC T.C.L.R. T.L.R. UKHL UKPC UKSPC US Va. VABCA V.L.R. V.R. VSC VSCA W.A.R. WASC WASCA Wash. App. W.D. W.L.R. W.N. W.R. W.T.L.R. W.W. & A.B. W.W.R.

Queensland Justice of the Peace Reports Queensland Supreme Court Road Traffic Reports Rating & Valuation Reporter Session Cases Scottish Civil Law Reports Supreme Court Reports South Eastern Reporter Solicitors Journal Solicitors Journal Solicitors Journal Scots Law Times State Reports (New South Wales) South Western Reporter (Second Series) Tasmanian Supreme Court (Trial Division) Technology and Construction Court Technology and Construction Law Reports Times Law Reports UK House of Lords UK Privy Council UK Special Commissioners United States Supreme Court Reports Virginia Reports Veterans Affairs Board of Contract Appeals Victoria Law Reports Victoria Law Reports Victorian Supreme Court (Trial Division) Victorian Supreme Court (Court of Appeal) Western Australian Reports Western Australian Supreme Court (Trial Division) Western Australia Supreme Court (Court of Appeal) Washington Appeals Reports Weekly Digest Weekly Law Reports Weekly Notes Weekly Reporter Wills & Trusts Law Reports Wyatt, Webb & A’Beckett’s Reports Western Weekly Reports

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Australian Australian English English Scottish Scottish Canadian American English English English Scottish Australian American Australian English English English UK UK UK American American American Australian Australian Australian Australian Australian Australian Australian American American English English American English Australian Canadian

TA B L E O F CA S ES References are to paragraph number

620 Collins Street Pty Ltd v Abigroup Contractors Pty Ltd (No 1) [2006] VSC 490 ...........App.3 AEC Corp Inc (1997) ASBCA No.45,713, 97–1 BCA at 28,973 ................................................21–160 AGH Industries Inc (1989) ASBCA Nos 27,960 and 31,150, 89–2 BCA at 21,637 ..................................................................................9–025, 15–041 AMEV-UDC Finance v Austin (1987) 68 A.L.R. 185 ......................................................21–237 AMF International v Magnet Bowling [1968] 1 W.L.R. 1028; [1968] 2 All E.R. 789; 66 L.G.R. 706; (1968) 112 S.J. 522, QBD............................... 7–167, 7–168 AMW Plumbing and Heating Ltd v Zoom Development Ltd [2011] GWD 1–13; 2010 WL 4810776 ..............................................................................4–171 AWG Construction Services Ltd v Rockingham Motor Speedway Ltd [2004] EWHC 888 (TCC); [2004] T.C.L.R. 6 .................................................................... 23–008 Aberdeen Harbour Board v Heating Enterprises (Aberdeen) Ltd, 1990 S.L.T. 416; 1989 S.C.L.R. 716, IH (Ex Div) ............................................... 2–077, 2–154 Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd [2002] NSWCA 211 .............................................................................................. 5–139, 5–141 Absolute Rentals Ltd v Gencor Enterprises Ltd (2001) 17 Const. L.J. 322 .......................23–046 Ace Constructors Inc v United States, 70 Fed. Cl. 253 (2006) .............................................. 7–151 Acker Construction LLC v Tran (2012) Ark. App. 214, 2012 Ark. App. LEXIS 318 (2012) ...............................................................................................21–214 Acme Contracting Ltd v TolTest Inc (2008) U.S. Dist. LEXIS 36355 (E.D. Mich., May 5, 2008) ....................................................................................21–284 Adams Construction Co (1997) VABCA No.4,669, 97–1 BCA at 28,801 .........................17–130 Admiral Management Services Ltd v Para Protect Europe Ltd [2002] EWHC 233 (Ch); [2002] 1 W.L.R. 2722; [2003] 2 All E.R. 1017; [2002] C.P. Rep. 37; [2003] 1 Costs L.R. 1; [2002] F.S.R. 59; (2002) 99(16) L.S.G. 37; (2002) 152 N.L.J. 518; (2002) 146 S.J.L.B. 93................21–072 Adyard Abu Dhabi v SD Marine Services[2011] EWHC 848 (Comm); [2011] B.L.R. 384; 136 Con. L.R. 190; (2011) 27 Const. L.J. 594 .................6–129, App.3 Aioi Nissay Dowa Insurance Co Ltd (formerly Chiyoda Fire and Marine Insurance Co Ltd) v Heraldglen Ltd [2013] EWHC 154 (Comm); [2013] 2 All E.R. (Comm) 231; [2013] 1 C.L.C. 440; [2013] Lloyd’s Rep. I.R. 281 ..............................................................................................4–258 Aird v Prime Meridian Ltd [2006] EWCA Civ 1866; [2007] C.P. Rep. 18; [2007] B.L.R. 105; 111 Con. L.R. 209; (2007) 104(2) L.S.G. 31; (2007) 151 S.J.L.B. 60 ..........................................................................................22–052 Ajax Paving Industries Inc v Charlotte County (2000) 752 So.2d 143 ................................2–085 Aktieselskabet Reidar v Arcos Ltd; sub nom. Reidar A/S v Acros Ltd [1927] 1 K.B. 352; (1926) 25 Ll. L. Rep. 513, CA ............................................................11–208 Alfred McAlpine Capital Projects Ltd v SIAC Construction (UK) Ltd [2005] EWHC 3139 (TCC); [2006] B.L.R. 139; 105 Con. L.R. 73 ...................................22–122

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TABLE OF CASES

Alfred McAlpine Capital Projects Ltd v Tilebox Ltd [2005] EWHC 281 (TCC); [2005] B.L.R. 271; 104 Con. L.R. 39; (2005) 21 Const. L.J. 539...............11–190, 21–238 to 21–240, 25–013 Alfred McAlpine Construction Ltd v Panatown Ltd (No.1); sub nom. Panatown Ltd v Alfred McAlpine Construction Ltd [2001] 1 A.C. 518; [2000] 3 W.L.R. 946; [2000] 4 All E.R. 97; [2000] C.L.C. 1604; [2000] B.L.R. 331; (2000) 2 T.C.L.R. 547; 71 Con. L.R. 1; [2000] E.G. 102 (C.S.); (2000) 97(38) L.S.G. 43; (2000) 150 N.L.J. 1299; (2000) 144 S.J.L.B. 240; [2000] N.P.C. 89, HL ..................1–022 Alghussein Establishment v Eton College [1988] 1 W.L.R. 587; [1991] 1 All E.R. 267; [1988] E.G. 69 (C.S.); (1988) 132 S.J. 750, HL ...............................6–124 All Seasons Construction & Roofing Inc (1998) ASBCA No.45583, 98–2 BCA (CCH) at 30,061 ....................................................................14–012, 15–003 Allen v Gulf Oil Refining Ltd [1980] Q.B. 156; [1979] 3 W.L.R. 523; [1989] 3 All E.R. 1008; [1979] J.P.L. 674; (1979) 123 S.J. 737, CA .....................................2–186 Allen v Gulf Oil Refining Ltd [1981] A.C. 1001; [1981] 2 W.L.R. 188; [1981] 1 All E.R. 353; [1981] J.P.L. 353; (1981) 125 S.J. 101, HL .......................................2–186 Alstom Power Ltd v Yokogawa Australia Pty Ltd (No.7) [2012] SASC 49; (2012) 28 Const LJ 553 ........................................................................... 115–016, App.3 Altmayer v Johnson, 79 F.3d 1129 (Fed. Cir., 1996) ........................................................21–172 Altus, The. See Total Transport Corp of Panama v Amoco Transport Co Amalgamated Building Contractors Ltd v Waltham Holy Cross Urban DC [1952] 2 All E.R. 452; [1952] 2 T.L.R. 269; 50 L.G.R. 667; [1952] W.N. 400; (1952) 96 S.J. 530, CA ......................................... 6–077, 6–080, 6–126, 18–071, 18–094 Amec Building Ltd v Cadmus Investment Co Ltd (1997) 51 Con. L.R. 105; (1997) 13 Const. L.J. 50, QBD .................................................12–138 Amec Capital Projects Ltd v Whitefriars City Estates Ltd [2004] EWCA Civ 1418; [2005] 1 All E.R. 723; [2005] B.L.R. 1; 96 Con. L.R. 142; (2005) 21 Const. L.J. 249; (2004) 154 N.L.J. 1690; (2004) 148 S.J.L.B. 1285; Times, November 8, 2004 .............................23–060 to 23–062 Amec Process & Energy Ltd v Stork Engineers & Contractors BV (No.1) [1999] EWHC 238 (TCC)...................... 8–082 to 8–087, 11–137 American Oil Co v Valenti, 179 Conn. 349; 427 A.2d 305 (1979) .....................................13–186 American Trading v Quebec Steamship, Cour de cassation (Chambre civile), 5 December 1910 ......................................................................25–006 Ampurius Nu Homes Holdings Ltd v Telford Homes (Creekside) Ltd [2013] EWCA Civ 577; [2013] 4 All E.R. 377; [2013] B.L.R. 400; 148 Con. L.R. 1; [2013] 23 E.G. 76 (C.S.) ..................................................................22–076 Anderson v Tuapeka County Council (1900) 19 N.Z.L.R. 1................................... 6–079, 6–138 Angelo v State of New York, 362 NYS.2d 283 (1974) ........................................................2–085 Anns v Merton LBC; sub nom. Anns v Walcroft Property Co Ltd [1978] A.C. 728; [1977] 2 W.L.R. 1024; [1977] 2 All E.R. 492; 75 L.G.R. 555; (1977) 243 E.G. 523; (1988) 4 Const. L.J. 100; [1977] J.P.L. 514; (1987) 84 L.S.G. 319; (1987) 137 N.L.J. 794; (1977) 121 S.J. 377, HL ....................2–173 Antaios Compania Naviera SA v Salen Rederierna AB (The Antaios) [1985] A.C. 191; [1984] 3 W.L.R. 592; [1984] 3 All E.R. 229; [1984] 2 Lloyd’s Rep. 235; (1984) 81 L.S.G. 2776; (1984) 128 S.J. 564, HL .......................2–071 Antaios, The. See Antaios Compania Naviera SA v Salen Rederierna AB Apple Corps Ltd v Apple Computer Inc [2004] EWHC 768 (Ch); [2004] 2 C.L.C. 720; [2004] I.L.Pr. 34 ............................................................................25–006 Aptus Co v United States, 61 Fed. Cl. 683 (2004) ...........................................................14–116

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Aqua Design & Play International Ltd (t/a Aqua Design) (In Liquidation) v Kier Regional Ltd (t/a French Kier Anglia); Fenlock Hansen Ltd (t/a Fendor Hansen) v Kier Regional Ltd (t/a French Kier Anglia) [2002] EWCA Civ 797; [2003] B.L.R. 111; 82 Con. L.R. 107 .................................2–073 Arcadis UK Ltd v May and Baker Ltd (t/a Sanofi) [2013] EWHC 87 (TCC); [2013] B.L.R. 210; [2013] C.I.L.L. 3305 .................23–053 to 23–059 Argyle Motors (Birkenhead) Ltd v Birkenhead Corp [1975] A.C. 99; [1974] 2 W.L.R. 71; [1974] 1 All E.R. 201; 72 L.G.R. 147; (1974) 27 P. & C.R. 122; (1973) 118 S.J. 67, HL .............................2–187 Ariston SRL v Charly Records, unreported, 1990, CA (Civ Div)............... 21–237, 21–238, 21–239 Arthur White (Contractors) Ltd v Tarmac Civil Engineering Ltd [1967] 1 W.L.R. 1508; 3 All E.R. 586; (1967) 111 S.J. 831, HL ...........................................2–168 Ascon Contracting Ltd v Alfred McAlpine Construction Isle of Man Ltd (1999) 66 Con. L.R. 119; (2000) 16 Const. L.J. 316; [2000] C.I.L.L. 1583, QBD ......................................... 1–029, 4–323, 4–342, 6–110, 10–038, 11–015, 11–063, 11–065, 11–112, 14–006, 14–079, 14–111, 16–075, 16–130, 17–006, 17–026, 20–020 to 20–026, 21–021, 21–109, 22–008 Ashwell and Nesbitt Ltd v Allen and Co (1912) H.B.C. (4th edn) 462, CA ...........................12–010 Aspect Contracts (Asbestos) Ltd v Higgins Construction Plc [2013] EWHC 1322 (TCC); [2013] Bus. L.R. 1199; [2013] B.L.R. 417; [2013] C.I.L.L. 3369 ..................................................................23–002, 23–003, 23–063 Aspen Insurance UK Ltd v Adana Construction Ltd [2015] EWCA Civ 176; [2015] B.L.R. 273; [2015] E.C.C. 33; [2015] Lloyd’s Rep. I.R. 511......................... 22–120 Astea (UK) Ltd v Time Group Ltd [2003] EWHC 725 (TCC) ........ 6–110, 6–155, 6–162, 6–165 Astrazeneca Insurance Co Ltd v XL Insurance (Bermuda) Ltd [2013] EWHC 349 (Comm); [2013] 2 All E.R. (Comm) 97; [2013] 1 C.L.C. 478; [2013] Lloyd’s Rep. I.R. 290 .............................................................4–258 Athens Generating Co LP v Bechtel Power Corp, No.6085–09 (SC DC, 2009) ................21–253 Atlantic Baron, The. See North Ocean Shipping Co v Hyundai Construction Co Atlas Express Ltd v Kafco (Importers and Distributors) Ltd [1989] Q.B. 833; [1989] 3 W.L.R. 389; [1989] 1 All E.R. 641; (1990) 9 Tr. L.R. 56; (1989) 139 N.L.J. 111; (1989) 133 S.J. 977, QBD ............................22–066 Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10; [2009] 1 W.L.R. 1988; [2009] 2 All E.R. 1127; [2009] 2 All E.R. (Comm) 1; [2009] Bus. L.R. 1316; [2009] B.C.C. 433; [2009] 2 B.C.L.C. 148........................................ 2–072 Attorney General of the Falkland Islands v Gordon Forbes Construction (Falklands) Ltd [2003] B.L.R. 280; [2003] T.C.L.R. 9; (2003) 19 Const. L.J. 149, Sup. Ct (FI) ............................................................................13–030 Austin Hall Building Ltd v Buckland Securities Ltd [2001] B.L.R. 272; (2001) 3 T.C.L.R. 18; 80 Con. L.R. 115; (2001) 17 Const. L.J. 325; [2001] 25 E.G. 155 (C.S.) ....................................................................................23–013 B Sunley & Co Ltd v Cunard White Star Ltd; sub nom. Sunley & Co Ltd v Cunard White Star Line Ltd [1940] 1 K.B. 740; (1940) 66 Ll. L. Rep. 134, CA ..................................21–082, 21–160, 21–169 BHP Billiton Petroleum Ltd v Dalmine SpA [2003] EWCA Civ 170; [2003] B.L.R. 271; (2003) 147 S.J.L.B. 234, CA (Civ Div) ....................................14–027 BJ Carney and Co, ASBCA No.76,114, 77–1 BCA at 12,285 ...........................................12–194 BP Refinery (Westernport) Pty Ltd v Shire of Hastings, 180 C.L.R. 266; (1978) 52 A.L.J.R. 20, PC (Aus) ........................................................................................2–079 BV Construction Inc (2004) ASBCA Nos 47,766, 49,337, 50,553 ...................................21–151

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Baese Pty Ltd v RA Bracken Building Pty Ltd (1989) 52 B.L.R. 134; (1990) 6 B.C.L. 137 ...................................................................21–243, 21–244, 31–245 Balcombe Group Plc v London Development Agency [2008] EWHC 1392 (TCC); [2008] T.C.L.R. 8................................................................22–041 Balfour Beatty Building Ltd v Chestermount Properties Ltd (1993) 62 B.L.R. 1; 32 Con. L.R. 139; (1993) 9 Const. L.J. 117, QBD ........ 4–209, 6–009, 6–050, 6–100, 6–103, 6–129, 9–023, 9–032, 10–040, 12–006, 14–109, 18–132 Balfour Beatty Civil Engineering Ltd v Docklands Light Railway Ltd [1996] C.L.C. 1435; 78 B.L.R. 42; 49 Con. L.R. 1; (1996) 12 Const. L.J. 259, CA (Civ Div) ............................... 1–023, 2–071, 2–094, 3–016, 6–070 Balfour Beatty Construction Ltd v Lambeth LBC [2002] EWHC 597 (TCC); [2002] B.L.R. 288; [2002] T.C.L.R. 25; 84 Con. L.R. 1; (2002) 18 Const. L.J. 405 ............................... 6–148, 9–014, 9–032, 9–063, 14–019, 14–115, 14–180, 15–003, 15–017, 18–009, 18–021, 20–008, 22–111, 22–112, 23–059, App.3 Balfour Beatty Engineering Services (HY) Ltd v Shepherd Construction Ltd [2009] EWHC 2218 (TCC); 127 Con. L.R. 110; (2009) 159 N.L.J. 1475 ................................14–153, 14–154, 14–198 Banabelle Electrical v State of New South Wales [2005] NSWSC 714 .................19–056; 22–105 Bank of Credit and Commerce International SA (In Liquidation) v Ali (No.1) [2001] UKHL 8; [2002] 1 A.C. 251; [2001] 2 W.L.R. 735; [2001] 1 All E.R. 961; [2001] I.C.R. 337; [2001] I.R.L.R. 292; [2001] Emp. L.R. 359; (2001) 98(15) L.S.G. 32; (2001) 151 N.L.J. 351; (2001) 145 S.J.L.B. 67; (2001) 145 S.J.L.B. 70 ....................2–071 Bank of Victoria v Costain Australia Ltd (1983) 5 B.C.L.R.S. 193 ....................................16–092 Banque Financière de la Cité SA (formerly Banque Keyser Ullmann SA) v Westgate Insurance Co (formerly Hodge General & Mercantile Co Ltd); sub nom. Banque Keyser Ullmann SA v Skandia (UK) Insurance Co; Skandia (UK) Insurance Co v Chemical Bank; Skandia (UK) Insurance Co v Crédit Lyonnais Bank Nederland NV [1991] 2 A.C. 249; [1990] 3 W.L.R. 364; [1990] 2 All E.R. 947; [1990] 2 Lloyd’s Rep. 377; (1990) 87(35) L.S.G. 36; (1990) 140 N.L.J. 1074; (1990) 134 S.J. 1265, HL ...........................................................20–045 Barking and Dagenham LBC v Stamford Asphalt Co Ltd [1997] C.L.C. 929; 82 B.L.R. 25; 54 Con. L.R. 1, CA (Civ Div) .........................................2–159 Barratt Southampton v Fairclough Building Ltd (1988) 27 Con. L.R. 62, QBD..................2–081 Barton (Alexander) v Armstrong (Alexander Ewan) [1976] A.C. 104; [1975] 2 W.L.R. 1050; [1975] 2 All E.R. 465; (1973) 119 S.J. 286, PC (Aus) ..........22–065 Baston-Cook Co v Loden, 199 SE.2d 591 (Ga. App., 1973) ..............................................5–161 Bat Masonry Co Inc v Pike-Paschan Joint Venture IT, 842 F.Supp. 174 (D. Md., 1993) ..............................................................................................17–135 Bate v Aviva Insurance UK Ltd [2014] EWCA Civ 334; [2014] Lloyd’s Rep. I.R. 527 ..............................................................................................4–258 Bay Construction Co (2002) VABCA Nos 5,594, 5,625–5,626, 5,628, 5,831 ...............................................................................13–013, 13–162, 17–007 Beaufort Developments (NI) Ltd v Gilbert-Ash (NI) Ltd [1999] 1 A.C. 266; [1998] 2 W.L.R. 860; [1998] 2 All E.R. 778; [1998] N.I. 144; [1998] C.L.C. 830; 88 B.L.R. 1; 59 Con. L.R. 66; (1998) 14 Const. L.J. 280; [1998] E.G. 85 (C.S.); (1998) 95(24) L.S.G. 33; (1998) 95(31) L.S.G. 34; (1998) 148 N.L.J. 869; (1998) 142 S.J.L.B. 172; [1998] N.P.C. 91; [1998] N.P.C. 93, HL ..................................................... 2–071, 2–094 Beazley Underwriting Ltd v Al Ahleia Insurance Co [2013] EWHC 677 (Comm); [2013] Lloyd’s Rep. I.R. 561 ...................................................................................4–258

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Bechtel National Inc (1990) NASA BCA No.1186–7, 90–1 BCA at 22,549 ......................13–013 Bedford v Borough of Cudgegong (1900) 16 W.N. (NSW) 142 ........................................12–166 Bell BCI Co v United States, Fed Ct Cl. No.03–1613C, April 21, 2008 .................2–124, 17–002 Belleville Shoe Manufacturing Co (1995) ASBCA 46,036, 95–2 BCA at 27,680...............20–048 Bellway Homes Ltd v Seymour (Civil Engineering Contractors) Ltd [2013] EWHC 1890 (TCC); [2013] T.C.L.R. 8................................................................22–120 Ben C Gertwick v United States (1961) 152 Ct Cl 69........................................................2–085 Berkeley Industries Inc v City of New York, 45 NY.2d 683; 385 NE.2d 281; 412 NYS.2d 589 (1978) ..........................................................................21–161, 21–185 Bernhard’s Rugby Landscapes Ltd v Stockley Park Consortium Ltd [1998] All E.R. 249; (1998) 14 Const. L.J. 329, QBD ............ 6–074, 6–077, 6–134, 6–136, 6–141 Bernhard-Thomas Bldg Systems LLC v Weitz Co LLC (2011) US Dist. LEXIS 91152 (D. Conn., 16 August 2011) ................................................9–062 Biffa Waste Services Ltd v Maschinenfabrik Ernst Hese GmbH [2008] EWhc 6 (Tcc); [2008] B.L.R. 155; 118 Con. L.R. 104; [2008] P.N.L.R. 17 ..........................................................................................21–229 to 21–230 Birmingham City Council v Paddison Construction Ltd [2008] EWHC 2254 (TCC); [2008] B.L.R. 622 ...............................................................23–051 Blackhawk Heating & Plumbing Co Inc (1975) GSBCA No.2,432, 75–1 BCA at 11,261; (1976) GSBCA 76–1 55,577 .......................... 7–093, 9–030, 9–031, 14–043, 15–113, 16–081 Blinderman Construction Co v United States, 39 Fed. Cl. 529 (1997) ...............................9–019 Blue Circle Industries Plc v Ministry of Defence; sub nom. Ministry of Defence v Blue Circle Industries Plc [1999] Ch. 289; [1999] 2 W.L.R. 295; [1998] 3 All E.R. 385; [1999] Env. L.R. 22; [1998] E.G. 93 (C.S.); [1998] N.P.C. 100, CA (Civ Div) ....................................................4–261 Bluewater Energy Services BV v Mercon Steel Structures BV [2014] EWHC 2132 (TCC); 155 Con. L.R. 85 ..................................................... 15–014, App.3 Boiler Inspection and Insurance Co of Canada v Sherwin Williams Co of Canada Ltd [1974] Q.B. 57, CA (Civ Div) ........................................................20–046 Boskalis Westminster Construction Ltd v Liverpool City Council (1983) 24 B.L.R. 83; (1983) 133 N.L.J. 576, QBD .............................................................4–174 Bottoms v Lord Mayor etc. City of York (1888) H.B.C. (4th edn) 208, CA.......................... 12–028 Bouygues UK Ltd v Dahl-Jensen UK Ltd [2001] 1 All E.R. (Comm) 1041; [2001] C.L.C. 927; [2000] B.L.R. 522; (2001) 3 T.C.L.R. 2; 73 Con. L.R. 135; (2000) 97(35) L.S.G. 36, CA (Civ Div) ....................................22–111 Bovis Lend Lease Ltd v Cofely Engineering Services [2013] EWHC 3142 (TCC) ............22–106 Bowen v Paramount Builders [1977] 1 N.Z.L.R. 394.........................................................2–180 Boyajian v United States, 423 F.2d 1231 (Ct. Cl. 1970) ......................................19–001, 20–067 Brand Investments Co v United States, 102 Ct. Cl. 40; 324 U.S. 850 ...............................21–080 Brauer & Co (Great Britain) Ltd v James Clark (Brush Materials) Ltd [1952] 2 All E.R. 497; [1952] 2 Lloyd’s Rep. 147; [1952] 2 T.L.R. 349; [1952] W.N. 422; (1952) 96 S.J. 548, CA ...........................................................................4–057 Bremer Handels GmbH v Vanden-Avenne Izegem PVBA [1978] 2 Lloyd’s Rep. 109, HL ..............................................................................5–130, 25–010 Bridge v Campbell Discount Co Ltd; sub nom. Campbell Discount Co Ltd v Bridge [1962] A.C. 600; [1962] 2 W.L.R. 439; [1962] 1 All E.R. 385; (1962) 106 S.J. 94, HL ..................................21–239 Bridge UK.com Ltd (t/a Bridge Communications) v Abbey Pynford Plc [2007] EWHC 728 (TCC); (2009) 25 Const. L.J. 150; [2007] C.I.L.L. 2465 .............................................................................17–073, 17–074, 21–073 Bridgeway Construction Ltd v Tolent Construction Ltd [2000] C.I.L.L. 1662; [2000] W.L. 1027055 ...............................................................................21–136, 23–004

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Briess v Woolley; sub nom. Briess v Rosher [1954] A.C. 333; [1954] 2 W.L.R. 832; [1954] 1 All E.R. 909; (1954) 98 S.J. 286, HL ..................................22–081 British Airways Pension Trustees Ltd v Sir Robert McAlpine & Sons Ltd (1994) 72 B.L.R. 26; 45 Con. L.R. 1; (1995) 11 Const. L.J. 365, CA (Civ Div) .........19–054, 19–055 British American Tobacco Australia Services Ltd Cowell [2002] VSCA 197 ......................13–249 British Fermentation Products Ltd v Compair Reavell Ltd [1999] 2 All E.R. (Comm) 389; [1999] B.L.R. 352; (2000) 2 T.C.L.R. 704; 66 Con. L.R. 1, QBD ...........................................................................................21–269 British Motor Trade Association v Salvadori [1949] Ch. 556; [1949] 1 All E.R. 208; 65 T.L.R. 44; [1949] L.J.R. 1304, Ch D ............................17–074, 21–073 British Steel Corp v Cleveland Bridge & Engineering Co Ltd [1984] 1 All E.R. 504; [1982] Com. L.R. 54; 24 B.L.R. 94, QBD ............................6–111, 6–161, 21–196 to 21–198 British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd (No.2) [1912] A.C. 673, HL ..........................11–002 Broome Construction Inc v United States (1974) 203 Ct. Cl. 521; 492 F.2d 829 ..................................................................11–132, 13–010 Bruce v Odhams Press Ltd [1936] 1 K.B. 697; [1936] 1 All E.R. 287, CA...................................................................................22–123, 22–151 Bruce v The Queen [1866] 2 W.W. & A.B. (L) 193 .............................................................6–126 Bush v Whitehaven Trustees (1888) 52 J.P. 392................................................................21–205 Bwllfa and Merthyr Dare Steam Collieries (1891) Ltd v Pontypridd Waterworks Co [1903] A.C. 426 ...................................................App.3 Byers v Illinois State Police, 53 Fed. R. Serve. 3d 740 (N.D.III, 2002) ..............................13–260 Bysouth v Blackburn and Mitcham (1928) V.L.R. 562 ........................................12–170, 12–171 C&B Scene Concept Design Ltd v Isobars Ltd [2002] EWCA Civ 46; [2002] C.L.C. 652; [2002] B.L.R. 93; [2002] T.C.L.R. 22; 82 Con. L.R. 154; (2002) 18 Const. L.J. 139, CA (Civ Div) ...............22–111 CIB Properties Ltd v Birse Construction Ltd [2004] EWHC 2365 (TCC); [2005] 1 W.L.R. 2252; [2005] B.L.R. 173.............................23–009 CJP Contractors Inc v United States, 45 Fed. Cl. 343 (1999)...........................................14–116 CMC Group v Michael Zhang [2007] EWHC 3454 (TCC) ...........................................25–013 CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK [2011] 4 SLR 3050 ...24–068 Cala Homes (South) Ltd v Alfred McAlpine Homes East Ltd (No.1) [1995] F.S.R. 818; (1995) C.I.L.L. 1083, Ch D...........................22–027, 22–045, 22–054 Calcraft v Guest [1898] 1 Q.B. 759, CA ............................................................................App.1 Canadian Red Cross Society v WN Developments (Ottawa) Ltd and McLean & McPhadyen (1983) 1–C.L.D.–02–09, Sup. Ct (Ont.) ..............................4–144 Canon Construction Corp (1972) ASBCA No.16,142, 72–1 BCA (CCH) at 9,404 ......................................................................11–152, 14–234 Cantillon Ltd v Urvasco Ltd [2008] EWHC 282 (TCC); [2008] B.L.R. 250; 117 Con. L.R. 1; [2008] C.I.L.L. 2564 ...............................................23–059 Caparo Industries Plc v Dickman [1990] 2 A.C. 605; [1990] 2 W.L.R. 358; [1990] 1 All E.R. 568; [1990] B.C.C. 164; [1990] B.C.L.C. 273; [1990] E.C.C. 313; [1955–95] P.N.L.R. 523; (1990) 87(12) L.S.G. 42; (1990) 140 N.L.J. 248; (1990) 134 S.J. 494, HL......................................................................................... 2–173, 2–192 Capital Electric Co v United States, 729 F.2d 743 (Fed. Cir., 1984) ..............................................21–161, 21–162, 21–172, 21–182, 21–185 Cardy & Co v Taylor and Roberts (1994) 38 Con. L.R. 79; [1994] E.G. 46 (C.S.); [1994] N.P.C. 30 ................................................14–112, 17–060, 17–061 Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358; [2006] B.L.R. 15; 104 Con. L.R. 1; (2005)

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102(47) L.S.G. 26; Times, November 24, 2005.........................................23–016, 23–058 Carillion Construction Ltd v Felix (UK) Ltd [2001] B.L.R. 1; 74 Con. L.R. 144, QBD ...........................................................22–068, 22–069 to 22–072 Carillion Construction Ltd v Smith [2011] EWHC 2910 (TCC); 141 Con. L.R. 117; [2011] C.I.L.L. 3097; [2012] Bus. L.R. D61 ...........................22–112 Carillion JM Ltd v PHI Group Ltd; Carillion JM Ltd v Robert West Consulting Ltd; sub nom. PHI Group Ltd v Robert West Consulting Ltd [2012] EWCA Civ 588; [2012] C.P. Rep. 37; [2012] B.L.R. 329; [2012] T.C.L.R. 5; 142 Con. L.R. 96; [2012] 4 Costs L.O. 523; [2012] C.I.L.L. 3180 ........... 22–120 Carlson v Townsend [2001] EWCA Civ 511; [2001] 1 W.L.R. 2415; [2001] 3 All E.R. 663; [2001] C.P. Rep. 86; [2001] C.P.L.R. 405; [2001] P.I.Q.R. P24; (2001) 62 B.M.L.R. 50 ....................................................................22–028 Carr v JA Berriman Pty Ltd (1953) 89 C.L.R. 327 ..........................................................12–141 Cary v United of Omaha Life Insurance Co, 68 P.3d 462 (Colo. 2003)...............................2–068 Castle Inns (Stirling) Ltd v Clark Contracts Ltd [2007] Adj LR 02/06 .............................18–039 Cellulose Acetate Silk Co Ltd v Widnes Foundry (1925) Ltd; sub nom. Widnes Foundry (1925) Ltd v Cellulose Acetate Silk Co Ltd [1933] A.C. 20, HL ........................................................11–206, 21–228, 21–252 Centex Bateson Construction Co Inc v Togo D West Jr, Secretary of Veterans Affairs, 250 F.3d 761 (Fed. Cir., 2000) ...................................13, 013, 17–007, 17–008, 17–130, 17–148 Ceylon v Chandris [1965] 3 All E.R. 48; [1965] 2 Lloyd’s Rep. 204, QBD .......................20–042 Chadmax Plastics Pty Ltd v Hansen and Yuncken (SA) Pty Ltd (1984) 1 B.C.L. 52 .............12–008 Chandris v Isbrandtsen Moller Co Inc [1951] 1 K.B. 240; [1950] 2 All E.R. 618; (1950) 84 Ll. L. Rep. 347; 66 T.L.R. (Pt 2) 358; (1950) 94 S.J. 534, CA .........................................................................................11–208 Chaney & James Construction Co v United States, F.2d 728 (190 Ct. Cl. 699) (1970) .........................................................................................7–077 Charles Rickards Ltd v Oppenheim [1950] 1 K.B. 616; [1950] 1 All E.R. 420; 66 T.L.R. (Pt. 1) 435; (1950) 94 S.J. 161, CA ...................................6–109 Chesham Properties Ltd v Bucknall Austin Management Services Ltd (1996) 82 B.L.R. 92; 53 Con. L.R. 22, QBD ......................................................................3–017 Christopher Shaw v Massey Foundations and Pilings Ltd. See Shaw v Massey Foundations and Pilings Ltd ................................................................................ Chittick and Taylor, Re (1954) 12 W.W.R. (N.S.) 653 ......................................................12–016 Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60 .....................................................................................................22–105 City Inn Ltd v Shepherd Construction Ltd 2002 S.L.T. 781; 2001 S.C.L.R. 961; 2001 G.W.D. 26-999 ................ 5–094, 5–095, 5–125 to 5–128, 5–143 City Inn Ltd v Shepherd Construction Ltd, 2003 S.L.T. 885; 2003 S.C.L.R. 795; [2003] B.L.R. 468; 2003 G.W.D. 18–549, IH (2 Div) ............ 5–094, 5–125 to 5–128, 5–143, 5–144, 5–145 City Inn Ltd v Shepherd Construction Ltd [2007] CSOH 190; [2008] B.L.R. 269; (2008) 24 Const. L.J. 590; [2008] C.I.L.L. 2537; 2008 G.W.D. 8–145 ................. 1–029, 4–009, 4–010, 4–104, 4–105, 4–204, 4–209, 5–096, 5–128, 6–046, 6–057, 6–061, 6–098, 8–013, 9–016, 9–032, 14–004, 14–024, 14–073, 14–115, 14–160, 14–178, 14–223, 14–239, 14–240, 15–028, 15–040, 16–032, 16–075, 17–026, 18–005, 18–013, 18–022, 18–023, 18–056, 18–092, 18–138, 20–027, 20–028, 20–031, 20–034, 20–035, 20–068 to 20–070 City Inn Ltd v Shepherd Construction Ltd [2010] CSIH 68; 2011 S.C. 127; 2011 S.C.L.R. 70; [2010]

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B.L.R. 473; 136 Con. L.R. 51; [2010] C.I.L.L. 2889; 2010 G.W.D. 29–598 .........................................4–009, 4–104, 4–105, 4–204, 4–209, 4–215, 5–096, 5–128, 6–023, 6–046, 6–049, 6–050, 6–057, 6–061, 6–098, 8–013, 9–016, 9–032, 14–004, 14–024, 14–073, 14–115, 14–160, 14–178, 14–223, 14–239, 14–240, 15–028, 15–040, 15–147, 16–075, 17–026, 18–005, 18–013, 18–022, 18–023, 18–057, 18–138, 20–027, 20–029 to 20–031, 20–034, 20–035, 20–068 to 20–070 Clancy Consulting Ltd v Derwent Holdings Ltd [2010] EWHC 762 (TCC) ....................21–068 Clarapede & Co v Commercial Union Association (1883) 32 W.R. 262.............................22–149 Clark Baridon Inc v Merritt Chapman and Scott Corp, 311 F.2d 389 (4th Cir., 1962) ....................................................................................................17–119 Clark Construction Group Inc (2000) VABCA No.5,674, 00–1 BCA at 30,870 ..........................................................13–013, 13–040, 17–007, 17–027 to 17–030, 17–114 to 17–116, 17–121, 17–126, 17–161 Clearwater Constructors Inc v united States, 71 Fed. Cl. 25 (2006) ...................................4–057 Cleveland Bridge UK Ltd v Multiplex Constructions (UK) Ltd [2005] EWHC 2101 (TCC) ..............................................................................................2–087 Cleveland Bridge UK Ltd v Severfield-Rowen Structures Ltd [2012] EWHC 3652 (TCC) ................................................................................. 11–020, App.3 Clough v London & North Western Railway Co (1871–72) L.R. 7 Ex. 26, Ex Chamber .........................................................................................................22–080 Clydebank Engineering & JF Finnegan v Community Housing (1993) 65 B.L.R. 103..........................................................................................21–216, 21–217 Clydebank Engineering & Shipbuilding Co Ltd v Don Jose Ramos Yzquierdo y Castaneda; sub nom. Castaneda v Clydebank Engineering & Shipbuilding Co Ltd [1905] A.C. 6; (1904) 7 F. (H.L.) 77; (1904) 12 S.L.T. 498, HL .............21–223, 21–233, 31–234 Collins/Snoops Associates Inc v CJF LLC 190 Md. App. 146, 988 A 2d 49 (2010) ..............................................................................................17–014 Commercial Contractors Inc v United States, 29 Fed. Cl. 654 (1993) ..............................21–164 Commissioner for Main Roads v Reed and Stuart Pty Ltd (1974) 131 C.L.R. 378 ....................................................................................................12–141 Commissioner of Public Works v Hills; sub nom. Public Works Commissioners v Hills [1906] A.C. 368; (1906) 22 T.L.R. 589, HL ...........21–233, 31–239 Concadoro, The [1916] 2 A.C. 199, PC (Egy) ...................................................................4–057 Continental Consolidated Corp, Eng (1967) BCA Nos 2,743, 2,766, 67–2 BCA (CCH) at 6,624............................................................15–113, 16–128 Copeland BC v Hayton Builders Ltd (No.1) (1998) 14 Const. L.J. 412, QBD ..................13–275 Co-operative Group Ltd v Birse Developments Ltd [2013] EWHC 1790 (TCC)..............22–149 Copthorne Hotel (Newcastle) Ltd v Arup Associates (No.2) (1998) 85 B.L.R. 22, CA (Civ Div) ........................................................................ 3–048, 3–049 Corbell Construction Co (1977) AGBCA 77–129, 74–1 BCA at 1380 ...............................5–161 Corelogic Ltd v Bristol City Council [2013] EWHC 2088 (TCC); 149 Con. L.R. 225................................................................................................22–149 Costain Civil Engineering Ltd v Zanen Dredging and Contracting Co Ltd (No.1) (1996) 85 B.L.R. 77, QBD ...................................................................................22–061 Costain Ltd v Charles Haswell & Partners Ltd [2009] EWHC 3140 (TCC); [2010] TCLR 1; 128 Con. L.R. 154 .......................14–161, 14–197, 14–254, 15–007, 15–170, 18–009, 20–008 Cottman Mechanical Contractors Inc (2000) ASBCA No.48,882 ....................................18–109 Cotton v Wallis [1955] 1 W.L.R. 1168; [1955] 3 All E.R. 373; (1955) 99 S.J. 779, CA........................................................................................12–182, 12–183

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Cour de cassation, 3e civ., 30 January 2008, No. 06–14.641 .............................................25–005 Cour de cassation, chamber mixte, 30 November 2007, No. 06–14.006 ............................25–005 Cour de cassation, 3 civ., 25 February 2009, No. P07–20.096 ..........................................25–005 Crosfield & Sons v Techno Chemical Laboratories Ltd (1913) 29 T.L.R. 379....................22–049 Crown Estate Commissioners v John Mowlem & Co Ltd (1994) 70 B.L.R. 1; 40 Con. L.R. 36; (1994) 10 Const. L.J. 311 ..........................................2–071 Crown House Engineering v Amec Projects (1990) 48 B.L.R. 32; (1990) 6 Const. L.J. 141, CA (Civ Div) ............................................................................21–199 Cutts v Head [1984] Ch. 290; [1984] 2 W.L.R. 349; [1984] 1 All E.R. 597; (1984) 81 L.S.G. 509; (1984) 128 S.J. 117, CA (Civ Div) ...............22–061 D v National Society for the Prevention of Cruelty to Children (NSPCC) [1978] A.C. 171; [1977] 2 W.L.R. 201; [1977] 1 All E.R. 589; 76 L.G.R. 5; (1977) 121 S.J. 119, HL.......................................................13–274, 13–275 D&C Builders Ltd v Rees [1966] 2 Q.B. 617; [1966] 2 W.L.R. 288; [1965] 3 All E.R. 837; (1965) 109 S.J. 971, CA ........................................22–066, 22–074 DEW Inc (1993) ASBCA No.35173, 93–2 BCA at 25,706 ................................................7–093 DM Drainage & Constructions Pty Ltd v Karara Mining Ltd [2014] WASC 170 ................App.3 DSND Subsea Ltd (formerly DSND Oceantech Ltd) v Petroleum Geo Services ASA [2000] B.L.R. 530, QBD ....................................................22–067, 22–068 Dale Construction Co v United States, 168 Ct. Cl. 692 (1964) ........................................19–024 Dalkia Utilities Services Plc v Celtech International Ltd [2006] EWHC 63 (Comm); [2006] 1 Lloyd’s Rep. 599; [2006] 2 P. & C.R. 9 ......................2–142 Danac Inc (1994) ASBCA No.33,394, 94–1 BCA ..............................14–224, 17–151 to 17–159 Danac Inc (1998) 98–1 BCA at 29,454 ..............................................11–131, 17–151 to 17–159 David Builders Inc (1998) ASBCA No.51,262 ...............................................14–051, 14–183 to 14–186, 18–080, 18–110 Davis v Radcliffe [1990] 1 W.L.R. 821; [1990] 2 All E.R. 536; [1990] B.C.C. 472; [1990] B.C.L.C. 647; (1990) 87(19) L.S.G. 43; (1990) 134 S.J. 1078, PC (IoM) ..............................................................................2–192 Davis Contractors v Fareham Urban DC [1956] A.C. 696; [1956] 3 W.L.R. 37; [1956] 2 All E.R. 145; 54 L.G.R. 289; (1956) 100 S.J. 378, HL........................................................................................4–053, 21–206 Dawson (1993) 93–3 BCA at 26,177 .................................................................13–013, 18–108 Dawson Construction Co, GSBCA No.3,998, 75–2 BCA (CCH) at 11,563 ....................................................................................16–081, 16–149, 18–028 De Beers UK Ltd (formerly Diamond Trading Co Ltd) v Atos Origin IT Services UK Ltd [2010] EWHC 3276 (TCC); [2011] B.L.R. 274; 134 Con. L.R. 151; [2010] Info. T.L.R. 448...........................................App.3 Deangrove Pty Ltd v Commonwealth Bank of Australia [2001] F.C.A. 173 ......................13–192 Deluxe Building System v Constructamax Inc, US Dist LEXIS 131296 (D.N.J., September 13, 2013)..................................................................................7–068 Department of Transport v North West Water Authority [1984] A.C. 336; [1983] 3 W.L.R. 707; [1983] 3 All E.R. 273; 82 L.G.R. 207; (1983) 133 N.L.J. 1016; (1983) 127 S.J. 713, HL ........................................ 2–187, 2–188 Derry v Peek; sub nom. Peek v Derry (1889) L.R. 14 App. Cas. 337; (1889) 5 T.L.R. 625, HL ..........................................................................22–079, 22–081 Diamond v PJW Enterprises Ltd. See Gillies Ramsay Diamond v PJW Enterprises Ltd Digicel (St Lucia) Ltd v Cable & Wireless Plc [2008] EWHC 2522 (Ch); [2009] 2 All E.R. 1094................................................................13–122, 13–259, 13–260 Discain Project Services Ltd v Opecprime Development Ltd (No.2). See Discain Project Services Ltd v Opecprime Development Ltd (Bias) Discain Project Services Ltd v Opecprime Development Ltd (Bias); sub nom. Discain Project Services Ltd v Opecprime Development Ltd (No.2) [2001] B.L.R. 285; (2001) 3 T.C.L.R. 17; 80 Con. L.R. 95, QBD......................................22–111

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Dodd v Churton [1897] 1 Q.B. 562, CA .................................................... 6–117, 6–118, 6–126 Domsalla (t/a Domsalla Building Services) v Dyason [2007] EWHC 1174 (TCC); [2007] B.L.R. 348; [2007] T.C.L.R. 5; 112 Con. L.R. 95; [2007] C.I.L.L. 2501................................................................23–045 Donohoe Construction Co (1999) ASBCA Nos 47,310, 47,312............14–169, 15–018, 15–027, 15–168, 15–173 Drinkwater v Caddyrack Pty Ltd, unreported, 1997, Sup. Ct (NSW) .................................6–121 Dubaldo Electric LLC v Montagno Construction Inc (2010) A.C. 30063 ...........17–057, 17–085 Dudley BC v Parsons and Morrin Ltd (1967) Building and Civil Engineering Claims, CA..........12–108 Dunkirk Colliery Co v Lever (1878) L.R. 9 Ch. D. 20, CA ..............................................11–005 Dunlop Pneumatic Tyre Co Ltd v New Garage & Motor Co Ltd [1915] A.C. 79, HL ...................................................................... 7–103, 21–233, 21–236, 25–013 Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No.3) [2012] VSC 99 .......................................................................................................App.3 Dynalectric Co v Whittenberg Construction Co, US Dist. LEXIS 110136 (W.D. Ky, 2010) .............................................................................1–034 E (A Minor) v Dorset CC; Christmas v Hampshire CC (Duty of Care); Keating v Bromley LBC (No.1) [1994] 3 W.L.R. 853; [1994] 4 All E.R. 640; [1995] 1 F.C.R. 1; 92 L.G.R. 484; (1994) 144 N.L.J. 755, CA (Civ Div) ..................2–171 E Scott (Plant Hire) Ltd v British Waterways Board, unreported, 20 December 1982 ..........2–168 ER Mitchell Construction Co Inc (1998) ASBCA 48,745, 98–1 BCA at 29,632 ...............20–048 Ealahan Electric Co (1990) DOTBCA No.1,959, 90–3 BCA (CCH) at 23,177 ....................................................................................15–017, 15–113, 16–149 Earth Tech Industries Ltd (1999) ASBCA No.46,450 .........................................11–119, 13–011 Edenbreath Ltd v CREB Development Ltd [2008] EWHC 570 (TCC) ...........................23–046 Education 4 Ayrshire Ltd v South Ayrshire Council [2009] CSOH 146; 2010 S.L.T. 253; 26 Const LJ 327; [2010] C.I.L.L. 2814; 2009 G.W.D. 36–609 .......................................................... 5–029, 5–46 to 5–051, 5–090, 5–102, 5–116 Edward M Crough Inc v Department of General Services (1990) 572 A.2d 457 .................2–085 Eichleay Corp (1961) BCA at 12,894 ................................................................21–172, 21–185 Elanay Contracts v Vestry [2001] B.L.R. 33; (2001) 3 T.C.L.R. 6 ........................23–012, 23–020 Electronic & Missile Inc (1964) ASBCA 9,031, 64 BCA (CCH) at 4,338 .............11–132, 13–010 Elek v Bar-Tur [2013] EWHC 207 (Ch); [2013] 2 E.G.L.R. 159; [2013] 8 E.G. 107 (C.S.) .................................................................................................21–203 Ellis Don v Parking Authority of Toronto (1978) 28 B.L.R. 98 ...........................17–063, 17–064, 21–138, 21–178 Elmbid Ltd v Burgess [2013] EWHC 1489 (Ch) ...............................................................6–078 Elsley v JG Collins (1978) 83 D.L.R. (3d) 1, Sup. Ct. (Can) ............................................21–251 Elvanite Full Circle Ltd v AMEC Earth & Environmental (UK) Ltd [2013] EWHC 1643 (TCC); [2013] 4 All E.R. 765; [2013] B.L.R. 473; [2013] T.C.L.R. 7; [2013] 4 Costs L.R. 612; [2013] C.I.L.L. 3385 .....................................4–258 Emard Engineering v Linares (in re Linares) 2012 Bankr. LEXIS 5944 (Bankr. N.D. Cal., Dec. 27 2012) ..........................................................................21–216 Emirates Trading Agency LLC v Prime Mineral Exports Private Ltd [2014] EWHC 2104 (Comm); [2015] 1 W.L.R. 1145; [2014] 2 Lloyd’s Rep. 457; [2014] 2 C.L.C. 1; (2014) 164(7615) N.L.J. 19 ................................................................24–073 Enterprise Managed Services Ltd v Tony McFadden Utilities Ltd [2009] EWHC 3222 (TCC); [2011] 1 B.C.L.C. 414; [2010] B.L.R. 89; (2010) Const. L.J. 204 ..........................................................................................23–063 Enterprise Managed Services Ltd v Tony McFadden Utilities Ltd (Costs) [2010] EWHC 1506 (TCC); [2011] Bus. L.R. D11 ...............................................23–063 Environment Agency v Lewin Fryer [2006] EWHC 1597 (TCC); (2006) 22 Const. L.J. 574 .....................................................................................13–251

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Envirotech Corp v Tennessee Valley Authority (1988) 715 F.Supp. 190 (W.D. Ky) ............11–111 Esor Africa (Pty) Ltd/Franki Africa (Pty) Ltd JV and Bombela Civils JV (Pty) Ltd SGHC, case no. 12/7442, unreported .......................................24–069 Essex Electro Engineers Inc v Richard J Danzig, Secretary of the Navy, 224 F.3d 1283 (Fed. Cir., 2000) ..................15–003, 18–023, 18–028, 18–044 Esso Petroleum Co Ltd v Mardon [1976] Q.B. 801; [1976] 2 W.L.R. 583; [1976] 2 All E.R. 5; [1976] 2 Lloyd’s Rep. 305; 2 B.L.R. 82; (1976) 120 S.J. 131, CA (Civ Div) ...................................................................................22–082 European Dynamics SA v HM Treasury [2009] EWHC 3419 (TCC); 128 Con. L.R. 36; [2010] Eu. L.R. 397; (2010) 26 Const. L.J. 191 .........................22–119 Excavation Construction Inc v Washington Metropolitan Area Transit Authority, 624 F.Supp. 582 (DDC, 1984) ..............................................................................21–185 F Garofalo Elec. Co Inc v New York University, 705 NYS.2d 327 (App. Div., 2000) ........................................................................................ 5–092, 5–123 F Whitten Peters, Secretary of the Air Force, 226 F.3d 1307 (2000) .................................15–003 FG Minter Ltd v Welsh Health Technical Services Organisation (1980) 13 B.L.R. 1, CA (Civ Div) .............................................. 4–302, 5–151, 5–155, 21–121 to 21–127, 21–128 FH McGraw & Co v United States, 131 Ct. Cl. 501; 130 F.Supp. 394 (1955) ..................19–024 Farm Assist Ltd (In Liquidation) v Secretary of State for the Environment, Food and Rural Affairs [2008] EWHC 3079 (TCC); [2009] B.L.R. 80; [2009] P.N.L.R. 16; (2009) 25 Const. L.J. 308 ......................................22–068 Farrell Heating, Plumbing, Air Conditioning Contractors Inc v Facilities Development and Improvements Corp, 414 NYS.2d 767 (1979)..............................2–085 Fastrack Contractors Ltd v Morrison Construction Ltd [2000] B.L.R. 168; [2000] B.L.R. 168; 75 Con. L.R. 33; (2000) 16 Const. L.J. 273; [2000] All E.R. (D) .................................................................23–063 Fence Gate Ltd v NEL Construction Ltd (2002) 82 Con. L.R. 41, QBD .........................22–144 Fence Gate Ltd v James R Knowles Ltd (2001) 84 Con. L.R. 206, QBD (TCC) ...........................................................................................23–039, 23–040 Ferguson v John Dawson & Partners (Contractors) Ltd [1976] 1 W.L.R. 1213; [1976] 3 All E.R. 817; [1976] 2 Lloyd’s Rep. 669; 8 B.L.R. 38; [1976] I.R.L.R. 346; (1976) 120 S.J. 603, CA (Civ Div) .....................21–049 Fiona Trust v Privalov [2000] I.L.L.R. 254......................................................................23–039 Fire Security Systems Inc (1991) VABCA No.2,107, 91–2 BCA at 23,743 ........................17–130 Firmont Divisions Dynamics Corp of America (1978) 578 F.2d 1389 (Ct. Cl.) ..............................................................11–111, 11–118, 11–119 Fischbach and Moore International Corp (1971) ASBCA No.14,216 ...............................12–187 Fitzpatrick v Sarcon (No.177) Ltd [2012] NICA 58; [2014] N.I. 35...................................6–035 Flatman and Another, Weddall v Germany, Barchester Healthcare Limited (A2/2011/1168, 3115(B), 3118(A)) [2012] EWCA Civ 745 ...................................22–120 Ford v Beech (1848) 11 Q.B.D. 852..................................................................................2–071 Ford and Co and Bemrose and Sons, Re (1902) H.B.C. (4th edn) 324 .............................12–078 Fortec Constructors v United States, 804 F.2d 141 (Fed. Cir., 1986) .....................7–008, 9–026, 9–035, 15–113, 16–075 Foundation Co of Canada Ltd v United Grain Growers Ltd (1995) 25 C.L.R. (2d) 1 (BC SC); (1996) 62 A.C.W.S. 3d 29 .................... 13–006, 17–090, App.l Foxman Holdings Pty Ltd v NMBE Pty Ltd (1995) 38 NSWLR 615 ...............................22–105 Fred A Arnold Inc (1984) ASBCA No.20,150, 84–3 BCA (CCH) at 17, 517......................9–029 Freeman–Darling Inc (1989) PSBCA No.7,112, 89–2 BCA (CCH) at 21,882 ...............................8–080, 12–186, 15–052, 15–053, 21–023 Fru-Con Construction Corp v United States (2000) 250 F.3d 762 (Fed. Cir.) ...................................11–132, 13–010, 13–013, 17–007, 17–160 GEMS Inc v United States, 59 Fed. Cl. 168 (2003) .........................................................18–086

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GII Industries Inc v New York State Department of Transportation Bankr, LEXIS 3663 (Bankr EDNY30 September 2011) ...................................................19–008 GMTC Tools and Equipment Ltd v Yuasa Warwick Machinery Ltd (1995) 44 Con. L.R. 68; (1995) 11 Const. L.J. 370, CA (Civ Div) ........................14–212, 22–135 Galaxy Builders Inc (2000) ASBCA Nos 50,018 and 50,136 .................................7–009, 7–068, 15–108 to 15–113, 16–033 Gallagher v Hirsch, N.Y. 45 App. Div. 467 (1899)............................................................12–142 Galoo Ltd v Bright Grahame Murray [1994] 1 W.L.R. 1360; [1995] 1 All E.R. 16; [1994] B.C.C. 319, CA (Civ Div) ....................................................20–046 Garnac Grain Co Inc v HMF Faure & Fairclough Ltd; sub nom. Bunge Corp v HMF Faure & Fairclough Ltd [1968] A.C. 1130; [1967] 3 W.L.R. 143; [1967] 2 All E.R. 353; [1967] 1 Lloyd’s Rep. 495; (1967) 111 S.J. 434, HL..........................................................11–005 Gassman Corp (1999) ASBCA Nos 44,975, 44,976 .................................. 7–009, 7–012, 7–093, 9–026, 9–063, 14–181, 15–041, 16–034, 16–060, 16–090, 16–091, 16–092 Gaymark Investments Pty Ltd v Walter Construction Group Ltd (formerly Concrete Constructions Group Ltd) (1999) NTSC 143; (1999) 16 B.C.L. 449..................................... 2–076, 5–044, 5–136 to 5–139, 5–144, 5–147, 6–125, App.3 Geldof Metaalconstructie NV v Simon Carves Ltd [2010] EWCA Civ 667; [2010] 4 All E.R. 847; [2011] 1 Lloyd’s Rep. 517; [2010] 1 C.L.C. 895; [2010] B.L.R. 401; [2010] T.C.L.R. 6; 130 Con. L.R. 37; [2010] C.I.L.L. 2880; [2011] Bus. L.R. D61; Times, June 21, 2010 .....................................7–116 Genesis Housing Association Ltd v Liberty Syndicate Management Ltd; [2013] Bus. L.R. 1399; [2013] 2 C.L.C. 444; [2013] B.L.R. 565; 151 Con. L.R. 81; [2014] Lloyd’s Rep. I.R. 318; [2013] C.I.L.L. 3417; [2013] 42 E.G. 124 (C.S.) .................................................................................................2–153 George Hyman Construction v Washington Metropolitan Area Transit Authority, 621 F.Supp. 898 (DDC, 1985) .....................................21–160, 21–185 George Sollitt Construction Co v United States, No.99–979 C (2005) ...................7–008, 9–019, 9–035, 10–013 Gilbert Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd; sub nom. Modern Engineering (Bristol) Ltd v Gilbert Ash (Northern) Ltd [1974] A.C. 689; [1973] 3 W.L.R. 421; [1973] 3 All E.R. 195; 1 B.L.R. 73; 72 L.G.R. 1; (1973) 117 S.J. 745, HL ........................3–048, 21–235, 21–264 Gillies Ramsay Diamond v PJW Enterprises Ltd; sub nom. Diamond v PJW Enterprises Ltd, 2004 S.C. 430; 2004 S.L.T. 545; [2004] B.L.R. 131; 2004 G.W.D. 12–262, IH (2 Div)................................22–111, 23–019 Girardeau Contractors Inc (1988) EBCA No.5,034, 88–1 BCA (CCH) at 20,391 ............11–111 Gladman Commercial Properties v Fisher Hargreaves Proctor [2013] EWCA Civ 1466; [2014] C.P. Rep. 13; [2014] P.N.L.R. 11; [2013] 47 E.G. 128 (C.S.) ...............................................................................................22–064 Glasgow Inc v Department of Transport, 108 Pa. Comm. 48,529 A.2d 576 (1987) ...........19–072 Glendalough Associated SA v Harris Calnan Construction Co Ltd [2013] EWHC 3142 (TCC); [2014] 1 W.L.R. 1751; [2013] 3 E.G.L.R. 115; [2014] C.I.L.L. 3441 .......................................................................................................22–106 Glenlion Construction Ltd v Guinness Trust (1987) 39 B.L.R. 89; 11 Con. L.R. 126; (1988) 4 Const. L.J. 39, QBD ............... 4–206, 7–095, 16–093, 16–094 Global Time Investments Ltd v Super Keen Investments Ltd [2000] HKCFA 104 ......................App.3 Glynn v Margetson & Co; sub nom. Margetson v Glynn [1893] A.C. 351, HL ........................ 2–071

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Goddard v Nationwide BS [1987] Q.B. 670; [1986] 3 W.L.R. 734; [1986] 3 All E.R. 264; (1986) 83 L.S.G. 3592; (1986) 137 N.L.J. 775; (1986) 130 S.J. 803, CA (Civ Div) ...................................................App.l Golf Landscaping Inc v Century Construction Co, 39 Wash. App. 895; 696 P.2d 590 (1985) ...............................................................21–185 Great Eastern Hotel Co Ltd v John Laing Construction Ltd [2005] EWHC 181 (TCC); [2005] All E.R. 368; 99 Con. L.R. 45 ............... 3–054, 4–209, 4–215, 6–145, 7–007, 9–018, 9–036, 9–080 to 9–083, 9–085, 10–031, 10–083, 15–115, 17–026, 18–133, 20–045, 22–038, App.3 Greater London Council v Cleveland Bridge and Engineering Co Ltd (1986) 34 B.L.R. 50; 8 Con. L.R. 30, CA (Civ Div) ..................................7–065, 11–047, 18–127 Greenwich Millennium Village Ltd v Essex Services Group Plc (formerly Essex Electrical Group Ltd) [2013] EWHC 3059 (TCC); 151 Con. L.R. 1 ...................................................................................................21–009 Grumman Aerospace Corp (on behalf of Rohr Corp) (2001) 01–1 BCA at 31,316 ..........13–041, 19–038, 19–039, 20–064 Grundt v Great Boulder Pty Gold Mines Ltd, (39) 59 CLR 641 ........................................5–096 Grupo Hotelero Urvasco SA v Carey Value Added SL (formerly Losan Hotels World Value Added I SL) [2013] EWHC 1039 (Comm); [2013] Bus. L.R. D45 .......................................................20–120 Gulf Contracting Inc (1990) 90–1 BCA (CCH) at 22,393 .................................15–011, 15–017, 15–113, 15–149, 16–036 H v Schering Chemicals Ltd [1983] 1 W.L.R. 143; [1983] 1 All E.R. 849; (1983) 127 S.J. 88, QBD ...............................................................22–049 H Fairweather & Co Ltd v Wandsworth LBC (1987) 39 B.L.R. 106, QBD ...................................................................14–098, 20–018, 20–019 HOK Sport Ltd (formerly Lobb Partnership Ltd) v Aintree Racecourse Co Ltd [2002] EWHC 3094 (TCC); [2003] B.L.R. 155; 86 Con. L.R. 165; [2003] Lloyd’s Rep. P.N. 148 ..................................................................................2–101 HW Detwiler Co Inc (1989) ASBCA No.35,327, 89–2 BCA (CCH) at 21,612 ................14–230 Hackney BC v Doré [1922] 1 K.B. 431, KBD ...................................................................4–055 Hadley v Baxendale, 156 E.R. 145; (1854) 9 Ex. 341, Ex Ct ..............................21–003, 21–005, 21–007, 21–123, 21–247 Halifax Life Ltd v Equitable Life Assurance Society; [2007] 2 All E.R. (Comm) 672; [2007] 1 Lloyd’s Rep. 528; (2007) 23 Const. L.J. 373; [2007] 17 E.G. 172 (C.S.); [2007] Bus. L.R. D101 ..................22–103 Hall v Van Der Heiden [2010] EWHC 586 (TCC) ............................................................4–172 Hall (Inspector of Taxes) v Lorimer [1994] 1 W.L.R. 209; [1994] 1 All E.R. 250; [1994] S.T.C. 23; [1994] I.C.R. 218; [1994] I.R.L.R. 171; 66 T.C. 349; [1993] S.T.I. 1382; (1993) 90(45) L.S.G. 45; (1993) 137 S.J.L.B. 256, CA (Civ Div) ......................................21–049 Hamlin v Edwin Evans (A Firm) (1996) 80 B.L.R. 85; 52 Con. L.R. 106; (1997) 29 H.L.R. 414; [1996] P.N.L.R. 398; [1996] 2 E.G.L.R. 106; [1996] 47 E.G. 141; [1996] E.G. 120 (C.S.); (1996) 93(27) L.S.G. 29; (1996) 140 S.J.L.B. 167; [1996] N.P.C. 110, CA (Civ Div) ...............................................22–062 Hammersmatch Properties (Welwyn) Ltd v Saint-Gobain Ceramics & Plastics Ltd [2013] EWHC 2227 (TCC); [2013] B.L.R. 554; 149 Con. L.R. 147; [2013] 5 Costs L.R. 758; [2013] 3 E.G.L.R. 123; (2013) 163(7571) N.L.J. 20 .................... 22–120 Haney v United States, 676 F.2d 584 (Ct. Cl., 1983) ............................................7–068, 15–011

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Hardesty & Hanover International LLC v Abigroup Contractors Pty Ltd [2010] SASC 44 .........22–105 Hardypond Construction v University of Maine System, Ne Super, LEXIS 48 (May 6, 2013) ......................................................................................22–115 Hart v Smith [2009] EWHC 2223 (TCC); (2009) 159 N.L.J. 1296 .................................22–112 Havant BC v South Coast Shipping Ltd (No.1) (1998) 14 Const. L.J. 420, QBD ...............7–169 Hawl Mac Construction v Campbell River (1985) 60 B.C.L.R. 57; (1985) 1 Const. L.J. 370, Sup. Ct (BC) .................................................................. 6–079, 6–138 Heat Exchangers, ASBCA No.8,705, 63–1 BCA (CCH) at 3,881.....................................16–127 Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] A.C. 465; [1963] 3 W.L.R. 101; [1963] 2 All E.R. 575; [1963] 1 Lloyd’s Rep. 485; (1963) 107 S.J. 454, HL.................................... 2–171, 2–177, 2–192, 22–079, 22–081, 22–082 Henderson v Merrett Syndicates Ltd (No.1); sub nom. Gooda Walker Ltd v Deeny; McLarnon Deeney v Gooda Walker Ltd; Arbuthnott v Fagan; Hallam-Eames v Merrett Syndicates Ltd; Hughes v Merrett Syndicates Ltd; Feltrim Underwriting Agencies Ltd v Arbuthnott; Deeny v Gooda Walker Ltd (Duty of Care) [1995] 2 A.C. 145; [1994] 3 W.L.R. 761; [1994] 3 All E.R. 506; [1994] 2 Lloyd’s Rep. 468; [1994] C.L.C. 918; (1994) 144 N.L.J. 1204, HL............ 2–173, 2–177 Henry v News Group Newspaper Ltd (2013) [2013] EWCA Civ 19; [2013] 2 All E.R. 840; [2013] C.P. Rep. 20; [2013] 2 Costs L.R. 334; (2013) 163 N.L.J. 140; (2013) 157(5) S.J.L.B. 31 ..................................................22–120 Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [1999] B.L.R. 123; 64 Con. L.R. 32, QBD (TCC) ..................................... 4–320, 5–041, 12–109 Henry Boot Construction Ltd v Alstom Combined Cycles Ltd; sub nom. Henry Boot Construction v Alston Combined Cycles; Henry Boot Construction Ltd v GEC Alstom Combined Cycles Ltd [2000] C.L.C. 1147; [2000] B.L.R. 247; (2000) 2 T.C.L.R. 735; 69 Con. L.R. 27; (2000) 16 Const. L.J. 400; (2000) 97(17) L.S.G. 32; (2000) 144 S.J.L.B. 204, CA (Civ Div) ................................................................................ 4–273, 4–277, 12–109 Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] EWCA Civ 814; [2005] 1 W.L.R. 3850; [2005] 3 All E.R. 832; [2005] 2 C.L.C. 63; [2005] B.L.R. 437; 101 Con. L.R. 52; (2005) 102(30) L.S.G. 28 .....................................................................................9–109, 14–025 Henry Boot Construction Ltd v Central Lancashire New Town Development Corp (1980) 15 B.L.R. 1, QBD.............................................4–174, 18–002 Henry Boot Construction Ltd v GEC Alstom Combined Cycles Ltd. See Henry Boot Construction Ltd v Alstom Combined Cycles Ltd Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 Con. L.R. 32; (1999) C.I.L.L. 1527, QBD ........................................... 4–209, 5–041, 6–050, 6–053, 9–022, 9–023, 9–032, 10–040, 15–003, 16–131, 18–078, 18–079, App.3 Heron II, The. See Koufos v C Czarnikow Ltd Heskell v Continental Express Ltd [1950] 1 All E.R. 1033; (1949–50) 83 Ll. L. Rep. 438; [1950] W.N. 210; (1950) 94 S.J. 339, KBD ...........20–043, 20–045 Hewitt Construction Co, Eng BCA Nos 4,596, 4,597, 83–2 BCA I 16,816 at 83,643 (1983) ....................................................................19–072 Hick v Raymond & Reid; sub nom. Hick v Rodocanachi; Pantland Hick v Raymond & Reid [1893] A.C. 22; [1891–4] All E.R. Rep. 491, HL........................................................... 6–154, 6–155, 6–163, 6–173 Hickman & Co v Roberts [1913] A.C. 229, HL .................................................................6–070 Higginson Securities (Developments) Ltd v Hudson [2012] EWHC 1052 (TCC); [2012] T.C.L.R. 6................................................................22–122

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Highgrade Traders Ltd, Re [1984] B.C.L.C. 151, CA (Civ Div) .......................................13–271 Hoel-Steffen Construction Co v United States, 456 F.2d 760 (Ct. Cl., 1972) ......... 5–158, 5–159 Holder Construction Group v Georgia Tech Facilities Inc, WL 2807182 (Ga. Ct. App. 2006) ...........................................................................4–057 Holland Dredging (UK) Ltd v Dredging & Construction Co (1987) 37 B.L.R. 1; 14 Con. L.R. 30, CA (Civ Div) ............................................................7–168 Holland Hannen & Cubitts (Northern) Ltd v Welsh Health Technical Services Organisation (1981) 18 B.L.R. 80 ..............................................................6–075 Holme v Guppy (1838) 3 M. & W. 387 .......................................... 6–077, 6–116, 6–117, 18–071 Honeywell Control Systems Ltd v Multiplex Constructions (UK) Ltd [2007] EWHC 390 (TCC) ................................................................................................2–087 Hoppe v Titman [1996] 1 W.L.R. 841; (1996) 140 S.J.L.B. 58, CA (Civ Div) ...................22–063 Horace Holman Group Ltd v Sherwood International Group Ltd [2001] All E.R. (D) 83 (Nov) ..............................................................................17–074, 17–085 Hosier & Dickinson v P&M Kaye. See P&M Kaye Ltd v Hosier & Dickinson Ltd Hounslow LBC v Twickenham Garden Developments Ltd [1971] Ch. 233; [1970] 3 W.L.R. 538; [1970] 3 All E.R. 326; 7 B.L.R. 81; 69 L.G.R. 109; (1970) 114 S.J. 603, Ch D.....................................6–070, 16–089, 18–129 Housing Authority of City of Dallas, Texas v Hubbell-Hubbard Associates Contractors, 325 SW.2d 880 (Tex., 1959) ................................21–277, 21–278 Houston Ready-Cut House Co v United States, 119 Ct. Cl. 120; F.Supp. 629 (1951) ..........19–024 How Engineering Services Ltd v Lindner Ceilings Floors Partitions Plc [1999] 2 All E.R. (Comm) 374; 64 Con. L.R. 67, QBD .......................................22–157, 22–158 Hsin Chong Construction (Asia) Ltd v Henble Ltd [2006] HKCFI 940; (2005) HCCT 000023A/2005, August 18, 2006 .....................4–271, 5–073, 5–074, 5–148, App.3 Humber Oil Terminals Trustee Ltd v Harbour and General Works (Stevin) (1991) 59 B.L.R. 1; 32 Con. L.R. 78; (1991) 7 Const. L.J. 333, CA (Civ Div) ............4–145 to 4–147 Hughes Bros Pty Ltd v Minister for Public Works, unreported, 17 August 1994, BC 9402885.................................................................................22–105 Hunt v Optima (Cambridge) Ltd [2013] EWHC 681 (TCC); 148 Con. L.R. 27 ................2–166 Hunte v E Bottomley & Sons Ltd [2007] EWCA Civ 1168; [2008] C.P. Rep. 3 ................13–171 Hussey v Eels [1990] 2 Q.B. 227; [1990] 2 W.L.R. 234; [1990] 1 All E.R. 449; [1990] 19 E.G. 77; [1989] E.G. 168 (C.S.); (1990) 140 N.L.J. 53, CA (Civ Div) .................................................................................11–006 IBM United Kingdom Ltd v Rockware Glass Ltd [1980] F.S.R. 335, CA (Civ Div) ..........11–037 ICI Plc v Bovis Construction Ltd (1992) 8 Const. L.J. 293 ................................14–214, 14–215, 19–043, 19–044, 19–053 Igloo Regeneration (General Partner) Ltd v Powell Williams Partnership [2013] EWHC 1718 (TCC) .................................................................2–166 Ikarian Reefer, The. See National Justice Compania Naviera SA v Prudential Assurance Co Ltd Imperial Gas Light and Coke Co v Broadbent, 11 E.R. 239; (1859) 7 H.L. Cas. 600, QB..........2–191 Inforex v United States, 223 Ct. Cl. 633 (1980)...............................................................11–097 Inframatrix Investments Ltd v Dean Construction Ltd [2012] EWCA Civ 64; [2012] 2 All E.R. (Comm) 337; 140 Con. L.R. 59; (2012) 28 Const. L.J. 438; [2012] C.I.L.L. 3145 ..............................................................21–264 Integrity Management International Inc (1975) ASBCA No.18, 289, 75–1 BCA at 11,235 .....................................................................................12–193 Interstate General Government Contractors Inc v West, 12 F.3d 1053 (Fed. Cir., 1993) .............................................................7–093, 21–150, 21–158, 21–185 Investors Compensation Scheme Ltd v West Bromwich BS (No.2) [1999] Lloyd’s Rep. P.N. 496, Ch D ....................................................................... 2–071, 2–072 Ipex ITG Pty Ltd v Melbourne Water Corp (No.3) [2006] VSC 83 ....................14–011, 19–003, 19–057 to 19–059

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J, Re [1990] 1 F.C.R. 193 ...............................................................................................22–045 J Crosby & Sons Ltd v Portland Urban DC (1967) 5 B.L.R. 121, QBD.............5–160, 19–025 to 19–027 J&J Fee Ltd v Express Lift Co (1993) 34 Con. L.R. 147; (1994) 10 Const. L.J. 151, QBD...........6–165 JA Jones Construction Co, Eng BCA (1972) No.3,035 at 3,222 ............................. 9–026, 9–029 JA Jones Construction Co v City of Dover (1997) 372 A.2d 540 ........................................2–085 JC & Sons Ltd v Southwark LBC (1981) Times, April 16 ...................................21–047, 21–048 J-Corp Pty Ltd v Mladenis and Graham Athletic Pty Ltd [2009] WASCA 157 ..............................................................................21–242, 21–244, 21–245 JD Hedin Construction Co v United States, 171 Ct. Cl. 86, 347 F.2d 235 (1965) .............19–072 JD Wetherspoon Plc v Commissioners for Her Majesty’s Revenue and Customs [2007] UKSPC SPC 00657 .............................................................21–100 JE Dunn Construction Co (2000) GSBCA 14,477, 00–1 BCA, para.30,806.....................12–019 JF Finnegan Ltd v Sheffield City Council (1988) 43 B.L.R. 124, QBD...............21–146, 21–148, 21–165, 31–169, 21–177, 21–178 JP Morgan Bank (formerly Chase Manhattan Bank) v Springwell Navigation Corp [2008] EWHC 1186 (Comm) .....................................................21–264 JW Bateson Co Inc (1984) ASBCA No.27,491, 84–3 BCA at 17,566 .................14–169, 15–018, 16–075 JW Mertz (1959) IBCA 64, 59–1 BCA (CCH) at 2,086 ....................................................5–090 Jackson v Marley Davenport Ltd [2004] EWCA Civ 1225; [2004] 1 W.L.R. 2926; [2005] C.P. Rep. 8; [2005] B.L.R. 13; [2005] P.I.Q.R. P10; [2005] 1 E.G.L.R. 103; (2004) 101(38) L.S.G. 29; (2004) 148 S.J.L.B. 1121 ....................................................................................13–272, 22–028 Jackson Construction Co Inc v United States, Case No.97–31C, September 15, 2004.................................................................................21–150, 31–164 Jarvis & Sons Ltd v Westminster Corp [1970] 1 W.L.R. 637; [1970] 1 All E.R. 943; 68 L.G.R. 470, HL ........................................................................25–017 Jeancharm Ltd (t/a Beaver International) v Barnet Football Club Ltd [2003] EWCA Civ 58; [2003] All E.R. 69; 92 Con. L.R. 26 .........................................................11–190, 21–238 Jenson v Faux [2011] EWCA Civ 423; [2011] 1 W.L.R. 3038; [2011] T.C.L.R. 4; [2011] H.L.R. 30; [2011] 2 P. & C.R. 11; [2011] C.I.L.L. 3025; [2011] N.P.C. 42; Times, April 26, 2011 ...........................................2–165 Jerram Falkus Construction Ltd v Fenice Investmetns Inc [2011] EWHC 1935 (TCC); [2011] B.L.R. 644; 138 Con. L.R. 21; [2011] C.I.L.L. 3072s .....................................................................................................22–112 John Barker Construction Ltd v London Portman Hotel Ltd (1996) 83 B.L.R. 31; 50 Con. L.R. 43; (1996) 12 Const. L.J. 277, QBD ................ 2–086, 2–092, 2–093, 3–016, 6–046, 6–056, 6–058 to 6–062, 6–065, 6–069, 6–135, 6–145, 7–074, 7–108, 7–109, 10–075, 11–067, 11–159, 11–168, 12–020, 12–096 to 12–098, 12–103, 12–160, 12–164, 12–185, 13–196, 14–005, 14–010, 14–178, 14–179, 14–180, 14–215, 15–003, 15–017, 15–090, 15–100, 15–101, 18–009, 18–027, 20–008, 22–038 John Doyle Construction Ltd v Laing Management (Scotland) Ltd; sub nom. Laing Management (Scotland) Ltd v John Doyle Construction Ltd, 2004 S.C. 713; 2004 S.C.L.R. 872; [2004] B.L.R. 295; (2004) 20 Const. L.J. 477; [2004] C.I.L.L. 2135; 2004 G.W.D. 20–434, IH (Ex Div) ................................................. 1–014, 18–111, 18–112, 19–001, 19–065 to 19–067, 19–069, 19–072, 20–033, 20–055, 20–069 John E Green Plumbing and Heating v Turner Construction Co, F.2d 965 (6th Cir., 1984) 8 CCH para.478............................................21–274 to 21–276

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John Grimes Partnership Ltd v Gubbins [2013] EWCA Civ 37; [2013] B.L.R. 126; 146 Con. L.R. 26; [2013] P.N.L.R. 17; [2013] 2 E.G.L.R. 31 ................ 21–214 John Holland Construction & Engineering Pty Ltd v Kvaerner RJ Brown Pty Ltd (1996) 82 B.L.R. 83, Sup. Ct (Vic.) ...........................................19–022 John Jarvis Ltd v Rockdale Housing Association (1986) 36 B.L.R. 48; 10 Con. L.R. 51; (1987) 3 Const. L.J. 24, CA (Civ Div).........................................11–211 John Mowlem & Co Plc v Eagle Star Insurance Co Ltd (No.1) (1992) 62 B.L.R. 126; 33 Con. L.R. 131, QBD....................................................... 3–051, 4–045 John Mowlem & Co Plc v Eagle Star Insurance Co Ltd (No.2) (1995) 44 Con. L.R. 134; [1995] N.P.C. 64, CA .................................................................App.3 John Murphy Construction Co, AGBCA No.418, 79 1 BCA (CCH) at 13,836 .................12–192 John T Jones Contracting (1996) ASBCA Nos 48,303 and 48,593 ...................................15–102 Jolliffe v Exeter Corp; sub nom. Jolliffe v Exeter City Council [1967] 1 W.L.R. 993; [1967] 2 All E.R. 1099; (1967) 131 J.P. 421; 65 L.G.R. 401; (1967) 18 P. & C.R. 343; [1967] R.V.R. 413; (1967) 111 S.J. 414, CA (Civ Div) ..........................................................................2–187 Jones v St John’s College, Oxford (1870–71) L.R. 6 Q.B. 115 ............................................App.3 Jose v MacSalvors Plant Hire Ltd; sub nom. MacSalvors Plant Hire Ltd v Brush Transformers Ltd [2009] EWCA Civ 1329; [2010] T.C.L.R. 2; [2010] C.I.L.L. 2809............................................................................2–168 Joseph Sternberger, Trustee in Bankruptcy for Spenco Inc v United States, 401 F.2d 1012 (1968).............................................9–072, 19–008, 20–054 KA & SBM Feakins Ltd v Dover Harbour Board (1998) 10 Admin. L.R. 665; (1998) 95(36) L.S.G. 31; (1998) 142 S.J.L.B. 226, QBD .........2–182 K/S Lincoln v CB Richard Ellis Hotels Ltd [2010] EWHC 1156 (TCC); [2010] P.N.L.R. 31; (2011) 27 Const. L.J. 50 .....................................2–166 Kane Constructions Pty Ltd v Sopov [2005] VSC 237; (2006) B.C.L. 92; (2007) 23 Const. L.J. 145..........................................................6–135, 21–202 Kansas City Bridge Co v Kansas City Structural Sheet Co, SW.2d 370 (Mo., 1980) .........21–152 Kato Corp (2006) ASBC 51462, 06–2 BCA p.33293.........................................................6–067 Kemble v Farren (1829) 6 Bing. 141 ...............................................................................21–232 Kemron Environmental Services Corp (1999) ASBCA 51,536 ..............7–009, 9–024, 9–063, 15–040 Kier Regional Ltd (t/a Wallis) v City & General (Holborn) Ltd [2008] EWHC 2454 (TCC); [2009] B.L.R. 90; (2009) 25 Const. L.J. 36; [2008] C.I.L.L. 2639 .....................................................2–142; 23–063 Kinetic Builders Inc (1999) ASBCA Nos 51,012 and 51,611 ..............................14–013, 15–003 Kitsons Insulation Contractors Ltd v Balfour Beatty Buildings Ltd (1991) 8–C.L.D.–05–04, QB............................................................................21–208 to 21–210 Kitsons Sheet Metal v Matthew Hall Mechanical & Electrical Engineers (1989) 47 B.L.R. 82 ...................................................... 7–060, 7–175, 21–267 Knightley v Johns [1982] 1 W.L.R. 349; [1982] 1 All E.R. 851; [1982] R.T.R. 182; (1982) 126 S.J. 101, CA (Civ Div) ......................................................14–004 Koufos v C Czarnikow Ltd (The Heron II); sub nom. C Czarnikow Ltd v Koufos (The Heron II) [1969] 1 A.C. 350; [1967] 3 W.L.R. 1491; [1967] 3 All E.R. 686; [1967] 2 Lloyd’s Rep. 457; (1967) 111 S.J. 848, HL .......................... 17–064 Kvaerner Construction Ltd v Egger (Barony) Ltd, unreported, 2000, QBD ........................................... 7–008, 9–015, 9–017, 9–023, 17–026 L&C Europa Contracting (2004) ASBCA No.52,848 ..............................9–027, 13–012, 15–042 Laburnum Construction Corp v United States, 163 Ct. Cl. 339, F.2d 451 (1964) ........................7–085, 18–108, 21–041, 21–085, 21–139 Lacaba Ahden Australia Pty Ltd v Bucyrus (Australia) Pty Ltd [2005] QSC 335 .................................................................................................19–015, 19–016

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Lafarge (Aggregates) Ltd v Newham LBC [2005] EWHC 1337 (Comm); [2005] 2 Lloyd’s Rep. 577 ......................................................... 5–106 to 5–109 Lamb Engineering & Construction Co (1997) EBCA 97–2 BCA 29,207 ..................................13–170, 14–182, 17–127, 17–149, 17–150 Lane-Verdugo (1973) VABCA Nos 16,327, 16,328, 73–2 BCA (CCH) at 10,271 .............15–113 Lebeaupin v Richard Crispin & Co [1920] 2 K.B. 714; (1920) 4 Ll. L. Rep. 122, KBD .................................................................... 4–054, 4–055, 4–056 Lee Masonry Inc v City of Franklin, Tennessee, No.M2008–02844–COA–R3–CV (Tenn. Ct. App., 2010) 3–029, ............. 3–038, 5–030 to 5–032, 5–070, 5–091 Leedsford Ltd v City of Bradford (1956) 24 B.L.R. 45 ....................................................12–188 Leighton Contractors (Asia) Ltd v Stelux Holdings Ltd [2004] HKCFI 822; (2007) 23 Const. L.J. 70 ........................... 4–209, 9–036, 14–004, 14–071 to 14–073, 15–114, 18–089, 18–132, App.3 Lester & Huges v White [1992] N.Z.L.R. 483....................................................................2–180 Lewis Jorge Construction Management Inc v Pomona Unified School District, 34 Cal.4th 960 (2004) ..........................................................................................21–140 Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd [1918] A.C. 350, HL .............................................................................14–002, 20–003, 20–046 Liberty Mercian Ltd v Cuddy Civil Engineering Ltd [2013] EWHC 2688 (TCC); [2014] 1 All E.R. (Comm) 761; [2014] B.L.R. 179; [2013] T.C.L.R. 9; 150 Con. L.R. 124 ..................................................2–092 Liberty Syndicate Management Ltd v Campagna Ltd [2011] EWHC 209 (TCC); (2011) 27 Const. L.J. 275 ........................................................2–168 Liebe v Molloy (1906) 4 C.L.R. 347 .....................................................12–168, 12–169, 12–170 Liesbosch, The; sub nom. Owner of the Liesbosch v Owners of the Edison; Liesbosch Dredger v SS Edison [1933] A.C. 449; [1933] All E.R. Rep. 144; (1933) 45 Ll. L. Rep. 123, HL ..................................................21–069 Lilly Ames Co Inc v United States, 293 F.2d 630 (Ct. Cl., 1961) .....................................21–190 Lim Ting Guan v Goodlink Enterprise [2004] 25 Const. L.J. 52 ......................................21–224 Linden Gardens Trust Ltd v Lenesta Sludge Disposal Ltd; St Martins Property Corp Ltd v Sir Robert McAlpine & Sons [1994] 1 A.C. 85; [1993] 3 W.L.R. 408; [1993] 3 All E.R. 417; 63 B.L.R. 1; 36 Con. L.R. 1; [1993] E.G. 139 (C.S.); (1993) 143 N.L.J. 1152; (1993) 137 S.J.L.B. 183, HL ................................................................. 2–064 Lingke v Christchurch Corp [1912] 3 K.B. 595, CA ..........................................................2–191 Lipman Pty Ltd v Emergency Services Superannuation Board [2010] NSWSC 710.............22–105 Lisbon Contractors Inc v United States, 828 F.2d 759 (1987) ..........................................17–005 Lissack v Manhattan Loft Corp Ltd [2013] EWHC 128 (Ch) ..........................................21–192 Livingstone v Rawyards Coal Co (1879–80) L.R. 5 App. Cas. 25, HL ..............................21–001 Locke v United States, 151 Ct. Cl. 262; 283 F.2d 521 (1960) ..........................................19–024 London & Amsterdam Properties v Waterman Partnership [2003] EWHC 3059 (TCC); [2004] B.L.R. 179; 94 Con. L.R. 154; (2004) 20 Const. L.J. 215 ................................................................................................23–008 London Fire and Emergency Planning Authority (LFEPA) v Halcrow Gilbert & Co Ltd; Halcrow Gilbert & Co Ltd v Jones [2004] EWHC 2340 (TCC); [2005] B.L.R. 18 .................................................................13–271 London Steam Stone Saw Mills v Lorden (1900) H.B.C. (4th edn) 301 ...........................12–082 London Underground Ltd v Kenchington Ford Plc, 63 Con. L.R. 1; [1999] C.I.L.L. 1452, QBD ................................................................................15–001, 22–054 Lord Elphinstone v Monkland Iron & Coal Co Ltd; sub nom. Lord Elphinstone v Markland Iron & Coal Co Ltd (1886) L.R. 11 App. Cas. 332, HL....................................................................................21–233

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Lubenham Fidelities & Investment Co Ltd v South Pembrokeshire DC, 33 B.L.R. 39; 6 Con. L.R. 85; (1986) 2 Const. L.J. 111, CA (Civ Div) ......11–211, 21–132 Luria Brothers & Co v United States, 369 F.2d 701 (Ct. Cl., 1996)..................................17–009 M v Newham LBC. See X (Minors) v Bedfordshire CC M&J Polymers Ltd v Imerys Minerals Ltd[2008] EWHC 344 (Comm); [2008] 1 All E.R. (Comm) 893; [2008] 1 Lloyd’s Rep. 541; [2008] 1 C.L.C. 276; 117 Con. L.R. 88; [2008] C.I.L.L. 2575; [2008] Bus. L.R. D68; Times, April 2, 2008 .............................................................................25–013 MCI Constructors (1996) DCCAB No.D–924, WL 331,212 ..............................18–033, 18–126 MJ Gleeson (Contractors) Ltd v Hillingdon LBC (1970) 215 E.G. 165..............................7–107 MJ Gleeson Group Plc v Axa Corporate Solutions Assurance SA [2013] Lloyd’s Rep. I.R. 677, QBD (TCC) .........................................................................2–153 McAlpine Humberoak Ltd v McDermott International Inc (No.1) (1992) 58 B.L.R. 1; 28 Con. L.R. 76; (1992) 8 Const. L.J. 383, CA (Civ Div) .......................................2–118, 13–163, 14–124, 15–003, 17–026, 19–043, 21–029, 21–215, 22–005, 22–041 McAlpine Humberoak Ltd v McDermott International Inc (No.2) (1993) 58 B.L.R. 61, CA (Civ Div) .................................................................................14–078, McCabe v British American Tobacco Australia Services Ltd [2002] VSC 73 .....................13–248 MacEachern v Monaghan (2001) PESCTD 81 ...............................................................12–016 McGuire & Hester v City & County of San Francisco, Cal.App. 2d 186; 247 F.2d 934 (1952) ...................................................................21–281, 21–282 Mackay v Dick (1880–81) L.R. 6 App. Cas. 251, HL .........................................................8–081 McMahon Construction Pty v Crestwood Estates [1971] W.A.R. 162 .................................6–122 McNutt Construction Co (1985) EBCA No.4,724, 85–3 BCA (CCH) at 18,397 ...............................................................11–111, 11–132, 13–010 Macob Civil Engineering Ltd v Morrison Construction Ltd [1999] C.L.C. 739; [1999] B.L.R. 93; (1999) 1 T.C.L.R. 113; 64 Con. L.R. 1; [1999] 3 E.G.L.R. 7; [1999] 37 E.G. 173; (1999) 15 Const. L.J. 300; (1999) 96(10) L.S.G. 28, QBD...................................22–108, 22–111 MacSalvors Plant Hire Ltd v Brush Transformers Ltd. See Jose v MacSalvors Plant Hire Ltd Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184 ..................................App.3 Malhotra v Dhawan [1997] EWCA Civ 1096; [1997] 8 Med. L.R. 319 ............................13–244 Manuel Bros Inc v United States, 55 Fed. Cl. 8 (2002) ......................................................7–068 Mariner International Hotels Ltd v Atlas Ltd [2004] HKCFI 630 ....................................13–253 Maron Constr. Co Inc (1998) GSBCA No.13625, 98–1 BCA, para.29,685 ........................7–093 Maryland Sanitary Manufacturing Corp v United States, 119 Ct. Cl. 100 (1951) .............17–119 Masons (A Firm) v WD King Ltd [2003] EWHC 3124 (TCC); 92 Con. L.R. 144....................................... 2–056, 2–077, 7–002, 7–103, 10–046, 10–094, 11–059, 11–189, 11–201 to 11–203, 11–209, 11–210, 11–212, 11–213, 12–025, 21–009, 21–228, 21–231, 21–251 Massman Construction Co v Tennessee Valley Authority, 769 F.2d 1114 (6th Cir., 1985) .............................................................................21–160 Matsoukis v Priestman & Co [1915] 1 K.B. 681, KBD .......................................... 4–054, 4–055 Mayor, The, Aldermen and Burgesses of Hounslow v Twickenham Garden Developments Ltd. See Hounslow LBC v Twickenham Garden Developments Ltd Mel Williamson Inc v United States, 229 Ct. Cl. 846 (1982) ............................................14–117 Melka Marine Inc v United States, 187 F.3d 1370 (1999) ................................................21–150 Menolly Investments 3 Sarl v Cerep Sarl [2009] EWHC 516 (Ch); 125 Con. L.R. 75 ..........................................................................................................6–044

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Merton LBC v Stanley Hugh Leach Ltd (1985) 32 B.L.R. 51; (1986) 2 Const. L.J. 189, Ch D .................... 2–082, 2–083, 2–084, 4–211 to 4–214, 4–223, 5–025 to 5–027, 5–044, 5–046, 5–139, 6–076, 9–036, 14–049, 18–105, 19–027, 19–068 Meyer v Gilmer (1899) N.Z.L.R. 129 .............................................................................12–174 Michael v Andrews (1925) 2 Q.J.P.R. 30 .........................................................................12–169 Micallef v Malta (17056/06) (2010) 50 E.H.R.R. 37; 28 B.H.R.C. 31 ..............................23–020 Michael Salliss & Co Ltd v Calil (1987) 13 Con. L.R. 68; (1988) 4 Const. L.J. 125, QBD ...........2–167 Micklefield v SAC Technology Ltd [1990] 1 W.L.R. 1002; [1991] 1 All E.R. 275; [1990] I.R.L.R. 218, Ch D ..............................................................6–124 Mid Essex Hospital Services NHS Trust v Compass Group UK and Ireland Ltd (t/a Medirest); sub nom. Compass Group UK and Ireland Ltd (t/a Medirest) v Mid Essex Hospital Services NHS Trust [2013] EWCA Civ 200; [2013] B.L.R. 265; [2013] C.I.L.L. 342 .........................................2–068 Mid Glamorgan CC v J Devonald Williams & Partner, 29 Con. L.R. 129; (1992) 8 Const. L.J. 61, QBD .....................................19–043, 19–045, 19–046, 19–049, 19–050, 19–060, 19–068 Midland Expressway Ltd v Carillion Construction Ltd (No.2) [2005] EWHC 2963 (TCC); 106 Con. L.R. 154 ................................................................3–070 Mies Equipment Inc v NCI Building Systems LP, 167 F.Supp. 2d 1077 (D. Minn., 2001).........6–113 Miller v London CC; sub nom. Miller v LCC [1934] All E.R. 657; (1934) 50 T.L.R. 479 ..........6–080 Minmar Builders Inc (1972) GSBCA No.3,430, 72–2 BCA (CCH) at 9,599 ........... 8–012, 14–229 Minor v Minor, 863 S.W.2d 51 (Tenn. Ct. App., 1993) ......................................................6–165 Mirant Asia-Pacific Construction (Hong Kong) Ltd v Ove Arup & Partners International Ltd [2007] EWHC 918 (TCC); [2007] C.I.L.L. 2480; [2008] Bus. L.R. D1 ........................ 1–012, 1–029, 4–209, 7–029, 10–004, 13–244, 13–245, 14–004, 14–010, 14–190, 14–193, 14–194, 14–196, 15–007, 15–010, 15–167, 15–170, 15–173, 18–009, 20–008, 21–118, App.3 Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537 ..........................................22–120 Mitchell v Pacific Dawn Pty Ltd [2003] QSC 086 ..............................................22–073, 22–074 Mithen Ltd v Lighting Technology Projects Ltd [2001] ADJCS 04/09 (TCC)...................23–050 Mitsui Construction Co Ltd v Attorney General of Hong Kong (1986) 33 B.L.R. 1; 10 Con. L.R. 1; [1987] H.K.L.R. 1076; (1986) 2 Const. L.J. 133, PC (HK) ..................................................................................12–190 Modern Engineering (Bristol) Ltd v Gilbert Ash (Northern) Ltd. See Gilbert Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd Monarch Steamship Co Ltd v A/B Karlshamns Oljefabriker; sub nom. A/B Karlshamns Oljefabriker v Monarch Steamship Co Ltd [1949] A.C. 196; [1949] 1 All E.R. 1; (1948–49) 82 Ll. L. Rep. 137; 1949 S.C. (H.L.) 1; 1949 S.L.T. 51; 65 T.L.R. 217; [1949] L.J.R. 772; (1949) 93 S.J. 117, HL ........................................................................20–046 Montgomery-Ross-Fisher Inc (1984) PSBCA Nos 1,033, 1,096, 84–2 BCA (CCH) at 17,492.......................................................................16–041 Moorcock, The (1889) L.R. 14 P.D. 64; [1886–90] All E.R. Rep. 530, CA ..........................2–083 Morgan Grenfell (Local Authority Finance) Ltd v Sunderland BC and Seven Seas Dredging Ltd (No.1) (1991) 49 B.L.R. 31; (1990) 21 Con. L.R. 122; (1991) 7 Const. L.J. 110, QBD ....................................21–130, 21–131 Morganti National Inc, 36 Fed. 452 (2002) .....................................................................18–028 Morris Homes (West Midlands) Ltd v Keay [2013] EWHC 932 (TCC); [2013] B.L.R. 370; 152 Con. L.R. 105 ...................................11–013

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Morrison-Knudsen Co v British Columbia Hydro and Power Authority (No.2) (1978) 85 D.L.R. (3d) 186, CA (BC)..................11–096, 11–099, 11–103, 12–006, 21–201 Motherwell Bridge Construction Ltd (t/a Motherwell Storage Tanks) v Micafil Vakuumtechnik; Motherwell Bridge Construction Ltd (t/a Motherwell Storage Tanks) v Micafil AG (2002) 81 Con. L.R. 44; (2002) C.I.L.L. 1913, QBD.............................11–110, 11–111, 11–116, 11–125, 14–149, 14–162, 15–103 to 15–107, 20–011. App.3 Mowlem Plc v Phi Group Ltd [2004] B.L.R. 421, QBD ..................................................21–195 Mueller Europe Ltd v Central Roofing (South Wales) Ltd [2013] EWHC 237 (TCC); 147 Con. L.R. 32 ..................................................................14–004 Multimedia Productions Ltd v Secretary of State for the Environment [1989] J.P.L 96; (1988) E.G.C.S. 83.................................................................................22–027 Multiplex Construction Pty Ltd v Abgarus Pty Ltd (1992) 33 N.S.W.L.R. 504 .................21–218 Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2006] EWHC 1341 (TCC); 107 Con. L.R. 1 ....................................................................2–087 Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2007] EWHC 145 (TCC); 111 Con. L.R. 48 ....................................................................2–087 Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2007] EWHC 659 (TCC); (2007) 23 Const. L.J. 299 ........................................................2–087 Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2008] EWHC 231 (TCC) ................................................................................................2–087 Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2008] EWHC 569 (TCC) ................................................................................................2–087 Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2008] EWHC 2220 (TCC) .................................................................................2–087, 22–047 Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2008] EWHC 2280 (TCC); 122 Con. L.R. 88; [2009] 1 Costs L.R. 55; (2008) 105(39) L.S.G. 23 ......................2–087 Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd [2007] EWHC 236 (TCC); [2007] B.L.R. 167; [2007] Bus. L.R. D13 ................................2–087 Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd [2007] EWHC 447 (TCC); [2007] B.L.R. 195; 111 Con. L.R. 78; [2007] C.I.L.L. 2458; [2007] Bus. L.R. D109 ................................. 2–087, 5–114, 5–131, 5–147, 6–115, 6–119, 6–128, 6–129, 7–028, 7–029, 7–034, App.3 Multiplex Constructions (UK) Ltd v Mott MacDonald Ltd [2007] EWHC 20 (TCC); 110 Con. L.R. 63; [2007] C.I.L.L. 2446 .......................2–087, 13–167 Murdock & Sons Const. Inc v Goheen General Const. Inc, 461 F.3d 837 (7th Cir., 2006) ...............................................................................11–128 Murphy v Brentwood DC [1991] 1 A.C. 398; [1990] 3 W.L.R. 414; [1990] 2 All E.R. 908; [1990] 2 Lloyd’s Rep. 467; 50 B.L.R. 1; 21 Con. L.R. 1; (1990) 22 H.L.R. 502; 89 L.G.R. 24; (1991) 3 Admin. L.R. 37; (1990) 6 Const. L.J. 304; (1990) 154 L.G. Rev. 1010; [1990] E.G. 105 (C.S.); (1990) 87(30) L.S.G. 15; (1990) 134 S.J. 1076, HL ........................................................... 2–173, 2–192 Murray v Leisureplay Plc [2005] EWCA Civ 963; [2005] I.R.L.R. 946 ............................21–232 Murray v Neil Dowlman Architecture Ltd [2013] EWHC 872 (TCC); [2013] T.C.L.R. 5; 148 Con. L.R. 256; [2013] 3 Costs L.R. 460; [2013] C.I.L.L. 3353 ......... 22–120 Nala Engineering v Roselec Ltd (1999) C.I.L.L. 1534 .......................................................2–084 Nat Harrison Associates Inc v Gulf States Utilities Co, 491 F.2d 578 (5th Cir., 1964) .........5–162 National Bonding and Accident Insurance Co (1983) ENGBCA 4586, 83–2 BCA at 16863 ......................................................................5–161

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National Justice Compania Naviera SA v Prudential Assurance Co Ltd (The Ikarian Reefer) (No.1) [1995] 1 Lloyd’s Rep. 455, CA (Civ Div) .............22–045, 22–047 National Museums and Galleries on Merseyside Board of Trustees v AEW Architects and Designers Ltd; sub nom. The Board of Trustees of National Museums and Galleries on Merseyside v AEW Architects and Designers Ltd v PIHL UK Ltd and Galliford Try Construction Ltd (trading together in partnership as a Joint venture “PIHL Galliford Try JV) [2013] EWHC 2403 (TCC)............... 2–165, 23–024 to 23–028s National Trust for Places of Historic Interest or Natural Beauty v Haden Young Ltd (1994) 72 B.L.R. 1, CA (Civ Div) ................................. 2–156 to 2–158 Natkin & Co v George A Fuller & Co, 347 F.Supp. 17 (W.D. Mo., 1972)..........................16–128 Nauru Phosphate Royalties Trust Ltd v Matthew Hall Mechanical & Electrical Engineering Pty Ltd; sub nom. Naru Phosphate Royalties Trust v Matthew Hall Mechanical & Electrical Engineers Pty Ltd (1992) 10 B.C.L. 179 .........................................................................................19–011, 19–061 Neal & Co Inc v United States, 36 Fed. Cl. 600 (1996); 41 Con. Cas. Fed. (CCH) at 77,003 ..................................................................................................15–034 Nebraska Public Power Distribution v Austin Power Inc, 773 F.2d 960 (8th Cir., 1985) ....................................................................................................21–185 Nello L Teer Co v Washington Metropolitan Area Transit Authority, F.Supp. 583 (DC Cir., 1988) ................................................................................11–110 Neodox Ltd v Borough of Swinton and Pendlebury (1958) 5 B.L.R. 38 ...........................12–027 New Design Construction Co Inc v Hamon Contractors Inc, Colorodo CA No.06CA2011, June 26, 2008 ............................................................2–068 Newfield Construction Ltd v Tomlinson [2004] EWHC 3051 (TCC); 97 Con. L.R. 148..................................................................................................22–118 Newport News Shipbuilding & Dry Dock Co v United States (1934) Ct. Cl. 25 ...............18–087 Norair Engineering Corp (1990) Eng GBCA 3,804, 90–1 BCA at 22,327 .............9–026, 15–149 Norair Engineering Corp v United States, 666 F.2d 546 (1981) .............11–097, 11–112, 11–131 North Ocean Shipping Co v Hyundai Construction Co (The Atlantic Baron) [1979] Q.B. 705; [1979] 3 W.L.R. 419; [1978] 3 All E.R. 1170; [1979] 1 Lloyd’s Rep. 89; (1979) 123 S.J. 352, QBD.....................22–066 Northern Developments (Cumbria) Ltd v J&J Nichol [2000] B.L.R. 158; (2000) 2 T.C.L.R. 261 ........................................................................................22–112, 23–023 Northern RHA v Derek Crouch Construction Co Ltd [1984] Q.B. 644; [1984] 2 W.L.R. 676; [1984] 2 All E.R. 175; 26 B.L.R. 1; [1986] C.I.L.L. 244; (1984) 128 S.J. 279, CA (Civ Div) .....................................................2–071 Nuttall and Lynton and Barnstaple Railway Co, Re (1899) 82 L.T. 17 ................12–028, 12–078 Oakapple Homes (Glossop) Ltd v DTR (2009) Ltd (In Liquidation) [2013] EWHC 2394 (TCC); 150 Con. L.R. 110; [2014] Lloyd’s Rep. I.R. 103; [2013] 3 E.G.L.R. 1; (2013) 29 Const. L.J. 523 .........................................4–258 Obrascon Huarte Lain SA v Attorney General for Gibraltar [2014] EWHC 1028 (TCC); [2014] B.L.R. 484; [2014] C.I.L.L. 3536 ................15–013, 25–010 Occidental Worldwide Investment Corp v Skibs A/S Avanti (The Siboen and The Sibotre) [1976] 1 Lloyd’s Rep. 293, QBD .............................22–066 Orange Personal Communications Services Ltd v Hoare Lea (A Firm) [2008] EWHC 223 (TCC); 117 Con. L.R. 76; [2009] Bus. L.R. D24................................22–122 Orlanda, The [1919] 2 K.B. 728 .....................................................................................21–200 Ottawa Northern & Western Railway Co v Dominion Bridge Co (1905) 36 S.C.R. 347 ........... 6–126 Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co (The Wagon Mound); sub nom. Morts Dock & Engineering Co v Overseas Tankship (UK) Ltd [1961] A.C. 388; [1961] 2 W.L.R. 126; [1961] 1 All E.R. 404; [1961] 1 Lloyd’s Rep. 1; 100 A.L.R.2d 928; 1961 A.M.C. 962; (1961) 105 S.J. 85, HL ..............20–041

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Owen Pell Ltd v Bindi (London) Ltd [2008] EWHC 1420 (TCC); [2008] B.L.R. 436; (2009) 25 Const. L.J. 168; [2008] C.I.L.L. 2605 .................................22–104 Owners of the Bow Spring v Owners of the Manzanillo II [2004] EWCA Civ 1007; [2005] 1 W.L.R. 144; [2004] 4 All E.R. 899; [2005] 1 All E.R. (Comm) 53; [2005] 1 Lloyd’s Rep. 1; [2005] 1 C.L.C. 394 ....................22–041 Owners of the Global Mariner v Owners of the Atlantic Crusader [2005] EWHC 380 (Admlty); [2005] 2 All E.R. (Comm) 389; [2005] 1 Lloyd’s Rep. 699; [2005] 1 C.L.C. 413; (2005) 155 N.L.J. 594............................22–041 P&M Kaye Ltd v Hosier & Dickinson Ltd; sub nom. Hosier & Dickinson v P&M Kaye [1970] 1 W.L.R. 1611; [1971] 1 All E.R. 301; (1971) 114 S.J. 929, CA ..................................................................2–071 P&M Kaye v Hoiser & Dickson Ltd [1972] 1 W.L.R. 146; [1972] 1 All E.R. 121; (1971) 116 S.J. 75; (1971) Times, December 23, HL ......................25–017 P&O Developments Ltd v Guy’s & St Thomas NHS Trust; Guy’s & St Thomas NHS Trust v P&O Developments Ltd [1999] B.L.R. 3; 62 Con. L.R. 38; (1999) 15 Const. L.J. 374, QBD......................14–004, 21–090 PC Harrington Contractors Ltd v Multiplex Constructions (UK) Ltd [2007] EWHC 2833 (TCC); [2008] B.L.R. 16; [2008] C.I.L.L. 2554 .................................2–087 PCL Construction Services Inc v United States, 53 Fed. Cl. 479 (2002) ..........................14–116 PHI Group Ltd v Robert West Consulting Ltd. See Carillion JM Ltd v PHI Group Ltd PJ Dick Inc v Principi, 324 F.3d 1371 (Fed. Cir., 2003) .........................18–086, 21–153, 21–157 PT Perusahaan Gas Negara (Persero) TBK v CRW Joint Operation [2010] 4 SLR 672 .............24–068 PT Perusahaan Gas Negara (Persero) TBK v CRW Joint Operation (Indonesia) and another matter [2014] SGHC 146 .....................................................24–068, 24–070 Paccon Inc v United States (1968) 399 F.2d 162 ...............................................................2–085 Pacific Coast Construction v Greater Vancouver Regional Hospital District [1986] 23 Const. L. Rep. 35 .............................................................................................15–030 Packard Construction Corp (2009) ASBCA 55,383.........................................................21–156 Panamena Europea Navegacion Compania Limitada v Frederick Leyland & Co Ltd; sub nom. Compania Panamena Europea Navigacion Limitada v Frederick Leyland & Co Ltd; Frederick Leyland & Co Ltd v Compania Panamena Europea Navegacion Limitada [1947] A.C. 428; (1947) 80 Ll. L. Rep. 205; [1947] L.J.R. 716; 176 L.T. 524, HL .............................. 6–139, 6–141 Pantland Hick v Raymond & Reid. See Hick v Raymond & Reid Paragon Finance Plc (formerly National Home Loans Corp) v Freshfields [1999] 1 WLR 1183; [2000] C.P. Rep. 81; [1999] Lloyd’s Rep. P.N. 446; (1999) 96(20) L.S.G. 40; (1999) 143 S.J.L.B. 136; [1999] N.P.C. 33; Times, March 22, 1999; Independent, March 16, 1999 ...........................................22–068 Park Construction (1995) 95–2 BCA at 138,529 ................................................11–132, 13–010 Parkwood Leisure Ltd v Laing O’Rourke Wales and West Ltd [2013] EWHC 2665 (TCC); [2013] B.L.R. 589; 150 Con. L.R. 93; [2013] 3 E.G.L.R. 6; [2013] C.I.L.L. 3413.............................22–112, 23–041 to 23–044, 23–063 Pathman Construction Co (1985) ASBCA No.23,392, 85–2 BCA at 18,096 ....................15–011 Pathman Construction Co v Hi-Way Electric Co, 382 N.E. 2d 453 (Ill. App. Ct., 1978) ..........20–032 Patman and Fotheringham Ltd v Pilditch (1904) H.B.C. (4th edn) 368 ..............12–078, 12–109 Payne v John Setchell Ltd [2002] B.L.R. 489; (2001) 3 T.C.L.R. 26; [2002] P.N.L.R. 7, QBD ....................................................................................................2–173 Payzu Ltd v Saunders [1919] 2 K.B. 581, CA..................................................................11–004 Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd (1970) 1 B.L.R. 111; 69 L.G.R. 1, CA (Civ Div) ............................. 4–011, 4–015, 6–077, 6–122, 6–126, 6–130, 18–052, 18–053, 18–071 Peakman v Linbrooke Services Ltd [2008] EWCA Civ 1239; [2009] C.P. Rep. 14; (2008) 105(45) L.S.G. 18; (2008) 152(45) S.J.L.B. 25...........14–174 to 14–177

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Pearce v Ove Arup Partnership Ltd [2001] EWHC 455 (Ch) ...........................................22–038 Penta-Ocean Construction Co Ltd v CWF Piling and Civil Engineering Ltd (2012) 26 Const. L.J. 131 ................................................................................................21–224 Percy Bilton Ltd v Greater London Council [1982] 1 W.L.R. 794; [1982] 2 All E.R. 623; 20 B.L.R. 1; 80 L.G.R. 617; (1982) 126 S.J. 397, HL .......................6–126 Perini Pacific Ltd v Commonwealth of Australia [1969] 2 N.S.W.L.R. 530; (1969) 12 B.L.R. 82.......................... 6–082 to 6–084, 11–096, 11–098 Perini Pacific Ltd v Great Vancouver Sewerage and Drainage District (1996) 57 D.L.R. (2d) 307 .................................................................................................4–015 Peter Kiewit Sons Co (1969) ASBCA Nos 9,921, 10,440, 69–1 BCA at 7,510 ..................11–119 Peterborough City Council v Enterprise Managed Services Ltd [2014] EWHC 3193 (TCC); [2015] 2 All E.R. (Comm) 423; [2014] 2 C.L.C. 684; [2014] B.L.R. 735; 156 Con. L.R. 226; [2014] C.I.L.L. 3589..............24–074 Peterhead Towage Services Ltd v Peterhead Bay Authority, 1992 S.L.T. 593, OH ...............2–182 Peterson Co v Container Corp, 172 Cal. App. 3d 62; 218 Cal. Rptr. 592 (1985) ...............11–097 Phelps v Hillingdon LBC; sub nom. G (A Child), Re; Jarvis v Hampshire CC; G (A Child) v Bromley LBC; Anderton v Clwyd CC [2001] 2 A.C. 619; [2000] 3 W.L.R. 776; [2000] 4 All E.R. 504; [2000] 3 F.C.R. 102; (2001) 3 L.G.L.R. 5; [2000] B.L.G.R. 651; [2000] Ed. C.R. 700; [2000] E.L.R. 499; (2000) 3 C.C.L. Rep. 156; (2000) 56 B.M.L.R. 1; (2000) 150 N.L.J. 1198; (2000) 144 S.J.L.B. 241, HL ......................2–173 Philips Hong Kong Ltd v Attorney General of Hong Kong (1990) 50 B.L.R. 122 (HCHK) .............................................................................7–103, 21–221 Philips Hong Kong Ltd v Attorney General of Hong Kong (1993) 61 B.L.R. 41; (1993) 9 Const. L.J. 202, PC (HK) ......................................7–103, 21–216, 21–220 to 21–222, 21–236 Phoenix Contracting Corp v New York City Health and Hospital Corp, 118 AD.2d 477; 499 NYS.2d 953 (NY App. Div., 1986) ...........................21–267, 21–268 Pigott Foundations Ltd v Shepherd Construction Ltd (1993) 67 B.L.R. 48; 42 Con. L.R. 98, QBD ............................. 7–062 to 7–065, 11–206, 21–228 Picardi v Cuniberti [2003] B.L.R. 487 ............................................................................23–045 Plummers v Debenhams [1986] BCLC 447 ....................................................................13–271 Point West London Ltd v Mivan Ltd [2012] EWHC 1223 (TCC); 144 Con. L.R. 194; (2012) 28 Const. L.J. 423; [2012] C.I.L.L. 3197 .....................22–064 Polivitte Ltd v Commercial Union Assurance Co Plc [1987] 1 Lloyd’s Rep. 379, QBD ............22–045 Portland Utilities Construction Co v Chase Creek LLC (Tenn. App., 2004) .......................6–113 Prenn v Simmonds [1971] 1 W.L.R. 1381; [1971] 3 All E.R. 237; (1971) 115 S.J. 654, HL.....................................................................................................2–071 Priestly v Stone (1888) H.B.C. (4th edn) 134, CA ...........................................................12–075 Primus Build Ltd v Pompey Centre Ltd [2009] EWHC 1487 (TCC); [2009] B.L.R. 437; 126 Con. L.R. 26; [2009] C.I.L.L. 2739; (2009) 159 N.L.J. 995............................................................................................ 5–103, 5–104 Property & Land Contractors Ltd v Alfred McAlpine Homes (North) Ltd (1995) 76 B.L.R. 59; 47 Con. L.R. 74, QBD ............................21–002, 21–010, 21–070, 21–083, 21–086, 21–087, 21–149, 21–168, 21–173, 21–178, 21–179 Proton Energy Group SA v Orlen Lietuva [2013] EWHC 2872 (Comm); [2014] 1 All E.R. (Comm) 972; [2014] 1 Lloyd’s Rep. 100; 150 Con. L.R. 72..................................................................................................21–194 Public Works Commissioners v Hills. See Commissioner of Public Works v Hills .......................... Queensland v Multiplex Constructions Pty Ltd (1998) 14 B.C.L. 329................................5–059 R. v Coventry City Council Ex p. Phoenix Aviation; sub nom. R. v Coventry Airport Ex p. Phoenix Aviation; R. v Dover Harbour Board Ex p. Peter Gilder & Sons; R. v Associated British Ports Ex p.

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Plymouth City Council [1995] 3 All E.R. 37; [1995] C.L.C. 757; (1995) 7 Admin. L.R. 597; [1995] C.O.D. 300; (1995) 145 N.L.J. 559, DC .........................2–182 R. v Knowsley MBC Ex p. Maguire (1992) 90 L.G.R. 653; [1992] C.O.D. 499; (1992) 142 N.L.J. 1375, QBD .............................................................2–182 R + V Versicherung AG v Risk Insurance & Reinsurance Solutions SA (No.3) [2006] EWHC 42 (Comm) ......................................17–074, 21–073 RG Carter Ltd v Edmund Nuttall Ltd [2002] B.L.R. 359, QBD ......................................23–014 RP Wallace Inc v United States, COFC No.96–222 (2005); (2005) 21 Const.L.J. 378 ....................................... 4–015, 4–046, 4–110, 5–066 to 5–069, 6–151, 11–007, 11–033, 14–065, 14–116, 18–028, 19–033, 20–012 RWE npower Renewables Ltd v JN Bentley Ltd [2014] EWCA Civ 150; [2014] C.I.L.L. 3488 ....................................................................2–073 Rapid Building Group Ltd v Ealing Family Housing Association (1984) 29 B.L.R. 5, CA (Civ Div) .......................................................................... 6–122, 6–131 Redwing Construction Ltd v Wishart [2011] EWHC 19 (TCC); [2011] B.L.R. 186; [2011] T.C.L.R. 5; [2011] 2 Costs L.O. 212; [2011] Lloyd’s Rep. I.R. 331; [2011] 1 E.G.L.R. 13; [2011] 15 E.G. 94; [2011] C.I.L.L. 2997; (2011) 161 N.L.J. 137 ......................................22–120 Rees & Kirby Ltd v Swansea City Council (1985) 30 B.L.R. 1; 5 Con. L.R. 34; (1985) 1 Const. L.J. 378; [1985] C.I.L.L. 188; (1985) 82 L.S.G. 2905; (1985) 129 S.J. 622, CA (Civ Div) ......................... 5–151, 5–155, 5–156, 21–128, 21–129 Reinwood Ltd v L Brown & Sons Ltd [2008] UKHL 12; [2008] 1 W.L.R. 696; [2008] Bus. L.R. 979; [2008] 2 All E.R. 885; [2008] 2 C.L.C. 406; [2008] B.L.R. 219; 116 Con. L.R. 1; [2008] 2 E.G.L.R. 1; [2008] 17 E.G. 164; [2008] C.I.L.L. 2579; [2008] 8 E.G. 156 (C.S.); (2008) 152(8) S.J.L.B. 32; [2008] N.P.C. 20 .............................11–211 Reynolds v Strelitz (1901) 3 W.A.L.R. 143 ........................................................................App.3 Roberts v Bury Improvement Commissioners (1869–70) L.R. 5 C.P. 310, Ex Chamber .......... 6–123 Robglo Inc (1990) VABCA Nos 2,879, 2,884; (1990) VABCA LEXIS 27 ..........16–041, 16–149 Robinson v PE Jones (Contractors) Ltd [2010] EWHC 102 (TCC); [2010] T.C.L.R. 3.................................................................................................. 2–165, 2–173 Robinson v United States, 261 U.S. 486 (1923)...............................................................18–085 Robophone Facilities Ltd v Blank [1966] 1 W.L.R. 1428; [1966] 3 All E.R. 128; (1966) 110 S.J. 544, CA ................................................................21–236 Roper v Johnson (1872–73) L.R. 8 C.P. 167, CCP ..........................................................11–005 Rosehaugh Stanhope Plc (Broadgate Phase 6) v Redpath Dorman Long Ltd and Rosehaugh Stanhope (Broadgate Phase 7) (1990) 50 B.L.R. 69; 26 Con. L.R. 80; [1990] E.G. 87 (C.S.), CA (Civ Div).............11–120, 11–136 Ross Group Construction Corp v Riggs Contracting Inc, US Dist. LEXIS 162600 (N.D. Okla., 14 November 2012) ....................................................9–063 Rotherfield v Manolakos (1990) 63 D.L.R. (4th) 449 ........................................................2–192 Rotherham MBC v Frank Haslam Milan & Co Ltd [1996] C.L.C. 1378; 78 B.L.R. 1; 59 Con. L.R. 33; (1996) 12 Const. L.J. 333; [1996] E.G. 59 (C.S.), CA (Civ Div)...................................................................12–071, 12–090 Rowling v Takaro Properties Ltd [1988] A.C. 473; [1988] 2 W.L.R. 418; [1988] 1 All E.R. 163, PC (NZ).........................................................2–187 Royal Brompton Hospital NHS Trust v Hammond (No.1) [2000] EWHC 39 (TCC); [1999] B.L.R. 162; (2000) 2 T.C.L.R. 92; 66 Con. L.R. 42; (1999) 15 Const. L.J. 395; (1999) 149 N.L.J. 89, QBD ..............4–209, 6–050, 6–148, 9–013, 9–032, 9–063, 14–022, 14–165, 14–178, 15–002, 15–017, 18–021, 18–023, 18–055, 21–090, 22–037, 22–038, 22–040

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Royal Brompton Hospital NHS Trust v Hammond (No.7) [2001] EWCA Civ 206; 76 Con. L.R. 148 ................................................. 6–129, 9–013, 20–030 Royal Brompton Hospital NHS Trust v Hammond (No.8) [2002] EWHC 2037 (TCC); 88 Con. L.R. 1 ......................................................................App.3 Rush & Tompkins Ltd v Greater London Council [1989] A.C. 1280; [1988] 3 W.L.R. 939; [1988] 3 All E.R. 737; 43 B.L.R. 1; 22 Con. L.R. 114; [1988] E.G. 145 (C.S.); (1988) 138 N.L.J. Rep. 315; (1988) 132 S.J. 1592, HL .................22–061 SMEC Australia Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd (No.3) [2012] VSC 557 ..............................................................................App.3 SMK Cabinets v Hili Modern Electrics Pty Ltd [1984] V.R. 391; (1984) 1 Const. L.J. 159, Sup. Ct (Vic.)........................................... 6–122, 6–126, 6–127, 6–137, 6–146, 12–006, 21–215 SWI Ltd v P&I Data Services Ltd [2007] EWCA Civ 663; [2007] B.L.R. 430; (2009) 25 Const. L.J. 384 .................................. 2–036, 2–113, 3–027, 4–002, 12–005, 12–007 St Albans City and DC v International Computers Ltd [1996] 4 All E.R. 481; [1997–98] Info. T.L.R. 58; [1997] F.S.R. 251; (1996) 15 Tr. L.R. 444; [1998] Masons C.L.R. Rep. 98; (1997) 20(2) I.P.D. 20020, CA (Civ Div) .........................................................................21–270 St Modwen Developments Ltd v Bowmer & Kirkland Ltd (1998) 14 Const. L.J. 214, QBD..........................................................................21–163, 21–169 Sample (Warkworth) v Alnwick DC (1984) 48 P. & C.R. 474; (1984) 271 E.G. 204; [1984] R.V.R. 180; [1984] J.P.L. 670, Lands Tr..................................2–193 Samson v Metcalfe Hambleton (1998) 57 C.L.R. 88 .......................................................22–049 Samuels v Linzi Dresses Ltd [1981] Q.B. 115; [1980] 2 W.L.R. 836; [1980] 1 All E.R. 803; (1980) 124 S.J. 187, CA (Civ Div) .................................................22–157 Santa Fe Inc (1984) VABCA No.1,943, 84–2 BCA 17,341 at 86,410; (1984) W.L. 13,360 .................................................................................. 7–093, 9–029, 14–116 Santa Fe Inc (1987) VABCA No.2,168, 87–3 BCA (CCH) at 20,104 ....................9–029, 15–113 Santa Fe Engineers Inc (1994) ASBCA Nos 24,578 et al., 94–2 BCA at 26,872 .......... 7–093, 16–059 Sauer Inc (1998) 98–2 BCA (CCH) at 30,067 ................................ 9–072, 9–073, 9–084, 9–085 Sauer Inc v Richard J Danzig, Secretary of the Navy, 224 F.3d 1340 (Fed. Cir., 2000) .....................................................................................14–116, 14–117 Sawadi Corp (2001) ASBCA No.53,073 ............................................11–129 to 11–131, 13–194 Scott Lithgow Ltd v Secretary of State for Defence, 1989 S.C. (H.L.) 9; 1989 S.L.T. 236; 45 B.L.R. 1, HL ................................................ 2–071, 4–015, 4–042 to 4–045, 6–152, 6–153 Scottish Special Housing Association v Wimpey Construction (UK) Ltd [1986] 1 W.L.R. 995; [1986] 2 All E.R. 957; 1986 S.C. (H.L.) 57; 1986 S.L.T. 559; 34 B.L.R. 1; 9 Con. L.R. 19; (1986) 2 Const. L.J. 149; (1986) 83 L.S.G. 2652; (1986) 130 S.J. 592, HL ..........................2–155 Sempra Metals Ltd (formerly Metallgesellschaft Ltd) v IRC [2007] UKHL 34; [2008] 1 A.C. 561; [2007] 3 W.L.R. 354; [2008] Bus. L.R. 49; [2007] 4 All E.R. 657; [2007] S.T.C. 1559; [2008] Eu. L.R. 1; [2007] B.T.C. 509; [2007] S.T.I. 1865; (2007) 104(31) L.S.G. 25; (2007) 157 N.L.J. 1082; (2007) 151 S.J.L.B. 985 ..................................21–136 Serck Controls Ltd v Drake & Scull Engineering Ltd; sub nom. Serck Controls Ltd v Drake & Schull Engineering Ltd (2000) 73 Con. L.R. 100, QBD ...........................12–009 Servidone Construction Corp v United States, 931 F.2d 860 (Fed. Cir., 1991) .................20–067 Shaw v Massey Foundations and Pilings Ltd [2009] EWHC 493 (TCC) ..........................23–046 Shawton Engineering Ltd v DGP International Ltd (t/a Design Group Partnership) [2005] EWCA Civ 1359; [2006] B.L.R. 1; (2006) 22 Const. L.J. 129 ........... 6–109, 6–159 Sheffield District Railway v Great Central Railway (1911) 27 T.L.R. 451, Ch D................11–038 Shepherd Construction Ltd v Mecright Ltd [2000] B.L.R. 489, QBD (TCC) ..................23–038

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Sherwood & Casson Ltd v Mackenzie [2000] T.C.L.R. 418 ................................22–112, 23–048 Shoalhaven City Council v Firedam City Engineering Pty Ltd (2009) [2011] HCA 38 ....................................................................................................22–105 Shore & Horwitz Construction Co Ltd v Franki of Canada Ltd [1964] S.C.R. 589, Sup. Ct (Can) .......................................................................21–149, 21–178 Siboen, The and The Sibotre. See Occidental Worldwide Investment Corp v Skibs A/S Avanti Siebe Gorman & Co Ltd v Pneupac Ltd [1982] 1 W.L.R. 185; [1982] 1 All E.R. 377; (1981) 125 S.J. 725, CA (Civ Div) .................................................22–157 Sierra Blanca Inc (1991) ASBCA Nos 30,943 et al., 91–2 BCA at 23,990............................7–093 Silent Vector Pty Ltd t/a Sizer Builders v Squarcini [2008] WASC 246; (2009) B.C.L. 29 ...............................................................................21–246 Simplex Concrete Piles Ltd v St Pancras MBC (1958) 14 B.L.R. 80, DC ............12–025, 12–189 Sindall Ltd v Solland (2001) 3 T.C.L.R. 30; 80 Con. L.R. 152, QBD ..................... 5–034, 6–076 Skanska Construction UK Ltd v Egger (Barony) Ltd [2001] All E.R. (D) 362 ....................2–159 Skanska Construction Ltd (formerly Kvaerner Construction Ltd) v Egger (Barony) Ltd (appeal against order of Costs) [2002] EWHC 773 (TCC) .......................................................... 2–105, 3–034, 12–021, 17–026 Skanska Construction Ltd v Egger (Barony) Ltd [2002] EWCA Civ 310; [2002] B.L.R. 236; 83 Con. L.R. 132; [2003] Lloyd’s Rep. I.R. 479.....................................2–161 Skanska Construction UK Ltd (formerly Kvaerner Construction Ltd) v Egger (Barony) Ltd [2004] EWHC 1748 (TCC) .......................... 7–008, 9–015 to 9–018, 9–032, 9–141, 11–180, 11–181, 13–161, 13–164, 15–018, 15–049, 17–026, 18–092, 22–038, 22–040 Skanska Construction UK Ltd v ERDC Group Ltd (2003) S.C.L.R. 296; 2002 G.W.D. 39-1276 .....................................................................23–051 Skeate v Beale (1840) 11 Ad. & El. 983 ...........................................................................22–065 Slick Seating Systems v Adams [2013] EWHC 88 (Mercantile)........................................22–120 Smith v United States, 34 Fed. Cl. 313 (1995) ................................................................20–032 Solar Foam Insulation (1994) ASBCA No.46,278, 94–1 BCA at 26,288...........................11–119 Solholt, The. See Sotiros Shipping Inc v Sameiet Solholt Sopov v Kane Constructions Pty Ltd (No.2) [2009] VSCA 141; [2009] 1 B.L.R. 468 ...........................................................................................21–202, 21–203 Sotiros Shipping Inc v Sameiet Solholt (The Solholt) [1983] 1 Lloyd’s Rep. 605; [1983] Com. L.R. 114; (1983) 127 S.J. 305, CA (Civ Div) ........... 11–003 South Shropshire DC v Amos [1986] 1 W.L.R. 1271; [1987] 1 All E.R. 340; [1986] 2 E.G.L.R. 194; (1986) 280 E.G. 635; [1986] R.V.R. 235; (1986) 83 L.S.G. 3513; (1986) 136 N.L.J. 800; (1986) 130 S.J. 803, CA (Civ Div) ......................................................................................App.l Southern Comfort Builders v United States, 67 Fed. Cl. 124 (2005) ...................17–091, 17–130 Southern Foundries (1926) Ltd v Shirlaw [1940] A.C. 701; [1940] 2 All E.R. 445, HL ........... 2–078 Spence v Crawford [1939] 3 All E.R. 271; 1939 S.C. (H.L.) 52; 1939 S.L.T. 305, HL .......... 22–080 Standard Chartered Bank v Pakistan National Shipping Corp [2001] EWCA Civ 55; [2001] 1 All E.R. (Comm) 822; [2001] C.L.C. 825 ...........17–074, 21–073 State of Connecticut v Swinton, Conn. 847 A.2d 921 (2004) ...........................................13–186 State of Tasmania v Leighton Contractors Pty Ltd (No.3) [2004] TASSC 132 ......... 21–219, 21–232, 21–254–21–260 Stefanutti Stocks (Pty) Ltd and S8 Property (Pty) Ltd, SGHC case no 20088/2013 .............24–069 Steria Ltd v Sigma Wireless Communications Ltd [2008] B.L.R. 79; 118 Con. L.R. 177; [2008] C.I.L.L. 2544, QBD ..............5–045, 5–072, 5–132, 5–133, 5–147 Stevens v Gullis [2000] 1 All E.R. 527; [2001] C.P. Rep. 3; [1999] B.L.R. 394; (2002) 2 T.C.L.R. 385; 73 Con. L.R. 42; [2000] P.N.L.R. 229; [1999] 3 E.G.L.R. 71; [1999] 44 E.G. 143; (2000) 16 Const. L.J. 68, CA (Civ Div) ................................................ 2–088, 22–030 to 22–034

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Strachan & Henshaw Ltd v Stein Industrie (UK) Ltd (No.1) (1997) 63 Con. L.R. 132; (1997) 13 Const. L.J. 418, QBD ..................................... 4–305, 5–164 Strachan & Henshaw Ltd v Stein Industrie (UK) Ltd (No.2) (1998) 87 B.L.R. 52; 63 Con. L.R. 160; (1998) 14 Const. L.J. 370, CA (Civ Div) .......... 4–305, 5–164 Sunley & Co Ltd v Cunard White Star Line Ltd. See B Sunley & Co Ltd v Cunard White Star Ltd Sunshine Construction & Engineering Inc v United States, 02–250C Fed. Cl. Ct. ............22–053 Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549 ...........................22–105 Surrey Heath BC v Lovell Construction Ltd (1988) 48 B.L.R. 108; 24 Con. L.R. 1; (1990) 6 Const. L.J. 179, CA (Civ Div)............................11–206, 21–228 Sutton Jigsaw Transport Ltd v Croydon LBC [2013] EWHC 874 (QB) ...........................22–120 Swiss Supreme Court decision 4A_124/2014...................................................................24–074 Sycamore Bidco Ltd v Breslin [2013] EWHC 583 (Ch); [2013] 4 Costs L.O. 572 ...........................................................................................................22–120 TPS Inc (2004) ASBCA No.52,421 ...................................................19–034 to 19–037, 21–154 TSG Building Services Plc v South Anglia Housing Ltd [2013] EWHC 1151 (TCC); [2013] B.L.R. 484; 148 Con. L.R. 228 ....................... 2–142, 2–166 Tandrin Aviation Holdings Ltd v Aero Toy Store LLC [2010] EWHC 40 (Comm) .................................................................................... 4–058, 4–059 Tate & Lyle Industries Ltd v Greater London Council; sub nom. Tate & Lyle Food & Distribution Ltd v Greater London Council [1983] 2 A.C. 509; [1983] 2 W.L.R. 649; [1983] 1 All E.R. 1159; [1983] 2 Lloyd’s Rep. 117; 81 L.G.R. 4434; (1983) 46 P. & C.R. 243, HL ..............................................................................2–188, 17–084, 21–068, 21–069, 21–129, 21–176 Taylor v Motability Finance Ltd [2004] EWHC 2619 (Comm)...........................21–193, 21–194 Teal Assurance Co Ltd v WR Berkley Insurance (Europe) Ltd [2011] EWHC 91 (Comm); [2011] Lloyd’s Rep. I.R. 285, QBD .........................................2–153 Temloc Ltd v Errill Properties Ltd (1988) 39 B.L.R. 30; 12 Con. L.R. 109; (1988) 4 Const. L.J. 63, CA (Civ Div) .......................................11–206, 21–228, 21–243, 25–010 Tennants (Lancashire) Ltd v CS Wilson & Co Ltd; sub nom. Wilson & Co Ltd v Tennants (Lancashire) Ltd [1917] A.C. 495, HL ........................4–057 Tesco v Costain Construction Ltd; sub nom. Tesco Stores Ltd v Costain Construction Ltd [2003] EWHC 1487 (TCC) ........................................................2–173 Tesco Stores Ltd v Costain Construction Ltd. See Tesco v Costain Construction Ltd Thames Valley Power Ltd v Total Gas & Power Ltd [2005] EWHC 2208 (Comm); [2006] 1 Lloyd’s Rep. 441; (2006) 22 Const. L.J. 591...........4–057 Tharsis Sulphur & Copper Co v M’Elroy & Sons (1877–78) L.R. 3 App. Cas. 1040, HL ......................................................................................................12–167 Thorn v London Corp; sub nom. Thorn v Mayor and Commonalty of the City of London (1875–76) L.R. 1 App. Cas. 120, HL ......................... 2–126, 2–127 Thorn v Mayor and Commonalty of the City of London. See Thorn v London Corp Thorner v Major; sub nom. Thorner v Curtis; Thorner v Majors [2009] UKHL 18; [2009] 1 W.L.R. 776; [2009] 3 All E.R. 945; [2009] 2 F.L.R. 405; [2009] 3 F.C.R. 123; [2009] 2 P. & C.R. 24; [2009] W.T.L.R. 713; (2009–10) 12 I.T.E.L.R. 62; [2009] Fam. Law 583; [2009] 13 E.G. 142 (C.S.); (2009) 159 N.L.J. 514; (2009) 153(12) S.J.L.B. 30; [2009] N.P.C. 50; [2009] 2 P. & C.R. DG2 ............................12–172, 12–173 Thorner v Majors. See Thorner v Major Three Rivers DC v Bank of England (Disclosure) (No.3) [2003] EWCA Civ 474; [2003] Q.B. 1556; [2003] 3 W.L.R. 667; [2003] C.P.L.R. 349; (2003) 100(23) L.S.G. 37 ...............................................................13–271 Three Rivers DC v Bank of England (Disclosure) (No.4) [2004] UKHL 48; [2005] 1 A.C. 610; [2004] 3 W.L.R. 1274; [2005] 4 All E.R. 948; (2004) 101(46)

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L.S.G. 34; (2004) 154 N.L.J. 1727; (2004) 148 S.J.L.B. 1369; Times, November 12, 2004; Independent, November 16, 2004..........................................22–068 Tinseltime Ltd v Roberts [2012] EWHC 779 (TCC) Titan Mountain Estates Construction Corp, ASBCA Nos 22,617, 22,930, 23,095 and 23,118, 85–1 BCA (CCH) at 17,931 .......................................................................9–029 Titan Pacific Construction Corp (1987) ASBCA Nos 24,148, 24,616, 26, 692, 87–1 BCA (CCH) at 19,626........................2–119, 11–110, 11–117, 11–118, 16–149 Titan Pacific Construction Corp v United States (1989) No.747 87C, Cl. Ct. ..................15–113 Toomey v Scolaro’s Concrete Constructions Pty Ltd [2001] VSC 279 ................................2–189 Total Transport Corp of Panama v Amoco Transport Co (The Altus) [1985] 1 Lloyd’s Rep. 423, QBD ......................................................................................11–208 Tricon Kent Co v Lafarge North America Inc May 1, 2008, Col. CA No.06CA0595 ...........................................................................21–279, 21–280 Triple “A” South (1994) ASBCA No.46,866, 94–3 BCA at 27,194 .....................13–013, 17–007 Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board [1973] 1 W.L.R. 601; [1973] 2 All E.R. 260; 9 B.L.R. 60; (1973) 117 S.J. 355, HL.............................................................................. 2–080, 6–118, 6–126 Tsakiroglou & Co Ltd v Noblee Thorl GmbH; Albert D Gaon & Co v Société Interprofessionelle des Oléagineux Fluides Alimentaires [1962] A.C. 93; [1961] 2 W.L.R. 633; [1961] 2 All E.R. 179; [1961] 1 Lloyd’s Rep. 329; (1961) 105 S.J. 346, HL..........................................................21–207 Turner Corp Ltd v Austotel Pty Ltd (1997) 13 B.C.L. 378 ...................... 5–140 to 5–143, 5–147 Turner Corp Ltd v Co-ordinated Industries Pty Ltd (1996) 12 B.C.L. 33 .......................... 18–058 Total M&E Services Ltd v ABB Building Technologies Ltd (formerly ABB Steward Ltd) [2002] EWHC 248 (TCC); 87 Con. L.R. 154; [2002] C.I.L.L. 1857...................................................23–024, 23–028 Tubular Holdings (Pty) Ltd and DBT technologies (Pty) Ltd, SGHC case no. 06757/2013 ..................................................................................24–069 UK Highways A55 Ltd v Hyder Consulting (UK) Ltd [2012] EWHC 3505 (TCC); [2013] B.L.R. 95; (2013) 29 Const. L.J. 234; [2013] C.I.L.L. 3296 ........................22–156 United Beaton International (1976) VABCA 1209, 76–2 BCA at 12133 .............................5–161 United Constructors LLL v United States, 95 Fed. Cl.26, 2010 US Claims LEXIS 811 (2010)......................................................................11–035 United Marine Aggregates Ltd v GM Welding and Engineering Ltd [2012] EWHC 2628 (TCC) .................................................................................22–120 United States ex rei United States Steel Corp v Construction Aggregates Corp, 559 F.Supp. 414 (ED ich, 1983)............................................................................19–072 United States for Use and Benefit of Heller Electricity Co Inc v William F Klingensmith Inc. 670 F.2d 1227 (1982); 29 Cont. Gas. Fed. (CCH) at 82,194 (DC Cir.) ..........................................................20–071 to 20–073 Utica City National Bank v Gunn [1918] 118 NE 607.......................................................2–071 Utley-James Inc v United States (1988) 14 Cl. Ct. 804 ................ 7–013, 7–014, 18–028, 18–125 Vakili v Hawksmith, No.M2000–01402–COA–R3–CV, WL 1173285 (2001) Tenn. Ct. App. ........................................................................................................5–091 Vaughan v Lewisham LBC, UKEAT 4/0534/12 .................................................................App.1 Vaughan v Von Essen Hotels 5 Ltd [2007] EWCA Civ 1349 ............................... 5–099 to 5–101 Veba Oil Supply & Trading GmbH v Petrotrade Inc (The Robin) [2001] EWCA Civ 1832; [2002] 1 All E.R. 703; [2002] 1 All E.R. (Comm) 306; [2002] 1 Lloyd’s Rep. 295; [2002] C.L.C. 405; [2002] B.L.R. 54; Independent, January 14, 2002 .............................................................................22–103 Victoria Laundry (Windsor) v Newman Industries [1949] 2 K.B. 528; [1949] 1 All E.R. 997; 65 T.L.R. 274; (1949) 93 S.J. 371, CA ..................21–004, 21–006, 21–170 Vita Food Products Inc v Unus Shipping Co Ltd (In Liquidation) [1939] A.C. 277; [1939] 1 All E.R. 513; (1939) 63 Ll. L. Rep. 21, PC (Can.) ....................25–006

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Vitex Manufacturing Corp v Caribtex Corp, 377 F.2d 795 ..............................................21–171 Vitpol Building Services v Samen [2008] EWHC 2283 (TCC); (2009) 25 Const. L.J. 319; [2009] Bus. L.R. D65 ..............................................................21–194 W Stevenson (Western) Ltd v Metro Canada Ltd (1987) 27 Const. L.R. 113, Sup. Ct (BC) ........................................................................................................11–096 WC James Inc v Phillips Petroleum Co, 485 F.2d 22 (10th Cir., 1973) .............................21–276 WG Cornell v Ceramic Coating Co, 626 F.2d at 994 (DC Cir., 1980)..............................21–160 WG Yates & Sons Construction Co (2001) ASBCA Nos 49,398 and 49,399 ......................................................................... 7–009, 9–025, 9–063, 15–041 WRB Corp v United States, 183 Ct. Cl. 409 (1968) ...........................................19–001, 19–072 WW Gear Construction Ltd v McGee Group Ltd [2010] EWHC 1460 (TCC); 131 Con. L.R. 63; (2011) 27 Const. L.J. 39; [2010] C.I.L.L. 2884 ...........................4–339 Wagon Mound, The. See Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Walker v Randwick Municipal Council (1929) 30 S.R. (NSW) 847 ..................................12–027 Walter Lawrence & Son Ltd v Commercial Union Properties (UK) Ltd (1984) 4 Con. L.R. 37 ..............................................................18–094, 19–060, 20–019, 20–052 Walter Lilly & Co Ltd v Mackay [2012] EWHC 1773 (TCC); [2012] B.L.R. 503; 143 Con. L.R. 79; (2012) 28 Const. L.J. 622; [2012] C.I.L.L. 3229 .................................................................. 15–015, 19–060, 19–070, App.3 Walter Lilly & Co Ltd v Mackay and another; sub nom. Mackay v Walter Lilly & Co Ltd [2013] EWCA Civ 142 ...........................19–060, 19–070 Waugh v British Railways Board [1980] A.C. 521; [1979] 3 W.L.R. 150; [1979] 2 All E.R. 1169; [1979] I.R.L.R. 364; (1979) 123 S.J. 506, HL .................13–270, 13–271 Weaver-Bailey Contractors Inc v United States, 19 Cl. Ct. 474 (1990)..................7–068, 16–149, 16–150, 18–028, 21–158 Webb Resolutions Ltd v JV Ltd (t/a Shepherd Chartered Surveyors) [2013] EWHC 509 (TCC); [2013] T.C.L.R. 6; 147 Con. L.R. 234; [2013] 6 Costs L.R. 892; [2013] C.I.L.L. 3349 .....................................................22–120 Webster v Bosanquet [1912] A.C. 394, PC (Cey) ............................................................21–233 Wegan Constructions Pty Ltd v Wodonga Sewerage Authority (1978) V.R. 67 ...................12–011 Wells v Army & Navy Co-operative Society (1902) 86 L.T. 764, CA ..........4–015, 6–051, 6–077, 6–114, 11–068, 18–071, 18–077, 18–083, 20–019, 21–215 Welton v North Cornwall DC [1997] 1 W.L.R. 570; (1997) 161 J.P. 114; (1997) 9 Admin. L.R. 45; [1997] P.N.L.R. 108; (1996) 93(34) L.S.G. 34; (1996) 140 S.J.L.B. 186, CA (Civ Div) ...............................................................................2–177 West v All State Boiler Inc, 146 F.3d 1368 (Fed. Cir., 1968) ..................21–147, 21–151, 21–159 West v Ian Finlay and Associates (A Firm) [2013] EWHC 868 (TCC) .............................21–214 West Faulkner Associates v Newham LBC (1994) 71 B.L.R. 1; (1995) 11 Const. L.J. 157; [1994] E.G. 179 (C.S.); [1994] N.P.C. 142, CA (Civ Div) .........7–054, 7–102, 11–011 to 11–013, 18–130 Westfield Construction Ltd v Lewis [2013] EWHC 376 (TCC); [2013] 1 W.L.R. 3377; [2013] B.L.R. 223; 147 Con. L.R. 148; [2013] C.I.L.L. 3332; [2013] 10 E.G. 146 (C.S.) .............................................................23–047 Westminster Corp v J Jarvis & Sons Ltd; sub nom. Westminster City Council v J Jarvis & Sons [1970] 1 W.L.R. 637; [1970] 1 All E.R. 943; 68 L.G.R. 470, HL ..................................................................................... 4–005, 4–189 Westwood v Secretary of State for India (1863) 11 WR 261; 7 LT 736................................6–117 Wharf Properties Ltd v Eric Cumine Associates (No.2) (1991) 52 B.L.R. 1; [1991] 2 H.K.L.R. 154; (1991) 7 Const. L.J. 251, PC (HK) ....................13–032, 18–009, 19–006, 19–046 to 19–048, 19–050 to 19–052, 19–059, 19–068, 22–155, 22–157 White Constructions (NT) Pty Ltd v Commonwealth of Australia (1990) 7 BCL 193 .............22–105

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White Young Green Consulting v Brooke House Sixth Form College [2007] EWHC 2018 (TCC) ..............................................................................................App.3 Whitehouse v Jordan [1981] 1 W.L.R. 246; [1981] 1 All E.R. 267; (1981) 125 S.J. 167, HL...................................................................................................22–045 Witney Town Council v Beam Construction (Cheltenham) Ltd [2011] EWHC 2332 (TCC); [2011] B.L.R. 707; [2011] T.C.L.R. 8; 139 Con. L.R. 1; [2011] C.I.L.L. 3090; (2011) 161 N.L.J. 1369 ............................23–063 Whittal Builders Co Ltd v Chester le Street DC (1995) 40 B.L.R. 82; 11 Con. L.R. 40; (1996) 12 Const. L.J. 356, QBD ....................................21–149, 31–181 Whyte and Mackay Ltd v Blyth & Blyth Consulting Engineers Ltd [2012] CSOH 89; 2012 S.L.T. 1073; [2012] C.I.L.L. 3200; 2012 G.W.D. 19-376 ...........................................................................23–014 to 23–022 Wickham Contracting Co v United States, 12 F.3d 1574 (Fed. Cir., 1994) ..........21–158, 21–185 William Lacey (Hounslow) Ltd v Davis [1957] 1 W.L.R. 932; [1957] 2 All E.R. 712; (1957) 101 S.J. 629, QBD..............................................................21–198 William Grant & Sons Ltd v Glen Catrine Ltd, 2001 SC 901 .............................................5–096 William Sindall Ltd v North West Thames RHA (1977) 4 B.L.R. 151; [1977] I.C.R. 294; (1977) 121 S.J. 170, HL......................................................................21–044 Williams v Fitzmaurice (1858) 3 H. & N. 844; 157 E.R. 709 ...............................12–027, 12–163 Williams v Roffey Bros & Nicholls (Contractors) Ltd [1989] EWCA Civ 5; [1991] 1 Q.B. 1; [1990] 2 W.L.R. 1153; [1990] 1 All E.R. 512; 48 B.L.R. 69; (1991) 10 Tr. L.R. 12; (1990) 87(12) L.S.G. 36; (1989) 139 N.L.J. 1712 ..........................................................................2–146 Williams Enterprises Inc v Strait Manufacturing and Welding, 728 F.Supp. 12 (DDC, 1990)..........................................7–077, 16–149, 17–062, 21–052, 21–081, 21–108, 21–117, 21–144, 21–160, 21–185 Willis v MRJ Rundell & Associates Ltd [2013] EWHC 2923 (TCC); [2013] 6 Costs L.R. 924; [2013] 3 E.G.L.R. 13; [2013] C.I.L.L. 3428 ..............................22–120 Wilner v United States, 23 Cl. Ct. 241 (1991) .................................................................20–032 Wilson v United Counties Bank Ltd [1920] A.C. 102, HL ...............................................11–005 Workers Trust & Merchant Bank Ltd v Dojap Investments Ltd [1993] A.C. 573; [1993] 2 W.L.R. 702; [1993] 2 All E.R. 370; (1993) 66 P. & C.R. 15; [1993] 1 E.G.L.R. 203; [1993] E.G. 38 (C.S.); (1993) 143 N.L.J. 616; (1993) 137 S.J.L.B. 83; [1993] N.P.C. 33, PC (Jam) ......................21–239 Wraight Ltd v PH&T (Holdings) Ltd (1980) 13 B.L.R. 26, QBD ....................................21–011 Wren v Emmett Contractors Pty Ltd (1969) 43 A.L.J.R. 213 ...........................................12–005 Wunderlich Contracting Co v United States, 351 F.2d 956; 173 Ct. Cl. 180 (1965) ...............................................................15–003, 19–008, 19–024 Wylie v Gerald R Smith, unreported, 1995 ......................................................................21–141 X (Minors) v Bedfordshire CC; (A Minor) v Newham LBC; E (A Minor) v Dorset CC (Appeal); Christmas v Hampshire CC (Duty of Care); Keating v Bromley LBC (No.2) [1995] 2 A.C. 633; [1995] 3 W.L.R. 152; [1995] 3 All E.R. 353; [1995] 2 F.L.R. 276; [1995] 3 F.C.R. 337; 94 L.G.R. 313; (1995) 7 Admin. L.R. 705; [1995] Fam. Law 537; (1996) 160 L.G. Rev. 103; (1996) 160 L.G. Rev. 123; (1995) 145 N.L.J. 993, HL ....................................................................................2–171, 2–174, 2–175, 2–178 Xuereb v Viola (1989) 18 NSWLR 453 ...........................................................................22–105 Yam Seng Pte Ltd v International Trade Corp Ltd [2013] EWHC 111 (QB); [2013] 1 All E.R. (Comm) 1321; [2013] 1 Lloyd’s Rep. 526; [2013] 1 C.L.C. 662; [2013] B.L.R. 147; 146 Con. L.R. 39; [2013] Bus. L.R. D53 ............21–247 Yarm Road Ltd (formerly Kvaerner Cleveland Bridge UK Ltd) v Hewden Tower Cranes Ltd [2003] EWCA Civ 1127; 90 Const. L.R. 1; (204) Const. L.J. 137; (2003) S.J.L.B. 994 ...................................................2–168

lxv

TABLE OF CASES

Yorkshire Dale Steamship Co Ltd v Minister of War Transport [1942] A.C. 691; (1942) 73 Ll. L. Rep. 1; 1942 A.M.C. 1000, HL...........14–003, 20–004, 20–046 Young & Marten Ltd v McManus Childs Ltd; sub nom. Prior v McManus Childs Ltd [1969] 1 A.C. 454; [1968] 3 W.L.R. 630; [1968] 2 All E.R. 1169; 67 L.G.R. 1; (1968) 112 S.J. 744, HL ............2–047 Youngdale & Sons Construction Co v United States, 27 Fed. Cl. 516 (1993) ....................21–164 Yuanda (UK) Co Ltd v WW Gear Construction Ltd [2010] EWHC 720 (TCC); [2011] 1 All E.R. (Comm) 550; [2011] Bus. L.R. 360; [2010] 1 C.L.C. 491; [2010] B.L.R. 435; [2010] T.C.L.R. 5; 130 Con. L.R. 133; [2010] C.I.L.L. 2849............................................21–136 Yukon Construction Co Ltd (1967) ASBCA No.10,859, 67–1 BCA at 6,334 ...................11–119

lxvi

TA B L E O F L EG IS LAT ION References are to paragraph number

United Kingdom 1845 Railway Clauses Consolidation Act (8 & 9 Vict. c.20) s.55 ....................................... 2–182 1847 Harbours, Docks, and Piers Clauses Act (10 & 11 Vict. c.27) s.33 ....................................... 2–182 s.70 ....................................... 2–182 ss.74 to 76 ............................ 2–182 1893 Sale of Goods Act (55 & 56 Vict. c.71) s.14 ....................................... 2–047 1936 Public Health Act (26 Geo. 5 & 1 Edw. 8 c.49) 2–191 s.278(1)................................. 2–191 1965 Compulsory Purchase Act (c.56) ................................. 2–187 s.10(2) .................................. 2–187 Nuclear Installations Act (c.57) .......................... 4–261 1966 Construction (Working Places) Regulations (SI 1966/94) reg.3(1)(a) ............................21–049 1967 Misrepresentation Act (c.7) ......22–079 s.2(2) ...................................22–082 1968 Civil Evidence Act (c.64) s.14(1) .................................13–270 1970 Administration of Justice Act (c.31) s.31 ......................................13–237 s.32(1) .................................13–237 1971 Town and Country Planning Act (c.78) s.177 ..................................... 2–193 1972 Defective Premises Act (c.35) .... 2–047 s.1 ......................................... 2–165 (1) ..................................... 2–165 1977 Unfair Contract Terms Act (c.50) ..................21–136, 21–269, 21–272, 22–084, 22–101 s.3(1) ...................................21–136 Pt 3....................................... 4–299

1979

1981

1980

1982 1984

1986

1989 1990

lxvii

Sale of Goods Act (c.28) ...................... 2–047, 2–096 Arbitration Act (c.42) ...........19–027 Senior Courts Act (c.54) s.51 ......................................22–120 (3) ....................................22–120 s.70 ......................................22–040 Supreme Court Act. See Senior Courts Act Limitation Act (c.58) ....... 22–149, 25–023 s.2 ........................................25–023 s.5 ........................................25–023 s.8 ........................................25–023 s.14A .................................... 2–165 (4)(a) ................................25–024 (b).................................25–024 (5) ....................................25–024 (6) ....................................25–024 s.14B(1) ...............................25–024 Supply of Goods and Services Act (c.29) ................................. 2–047 Telecommunications Act (c.12) .. 2–187 Sch.2 paras.2 to 15 ............... 2–187 County Courts Act (c.28) s.63 ......................................22–040 Building Act (c.55)..... 2–189, 2–190 s.36 ....................................... 2–191 s.106 ..................................... 2–190 Police and Criminal Evidence Act (c.60) s.10(1)(a) .............................13–270 (b) .............................13–270 Gas Act (c.44) ........................... 2–187 Sch.4 para.1(3) ..................... 2–187 Insolvency Rules (SI 1986/1925) r.4.90 ...................................23–063 Electricity Act (c.29) ................. 2–187 Sch.4 para.1(6) ..................... 2–187 Town and Country Planning Act (c.8) ........................ 1–022, 2–188 s.186(2)...................... 2–191, 2–193

TABLE OF LEGISLATION

1991 Water Industry Act (c.56)........... 2–188 Sch.12 para.2(a), (b) ............. 2–188 1994 Construction (Design and Management) Regulations (SI 1994/3140) ... 4–254 1995 Civil Evidence Act (c.38) ..........13–192 1996 Arbitration Act (c.23) ..............21–136, 22–101, 22–116 s.33(1)(b) .............................22–129 s.34 ......................................22–136 (1) ....................................22–124 (g) .................................22–125 (2)(e) ................................22–154 s.41(6) .................................22–159 (7)(d) ............................22–159 s.61(2) .................................22–144 s.63 ......................................22–144 Housing Grants, Construction and Regeneration Act (c.53) .......3–070, 4–037, 4–039, 4–040, 5–104, 8–019, 14–059, 21–224, 22–101, 22–106, 22–107, 23–005, 23–008, 23–032, 23–040, 23–042 to 23–044, 23–063, 25–003, 25–004 s.2 ........................................23–040 s.26 ......................................21–136 Pt II .......... 12–179, 21–224, 23–063 s.104 ......... 22–116, 23–005, 23–038 (6)(b) ...............................25–003 (7) ....................................25–003 s.105 ...........4–037, 23–005, 23–038 s.106 ......... 22–106, 23–045, 23–047 (1)(b) ...............................23–040 s.107(5)................................22–106 s.108 ...........3–070, 21–136, 22–106 (1) ...................... 23–001, 25–004 (f) .................................22–107 (2) ....................................23–001 (b).................................25–004 (c) .................................25–004 (3) ...................... 22–108, 23–001 (5) ....................................25–004 s.108A..................................23–063 ss.109 to 113 ........................ 7–102 s.112 ...............4–037, 4–038, 4–292 s.113 ..................................... 3–070 1998 Late Payment of Commercial Debts (Interest) Act (c.20) ........21–133, 21–134, 23–004, 23–030, 23–035 s.4 ........................................23–032

lxviii

s.5A .....................................23–036 (1) ....................................23–035 (2A) .....................................23–035 s.9 ........................................21–136 Human Rights Act (c.42) ........23–003, 23–010, 23–011, 23–018, 23–019 Sch.1 Pt I art.6 ............... 23–010 to 23–013, 23–020 Pt II Protocol 1 art.1 ...... 23–015 to 23–017, 23–019 Civil Procedure Rules (SI 1998/3132) ...............2–088, 13–237, 13–263, 13–264, 13–265, 14–209, 21–031, 22–090, 22–120, 22–122, 22–133 r.3.4 ....................... 21–193, 22–123 (2)(e) ................................22–156 r.3.9 .....................................22–156 (1)(e) ................................22–031 Pt 3 PD para.5 ....................22–156 Pt 8....................... 21–194, 21–239, 22–106, 23–037, 23–041 r.12.5 ...................................22–052 r.13 ......................................22–052 r.15.4(1)...............................22–139 r.15.8 ...................................22–145 r.16.4 ...................................22–123 r.16.5(2)...............................22–137 (3).................................22–138 (5)................... 22–133, 22–138 Pt 16 PD para.3.2 ................22–139 para.9.3 ................................22–131 para.16.3 ..............................22–132 r.17.1(2)...............................22–148 (4).................................22–149 Pt 18 PD para.5...................22–153 Pt 20....................................22–140 r.20.8(1)(a) ..........................22–140 Pt 23....................................22–148 r.24.2 ...................................21–193 r.26.4 ...................................22–095 r.31.2 ...................................13–237 r.31.3 ...................................13–241 r.31.4 ...................................13–254 r.31.6 ...................................13–237 r.31.8 ...................................13–252 r.31.12 .................................13–250 r.31.16 ................... 13–238, 22–015

TABLE OF LEGISLATION

1999

2005 2007

2009

r.31.19 .................................13–270 r.31.23(1) .............................13–240 Pt 35........ 22–030, 22–031, 22–036, 22–043, 22–046 to 22–048, 22–132 r.35.3 ...................................22–043 r.35.4(1)................. 22–044, 22–047 (4) ....................................22–144 r.35.9 ...................................22–037 r.35.10(2) .............................22–031 (3) ...................... 22–031, 22–042 (4) ....................................22–042 r.35.12 .................................22–052 (3) ....................................22–052 (5) ....................................22–052 r.35.13 ................... 13–272, 22–054 r.35.15 .................................22–119 Pt 35 PD .............. 22–030, 22–034, 22–046 para.1.2 ................................22–031 para.3...................................22–042 para.3.3 ................................22–046 para.7...................................22–119 Pt 36....................................22–120 r.36.2(2)(c) ..........................22–120 r.36.9(1)...............................22–120 r.44.2(4)(c) ..........................22–120 r.48.2 ...................................22–120 Pt 49 PD .............................14–210 r.72 ....................................... 2–142 Unfair Terms in Consumer Contracts Regulations (SI 1999/2083) ..................21–269 Civil Procedure (Amendment) Rules (SI 2005/352) ....................22–041 Construction (Design and Management) Regulations (Northern Ireland) (SI 2007/291)........................ 4–254 Construction (Design and Management) Regulations (SI 2007/320) ..................... 4–254 Local Democracy, Economic Development and Construction Act (c.20) .............. 3–014, 21–224 s.141 ....................................23–063 Civil Procedure (Amendment) Rules (SI 2009/2092) ...........22–030 r3.2(9)(a) .............................22–046 (b) ....................................22–046 r.35.9 ...................................22–037 r.35.10(3) .............................22–036 r.35.15 .................................22–040 Pt 35 PD .............................22–036

2012

Consumer Insurance (Disclosure and Representations) Act (c.6) .... 2–163, 2–164 2013 Late Payment of Commercial Debts Regulations (SI 2013/395) .......21–135, 21–136 2015 Construction (Design and Management) Regulations (SI 2015/51) ....................... 4–254 Australia 1999 Building and Construction Industry (Security of Payment) Act (NSW) ........................22–106 2002 Building and Construction Industry (Security of Payment) Act (Vic) ...........................22–106 2004 Construction Contracts Act (WA) .................................22–106 Construction Industry Payments Act (Qd)............................22–106 Chile 2010 Law No.20.410 of 20 January 2010 ................24–016 European Union 1980 Convention 80/934/EEC on the law applicable to contractual obligations (Rome Convention) ...........25–007 2008 Regulation 593/2008/EC of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I) ...........................25–007 preamble (6) ........................25–007 art.3(3) .................. 25–002, 25–008 art.4(1) ................................25–007 (a) .............................25–007 (b) .............................25–007 (2) ....................................25–007 (3) ....................................25–007 (4) ....................................25–007 art.5 .....................................25–007 (1) ....................................25–007 art.6 .....................................25–007 art.7 .....................................25–007 art.8 .....................................25–007 art.9 ....................... 25–002, 25–008 (1) ...................... 25–003, 25–008 (2) ....................................25–008 (3) ....................................25–008 art.21 ...................................25–008 2011 Directive 2011/7/EU of the European Parliament and of the Council

lxix

TABLE OF LEGISLATION

of 16 February 2011 on combining later payment in commercial transactions ....21–135, 23–029 France

1975

Civil Code art.1152 ...............................21–261 art.1792 ...............................25–025 art.1792–2............................25–026 art.1792–3............................25–026 art.1792–5............................25–026 art.1792–6............................25–026 Law on Subcontracting (Act No.75–1334)..............25–005 art.12 ...................................25–005 art.13 ...................................25–005

Germany Civil Code............................21–261 s.305 ....................................25–010 s.307 ....................................25–010 (1) .......................................21–261 Hungary 2013 Act XXXIV of 1 July 2013 ........24–016 Ireland 1995 European Communities (Unfair Terms in Consumer Contracts) Regulations (27/1999)........21–291

Germany Civil Code............................21–261 s.307(1)................................21–261 New Zealand 1992 Construction Contracts Act ......22–106 Peru Framework Law for Public-Private Partnerships ......................24–085 Romania 1994 Regulation 273/1994 art.3 .....................................25–019 art.15 ...................................25–020 art.21 ...................................25–020 art.37 ...................................25–021 art.38 ...................................25–021 1994 Law No.10/1995 ......................25–021 Singapore 2004 Building and Construction Industry Security of Payment Act (Cap.30B) .........................22–106 United Arab Emirates Civil Code art.390(1).............................25–014 (2) .............................25–015 United States 1978 Contracts Disputes Act .............12–160 1994 Federal Rules of Civil Procedure r.26 ........................ 13–264, 22–035

lxx

TAB L E O F C O N T R ACT CLAU S ES References are to paragraph number

A201/97........................4–016, 4–021, 4–078, 6–039, 7–224, 8–075, 11–021, 16–061 cl.3.2.1 ...................................... 4–086 cl.3.2.3 ................4–021, 4–086, 4–320 cl.3.10 ....................................... 7–181 cl.3.10.1 .................................... 9–037 cl.4.2.7 .....................................14–053 cl.4.3.1 ...................................... 5–013 cl.4.3.4 ........................... 4–158, 4–320 cl.4.3.7.2 ................................... 4–141 cl.4.3.10 .................................... 4–320 cl.4.14 ....................................... 4–037 cl.4.19.1 .................................... 9–037 cl.5.2.3 ...................................... 4–012 cl.6.2.3 ........................... 4–178, 4–320 cl.7.2 ........................................10–077 cl.7.2.1 ......................... 4–236, 12–035 cl.7.3.1 .....................................12–035 cl.8.3.1 .......................... 2–035, 4–012, 4–033, 4–049, 4–052, 6–015, 14–155 cl.9.7.1 ...................................... 4–037 cl.9.9.1 ...................................... 4–255 cl.10.3.2 .................................... 4–012 cl.10.6.1 ......................... 4–012, 4–255 cl.12.1.2 .................................... 4–236 cl.12.3 ....................................... 4–037 cl.14.3.2 .................................... 4–171 cl.15.1.2 ......................... 5–078, 5–099 A201/07........................4–016, 4–021, 4–078, 7–224, 8–075, 11–021, 14–054, 14–156, 16–061 cl.3.2.2 ...................................... 4–086 cl.3.2.4 ................4–021, 4–086, 4–320 cl.3.7.4 ........................... 4–158, 4–320 cl.3.7.5 ...................................... 4–320 cl.3.10 ....................................... 7–197 cl.3.10.1 .................................... 9–037 cl.4.14 ....................................... 4–037 cl.4.19.1 .................................... 9–037

cl.5.2.3 ...................................... 4–012 cl.6.2.3 ........................... 4–178, 4–320 cl.7.2 ............................ 4–108, 10–077 cl.7.2.1 ......................... 4–236, 12–035 cl.7.3 ......................................... 4–108 cl.7.3.1 .....................................12–035 cl.7.3.4 ...................................... 4–320 cl.7.4 ......................................... 4–108 cl.8.3.1 .......................... 2–035, 4–012, 4–016, 4–033, 4–049, 4–052, 6–015, 6–039 cl.9.7 ......................................... 4–037 cl.9.9.1 ...................................... 4–255 cl.10.3.2 .................................... 4–012 cl.10.4 ............................ 4–012, 4–255 cl.12.1.2 .................................... 4–236 cl.12.3 ....................................... 4–037 cl.14.3.2 ......................... 4–171, 4–320 cl.15.1.2 ......................... 5–078, 5–099 cl.15.1.5.1 ................................. 5–013 cl.15.1.5.2 ................................. 4–141 cl.15.1.6 .................................... 4–320 A201SC/07 cl.15.2.2 ...................................13–157 ACA in general ........................ 1–022, 4–262, 7–090, 7–224 ACA82 .................................... 1–023, 8–031, 11–021 cl.1...........................................12–051 cl.1.5 ........................................12–123 cl.1.6 ......................................... 4–097 cl.2.1 ......................................... 4–215 cl.2.6 ............................ 4–152, 12–028 cl.3.2 ......................................... 7–201 cl.3.5 ......................................... 4–232 cl.8.1(d) ....................... 4–169, 12–052 (e) ...................................12–052 cl.11.3 ......................................21–225 alt.1 .........................................21–226 cl.11.5 alt. 1 .............................. 4–032 alt. 2 ......................................... 6–025

lxxi

TABLE OF CONTRACT CLAUSES

(a) .................................... 4–061 (c) .................................... 4–249 (d) .................................... 4–179 (e) ........................ 4–032, 4–097, 4–114, 4–152, 4–169, 4–172, 4–215, 4–232 cl.11.6 ......................................11–105 cl.11.8 .............4–172, 11–072, 11–102 cl.12.2 ....................................... 8–031 cl.12.3 ....................................... 8–031 cl.17 .........................................11–069 ACA98 .......... 1–023, 8–031, 10–030, 11–021 cl.1...........................................12–051 cl.1.5 ........................................12–123 cl.1.6 ......................................... 4–097 cl.2.1 ......................................... 4–215 cl.2.6 ............................ 4–152, 12–028 cl.3.2 ......................................... 7–201 cl.3.5 ......................................... 4–232 cl.8.1(d) ....................... 4–169, 12–052 (e) ..................... 12–052, 12–053 cl.11.3 alt.1 ..............................21–226 cl.11.5 alt.1 ............................... 4–032 alt.2 .......................................... 6–025 (a) .................................... 4–061 (c) .................................... 4–249 (d) .................................... 4–179 (e) ........................ 4–032, 4–097, 4–114, 4–152, 4–169, 4–172, 4–215, 4–232, 6–132 cl.11.6 ......................................11–105 cl.11.8 .............4–172, 11–072, 11–102 cl.12.2 ....................................... 8–031 cl.12.3 ....................................... 8–031 cl.17 .........................................11–069 AIA forms in general ..........................20–010 AIA 2007 .......... 1–012, 1–022, 2–054, 4–109 AS2124 ........................1–022, 4–016, 4–027, 4–033, 4–244, 5–059, 6–035, 6–135, 8–075, 10–030, 11–030, 11–031, 11–048, 13–140, 14–145, 16–061, 18–068, 21–246 cl.3.1 ........................................11–080 cl.6............................................ 7–181 cl.8.1 ........................................12–123 cl.32.2 ......................................18–136 cl.33.2 ................7–033, 7–091, 7–225, 9–030, 9–065, 18–043, 18–067 cl.35.5 .......................... 5–139, 16–086 (a) .................................. 4–125 (b) (iv) ............................ 4–114 (vii) ........................... 4–179 (viii)........................... 4–179 (x) ............................. 4–032

cl.40.1 ........................ 12–036, 12–037 cl.40.4 ......................................12–155 AS4000 ........................1–022, 3–024, 4–027, 4–033, 4–244, 4–274, 6–035, 8–075, 10–030, 11–048, 12–036, 13–140, 14–145, 16–061, 20–017 cl.1............................................ 4–033 (b) (ii).................................. 4–125 cl.6............................................ 7–181 cl.8.1 .......................... 12–123, 12–132 cl.11.2 ....................................... 4–289 cl.24.3 ....................................... 4–289 cl.24.4 cl.25.3 ....................................... 4–289 cl.32 ............... 4–289, 11–081, 18–043, 18–067, 18–136 cl.33.2 ........................... 7–033, 7–225, 9–030, 9–065 cl.33.4 ....................................... 4–289 cl.34.1 ....................................... 7–091 cl.34.3 ......................................14–145 cl.34.4 ........... 11–030, 18–068, 20–013 cl.34.5 ....................................... 5–139 cl.36.1 .......................... 4–289, 12–037 cl.36.3 ......................................12–155 cl.36.4 ....................................... 4–274 C21 in general ..................................... 6–012 C21/03 .........................1–022, 4–006, 4–009, 6–013, 6–032, 7–191, 8–075, 10–072, 14–115, 16–133 cl.11 .......................................... 9–065 cl.11.3 ......................................11–051 cl.31.2 ......................................12–120 cl.33 .........................................12–120 cl.38.1 ....................................... 4–314 cl.41 ............................. 4–314, 12–032 cl.41.8 ......................................12–022 cl.41.10 ....................................12–032 cl.43 ............................. 6–034, 14–143 cl.43.1 ....................................... 4–006 cl.43.1.2 .................................... 4–047 cl.43.2 ....................................... 5–018 cl.43.3 ......................................11–025 cl.44.1 ....................................... 4–314 cl.45.4 ....................................... 4–314 cl.46.3 ....................................... 4–314 cl.78 .......................................... 4–008 C21/09 .........................1–007, 1–022, 1–025, 2–056, 4–006, 4–027, 4–078, 4–122, 4–322, 5–165, 6–045, 7–204, 7–207, 8–075 cl.4.9.1 (6) ................................ 8–050

lxxii

TABLE OF CONTRACT CLAUSES

cl.17.4 ......................................13–135 cl.17.5 ......................................13–135 cl.25 ..................9–036, 9–065, 11–026 cl.25.4 ........................ 11–026, 11–051 cl.25.6 to cl.25.12 ..................... 7–191 cl.25.6 ....................................... 6–019 cl.25.8 ........................... 5–042, 5–087, 6–019, 9–047, 16–032 cl.25.9 ....................................... 4–006 cl.25.9.3 .................................... 8–050 cl.25.10 ....................................14–143 cl.25.11 ....................................16–032 cl.38.1 ....................................... 4–165 cl.41 ........................... 11–082, 12–032 cl.41.6 ....................................... 4–314 cl.41.8 ......................................12–022 cl.41.10 ....................................12–032 cl.42 ............................. 4–095, 12–121 cl.42.1 ....................................... 4–086 cl.42.4 ....................................... 4–314 cl.44 ............................. 4–095, 12–121 cl.44.3 ............................ 4–095, 4–314 cl.49 .......................................... 4–233 cl.51.1 ....................................... 6–035 cl.52 .........................................11–082 cl.53.1 ....................................... 4–118 cl.54 .........................................11–082 cl.54.1.1 ......................... 4–033, 4–047 cl.54.3 .................5–042, 5–087, 7–191 cl.54.4 ....................................... 4–006 cl.55 .......................................... 4–314 cl.55.3 ....................................... 5–164 cl.56 .........................................11–082 cl.57.3 ....................................... 4–172 cl.58.4 ....................................... 4–037 CE06 ................ 1–022, 4–036, 4–041, 4–087, 4–183, 4–266, 9–042, 12–122 cl.2.1 ......................................... 3–062 cl.4.19.1 ......................... 9–037, 9–051 cl.4.19.1.1 ................................. 7–206 cl.5.7 .............................. 6–027, 6–028 cl.5.7.1 ........................... 4–114, 4–117 cl.5.7.2 ................4–031, 4–170, 4–183 cl.5.7.3 ...................................... 4–050 cl.5.7.4 ...................................... 4–050 cl.5.8 ......................................... 4–236 cl.6.4 ........................................13–147 CM08...........................3–036, 3–044, 7–196, 13–060, 13–146 cl.1.1 ......................................... 7–205 CMTC/08 cl.2.28.9 .................................... 4–251 cl.2.28.12 .................................. 4–061

CPC 2013 ....................1–005, 1–012, 1–025, 2–034, 2–052, 2–056, 3–007 to 3–015, 4–325 to 4–366, 13–105 cl.2.4.7 ...................................... 4–348 cl.5.1 ......................................... 4–348 cl.5.2 ...................4–349, 4–354, 4–366 cl.13.4 ....................................... 4–353 cl.20 .......................................... 4–352 cl.21.4 ....................................... 4–351 cl.23.2 ....................................... 4–366 cl.23.3 ....................................... 4–366 cl.24 .......................................... 4–366 cl.25 .......................................... 4–348 cl.25.2 ....................................... 4–366 cl.26 ............................... 4–349, 4–366 cl.26.4 ....................................... 4–349 cl.26.5 ....................................... 4–349 cl.26.6 ....................................... 4–366 cl.27 ............................... 4–358, 4–366 cl.27.3 ....................................... 4–360 cl.27.4 ....................................... 4–360 cl.28 ............................... 4–356, 4–366 cl.32 ............................... 4–351, 4–366 cl.32.2 ....................................... 4–366 cl.32.3 ....................................... 4–366 cl.32.5 ....................................... 4–366 cl.33 .......................................... 4–366 cl.33.1 ....................................... 4–352 cl.33.3 ....................................... 4–353 cl.34.1 ....................................... 4–353 cl.34.2 ....................................... 4–353 cl.35 ............................... 4–349, 4–351 cl.36 .......................................... 4–358 cl.37 .......................................... 4–358 cl.37.1 ....................................... 4–358 cl.37.3 ....................................... 4–353 cl.38 .......................................... 4–363 cl.38.3 ....................................... 4–363 cl.38.4 ....................................... 4–363 cl.39 ............................... 4–363, 4–366 cl.39.2.6 .................................... 4–366 cl.40.3 ....................................... 4–363 cl.41 .......................................... 4–366 cl.42 ............................... 4–353, 4–359 cl.43 .......................................... 4–359 cl.43.2 ....................................... 4–353 cl.44 ....................4–353, 4–358, 4–360 cl.45 ............................... 4–358, 4–360 cl.51.3 ....................................... 4–344 cl.53.2 ....................................... 4–356 cl.57 .......................................... 4–356 cl.65 .......................................... 4–366

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TABLE OF CONTRACT CLAUSES

App.A ....................................... 4–363 App.E........................................ 4–351 DB05 ...........................1–023, 2–026, 4–266, 4–288, 7–196, 11–053, 11–079, 13–058, 13–140 cl.2.3 ......................................... 7–091 cl.2.10.1 .................................... 4–093 cl.2.12 ....................................... 4–094 cl.2.12.2 .................................... 4–021 cl.2.14.2 ...................................12–119 cl.2.25.1 .................................... 6–026 cl.2.25.1.2 .................... 6–034, 14–142 cl.2.25.5.1 ................................14–144 cl.2.25.5.2 ................................. 6–089 cl.2.25.6.1 .................. 11–023, 11–026 cl.2.26.1 ..............4–093, 4–094, 4–114 cl.2.26.2 .................................... 4–117 cl.2.26.2.1 ...................... 4–119, 4–172 cl.2.26.2.3 ................................. 4–236 cl.2.26.3 .................................... 4–169 cl.2.26.4 .................................... 4–038 cl.2.26.5 ......................... 4–183, 4–254 cl.2.26.6 ......................... 4–175, 4–179 cl.2.26.7 .................................... 4–127 cl.2.26.9 .................................... 4–251 cl.2.26.10 ....................... 4–245, 4–246 cl.2.26.11 .................................. 4–181 cl.2.26.12 .................................. 4–177 cl.2.26.13 .................................. 4–061 cl.2.29.2.1 ................................. 4–264 cl.3.7 ........................................14–032 cl.3.9.1 .....................................12–008 cl.3.10 ....................................... 4–172 cl.3.11 ....................................... 4–119 cl.3.16.1 .................................... 4–254 cl.3.22.2 .................................... 4–264 cl.4.21.1 .................................... 4–094 cl.5.1 .............................. 4–094, 4–114 DB09 cl.2.26.1 ...................................12–069 cl.3.5 ........................................12–069 cl.3.9.1 .....................................12–068 cl.4.20 ......................................12–069 cl.5.1.2 .....................................12–069 cl.5.1.1.3 ..................................12–068 DOM/1...............................................23–039 cl.11 .......................................... 7–063 cl.11.8 ....................................... 7–063 App. .......................................... 7–063 DOM/2...............................................21–209 ECC in general ....................... 8–001, 12–107 ECC2 ...........................2–019, 2–020, 2–036, 2–123, 2–131, 2–153, 4–021,

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4–027, 4–316, 7–165, 7–189, 7–207, 7–225, 7–243, 10–019, 11–021, 11–039, 11–105, 13–054, 13–056, 16–086, 16–141, 18–118 cl.11.2 ......................................15–099 cl.16 .......................................... 5–005 cl.17.1 .......................... 4–100, 12–123 cl.17.3 ....................................... 4–021 cl.19.1 .......................... 4–097, 12–113 cl.21.1 ......................................12–030 cl.31 ............................ 7–243, 15–062, 15–099, 15–144 cl.31.1 ............................ 7–181, 8–067 cl.31.2 ........................... 7–187, 7–204, 8–050, 11–041, 11–147, 16–062 cl.31.3 .......................... 8–068, 11–041 cl.32 .......................... 15–062, 15–099, 15–144, 15–149, 15–153 cl.32.1 ........................... 4–113, 9–040, 9–046, 11–041 cl.36 .........................................11–075 cl.36.1 ........................ 11–069, 11–102 cl.46.1 ......................................11–040 cl.50.3 ............................ 7–199, 8–006 cl.51.2 ....................................... 4–037 cl.60.1(1) ...................... 4–093, 4–097, 4–100, 4–113 (2) ..................... 4–165, 12–028 (3) ...................... 4–185, 4–226, 14–047 (4) .................................. 4–172 (5) .................................. 4–185 (6) ..................... 4–226, 14–052 (7) .................................. 4–264 (8) .................................. 4–113 (10) ................................ 4–236 (11) ................................ 4–236 (12) ................................ 4–149 (13) ................................ 4–134 (14) .................... 4–036, 4–039, 4–088, 4–244, 4–255, 4–259 (16) ................................ 4–184 (17) ................................ 4–113 (18) ................................ 4–035 cl.61 ............................... 4–112, 5–079 cl.62 ..................4–276, 9–059, 17–051 cl.62.1 ....................................... 9–060 cl.63.3 ................6–017, 6–045, 9–036, 14–143, 15–062, 15–099, 15–144, 15–149

TABLE OF CONTRACT CLAUSES

cl.63.4 ....................................... 5–006 cl.80 .......................................... 2–153 cl.80.1 ................4–036, 4–039, 4–088, 4–244, 4–246, 4–255, 4–259 Option R ..................................21–225 ECC3 ............... 1–007, 2–036, 2–040, 2–056, 2–131, 2–153, 4–021, 4–027, 4–135, 4–305, 4–316, 5–154, 5–165, 7–165, 7–190, 7–207, 7–225, 7–243, 10–019, 11–021, 11–039, 11–105, 13–054, 13–056, 16–086, 16–141, 18–118 cl.11.2 ......................................15–099 (31) ...............................12–084 cl.12.4 ............................ 2–045, 5–164 cl.16.1 ....................................... 5–005 cl.17.1 .......................... 4–100, 12–123 cl.17.3 ....................................... 4–021 cl.18.1 .......................... 4–097, 12–113 cl.21.1 ......................................12–030 cl.31 .................7–189, 7–243, 15–062, 15–099, 15–144 cl.31.1 ............................ 7–181, 8–067 cl.31.2 ................7–187, 7–204, 8–032, 8–050, 10–059, 11–041, 11–147, 16–062 cl.31.3 .......................... 8–068, 11–041 cl.32 .......................... 15–062, 15–099, 15–144, 15–149, 15–153 cl.32.1 ........................... 4–113, 9–040, 9–046, 11–041 cl.36 .........................................11–075 cl.36.1 ........................ 11–069, 11–102 cl.46.1 ......................................11–040 cl.50.3 ............................ 7–199, 8–006 cl.51.2 ....................................... 4–037 cl.52.2 ......................................13–136 cl.52.3 ......................................13–137 cl.55.1 ......................................12–084 60 (1) ........................... 4–093, 4–097, 4–100, 4––113 (2) .......................... 4–165, 12–028 (3) ...............4–185, 4–226, 14–047 (4) ....................................... 4–172 (5) ....................................... 4–185 (6) .......................... 4–226, 14–052 (7) ....................................... 4–264 (8) ....................................... 4–113 (10) ..................................... 4–236 (11) ..................................... 4–236

(12) ..................................... 4–149 (13) .............4–122, 4–134, 13–137 (14) ..............4–036, 4–039, 4–088, 4–244, 4–255, 4–259 (16) ..................................... 4–184 (17) ..................................... 4–113 (18) .......................... 4–035, 6–132 cl.60.2 (19) ............................... 4–078 cl.60.4 ......................................12–084 cl.60.5 ......................................12–084 cl.60.6 ......................................12–084 cl.60.7 ......................................12–084 cl.61 .......................................... 4–112 cl.61.1 ......................................10–077 cl.61.2 ......................................10–077 cl.61.3 ........................... 5–079, 5–120, 5–146, 5–154 cl.62 .............................. 2–123, 4–276, 9–059, 17–051 cl.62.1 ....................................... 9–060 cl.63.3 ................6–017, 6–045, 8–050, 9–036, 14–143, 15–062, 15–099, 15–144, 15–149 cl.63.4 ............................ 4–305, 5–165 cl.63.5 ....................................... 5–006 cl.80 .......................................... 2–153 cl.80.1 ........................... 4–036, 4–039, 4–088, 4–244, 4–246, 4–255, 4–259 Option X7................................21–225 FIDIC in general ..........1–015, 1–022, 1–023, 4–020, 4–021, 4–052, 4–063, 4–200, 4–228, 4–262, 6–035, 7–090, 7–224, 9–057, 11–042, 11–076, 12–046, 14–062, 16–061, 24–026 cl. 1.3 (a) .................................13–056 cl.8.4 ........................................15–103 cl.17.3 ....................................... 4–021 cl.20.1 ......................................11–105 cl.44.1 (c) ................................. 4–127 FIDIC/99 in general .............. 4–275, 24–011, 24–013, 24–030, 24–073 cl.3...........................................24–022 cl.20 .........................................24–043 cl.20.2 ......................................24–022 cl.20.4 ........................ 24–069, 24–070 cl.20.6 ......................................24–069 cl.24 .........................................24–022 App. .........................................24–022

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FIDIC4 ........................2–150, 6–074, 8–051, 11–036, 11–045, 12–083, 21–225 cl.2.6 .............................. 6–074, 6–140 cl.5.2 ............................ 5–023, 12–123 cl.6.3 ......................................... 5–021 cl.6.4 ......................................... 5–021 cl.8.1 .......................... 11–039, 12–040 cl.8.2 ........................................12–040 cl.12 .......................................... 5–014 cl.12.2 .......................... 2–130, 12–028 cl.14.1 ........................... 7–181, 7–238, 7–239, 8–067 cl.14.2 ....................................... 9–044 cl.17 .......................................... 5–023 cl.20.3 .................4–246, 4–249, 4–259 cl.20.4 (b) ................................. 4–249 (e) ................................. 4–246 (g) ................................. 4–259 cl.26.1 ......................................12–113 cl.27.1 (a) ................................. 4–264 cl.38.2 ....................................... 5–023 cl.44.1 ............................ 6–071, 6–081 (a) ...........4–114, 4–246, 4–249, 4–259, 5–023 (b) ....................... 2–130, 4–264 (c)................................... 4–140 (d) ....................... 4–034, 4–039 (e)................................... 4–052 cl.44.2 .................5–019, 5–060, 5–083 cl.44.3 ........................ 11–105, 12–144 cl.45.1 ......................................11–173 cl.46.1 ......................................11–174 cl.51.1 ......................................12–041 cl.53.1 ....................................... 5–077 FIDIC/Build98 ........................ 7–090, 8–051, 9–051, 9–054 cl.1.1.6.9 ..................................12–043 cl.1.9 ......................................... 4–228 cl.1.13 ........................ 12–113, 12–118 cl.2.1 ......................................... 4–168 cl.4.1 .......................... 12–042, 12–043 cl.4.7 ......................................... 4–102 cl.4.12 ....................................... 4–157 cl.4.21 ....................................... 9–055 (g) .................................. 9–052 cl.4.24 ....................................... 4–264 cl.5............................................ 4–201 cl.6.10 ....................................... 9–055 cl.7.4 .............................. 4–236, 4–236 cl.8.3 ..................7–181, 7–183, 8–050, 8–077, 9–044 (b) .................................... 4–249

cl.8.4 ........................................12–144 (a) ......................... 4–114, 4–140 (b) .............4–102, 4–157, 4–172, 4–180, 4–181, 4–236, 4–244, 4–248, 4–259, 4–264 (c) .................................... 4–140 (e) .................................... 4–312 cl.8.5 .............................. 4–180, 4–181 cl.8.6 (b) ................................... 9–039 cl.8.9 ......................................... 4–172 cl.13 .........................................12–043 cl.14.8 ....................................... 4–037 cl.17.3 (a) ................................. 4–249 (b) ................................ 4–248 (c) ................................. 4–244 (g) ................................. 4–259 (h) ................................ 4–140 cl.17.4 ........................... 4–140, 4–244, 4–248, 4–249, 4–259 cl.19.1 ............................ 4–068, 4–079 cl.19.5 ....................................... 4–079 cl.20.1 ........................... 5–021, 5–077, 5–117, 6–081 cl.20.2 ......................................24–048 cl.20.4 ......................................24–039 cl.20.6 ......................................24–039 App. .........................................24–050 FIDIC/Build99 ...... 2–150, 5–061, 6–016, 7–181, 8–051, 11–044, 11–045, 13–153, 24–030, 24–043, 25–004 cl.1.1.6.9 ..................................12–043 cl.1.5 ...............4–081, 12–130, 12–131 cl.1.9 ............................ 4–310, 14–047 cl.1.13 ......................................12–118 cl.2.1 .............................. 4–168, 4–310 cl.4.1 .......................... 12–042, 12–043 cl.4.7 ......................................... 4–310 cl.4.12 ............................ 4–159, 4–310 cl.4.21 ......................................13–152 cl.4.24 ............................ 4–264, 4–310 cl.5............................................ 4–201 cl.5.2 ........................................14–039 cl.5.6 ........................................13–153 cl.6.10 ......................................13–151 cl.7.4 .............................. 4–236, 4–310 cl.8.1 ........................................11–039 cl.8.3 ............................. 7–183, 7–185, 8–077, 9–045 (d) .................................... 4–114 cl.8.4 .................4–020, 6–090, 12–144 (a) .................................... 7–166 (b) .............4–168, 4–181, 4–236, 4–259, 4–264

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TABLE OF CONTRACT CLAUSES

(c) ......................... 4–021, 4–141 (e) ........................ 4–034, 4–039, 4–187, 6–132 cl.8.5 ......................................... 4–181 cl.8.6 ............. 11–041, 11–052, 11–057 cl.8.7 .......................... 25–013, 25–018 cl.8.9 ......................................... 4–310 cl.10.1 ......................................25–018 cl.10.2 ......................................25–018 cl.10.3 ....................................... 4–310 cl.11.1 ......................................25–023 cl.11.10 ....................................25–023 cl.12.3 ....................................... 4–290 cl.13 .........................................12–043 cl.13.1 ......................................12–131 cl.13.3 .......................... 2–123, 13–151 cl.13.7 ....................................... 4–310 cl.14.9 ......................................25–018 cl.16.1 ....................................... 4–310 cl.17.2 ......................................25–018 cl.17.3(c)................................... 4–246 (g) .................................. 4–259 cl.17.4 ............................ 4–259, 4–310 cl.19 ............................... 4–070, 4–079 cl.19.1 ....................................... 4–071 cl.19.4 ....................................... 4–310 cl.19.6 ....................................... 4–072 cl.20.1 ................4–311, 5–022, 5–077, 5–118, 5–146, 6–081, 13–151, 25–010, 25–012 cl.20.2 ......................................24–048 cl.20.4 ......................................24–039 cl.20.6 ........................ 24–039, 24–073 cl.20.8 ......................................24–073 Annex ........... 24–059, 24–063, 24–064 App. ........................... 24–050, 24–055 FIDIC/DB95 1–023, 6–081, 7–166, 8–051, 9–051, 9–054, 21–225, 24–009 cl.1.13 ......................................12–113 cl.2.2 ......................................... 4–168 cl.3.5 ......................................... 6–071 cl.4.14 ................7–181, 7–186, 7–187, 7–204, 8–050, 8–066, 9–044 cl.4.15 ....................................... 9–054 (g) .................................. 9–051 cl.4.24 ....................................... 4–264 cl.8.1 ........................................11–039 cl.8.3 .............................. 5–021, 9–045 (c) ........................ 4–140, 4–168, 4–172, 4–180, 4–181, 4–244, 4–249, 4–264

(d) .................................... 4–150 (e) ..............4–039, 4–187, 4–312 cl.8.4 .............................. 4–180, 4–181 cl.8.5 ........................................11–040 cl.8.8 ......................................... 4–172 cl.12.3 ....................................... 4–237 cl.13.8 ....................................... 4–037 cl.14.3 ....................................... 2–123 cl.17.3 (a) ................................. 4–249 (e) ................................. 4–244 (g) ................................. 4–140 cl.17.4 .................4–140, 4–244, 4–249 cl.19.1 ............................ 4–069, 4–079 (a) .................................. 4–069 cl.19.5 ....................................... 4–079 cl.20.1 ....................................... 5–077 FIDIC/DB99 ................2–150, 4–203, 4–290, 5–061, 6–016, 7–181, 8–051, 11–053, 24–031, 24–034, 24–043, 24–074 cl.1.5 ...............4–081, 12–130, 12–131 cl.1.13 ......................................12–118 cl.2.1 ......................................... 4–168 cl.4.1 ........................................12–072 cl.4.12 ....................................... 4–151 cl.4.24 ............................ 4–264, 4–310 cl.5.2 ......................................... 7–184 cl.7.4 .............................. 4–236, 4–310 cl.8.3 ...................7–184, 7–185, 8–077 (d) .................................... 7–166 cl.8.4 ............................ 6–090, 12–144 (a) .................................... 4–114 (b) ........................ 4–168, 4–181, 4–236, 4–264 (c) .................................... 4–187 (e) ......................... 4–034, 4–039 cl.8.5 ......................................... 4–181 cl.8.6 .......................... 11–052, 11–057 cl.8.9 ......................................... 4–310 cl.10.3 ....................................... 4–310 cl.13.1 ......................................12–131 cl.13.7 ....................................... 4–310 cl.16.1 ....................................... 4–310 cl.17.3 (c) ................................. 4–246 cl.17.4 ....................................... 4–310 cl.19 ............................... 4–070, 4–079 cl.19.1 ....................................... 4–142 cl.19.4 ....................................... 4–142 cl.19.6 ....................................... 4–072 cl.20.1 ........................... 4–311, 5–022, 5–077, 5–118 FIDIC/DBO ........................ 24–014, 24–030, 24–043, 25–010 cl.20.5 ......................................24–030

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TABLE OF CONTRACT CLAUSES

FIDIC/M&E87 ...........4–068, 6–081, 11–039, 11–068, 13–151, 21–225, 24–010, 24–031, 24–034 cl.12.1 ........................... 7–181, 7–186, 8–050, 8–051, 8–067 cl.12.3 ....................................... 9–044 cl.15.2 ......................................12–113 cl.26.1 ........................... 4–201, 5–021, 6–071, 6–101 (a) .................................. 4–114 (b) .................................. 4–127 (c)................................... 4–149 (d) ....................... 4–117, 4–228 (e)........................ 4–034, 4–312 (f) ................................... 4–187 (g) .................................. 4–172 (i) ........................ 4–255, 4–259 (l) ........................ 4–244, 4–249 cl.26.2 ....................................... 4–201 cl.31.2 ....................................... 2–123 cl.31.5 ......................................13–150 cl.33.6 ....................................... 4–037 cl.34.1 (a) ................................. 5–077 cl.37.2 (a) ...................... 4–064, 4–249 (b) ................................. 4–064 (c) ....................... 4–064, 4–244 (e) .................................. 4–064 (g).................................. 4–259 (h) ................................. 4–255 (i) .................................. 4–255 (k).................................. 4–034 cl.44.1 .................4–063, 4–069, 4–079 cl.44.2 ............................ 4–065, 4–067 cl.44.5 ....................................... 4–079 cl.44.6 .................4–066, 4–067, 4–079 cl.44.8 ....................................... 4–067 FIDIC/MDB 2004................ 24–030, 24–043 FIDIC/MDB 2010................ 24–030, 24–043 cl.20.2 ......................................24–035 cl.20.4 ......................................24–067 Annex ......................................24–030 App. .........................................24–076 FIDIC/PD + B99 .........2–150, 4–203, 4–259, 4–290, 5–061, 6–016, 7–181, 8–051, 11–053, 24–031, 24–034, 24–043 cl.1.1.6.8 ..................................12–074 cl.1.5 ...............4–081, 12–130, 12–131 cl.1.9 ......................................... 4–310 cl.1.13 ......................................12–118 cl.2.1 .............................. 4–168, 4–310 cl.4.1 ........................................12–073 cl.4.7 ......................................... 4–310

cl.4.12 ............................ 4–159, 4–310 cl.4.24 ............................ 4–264, 4–310 cl.5.2 ......................................... 7–184 cl.5.6 ........................................13–153 cl.7.4 .............................. 4–236, 4–310 cl.8.3 ............................. 7–184, 7–185, 8–077, 9–045 (d) .................................... 4–114 cl.8.4 ......................................... 6–090 (a) .................................... 4–114 (b) ........................ 4–168, 4–181, 4–236, 4–264 (c) .................................... 4–141 (e) ..............4–034, 4–039, 4–187 cl.8.5 ......................................... 4–181 cl.8.6 .......................... 11–052, 11–057 cl.8.9 ......................................... 4–310 cl.10.3 ....................................... 4–310 cl.13 .........................................12–074 cl.13.1 ......................................12–131 cl.13.7 ....................................... 4–310 cl.16.1 ....................................... 4–310 cl.17.3 (c) ................................. 4–246 cl.17.4 ....................................... 4–310 cl.19 ............................... 4–070, 4–079 cl.19.1 ....................................... 4–071 cl.19.4 ....................................... 4–310 cl.19.6 ....................................... 4–072 cl.20.1 ........................... 4–311, 5–022, 5–077, 5–118, 6–081 cl.44.5 ......................................12–144 FIDIC/SF98 .................4–025, 4–027, 6–081, 7–198, 11–039, 21–225 cl.1.1.14 ......................... 4–062, 4–079 cl.6.1 ...................4–025, 4–141, 6–030 (b) ......................... 4–248, 4–249 (c) .................................... 4–246 (g) .................................... 4–259 (h) ......................... 4–140, 4–141 (i) ..................................... 4–160 (j) ..................................... 4–172 (k) ..............4–034, 4–187, 4–312 (l) ..................................... 4–079 (m) .............4–025, 4–114, 4–236 cl.7.3 ..................4–034, 4–079, 4–114, 4–140, 4–141, 4–160, 4–172, 4–187, 4–236, 4–246, 4–248, 4–249, 4–259, 4–312, 6–030 cl.9.2 .............................. 4–025, 4–236 cl.10.3 ............................ 5–004, 5–022 GC/Works in general................ 1–022, 1–023, 2–019, 2–020, 4–122,

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TABLE OF CONTRACT CLAUSES

4–171, 4–248, 4–262, 4–264, 7–165, 9–038, 11–062, 13–056 cl.35 (3) (b) .............................. 4–229 (4) (e) .............................. 4–229 cl.46 (3) (a) .............................. 5–089 cl.46 (3) (b) .............................. 5–089 GC/Works/1 ..................2–036, 2–123, 6–035, 7–033, 7–198, 7–225, 7–226, 8–051, 9–105, 9–109, 11–048, 11–209, 12–083, 12–145, 13–140, 14–145, 16–061, 17–051, 21–225 cl.1 (1) ...................................... 8–067 (d) ............4–246, 4–249, 4–252 cl.2 (3) ...................................... 4–097 (5)............................................12–125 cl.3 (3) ...................................... 4–088 cl.7 (2) ...................................... 5–015 (3) ........................... 2–130, 4–156 cl.18 .........................................12–054 cl.25 (1) ...................................13–137 cl.33 (1) ........................ 7–127, 7–182, 7–204, 8–050 cl.34 (1) ....................... 7–091, 11–039 cl.35 (3) .................................... 9–058 (b) ..............................14–048 (c) .................... 5–015, 5–028 (e) ..............................11–060 (4) (c) ..............................11–061 (e) ..............................14–048 cl.36 ............................. 6–081, 11–105 (1) .....................................14–145 (2) (a) ..................... 4–097, 4–114 (b) ..................... 4–028, 6–132 (c) ................................ 4–244 (d) .................... 2–130, 4–246, 4–249, 4–252, 12–028 (e) ..................... 4–047, 4–156 (4) .....................................12–144 (6) .....................................11–027 cl.38 .............................. 4–112, 7–226, 11–069, 11–074, 11–102 cl.40 (2) ...................................12–055 (b) ..............................12–125 (5) ......................... 4–306, 9–059 cl.42 .......................................... 4–306 (2) .................................... 4–306 cl.46 .......................................... 4–306 (3) (a) ................... 5–015, 5–089 (b) .............................. 5–089 cl.47 .......................................... 4–306

GC/Works/1DB........................ 7–182, 7–198, 7–225, 7–226, 8–051, 16–061 cl.1 (1) ...................................... 8–067 (d) ..........4–246, 4–249, 4–252 cl.2 (3) ...................................... 4–093 cl.7 (2) ...................................... 5–015 (3) ...................................... 2–130 cl.33 (1) ......................... 7–204, 8–050 (10) .................................. 7–127 cl.34 (1) .................................... 7–091 cl.35 (3) .................................... 9–058 (b) ............................... 5–015 (e) ..............................11–060 (4) (c) .............................11–061 cl.36 (2) ......................... 4–028, 4–031 (a) .................... 4–093, 4–114 (b) ............................... 4–028 (d) ................... 2–130, 4–246, 4–249, 4–252 (e) ............................... 4–047 cl.40 (5) .................................... 9–059 cl.46 (3) (a) .............................. 5–015 GC/Works/1/98 ........................ 2–131, 3–024, 4–015, 7–198, 7–225, 7–226, 8–051, 12–083, 16–061, 17–051, 21–225 cl.1 (1) ...................................... 8–067 (d) ..........4–246, 4–249, 4–252 cl.2 (3) ...................................... 4–097 (5) .....................................12–125 cl.3 (3) ...................................... 4–088 cl.7 (2) ...................................... 5–015 (3) ........................... 2–130, 4–157 cl.18 .........................................12–054 cl.31 .........................................12–054 cl.33 (1) ........................ 7–127, 7–182, 7–204, 8–050 cl.34 (1) ...................................11–039 cl.35 (3) .................................... 9–058 (c) .................... 5–015, 5–028 cl.36 ............................. 6–081, 11–105 (2) .................................... 6–026 (a) .................... 4–097, 4–114 (c) ............................... 4–244 (b) ............................... 4–029 (d) ................... 2–130, 4–157, 4–246, 4–249, 4–252, 12–028 (e) ............................... 4–047 (g) ............................... 4–038 (4) ............................... 6–088 (6) ...................................11–027

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TABLE OF CONTRACT CLAUSES

cl.38 .............................. 4–112, 7–226, 11–069, 11–102 cl.40 (2) ...................................12–055 (b) ..............................12–125 (5) ..............2–123, 4–306, 9–059 cl.42 .......................................... 4–306 (2) ......................... 2–123, 4–306 cl.46 .......................................... 4–306 (3) (a) ................... 5–015, 5–089 (b) ............................. 5–089 cl.47 .......................................... 4–306 GC/Works/1DB/98 ................... 7–182, 7–198, 7–225, 7–226, 8–051, 16–061 cl.1 (1) ...................................... 8–067 (d) ..........4–246, 4–249, 4–252 cl.2...........................................12–124 (3) ........................... 4–021, 4–093 cl.7 (3) ........................... 2–130, 4–157 cl.33 (1) ......................... 7–204, 8–050 (10) .................................. 7–127 cl.35 (3) .................................... 9–058 cl.36 (2) (a) .............................. 4–093 (b) .............................. 4–029 (c) ............................... 4–244 (d) .................. 2–130, 4–157, 4–249, 4–252 (e) ............................... 4–047 (g)............................... 4–038 cl.40 (5) .................................... 9–059 GC/Works/2 .................4–246, 4–247, 11–036 cl.9...........................................12–113 cl.14 (2) .................................... 4–246 cl.16 (2) .................................... 4–047 cl.36 (6) ...................................11–027 GC/Works/2/98 ........................ 3–044, 4–015, 4–246, 4–247 cl.4 (2) ...................................... 4–157 cl.23 (b) .................................... 4–047 (d) .................................... 4–038 cl.36 (6) ...................................11–027 HK86 ...........................2–035, 2–053, 3–024, 4–027, 4–079, 4–126, 4–217, 4–318, 6–035, 6–137, 13–056, 13–140, 14–071, 14–145 cl.11 (6) .................................... 4–318 cl.21 (2) .................................... 4–172 cl.23 ..................4–206, 6–035, 14–145 (a) ...................................... 4–061 (b)...................................... 4–124 (c) ...................................... 4–262 (d)...................................... 4–242

(e) ........................... 4–114, 4–172 (f) ...................................... 4–215 (g) ........................... 4–196, 4–198 (h)...................................... 4–183 (i)....................................... 4–236 (k) ...................................... 4–264 cl.24 .......................................... 4–318 (b)...................................... 4–236 cl.25.1 ....................................... 2–035 HK05 ...........................2–029, 2–035, 2–053, 2–153, 3–024, 4–015, 4–027, 4–218, 4–278, 4–305, 5–065, 5–085, 5–086, 6–052, 8–075, 11–039, 11–088, 12–064, 13–056 cl.1............................................ 4–246 cl.1.6 .............................. 4–246, 4–319 cl.2.4 ..................2–053, 4–081, 4–082, 4–083, 7–237, 12–088, 12–125 (1) ...................................12–123 cl.3.1 ......................................... 2–053 (1) .................................... 8–051 (a) ............................... 7–181 (b) ............................... 7–167 (d) ............................... 7–167 (4) ......................... 2–053, 7–237 cl.3.2 (1) .................................... 9–050 (3) .................................... 9–050 cl.5.1 ..................2–053, 4–081, 7–237, 12–088, 12–125 (2) ...................................12–089 cl.5.6 (1) ................................... 4–216 cl.5.7 (1) ................................... 4–216 (2) ..................... 4–216, 14–047 cl.6.2 (2) ................................... 4–098 cl.8.2 ......................................... 4–235 cl.13.1 (1) (c) ..........................12–063 cl.13.4 (1) (c) (iii) ....................12–063 cl.25 .......................................... 2–029 cl.25.1 ....................................... 2–035 (1) .................................. 5–020 (3) ....................... 2–151, 4–318 (a) ............................. 4–061 (d) ............................. 4–246 (h) ............................. 4–114 (i) ......................... 4–114 (j) (i) .............. 4–169, 4–172 (iii) ....................... 4–172 (k) ............................. 4–264 (m) ................. 2–029, 4–198 (n) ............................. 4–195 (o) ............................. 4–195 (p) ............................. 4–183

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TABLE OF CONTRACT CLAUSES

(q) .................. 4–176, 4–179 (r) .............................. 4–184 (t) .............................. 4–179 (u) ............................. 4–052 (v) .......4–033, 4–187, 6–132 (4) (a) ........................ 11–028, 11–029 (7) .................................11–146 cl.25.2 (1) ................................. 5–083 (b) ............................. 5–086 (c) ............................. 5–086 (3) (c).............................. 2–029 (m) ............................ 5–065 cl.25.3 ......................................14–142 (1) ....................... 6–034, 6–050 (2) .................................. 6–081 (5) .................................. 6–092 (7) ...................... 6–090, 6–101, 12–144, 14–144 (8) ...................... 6–081, 6–090, 14–144, 14–155 cl.25.4 ....................................... 4–198 cl.25.5 (2) ................................11–041 cl.26 ........................... 11–029, 11–085 cl.26.1 ........................ 11–085, 11–087 cl.26.2 ......................................11–086 cl.26.4 ......................................11–086 cl.27.1 (1) ...................... 4–300, 5–154 cl.28.1 (1) (a) ................ 5–077, 5–154 cl.28.2 (1) .................... 4–307, 13–137 cl.28.3 ....................................... 4–305 cl.29.2 (1) (d) ..........................14–039 cl.29.9 ....................................... 4–194 HKGC99.................................. 4–078, 4–149 cl.5 (2) ...................................... 4–101 cl.50 (1) (b) .............................. 4–125 (iii) ......................... 4–101 (iv) .............. 4–114, 4–115 (vi) ........................... 4165 (vii) ............ 4–031, 4–183, 4–215, 4–236 (viii) ............ 4–031, 4–172 (ix) ......................... 4–179 (x) ............... 4–179, 4–196 (xi) ......................... 4–016 cl.61 .......................................... 4–318 cl.63 .......................................... 4–318 (a) ...................................... 4–215 (c) ...................................... 4–236 cl.63 (a) .................................... 4–215 (e) .................................... 4–031 cl.64 .......................................... 4–318 ICE in general ..............1–022, 2–019, 2–150, 4–078, 4–246, 4–248,

4–262, 4–264, 4–275, 5–106, 7–090, 7–224, 11–209, 13–056, 16–061 ICE5 ...................................... 2–094, 21–130 cl.12 ............................... 4–145, 5–146 cl.60 (6) ..................... 21–130, 21–131 ICE6 ............................2–036, 2–130, 3–024, 4–021, 4–315, 5–060, 8–051, 11–042, 11–045, 11–076, 21–225 cl.1 (5) ...................................... 4–273 cl.5............................... 4–088, 12–123 cl.8 (1) .....................................12–045 (2) .....................................12–046 (3) .....................................12–046 cl.12 (6) ...................................12–028 cl.13 .......................................... 7–169 (3) ........................... 4–088, 4–254 cl.14 ............................... 7–169, 8–067 (1) (a) ..................... 7–181, 8–072 (b) ................................ 8–072 (2) ...................................... 8–073 (3) ...................................... 8–074 (4) ........................... 8–073, 9–045 cl.20 (2) .................................... 4–247 cl.26 (3) (b) .............................. 4–097 cl.36 (3) .................................... 4–236 cl.40 (1) .................................... 4–172 (c) .................... 4–172, 4–254 cl.41 (2) ...................................11–039 cl.42 (3) ......................... 4–165, 4–169 cl.43 .......................................... 7–091 cl.44 (1) ......................... 4–017, 5–078 (a) .................... 4–097, 4–114 (b) ............................... 4–088 (c) ........4–088, 4–165, 4–169, 4–172, 4–254 (d) ............................... 4–127 (e) .................... 4–032, 4–039 (f)..................... 4–039, 4–052 (g) ............................... 4–039 (2) (a) ................... 6–025, 6–051 (3) ....................... 6–015, 11–105 (5) ..........6–088, 11–105, 12–144 cl.46 (2) ...................................11–172 (3) ..................... 11–069, 11–102 cl.50 ............................... 4–233, 4–236 cl.51 (1) ....................... 4–114, 12–047 (4) .................................... 4–088 cl.52 (1) .................................... 4–273 (4) (b) ................... 4–273, 5–077 (c) .............................. 4–307 cl.59 (4) (f) ............................... 4–196

lxxxi

TABLE OF CONTRACT CLAUSES

cl.60 (7) (a) .............................. 4–037 cl.71 (3) (a) .............................. 4–254 ICE6DB cl.14.4................................. 9–047 ICE7 ............................1–023, 2–020, 2–027, 2–036, 3–024, 4–021, 4–274, 4–315, 5–003, 5–014, 5–060, 6–001, 8–051, 11–045, 11–076, 14–062, 14–156, 21–225 cl.1 (5) ...................................... 4–273 cl.5................................ 4–021, 4–088, 4–290, 12–123 cl.8 (1) .....................................12–045 (2) .....................................12–046 (3) .....................................12–046 cl.12 (1) .................................... 2–130 (2) .................................... 4–290 (4) (a) .............................. 4–290 (b) .............................. 4–290 (c) ............................... 4–290 (6) ...................................12–028 cl.13 .......................................... 7–169 (1) .................................... 4–290 (3) ......................... 4–088, 4–254 cl.14 ............................... 7–169, 8–067 (1) .................................... 1–056 (a) .................... 7–181, 8–072 (b) ............................... 8–072 (2) ......................... 8–073, 9–045 (3) .................................... 8–074 (4) ....................... 8–073, 11–056 cl.17 (2) .................................... 4–290 cl.18 .......................................... 4–290 cl.20 (2) .................................... 4–247 cl.26 (3) (b) ................... 4–097, 4–290 cl.27 (2) (a) .............................. 4–290 cl.32 .......................................... 4–290 cl.36 (4) ......................... 4–236, 4–290 cl.40 (1) ......................... 4–172, 4–290 (a) ............................... 4–290 (b) ............................... 4–290 (c) .........4–172, 4–254, 4–290 cl.41 (2) ...................................11–039 cl.42 (3) ......................... 4–165, 4–169 cl.43 ............................. 7–091, 11–056 cl.44 .........................................11–056 (1) ...............2–027, 4–018, 5–003, 5–078, 6–032, 13–138 (a) ....................... 4–097, 4–114 (b) .................................. 4–088 (c)............2–035, 2–130, 4–088, 4–165, 4–169, 4–172, 4–254 (d) .................................. 4–127 (e)........................ 4–032, 6–132

(f) ................................... 4–052 (2) (a) ................................ 6–025 (3) .......................... 2–027, 6–015, 6–032, 11–105 (5) ............6–088, 11–105, 12–144 cl.46 .........................................11–055 (1) .....................................11–042 (2) .....................................11–172 (3) ....................... 11–069, 11–102 cl.50 ............................... 4–233, 4–236 cl.51 (1) ............4–114, 4–290, 12–047 (a) .................................... 4–290 (b) .................................... 4–290 (c) .................................... 4–290 (4) .................... 2–036, 4–088 cl.52 (3) .................................... 4–273 cl.53 (2) ............4–273, 5–077, 13–137 (3) ....................... 4–307, 13–138 cl.58 (1) .................................... 4–290 (2) .................................... 4–290 cl.59 (2) .................................... 4–290 (4) (f) ............................... 4–196 cl.71 (3) (a) ................... 4–254, 4–290 ICE/DC ............................................... 2–049 cl.5 (1) (c) (i) ........................... 4–093 (ii)........................... 4–088 cl.8 (3) ...................................... 4–232 cl.14.1 ....................................... 7–181 cl.20 (2) .................................... 4–247 cl.23 (1) .................................... 4–236 cl.26 (3) (b) .............................. 4–097 cl.31 (2) .................................... 4–032 cl.40 (1) .................................... 4–172 (c) .................... 4–172, 4–254 cl.42 (3) .................................... 4–165 cl.44 (1) (a) ........4–093, 4–097, 4–114 (b) .......4–032, 4–088, 4–165, 4–172, 4–232 (c) .................... 4–127, 4–254 (d) ................... 4–032, 4–039 (e) .................... 4–039, 4–052 (2) (a) .............................. 6–025 (5) .................................... 6–088 cl.51 (1) .................................... 4–114 cl.60 (7) (a) .............................. 4–037 ICE/DC01 cl.44 (2) (a) .............................. 6–025 ICE/MW .....................1–023, 7–198, 11–025 cl.2.3 (a) ................................... 4–114 (c) ................................... 4–172 cl.3.8 (1) ................................... 4–150 cl.4.3 ......................................... 9–047 cl.4.4 ......................................... 6–088

lxxxii

TABLE OF CONTRACT CLAUSES

(a) ........................ 4–114, 4–172 (b) ................................... 4–236 (c) ................................... 4–150 (e) ................................... 4–165 (g) ................................... 4–127 (j) .................................... 4–052 (h) ................................... 4–312 cl.44 (1) (h) .............................. 4–039 (i)........................... 4–039 (j) ........................... 4–039 ICE/MW2 cl.4.4 ............................ 6–024, 11–027 IChemE ........................1–022, 1–023, 2–019, 4–040, 4–076, 4–106, 4–149, 4–182, 6–035, 7–224, 11–040, 14–145, 16–061 cl.3.2 ........................................12–113 cl.10.7 ....................................... 4–196 cl.12.1.8 .................................... 4–168 cl.13.1 ......................................11–058 cl.13.3 ....................................... 7–181 cl.13.5 ........................ 11–145, 11–058 cl.14.1 ....................................... 6–015 (d) .................................. 4–170 (e)................................... 4–196 cl.14.2 ....................................... 4–075 cl.14.5 ....................................... 4–077 cl.14.6 ....................................... 4–077 cl.16 .........................................12–039 cl.16.1 ......................................12–038 cl.16.6 ....................................... 5–124 cl.16.7 ......................................12–039 (a) .................................. 2–125 cl.17.1 ......................................12–154 cl.17.2 ......................................12–155 cl.18.1 ....................................... 4–312 cl.19.1 ....................................... 4–272 cl.19.3 ....................................... 2–123 cl.21.2.1 .................................... 4–170 cl.21.12 ....................................12–120 cl.41 .......................................... 4–172 cl.44.1(d) ....................... 4–032, 6–132 IFC84...........................2–019, 4–244, 6–076, 10–076, 15–020 cl.1.4 ......................................... 4–088 cl.2.2 ......................................... 6–101 cl.2.3 ............................. 4–080, 4–143, 4–188, 4–253, 4–263, 5–033, 5–034, 6–026, 6–050, 6–076, 6–089, 6–101, 11–023, 18–095 cl.2.4.1 ........................... 4–061, 6–101 cl.2.4.2 ........................... 4–127, 6–101

cl.2.4.3 ...................................... 6–101 cl.2.4.4 ................4–244, 4–246, 6–101 cl.2.4.5 .......................... 4–088, 4–097, 4–114, 4–117, 4–119, 4–172, 4–195 cl.2.4.7 ........................... 4–215, 9–036 cl.2.4.8 ...................................... 4–183 cl.2.4.9 ...................................... 4–184 cl.2.4.10 .................................... 6–101 cl.2.4.11 .................................... 6–101 cl.2.4.12 .................................... 4–165 cl.2.4.13 ......................... 4–179, 6–101 cl.2.4.14 ......................... 4–169, 6–101 cl.2.4.15 .................................... 4–099 cl.2.4.16 ......................... 4–248, 6–101 cl.2.4.17 .................................... 4–254 cl.2.6 ........................................21–225 cl.2.20.7 .................................... 4–188 cl.2.20.12 .................................. 4–188 cl.3.3.3 ...................................... 4–195 cl.3.6 ......... 4–088, 4–097, 4–172, 4–195 cl.3.6.1 .....................................12–048 cl.3.6.2 .....................................12–048 cl.3.8 ......................................... 4–119 cl.3.15 ....................................... 4–172 cl.5.4.3 ........................... 4–021, 4–097 cl.6.3.2 ...................................... 4–250 cl.26.3 ....................................... 5–016 IFC98...........................4–221, 4–224, 4–244, 10–076, 12–071 cl.1.4 .............................. 4–088, 4–100 cl.2.2 ......................................... 6–101 cl.2.3 ............................. 4–080, 4–143, 4–188, 4–253, 4–263, 5–033, 6–026, 6–050, 6–089, 6–101, 11–023, 18–095 cl.2.4.1 ........................... 4–061, 6–101 cl.2.4.2 ........................... 4–127, 6–101 cl.2.4.3 ...................................... 6–101 cl.2.4.4 ................4–244, 4–246, 6–101 cl.2.4.5 .......................... 4–088, 4–097, 4–100, 4–114, 4–117, 4–119, 4–172, 4–195 cl.2.4.6 ...................................... 4–238 cl.2.4.8 ...................................... 4–183 cl.2.4.9 ...................................... 4–184 cl.2.4.10 .................................... 6–101 cl.2.4.11 .................................... 6–101 cl.2.4.12 .................................... 4–165 cl.2.4.13 ......................... 4–179, 6–101 cl.2.4.14 ......................... 4–169, 6–101 cl.2.4.15 .................................... 4–099 cl.2.4.16 ......................... 4–248, 6–101

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TABLE OF CONTRACT CLAUSES

cl.2.4.17 .................................... 4–254 cl.2.4.18 .................................... 4–038 cl.2.6 ........................................21–225 cl.2.20.7 .................................... 4–188 cl.2.20.12 .................................. 4–188 cl.3.3.3 ...................................... 4–195 cl.3.6 ............................. 4–088, 4–097, 4–100, 4–172, 4–195 cl.3.6.1 .....................................12–048 cl.3.6.2 .....................................12–048 cl.3.8 ......................................... 4–119 cl.3.13.1 ......................... 4–238, 4–239 cl.3.13.2 .................................... 4–238 cl.3.15 ....................................... 4–172 cl.5.4.3 ........................... 4–021, 4–097 cl.13.2 ....................................... 6–013 cl.26.3 ....................................... 5–016 IFC05...........................3–024, 4–221, 4–244, 4–266, 7–196, 10–076, 11–079, 12–071, 13–058, 13–140 cl.2.4 ......................................... 7–091 cl.2.11 ....................................... 4–100 cl.2.12.2 .................................... 4–088 cl.2.13 .......................... 4–088, 12–123 cl.2.13.1 .................................... 4–088 cl.2.13.2 .................................... 4–100 cl.2.15 ......................................12–123 cl.2.15.2.2 ................................. 4–097 cl.2.16.3 .................................... 4–021 cl.2.19.1 ......................... 6–026, 6–035 cl.2.19.2 ........................ 4–080, 4–143, 4–188, 4–245, 4–253, 4–263, 18–095 cl.2.19.3 .................................... 6–089 cl.2.19.4.1 ................................11–023 cl.2.19.4.2 ...........5–016, 5–034, 6–050 cl.2.20.1 ....................... 4–114, 12–050 cl.2.20.2 .................................... 4–117 cl.2.20.2.1 ...........4–088, 4–100, 4–172 cl.2.20.2.3 ................................. 4–236 cl.2.20.3 .................................... 4–169 cl.2.20.4 .................................... 4–099 cl.2.20.5 .................................... 4–038 cl.2.20.6 ......................... 4–183, 4–254 cl.2.20.6.10 ............................... 4–251 cl.2.20.7 .................................... 6–101 cl.2.20.8 ......................... 4–127, 6–101 cl.2.20.9 ......................... 4–263, 6–101 cl.2.20.10 ............4–246, 4–253, 6–101 cl.2.20.11 ....................... 4–253, 6–101 cl.2.20.12 ....................... 4–181, 6–101 cl.2.20.13 ............4–061, 4–080, 6–101 cl.2.23.1 ...................................21–225

cl.3.8 ........................................12–050 cl.3.10.1 ...................................12–061 cl.3.10.3 ...................................12–061 cl.3.11.2 ...................................12–050 cl.3.11.4 ...................................14–030 cl.3.12 ....................................... 4–172 cl.3.23.1 .................................... 4–254 cl.4.17 ....................................... 5–153 cl.5.1 ........................................12–061 cl.5.1.1 .....................................12–049 cl.5.1.2 ....................... 12–049, 12–061 cl.5.1.2.4 .................... 12–050, 12–061 cl.5.5 ........................................12–050 IFWCD/05 .............................. 4–221, 4–244, 4–266, 7–196, 13–058, 13–140 cl.2.11 ....................................... 4–100 cl.2.12.2 .................................... 4–088 cl.2.13 .......................... 4–088, 12–123 cl.2.13.1 .................................... 4–088 cl.2.13.2 .................................... 4–100 cl.2.13.4 ...................................12–119 cl.2.15 ......................................12–123 cl.2.15.2.1 ................................. 4–118 cl.2.15.2.2 ................................. 4–097 cl.2.19.1 ......................... 6–026, 6–035 cl.2.19.2 ........................ 4–080, 4–143, 4–188, 4–245, 4–253, 4–263 cl.2.19.3 .................................... 6–089 cl.2.19.4.1 ................................11–023 cl.2.19.4.2 ................................. 5–016 cl.2.20.1 ....................... 4–114, 12–050 cl.2.20.2 .................................... 4–117 cl.2.20.2.1 ..................... 4–088, 4–100, 4–119, 4–172 cl.2.20.2.3 ................................. 4–236 cl.2.20.3 .................................... 4–169 cl.2.20.4 .................................... 4–099 cl.2.20.5 .................................... 4–038 cl.2.20.6 ......................... 4–183, 4–254 cl.2.20.6.10 ............................... 4–251 cl.2.20.7 ......................... 4–179, 6–101 cl.2.20.8 ......................... 4–127, 6–101 cl.2.20.9 ......................... 4–263, 6–101 cl.2.20.10 ....................... 4–253, 6–101 cl.2.20.11 ....................... 4–253, 6–101 cl.2.20.12 ....................... 4–181, 6–101 cl.2.20.13 ............4–061, 4–080, 6–101 cl.3.8.1 .....................................12–050 cl.3.8.2 .....................................12–050 cl.3.11.4 ...................................14–030 cl.3.12 ....................................... 4–172 cl.3.23.1 .................................... 4–254

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TABLE OF CONTRACT CLAUSES

cl.5.1.1 .....................................12–049 cl.5.1.2 .....................................12–049 cl.5.1.2.4 ..................................12–050 cl.5.5 ........................................12–050 Irish government standard forms, 2007 edition .......................... 1–023 cl.4.7 ......................................... 8–067 cl.4.7.10 .................................... 8–068 cl.4.9.1 ...................................... 8–067 Irish government standard forms, 2009 edition, in general .....1–012, 1–022, 1–023, 2–026, 2–054, 2–055, 2–074, 2–075, 3–025, 4–026, 4–036, 4–037, 4–078, 4–117, 4–137, 4–138, 4–230, 4–234, 4–243, 4–251, 4–256, 4–261, 4–265, 4–322, 5–061, 6–007, 6–035, 7–097, 7–105, 7–165, 7–204, 7–207, 7–208, 7–211, 7–217, 7–230, 8–001, 8–050, 9–039, 9–047, 11–147, 12–012, 12–189, 13–056, 16–064, 21–265, 21–286, 21–191 cl.1.1 ......................................... 7–224 cl.1.3 ......................................... 4–084 cl.1.3.4 ......................... 4–089, 12–075 cl.1.9.1 .....................................21–289 cl.4.3.2 ....................... 12–012, 12–013 cl.4.5.3 ...................................... 4–109 cl.4.5.4 ......................... 4–110, 12–115 cl.4.6.2 ...................................... 2–114 cl.4.8 ......................................... 4–111 cl.4.9 ......................................... 4–166 cl.4.9.1 .......................... 7–208, 7–209, 8–050, 8–051 cl.4.10.2 .................................... 9–056 cl.4.11.1 .................................... 4–220 cl.5.3.3 ...................................... 4–309 cl.7.1 ......................................... 4–166 cl.8.5.4 ...................................... 4–109 cl.9.1 ......................................... 4–166 cl.9.2.3 ...................................... 4–111 cl.9.3 ...................5–088, 6–045, 8–050 cl.9.4 .............................. 5–088, 6–045 cl.9.5 ........................................12–144 cl.10.1 ......................................21–289 cl.10.1.2 ......................... 4–269, 4–305 cl.10.3.1 ..............5–028, 5–088, 6–045 cl.10.3.2 .................................... 5–121 cl.10.3.4 .................................... 4–308

cl.10.4 ....................................... 5–122 cl.10.7 ......................................21–186 cl.10.7.4 ......................... 4–111, 4–322 cl.10.7.5 ...................................21–187 cl.11.4.2 .................................... 8–006 cl.12.3 ....................................... 4–037 cl.27.1.1 .................................... 4–305 Sch. Pt 1 s.K.............................4–026, 4–256, 16–067 IGBW/09 ................................. 2–032, 2–134, 4–090, 4–155, 4–167, 4–178, 4–203 cl.1.1 ............................ 6–004, 12–033 cl.1.3.1 .....................................12–126 cl.1.3.4 ......................... 2–122, 12–079 cl.1.4 ........................................12–079 cl.1.9.1 ...................................... 4–299 cl.1.9.4 ...................................... 5–093 cl.3.1 (3) ................................... 4–259 cl.3.2.3 ...................................... 4–259 cl.4............................................ 3–026 cl.4.1.2 ...................................... 3–026 (3) .................................13–154 cl.4.5.4 ...................................... 4–231 cl.4.6.2 .....................................12–114 cl.4.7.9 .....................................13–154 cl.4.7.10 .................................... 4–231 cl.4.8 ........................................12–157 cl.4.8.1 (2) ...............................11–084 cl.4.9.1 ........................... 2–054, 2–055 (6) ................... 8–050, 16–065 cl.4.9.3 ......................... 9–047, 11–041 (1) ................................ 9–052 cl.4.10.2 (1) .............................13–154 cl.4.10.2 (6) .............................14–048 cl.4.10.2 (4) .............................14–048 cl.4.10.2 (8) .............................13–154 cl.4.10.2 (10) ...........................11–062 cl.4.11 .......................... 4–230, 14–048 cl.4.11.1 ......................... 3–026, 4–234 cl.4.11.2 ......................... 4–230, 4–234 cl.4.13.4 ...................................13–154 cl.4.13.6 ...................................13–155 (5) ...............................13–154 (6) ...............................13–154 cl.9.1.3 .....................................11–039 cl.9.2.1 ...................................... 4–172 cl.9.3.2 ............6–004, 14–114, 16–066 (2) ................... 11–024, 11–030 cl.9.4 ......................................... 4–299 cl.9.4.2 ...................................... 2–057 cl.9.4.3 .....................................16–071 cl.9.6 ......................................... 7–097

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TABLE OF CONTRACT CLAUSES

cl.9.7 ......................................... 4–322 cl.9.8 ......................................... 6–004 cl.10.1 ....................................... 4–299 cl.10.1.2 ......................... 2–045, 5–164 cl.10.3.2 .................................... 4–299 cl.10.3.4 ...................................13–154 cl.10.4 ....................................... 2–123 cl.10.7.1 .................................... 4–299 cl.10.7.3 .................................... 4–299 cl.10.7.4 ...................... 4–299, 16–067, 16–080, 21–286 cl.11.4.2 .................................... 7–197 Sch. Pt 1 s.A ................ 4–117, 12–012 s.H ............................................ 7–097 s.K .....................2–057, 2–122, 4–036, 4–037, 4–090, 4–091, 4–178, 4–231, 4–234, 4–243, 4–251, 4–261, 4–295, 4–296, 4–299, 6–132, 12–080, 12–116, 16–068, 16–069, 16–070, 21–016 IGCE/09.................................. 2–134, 4–090, 4–167, 4–178, 4–2037–212 cl.1.3.4 .....................................12–079 cl.1.4 ........................................12–079 cl.1.9.1 ...................................... 4–299 cl.4............................................ 3–026 cl.4.1.2 ...................................... 3–026 cl.4.9.1 (4) ................................ 7–165 cl.4.11.1 .................................... 3–026 cl.9.2.1 ...................................... 4–172 cl.9.4 ......................................... 4–299 cl.10.1 ....................................... 4–299 cl.10.3.2 .................................... 4–299 cl.10.4 ....................................... 2–123 cl.10.7.1 .................................... 4–299 cl.10.7.3 .................................... 4–299 cl.10.7.4 .................................... 4–299 Sch. Pt 1 s.K................. 4–295, 4–296, 4–299, 6–132 IGCEDB/09 .................2–054, 2–132, 2–133, 4–155, 4–178, 4–203, 7–208, 7–212 cl.1.9.1 ...................................... 4–299 cl.4.6 ......................................... 4–096 cl.4.6.1 ...................................... 4–096 cl.4.6.2 ...................................... 4–096 (4) .................................. 7–165 cl.9.2.1 ...................................... 4–172 cl.9.4 .............................. 4–096, 4–299 cl.10.1 ....................................... 4–299 cl.10.3.2 .................................... 4–299

cl.10.4 ....................................... 2–123 cl.10.7.1 .................................... 4–299 cl.10.7.3 .................................... 4–299 cl.10.7.4 .................................... 4–299 Sch. Pt 1 s.K.........4–297, 4–299, 6–132 IGDB/09 ......................2–054, 2–132, 2–133, 4–155, 4–178, 4–203, 7–208 cl.1.9.1 ...................................... 4–299 cl.4.6 ......................................... 4–096 cl.4.6.1 ...................................... 4–096 cl.4.6.2 ......................... 4–096, 12–116 cl.9.2.1 ...................................... 4–172 cl.9.4 .............................. 4–096, 4–299 cl.10.1 ....................................... 4–299 cl.10.3.2 .................................... 4–299 cl.10.4 ....................................... 2–123 cl.10.7.1 .................................... 4–299 cl.10.7.3 .................................... 4–299 cl.10.7.4 .................................... 4–299 Sch. Pt 1 s.K.......4–297, 4–299, 6–132 IGMW/09 .....................2–132, 2–134, 4–203, 4–265, 7–209, 7–212, 9–052 cl.1.9.1 ...................................... 4–299 cl.4.10.2 .................................... 9–056 cl.9.2.1 ...................................... 4–172 cl.9.4 ......................................... 4–299 cl.10.1 ....................................... 4–299 cl.10.3.2 .................................... 4–299 cl.10.4 ....................................... 2–123 cl.10.7.1 .................................... 4–299 cl.10.7.3 .................................... 4–299 cl.10.7.4 .................................... 4–299 Sch. Pt 1 s.K................. 2–132, 2–133, 4–298, 4–299, 6–132 JCC B 1985 .......................................21–243 cl.10.14.01 ...............................21–243 cl.10.14.02 ...............................21–243 JCT in general ..............1–022, 2–019, 2–020, 2–054, 2–055, 2–150, 4–005, 4–027, 4–079, 4–089, 4–095, 4–114, 4–221, 4–224, 4–253, 4–262, 4–277, 4–313, 4–331, 4–337, 4–338, 4–339, 4–341, 4–342, 4–344, 4–366, 5–013, 5–017, 5–034, 5–035, 5–077, 5–105, 5–107, 5–125,6–052, 6–071, 7–089, 7–090, 7–165, 7–224, 8–050, 9–036, 9–037, 9–065, 10–018, 11–030, 11–036, 11–039, 11–053, 11–079, 12–087, 12–099, 12–145, 12–197,

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TABLE OF CONTRACT CLAUSES

13–101, 13–104, 13–148, 16–061, 18–131, 20–019, 21–019, 21–132, 21–242 cl.25.3.1.2 .................... 6–035, 14–145 cl.26.6 ....................................... 5–157 JCT63 ..........................2–082, 4–174, 4–203, 4–217, 4–245, 4–248, 4–302, 4–318, 5–025, 5–110, 5–113, 5–139, 6–080, 6–081, 6–131, 7–107, 11–011, 11–023, 11–024, 11–036, 12–090, 18–129, 20–018, 20–019, 21–126, 21–127 cl.1 (2) ...................................... 4–088 cl.4 (1) (c) ................................ 4–097 cl.11 (1) ......................... 4–097, 4–117 (2) .................................... 4–114 (6) ..........5–151, 21–121, 21–124 cl.18 (2) ......................... 2–154, 2–155 cl.20 (c) ......................... 2–154, 2–155 cl.21 .........................................11–011 (2) ...................................... 4–172 cl.23 .............................. 4–211, 4–282, 5–027, 5–044, 16–089 (a) ...................................... 4–061 (d)........................... 4–243, 4–246 (e) ...............4–088, 4–097, 4–114, 4–117, 4–172 (f) ........................... 4–211, 4–214 (g) ...................................... 4–196 (h)...................................... 4–183 (k) ...................................... 4–264 cl.24 ..................4–281, 4–300, 21–011 (1) ............5–151, 21–121, 21–123 (a) ...................... 4–211, 4–214 cl.25 .........................................11–011 (1) (b) ...............................11–013 (4) ...................................... 4–236 cl.26 .......................................... 4–300 cl.26 (1) .................................... 5–153 cl.26 (1) (1) .............................. 5–153 cll.26 (2) (1) to 26 (2) (8) ........ 5–153 (5) ........ 4–300 cl.27 (d) (ii) .............................. 4–193 cl.30 .........................................21–126 cl.30 (5) (b) .............................21–126 cl.31A ........... 21–044, 21–046, 21–047 cl.31C ......................................21–048 cl.31D (6) (c) ..........................21–054 cl.33 (1) (c) .............................. 4–211 cl.34 .......................................... 4–264 JCT80 ..........................1–023, 2–093, 2–108, 2–115, 2–123, 2–152, 4–009,

lxxxvii

4–104, 4–119, 4–174, 4–194, 4–199, 4–203, 4–217, 4–303, 4–304, 4–305, 5–035, 5–040, 5–111, 5–112, 6–020, 6–023, 6–026, 6–046, 6–047, 6–051, 6–057, 6–058, 6–060, 6–093, 7–192, 7–235, 8–001, 8–075, 9–013, 10–076, 11–024, 11–067, 11–101, 12–018, 12–020, 12–065, 12–147, 12–149, 12–177, 13–140, 14–024, 14–115, 14–144, 15–002, 16–032, 18–022, 18–057, 20–031, 20–069, 21–127, 21–168 cl.1............................................ 2–151 cl.1.3 ............................ 6–092, 12–147 cl.2................ 12–058, 12–081, 12–085 cl.2.2.2.2 ...................... 4–088, 12–094 cl.2.3 .................4–088, 4–303, 12–123 cl.2.4.1 ...................................... 4–100 cl.2.4.6 ...................................... 4–236 cl.2.5.4.5.1 ................................ 4–088 cl.2.9.1 ...................................... 8–051 cl.2.28.4 ...................................12–149 cl.2.29.2.1 ................................. 4–264 cl.3.3.1.2 ..................................12–151 cl.3.22.1.2 ................................. 4–264 cl.5.3.1.2 .............7–181, 8–051, 8–066 cl.6.1.2 ...................................... 4–097 cl.8.3 ......................................... 4–283 cl.13 ............................... 4–114, 4–268 cl.13.2 ........................... 4–088, 4–097, 4–303, 12–146 cl.13.3 ....................................... 4–303 cl.13.3.1 .................................... 4–119 cl.13A ................3–018, 4–112, 4–268, 6–094, 9–059, 17–051 cl.13A.2.2 .................. 11–069, 11–102 cl.20.2 ....................................... 4–255 cl.22.2 ....................................... 4–249 cl.22.2.3.5 ................................. 4–250 cl.23.1 ....................................... 7–091 cl.23.2 .................4–172, 4–283, 4–303 cl.23.3.1.4 ................................12–147 cl.24 .......................................... 4–300 cl.24.1 ......................................21–225 cl.25 .............................. 4–200, 4–303, 6–023, 6–053, 14–022, 14–178, 15–147, 18–013 cl.25.2.1 ......................... 5–084, 6–050 cl.25.2.1.1 ...........5–033, 5–111, 9–034

TABLE OF CONTRACT CLAUSES

cl.25.2.2 ..........5–111, 18–019, 18–020 cl.25.2.2.2 .......4–303, 18–019, 18–020 cl.25.3.1 ........................ 5–057, 5–111, 6–046, 6–092, 12–144, 12–146 cl.25.3.1.3 ................................. 4–303 cl.25.3.1.4 ........6–081, 6–092, 11–105, 12–146, 12–148 cl.25.3.2 ....................... 6–092, 12–148 cl.25.3.3 .................................... 6–094 cl.25.3.3.1 ...................... 5–111, 6–046 cl.25.3.4.1 .................. 11–023, 15–101 cl.25.3.14 .................................. 6–092 cl.25.4.1 .................................... 4–061 cl.25.4.2 .................................... 4–127 cl.25.4.4 ......................... 4–244, 4–246 cl.25.4.5 ..............4–105, 4–195, 4–204 cl.25.4.5.1 ..........4–088, 4–097, 4–100, 4–104, 4–114, 4–119, 4–172, 4–303 cl.25.4.5.2 ................................. 4–303 cl.25.4.6 ........................ 4–104, 4–105, 4–204, 4–215, 4–303, 9–036, 14–049 cl.25.4.7 .................................... 4–196 cl.25.4.8 ......................... 4–183, 4–303 cl.25.4.8.2 ................................. 4–184 cl.25.4.9 .................................... 4–181 cl.25.4.10 .................................. 6–078 cl.25.4.11 .................................. 4–179 cl.25.4.12 ....................... 4–165, 4–303 cl.25.4.13 .................................. 4–169 cl.25.4.14 .................................. 4–099 cl.25.4.15 .................................. 4–118 cl.25.4.16 .................................. 4–248 cl.25.4.17 .................................. 4–254 cl.25.15.2 .................................. 4–193 cl.26 .............................. 4–268, 4–300, 4–304, 21–002, 21–010 cl.26.1 .................4–303, 5–151, 5–153 cl.26.1.1 .................................... 5–153 cl.26.1.2 .................................... 4–304 cl.26.2 ...............4–283, 4–304, 21–123 cll.26.2.1 to 26.2.8 .................... 5–153 cl.26.3 ............................ 4–303, 4–323 cl.26.5 ....................................... 4–300 cl.26.6 ....................................... 4–268 cl.34.2 ....................................... 4–021 cl.35 .......................................... 4–195 cl.35.13 ..................................... 4–191 cl.35.14.1 ....................... 4–191, 4–197 cl.35.15 ..................................... 4–192 cl.35.15.1 .................................. 4–193 cl.36 .......................................... 4–195

JCT98 ..........................1–023, 2–019, 2–035, 2–115, 2–134, 2–152, 2–153, 3–021, 3–022, 4–119, 4–194, 4–199, 4–221, 4–224, 4–284, 4–302, 4–303, 4–304, 4–305, 5–013, 5–035, 5–040, 5–085, 5–112, 5–113, 6–020, 6–026, 6–047, 6–050, 6–051, 6–093, 7–037, 7–105, 7–192, 7–235, 7–247, 8–075, 10–019, 10–045, 10–048, 10–049, 10–076, 11–024, 11–085, 11–101, 12–018, 12–060, 12–071, 12–077, 12–147, 12–149, 12–177, 13–056, 13–140, 14–031, 14–063, 15–035, 16–063 cl.1............................................ 2–151 cl.1.3 ............................ 2–151, 12–147 cl.1.11 ......................................13–056 cl.2............................. 12–058, 12–085 cl.2.2.2.2 ...................... 4–088, 12–094 cl.2.3 ............................ 4–088, 12–123 cl.2.3.4 ...................................... 4–100 cl.2.4.1 ...................................... 4–100 cl.2.4.6 ...................................... 4–236 cl.2.5.4.5.1 ................................ 4–088 cl.2.9.1 ...................................... 8–051 cl.2.28.4 ...................................12–149 cl.2.29.2.1 ................................. 4–264 cl.3.3.1.2 ..................................12–151 cl.3.22.1.2 ................................. 4–264 cl.4.3 ........................................14–030 cl.5.3.1.2 .............7–181, 8–051, 8–066 cl.5.4.1 ........................... 4–205, 9–036 cl.5.4.2 ..............3–024, 4–284, 14–050 cl.6.1.1 ...................................... 4–098 cl.6.1.2 ...................................... 4–097 cl.6.1.5 ...................................... 4–098 cl.13 ............................... 4–114, 4–268 cl.13.1.1 ...................................12–059 cl.13.1.2 ...................................12–059 cl.13.1.2.1 to 13.1.2.4 ..............12–059 cl.13.2 ...............4–088, 4–097, 12–146 cl.13.3.1 .................................... 4–119 cl.13.4.1.2 alt. A........................ 9–059 cl.13A ........................... 2–123, 3–018, 4–112, 4–268, 6–094, 17–051 cl.13A.2.2 ................. 11–069, 11–073, 11–079, 11–102 cl.20.2 ....................................... 4–255

lxxxviii

TABLE OF CONTRACT CLAUSES

cl.22.2.3.5 ................................. 4–250 cl.23.1 ....................................... 7–091 cl.23.2 ....................................... 4–172 cl.23.3.1.4 ................................12–147 cl.24 .......................................... 4–300 cl.24.1 ......................................21–225 cl.25 ......... 2–043, 4–200, 4–303, 14–142 cl.25.2 ....................................... 5–016 cl.25.2.1 .................................... 5–084 cl.25.2.1.1 ...........5–017, 5–033, 9–034 cl.25.2.2 ..................... 18–019, 18–020 cl.25.2.2.2 ..................... 4–303, 5–035, 18–019, 18–020 cl.25.3.1 ........................ 5–057, 6–085, 6–142, 12–144, 12–146 cl.25.3.1.2 ...................... 6–020, 6–034 cl.25.3.1.3 ................................. 4–303 cl.25.3.1.4 ................... 6–081, 11–105, 12–146, 12–148 cl.25.3.2 ..........6–092, 11–146, 12–148 cl.25.3.3 ....................... 6–094, 11–105 cl.25.3.3.1 .................... 6–021, 14–144 cl.25.3.4.1 .................. 11–023, 15–101 cl.25.4 ....................................... 2–035 cl.25.4.1 .................................... 4–061 cl.25.4.2 .................................... 4–127 cl.25.4.4 ......................... 4–244, 4–246 cl.25.4.5 .................................... 4–195 cl.25.4.5.1 ..................... 4–088, 4–097, 4–100, 4–114, 4–119, 4–172, 4–303 cl.25.4.5.2 ................................. 4–303 cl.25.4.6 .................................... 4–303 cl.25.4.6.1 .................... 4–222, 14–045 cl.25.4.6.2 .........4–224, 9–036, 14–050 cl.25.4.7 ......................... 4–196, 4–198 cl.25.4.8 ......................... 4–183, 4–303 cl.25.4.8.2 ................................. 4–184 cl.25.4.9 .................................... 4–181 cl.25.4.10 ..................... 6–078, 16–048 cl.25.4.10.1 ..............................14–067 cl.25.4.10.2 ..............................14–067 cl.25.4.11 .................................. 4–179 cl.25.4.12 ....................... 4–165, 4–303 cl.25.4.13 .................................. 4–169 cl.25.4.14 ...................... 2–036, 2–108, 4–099, 7–194 cl.25.4.15 .................................. 4–118 cl.25.4.16 .................................. 4–248 cl.25.4.17 ..................... 4–254, 14–060 cl.25.15.2 .................................. 4–193 cl.26 .............................. 2–043, 4–268, 4–300, 4–304, 15–102, 21–002, 21–010

cl.26.1 ........................... 4–300, 4–303, 5–151, 5–153 cl.26.1.1 ......................... 4–300, 5–153 cl.26.1.2 ......................... 4–304, 4–321 cl.26.1.3 ...................................19–060 cl.26.2 ....................................... 4–304 cll.26.2.1 to 26.2.8 .................... 5–153 cl.26.2.1.1 ...................... 4–222, 4–284 cl.26.2.1.2 ...................... 4–224, 4–284 cl.26.2.7 .................................... 4–286 cl.26.2.9 .................................... 4–286 cl.26.2.10 .................................. 4–286 cl.26.3 ............................ 4–303, 4–323 cl.26.5 ....................................... 4–300 cl.26.6 ....................................... 4–268 cl.34.2 ....................................... 4–021 cl.35 .......................................... 4–195 cl.35.5.1 ...................................14–039 cl.35.13 ..................................... 4–191 cl.35.14.1 ....................... 4–191, 4–197 cl.35.15 ..................................... 4–192 cl.35.15.1 .................................. 4–193 cl.36 .......................................... 4–195 cl.42 .........................................12–065 Annex 2 ...................................13–057 JCT05 ..........................1–023, 2–037, 3–024, 3–029, 4–033, 4–119, 4–183, 4–184, 4–203, 4–221, 4–225, 4–245, 4–266, 4–301, 4–302, 4–303, 5–013, 5–036, 5–078, 5–088, 5–112, 5–151, 5–152, 6–026, 6–048, 6–093, 7–105, 7–180, 7–192, 7–196, 7–203, 7–204, 7–205, 7–206, 7–235, 8–075, 10–076, 11–101, 12–146, 12–177, 13–058, 13–140, 13–141, 13–143, 13–144, 14–144, 18–019 cl.1.1 .................4–033, 5–105, 12–086 cl.1.7 ......................................... 5–105 cl.1.7.2 ....................... 13–058, 13–059 cl.1.7.4 ...................................... 5–105 cl.2.1 ........................................12–061 cl.2.2 .......................... 12–061, 12–065 cl.2.3 ........................................12–061 cl.2.3.1 .....................................12–061 cl.2.3.2 .....................................12–061 cl.2.3.3 .....................................12–061 cl.2.4 .......................... 11–010, 18–128 cl.2.9 ......................................... 7–179 cl.2.9.1 ...................................... 8–051 cl.2.9.1.2 ........................ 7–073, 8–050 cl.2.9.2 ........................... 5–058, 9–034 cl.2.9.4 .....................................12–061

lxxxix

TABLE OF CONTRACT CLAUSES

cl.3.23.1 .................................... 4–254 cll.4.1 to 4.26............................ 7–179 cl.4.3 ........................................21–010 cl.4.14 ....................................... 4–037 cl.4.16 ....................................... 4–268 cl.4.23 .......................... 4–268, 11–006 cl.4.23.2 .................................... 4–321 cl.4.24 ............................ 4–079, 4–287 cl.4.24.6 .................................... 4–224 cl.4.26 ....................................... 4–268 cl.5.1 ...................2–123, 4–115, 4–268 cl.5.3 ............................ 4–112, 10–077 cl.5.3.1.2 ................................... 8–051 cl.5.7 ......................................... 7–192 cl.6.8 (b) ................................... 4–255 cl.13.2 ....................................... 7–193 cl.25.3.1.4 ................................. 6–081 cl.25.4.5.1 ................................. 7–193 cl.26.1 ....................................... 5–153 cl.26.1.1 .................................... 5–153 cll.26.2.1 to 26.2.8 .................... 5–153 cl.26.2.7 .................................... 7–193 Sch.1........................................12–065 Sch.2..................2–123, 4–112, 4–268, 10–077, 11–074 cll.1 to 5 ................................... 7–179 cl.2............................. 11–069, 11–102 cl.2.1 ........................................11–073 Sch.7......................................... 7–192 cll.A.1 to C.6 ............................ 7–179 JCTsub/05 ............................... 4–221, 4–241, 7–196, 13–140 cl.2.10 ......................................12–123 cl.2.19.1 .................................... 4–114 cl.2.19.2 .................................... 4–117 cl.2.19.2.1 ...................... 4–172, 4–264 cl.2.19.2.3 ................................. 4–236 cl.2.19.3 .................................... 4–169 cl.2.19.5 .................................... 4–038 cl.2.19.6.1 ................................11–026 cl.2.19.7 ......................... 4–183, 4–254 cl.2.19.10 .................................. 4–127 cl.2.19.12 .................................. 4–251 cl.2.19.14 .................................. 4–181 cl.3.7 ........................................14–032 cl.3.20.1 .................................... 4–254 cl.3.22.1.2 ................................. 4–264 cl.3.22.2 .................................... 4–172 JCT09 ...........................1–012, 4–030, 4–033 cl.1.1 ......................................... 4–033 cl.4.23 ......................................21–002 JCT/CIMAR .......................................22–126 r.6.5 ........................... 22–126, 22–159 r.7 ............................................22–129

cl.2.11 ....................................... 4–222 cl.2.12 ............................ 3–024, 4–100 cl.2.12.2 ...................................14–050 cl.2.12.3 ...................................14–050 cl.2.13.1 ...................................12–086 cl.2.14.3 ............4–088, 4–100, 12–086 cl.2.15 .......................... 4–088, 12–123 cl.2.15.4 .................................... 4–100 cl.2.17.1 .................................... 4–118 cl.2.17.2.1 ................................. 7–192 cl.2.17.2.2 ................................. 4–097 cl.2.18.3 .................................... 4–098 cl.2.19.2.1 ...................... 4–088, 4–100 cl.2.27 ............................ 5–036, 6–021 cl.2.27.1 ........................ 5–002, 5–017, 6–022, 9–034 cl.2.27.3 ..............5–016, 5–113, 6–050 cl.2.28 ....................................... 5–057 cl.2.28.1 ........................ 5–112, 6–021, 6–085, 12–149 cl.2.28.1.2 .................... 6–034, 14–142 cl.2.28.2 ....................... 4–005, 11–105 cl.2.28.3 ...................................12–149 cl.2.28.3.1 ................................. 4–303 cl.2.28.3.2 ................................12–144 cl.2.28.4 ..................... 11–146, 12–149 cl.2.28.5 ....................... 6–022, 11–105 cl.2.28.5.2 ................................. 6–092 cl.2.28.6.1 .................. 11–023, 11–026 cl.2.28.6.3 .........6–022, 6–095, 12–149 cl.2.28.6.4 ..................... 6–022, 6–095, 12–145, 12–149 cl.2.29.1 .................................... 4–114 cl.2.29.2 .................................... 4–117 cl.2.29.2.1 ...........4–119, 4–172, 4–264 cl.2.29.2.2 ................................. 4–236 cl.2.29.3 .................................... 4–169 cl.2.29.4 .................................... 4–099 cl.2.29.5 .................................... 4–037 cl.2.29.6 ........................ 4–030, 4–183, 4–222, 4–224, 4–254 cl.2.29.7 .................................... 4–179 cl.2.29.8 .................................... 4–127 cl.2.29.10 .................................. 4–251 cl.2.29.11 .................................. 4–245 cl.2.29.12 .................................. 4–181 cl.2.29.13 ....................... 4–061, 4–079 cl.2.32.1 ...................................21–225 cl.2.33 .......................... 7–055, 17–056 cl.3.10.3 ...................................12–061 cl.3.12 ......................................14–032 cl.3.15 ....................................... 4–172 cl.3.22.1.1 ................................. 4–266 cl.3.22.1.2 ................................. 4–264

xc

TABLE OF CONTRACT CLAUSES

r.8 ............................................22–129 r.9 ............................................22–129 r.9.3 .........................................22–148 MC87............... 1–021, 2–019, 2–043, 3–048, 4–199, 4–248, 7–218, 11–036 cl.1.5.1 ...................................... 7–181 cl.1.7 ......................................... 3–048 cl.2.12.1 ...................................11–024 cl.2.13 ....................................... 4–061 cl.2.13.1 .................................... 4–047 cl.2.13.1.2 ................................. 4–215 cl.2.13.2 .............4–021, 4–088, 4–099, 4–114, 4–117, 4–127, 4–165, 4–169, 4–179, 4–181, 4–183, 4–184, 4–195, 4–196, 4–236, 4–244, 4–246, 4–264 cl.3.21 ....................................... 3–048 cl.4.1 ......................................... 3–048 cl.6.2 ......................................... 4–250 Sch.2......................................... 3–048 Sch.3......................................... 7–188 cl.42 .......................................... 7–218 MC98............... 1–021, 2–043, 4–199, 4–221, 4–248, 4–264, 7–218 cl.1.5.1 ...................................... 7–181 cl.2.12.1 ...................................11–024 cl.2.13 ....................................... 4–061 cl.2.13.1 .................................... 4–047 cl.2.13.1.2 ................................. 4–215 cl.2.13.2 .............4–021, 4–032, 4–038, 4–087, 4–088, 4–099, 4–100, 4–114, 4–117, 4–118, 4–127, 4–165, 4–169, 4–179, 4–181, 4–183, 4–184, 4–195, 4–196, 4–236, 4–244, 4–246, 4–248, 4–254, 4–264, 6–132 cl.3.27 ....................................... 4–262 Sch.3......................................... 7–188 cl.42 .......................................... 7–218 MC08...........................2–037, 2–043, 4–199, 4–221, 7–218, 13–060 cl.1.8 .......................... 13–056, 13–060 cl.2.3.2 ...................................... 7–218 cl.2.3.8 .....................................13–148 cl.2.13 ....................................... 4–199 cl.2.19.1 .................................... 4–047 cl.2.19.1.2 ................................. 4–031 cl.2.19.2 .............4–021, 4–039, 4–061, 4–087, 4–088, 4–097, 4–099, 4–100, 4–114, 4–117, 4–118, 4–127,

4–169, 4–179, 4–181, 4–183, 4–236, 4–251, 4–254, 4–264 cl.2.19.5 .................................... 4–038 cl.2.19.8 .................................... 4–254 cl.3.27 ....................................... 4–264 cl.4.1 ......................................... 3–048 Sch.1......................................... 3–048 Annex B ......................... 7–188, 7–218 Pt 2..........................................13–149 cl.1.1 ......................................... 7–218 cl.1.11 ....................................... 7–218 cl.2.27 ....................................... 7–218 MF/1 ................ 1–022, 1–023, 2–019, 4–040, 4–077, 4–170, 4–203, 4–305, 6–037, 7–224, 12–128, 14–151, 16–061 cl.5.7 .............................. 4–162, 4–163 cl.6.1 ......................................... 4–182 cl.12.1 ......................................12–117 cl.14.2 ............................ 7–181, 7–239 cl.14.4 ....................................... 9–065 cl.16.1 ......................................12–117 cl.16.2 ......................................12–117 cl.25 .......................................... 4–172 cl.27.1 ......................................12–032 cl.27.2 ......................................12–156 cl.27.3 ....................................... 2–123 cl.33.1 ................4–032, 4–049, 4–074, 4–163, 4–170, 4–182, 6–015, 6–036, 14–150 cl.33.3 ......................................11–083 cl.44 .......................................... 5–164 cl.44.4 ............................ 4–305, 5–164 cl.46.1 ....................................... 4–073 cl.46.3 ....................................... 4–074 MP05 ...........................2–106, 4–103, 4–183, 4–266, 4–291, 7–196, 13–058, 13–140 cl.1............................... 4–114, 12–062 cl.7.1 ........................................12–062 cl.10.2 .......................... 4–085, 12–118 cl.10.3 ......................................12–118 cl.10.4 ......................................12–118 cl.11.1 ....................................... 4–085 c.14.1 ........................................ 4–152 c.14.2 ........................................ 4–152 cl.15.3 ......................................11–026 cl.18.1 ....................................... 6–016 cl.18.1.1 .................................... 4–061 cl.18.1.3 .................................... 4–181 cl.18.1.5 ......................... 4–086, 4–114 cl.18.1.6 ......................... 4–183, 4–186 cl.18.1.7 .................................... 4–038

xci

TABLE OF CONTRACT CLAUSES

cl.18.1.8 .................................... 4–031 cl.18.2 ....................................... 5–017 cl.18.4 ....................................... 4–251 cl.18.5 ....................................... 4–236 cl.18.8 .......................... 4–170, 12–144 cl.21 .......................................... 4–292 cl.22.1 ....................................... 4–236 cl.26 .......................................... 4–293 cl.26.6.4 .................................... 4–086 cl.27 .......................................... 4–293 cl.27.1 ............................ 4–292, 4–293 cl.27.2 ............................ 4–086, 4–292 cl.27.8 ....................................... 4–293 MPF 2011 ....................1–007, 1–012, 1–025, 2–106, 4–203, 4–291, 4–325 to 4–366, 11–053, 12–062, 13–140 cl.1............................................ 4–342 cl.1.1 ........................................12–062 cl.2.9 ......................................... 4–341 cl.4.2 ......................................... 4–085 cl.4.4 ........................................12–118 cl.5.1 ......................................... 4–085 cl.8.1 ......................................... 4–152 cl.8.2 ......................................... 4–152 cl.9.3 ........................................11–026 cl.10.3 ....................................... 4–345 cl.10.4 ....................................... 4–345 cl.10.5 ....................................... 4–345 cl.11.4 ....................................... 4–345 cl.12.1.1 .................................... 4–061 cl.12.1.2 .................................... 4–246 cl.12.1.3 .................................... 4–181 cl.12.1.4 .................................... 4–248 cl.12.1.5 ......................... 4–086, 4–114 cl.12.1.6 .................................... 4–186 cl.12.1.8 .................................... 4–170 cl.12.2 ....................................... 5–017 cl.12.9 ....................................... 4–345 cl.14.1 ....................................... 4–345 cl.14.2 ....................................... 4–345 cll.15 to 18 ............................... 4–340 cl.15.2 ....................................... 4–342 cl.15.3 .................4–342, 4–346, 4–366 cl.15.4 ....................................... 4–343 cl.16.1 ....................................... 4–343 cl.16.2 ....................................... 4–343 cl.17 .......................................... 4–344 cl.17.1 ....................................... 4–344 cl.17.2 ....................................... 4–344 cl.18 .......................................... 4–345 cl.18.1 ....................................... 4–345 cll.18.1.1 to 18.1.8 .................... 4–345

xcii

cl.18.1.1 .................................... 4–347 cl.18.1.2 .................................... 4–347 cl.18.1.3 .................................... 4–347 cl.18.1.4 .................................... 4–347 cl.18.1.5 .................................... 4–347 cl.18.1.6 .................................... 4–347 cl.18.1.7 .................................... 4–347 cl.18.1.8 .................................... 4–347 cl.18.4 ....................................... 4–337 cl.18.7 ............................ 4–346, 4–347 cl.18.7.1 .................................... 4–346 cl.18.7.2 .................................... 4–346 cl.18.7.3 .................................... 4–346 cl.18.8 ......................................12–144 cl.19 ....................4–340, 4–346, 4–366 cl.20 ............................... 4–340, 4–366 c.20.6.1 ..................................... 4–103 cl.20.6.4 ......................... 4–086, 4–291 cl.21.1 .................4–086, 4–103, 4–291 cl.21.2 ....................................... 4–291 cl.21.2.1 .................................... 4–170 cl.22.1 ....................................... 4–345 cl.22.3 ....................................... 4–345 cl.25 ............................... 4–331, 4–346 cll.25. to 25.4 ............................ 4–331 cl.25.1 ....................................... 4–331 cl.25.3 ....................................... 4–331 cl.25.4 ....................................... 4–332 cl.26 ....................4–328, 4–337, 4–346 cl.26.2.1 .................................... 4–329 cl.26.2.2 .................................... 4–329 cl.26.6 ....................................... 4–331 cl.26.6.1 .................................... 4–331 cl.26.6.2 .................................... 4–331 cl.26.6.3 .................................... 4–331 cl.26.6.4 .................................... 4–331 cl.26.7 ....................................... 4–329 cl.26.8 ....................................... 4–330 cl.27 ............................... 4–331, 4–334 cl.27.1 ....................................... 4–334 cl.27.2 ............................ 4–334, 4–337 cl.27.2.1 .................................... 4–334 cl.27.2.2 .................................... 4–334 cl.27.3 ..... 4–334, 4–335, 4–339, 4–366 cl.27.4 ............................ 4–336, 4–338 cl.27.5 ............................ 4–337, 4–338 cl.27.6 ....................................... 4–338 cl.27.8 ....................................... 4–338 cl.33.1 ....................................... 4–345 cl.39.2 ......................................12–062 cl.42 .......................................... 4–366 cl.43 .......................................... 4–366 cl.44 .......................................... 4–366

TABLE OF CONTRACT CLAUSES

cl.45 .......................................... 4–366 cl.46 .......................................... 4–366 Sch.2......................................... 4–328 para.7 ........................................ 4–328 para.7.1 ..................................... 4–328 para.7.2 ..................................... 4–328 para.7.5 ..................................... 4–328 Sch.3......................................... 4–325 MTC89 ........................4–015, 4–248, 7–088, 7–198, 11–021, 11–129 cl.1.5 ........................................12–113 cl.6.8 ......................................... 4–250 MTC08 .................... 4–027, 11–129, 13–060, 13–140, 13–140 MWA80 ........................2–019, 4–015, 4–027, 10–076, 11–021, 21–225 cl.2.2 ...................4–047, 4–117, 4–246 cl.3.6 ......................................... 4–246 cl.6.2 ...................2–156, 2–157, 2–158 cl.6.3B .......................... 2–156, 2–157, 2–158, 2–159, 4–246 MWA98 ........................3–044, 4–015, 4–027, 4–041, 4–221, 10–076, 11–021, 21–225 cl.1.5 ......................................... 5–105 cl.2.2 ...................4–047, 4–117, 4–246 cl.3.6 ......................................... 4–246 cl.4.2.2 ...................................... 4–041 cl.6.3B ...................................... 4–246 MWA05 ........................3–044, 4–015, 4–027, 4–041, 7–196, 10–076, 11–021, 13–140 cl.2.7 ...................4–047, 4–117, 4–246 cl.4.6 ......................................... 4–041 cl.5.4 ......................................... 4–246 MWA09 ..............................................21–225 NEC in general ............1–022, 4–262, 4–279, 5–079, 8–019, 8–051, 11–039, 12–083, 12–084, 12–197, 13–101, 16–141, 16–060 cl.11.2 (1) ................................. 6–018 cl.20.1 ......................................12–030 cl.32.1 ....................................... 6–018 cl.36.1 ......................................11–073 cl.63.3 ....................................... 6–018 NEC3 ............ 2–073, 3–014, 13–102, 13–104 cl.12.4 ....................................... 4–269 NEC3/PSSC ........................................ 3–014 NEC/SF99....................4–027, 4–041, 4–139, 4–161, 4–242, 4–246, 4–262, 11–021, 20–019 cl.15.1 ....................................... 5–079

cl.31.1 ............................ 7–181, 7–199 cl.50.7 ....................................... 7–199 cl.51 .......................................... 4–041 cl.60.1 (1) ................................. 4–093 (3)................................. 4–172 (5)................................. 4–236 (6)................................. 4–165 (8)................................. 4–185 (11)............................... 4–139 (13).................... 4–035, 4–036 cl.61.2 ....................................... 9–060 cl.82.1 ....................................... 4–262 NSC/4 ................................................. 4–194 cl.1.1.2.2 ................................... 4–190 cl.11.2.2.1 ................................. 4–197 cl.12 .......................................... 4–190 cl.12.2 ....................................... 4–191 cl.35.1.5 .................................... 4–190 NZ03................ 4–028, 4–179, 4–272, 4–294, 6–133, 13–056, 20–010 cl.2.2.5 ...............4–022, 4–092, 4–294, 12–056, 12–176 cl.2.3.2 ...............4–022, 4–092, 4–294, 12–056, 12–176 cl.2.3.4 ...............4–022, 4–092, 4–294, 12–056, 12–176 cl.2.8.4 ..............4–022, 4–294, 12–056 cl.2.87 ........................... 4–022, 4–227, 4–294, 12–056 cl.4.2.6 .......................... 4–022, 4–202, 4–294, 12–056 cl.5.5.2 ...............4–022, 4–032, 4–184, 4–294, 12–056 cl.5.6.6 .......................... 4–022, 4–262, 4–294, 12–056 cl.5.8.5 ..............4–022, 4–294, 12–056 cl.5.11.6 .............4–022, 4–092, 4–294, 12–056, 12–176 cl.5.13.4 ........................ 4–022, 4–294, 12–056, 12–176 cl.5.14.2 ............4–022, 4–294, 12–056 cl.5.16 ................4–022, 4–031, 4–184, 4–227, 4–294, 12–056, 12–176 cl.6.2.4 .......................... 4–022, 4–032, 4–227, 4–294, 12–056 cl.6.4.4 ..............4–022, 4–294, 12–056 cl.6.4.7 .......................... 4–022, 4–236, 4–294, 12–056 cl.6.6.4 .......................... 4–022, 4–032, 4–294, 12–056 cl.6.7.3 ...............4–022, 4–171, 4–294, 12–056, 12–176

xciii

TABLE OF CONTRACT CLAUSES

cl.6.7.4 .......................... 4–022, 4–294, 12–056, 12–176 cl.9.1 ............................ 4–022, 12–056 cl.9.1.1 ...................................... 4–114 cl.9.1.2 ...................................... 4–115 cl.9.5.2 ..............4–022, 4–153, 12–057 cl.10.3 ............................ 4–019, 5–071 cl.10.3.1 .................................... 6–040 (a) .........4–031, 4–032, 5–071 (b) ............................... 4–125 (f)................................ 4–048 cl.10.3.2 ....................... 4–022, 12–057 (b) .................... 5–019, 5–064 cl.10.7.4 ............4–022, 4–294, 12–056 cl.12.11.2 ...................... 4–022, 4–294, 12–056, 12–176 PCC92 ..........................2–019, 2–036, 2–037 cl.1.10 ....................................... 4–088 cl.2.5.4 .....................................11–023 cl.2.5.5 ........................... 7–200, 9–041 cl.2.6.1 ...................................... 4–061 cl.2.6.2 ...................................... 4–127 cl.2.6.4 ........................... 4–244, 4–246 cl.2.6.5 ...................................... 4–117 cl.2.6.5.1 ....................... 4–088, 4–097, 4–107, 4–195, 4–264 cl.2.6.5.2 ................................... 4–236 cl.2.6.6 ...................................... 4–215 cl.2.6.7 ...................................... 4–196 cl.2.6.10 .................................... 4–183 cl.2.6.11 .................................... 4–184 cl.2.6.12 ......................... 4–179, 4–181 cl.2.6.14 .................................... 4–165 cl.2.6.15 .................................... 4–169 cl.2.6.16 .................................... 4–248 cl.2.6.17 .................................... 4–254 cl.2.6.18 .................................... 4–038 cl.3.3.2 ...................................... 4–097 cl.3.4.2 ...................................... 4–107 cl.3.16.2 .................................... 4–264 cl.5.2 ......................................... 4–097 cl.5.3 ......................................... 4–097 cl.6.3.2.3.5 ................................ 4–250 cl.8A ......................................... 4–195 cl.8B ......................................... 4–195 PCC98 ..................................... 2–036, 2–037 cl.1.10 ....................................... 4–088 cl.2.5.4 .....................................11–023 cl.2.5.5 ........................... 7–200, 9–041 cl.2.6.1 ...................................... 4–061 cl.2.6.2 ...................................... 4–127 cl.2.6.4 ........................... 4–244, 4–246 cl.2.6.5 ...................................... 4–117

cl.2.6.5.1 ....................... 4–088, 4–097, 4–107, 4–195, 4–264 cl.2.6.5.2 ................................... 4–236 cl.2.6.6 ...................................... 4–215 cl.2.6.7 ...................................... 4–196 cl.2.6.10 .................................... 4–183 cl.2.6.11 .................................... 4–184 cl.2.6.12 ......................... 4–179, 4–181 cl.2.6.14 .................................... 4–165 cl.2.6.15 .................................... 4–169 cl.2.6.16 .................................... 4–248 cl.2.6.17 .................................... 4–254 cl.2.6.18 .................................... 4–038 cl.3.3.2 ...................................... 4–097 cl.3.4.2 ...................................... 4–107 cl.3.16.2 .................................... 4–264 cl.5.2 ......................................... 4–097 cl.5.3 ......................................... 4–097 cl.6.3.2.3.5 ................................ 4–250 cl.8A ......................................... 4–195 cl.8B ......................................... 4–195 PCC06 ............. 2–036, 2–037, 3–029, 4–221, 4–266, 7–088, 7–196, 13–058 cl.2.9 ......................................... 4–100 cl.2.10 ....................................... 4–088 cl.2.10.4 .................................... 4–100 cl.2.11.2 .................................... 4–097 cl.2.19.4 .................................... 9–041 cl.2.20.1.2 ................................. 6–034 cl.2.20.6.1 ................................11–026 cl.2.21.1 .................................... 4–117 cl.2.21.1.2 ..................... 4–088, 4–097, 4–100, 4–172 cl.2.21.1.3 ................................. 4–236 cl.2.21.2 .................................... 4–169 cl.2.21.3 .................................... 4–264 cl.2.21.4 .................................... 4–038 cl.2.21.5 ......................... 4–183, 4–254 cl.2.21.6 .................................... 4–179 cl.2.21.7 .................................... 4–127 cl.2.21.9 .................................... 4–251 cl.2.21.11 .................................. 4–181 cl.2.21.12 .................................. 4–061 cl.3.6 ......................................... 4–107 cl.3.12 ......................................14–030 cl.3.15 ....................................... 4–172 cl.3.22.1 .................................... 4–264 cl.3.22.2 .................................... 4–264 cl.3.23.1 .................................... 4–254 cl.4.2 ........................................13–146 PPC2000, 2009 edition............ 1–012, 1–022, 2–019, 2–020, 2–040, 4–078,

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TABLE OF CONTRACT CLAUSES

4–203, 10–030, 13–097, 13–104, 16–061 cl.2.4 ......................................... 4–081 cl.2.6 ........................................12–129 cl.3.1 ......................................... 5–007 cl.3.7 ......................................... 5–007 cl.5.3 ........................................11–078 cl.6............................................ 7–181 cl.6.2 ......................................... 8–076 cl.6.7 ......................................... 9–034 cl.10.12 ....................................14–062 cl.17 ....................2–106, 4–108, 4–113 cl.17.4 ....................................... 4–108 cl.18.2 .......................... 2–106, 11–078 cl.18.3 ................4–113, 6–040, 6–041, 11–027, 11–030, 14–156 to 14–158 (i) ....................... 4–165, 4–227, 5–007, 14–047 (ii)................................... 4–264 (iii)....................... 4–177, 4–313 (v) ........................ 4–127, 4–313 (vi) ....................... 4–179, 4–313 (vii) ................................. 4–236 (viii) ..................... 4–246, 4–313 (ix) ....................... 4–244, 4–313 (x) ................................... 4–181 (xi) .................................. 4–165 (xii) ................................. 4–038 (xiii) ................................ 4–248 (xiv) .................... 4–036, 4–172, 5–007, 5–144, 5–146 (xv) ................................. 4–177 cl.18.4 .......................... 6–041, 14–157 (i) ................................... 5–013 cl.19.1 ....................................... 4–246 cl.23.4 ....................................... 2–106 cl.23.5 ....................................... 2–106 App.1 ........................... 4–172, 12–031 RIBA 1939 .......................................... 6–080 cl.10 .........................................12–081 RIBA 1952 .........................................12–182 SBc/Q2011 cl.4.23.1 .................................... 4–339 SGC95 ............ 4–016, 4–079, 4–272, 14–145 cl.3.1 ......................................... 4–081 cl.9.4 .............................. 7–199, 8–006 cl.10.4 ....................................... 4–236 cl.14.1 ....................................... 7–091 (d) .................................. 4–064 cl.14.2 ......................................14–145 (b) .................................. 4–134 (c)................................... 4–244

(e)................................... 4–179 (f) ................................... 4–262 (g) .................................. 4–236 (h) .................................. 4–114 (i) ................................... 4–119 (j) ................................... 4–165 (k) .................................. 4–172 (l) ................................... 4–215 (m) ................................. 4–183 (n) .................................. 4–032 (o) .................................. 4–236 (p) .................................. 4–150 (q) .................................. 4–016 cl.18.4 ....................................... 4–236 cl.23 .......................................... 4–315 cl.41.2 ....................................... 4–150 SGC99 ..................................... 1–023, 6–035 cl.14.2 ....................................... 6–035 SIA80 ...........................3–024, 4–016, 4–079, 4–315, 5–119, 13–056, 13–140, 14–151 cl.1 (4) (c) ................................ 4–172 cl.7 (1) ........................... 4–097, 4–179 cl.14 .......................................... 4–101 cl.22 (1) .................................... 7–091 cl.23 (1) ....................... 6–036, 14–150 (a) ............................... 4–127 (c) ............................... 4–262 (d) ............................... 4–246 (e) ............................... 4–244 (f)..................... 4–114, 4–172 (g) .................... 4–114, 4–119 (h) .................... 4–114, 4–119 (i) ................................ 4–165 (j) ................................ 4–227 (k) ............................... 4–183 (l) ................................ 4–165 (n) ............................... 4–117 (o) ............................... 4–032 (p) .................... 4–016, 4–179 cl.32 (1) (n) .............................. 4–195 SMM7 .............. 2–092, 6–059, 6–060, 7–123, 7–192, 7–193, 12–076, 12–085, 12–086, 12–087, 12–092 to 12–096, 12–177, 15–035 s.A.5 .......................... 12–100, 12–102 r.1.1 .........................................12–091 r.7.1 (a) ...................................12–095 r.10 ........................................... 7–192 rr.10.1 to 10.6........................... 4–119 r.10.1 ........................... 7–194, 12–104 r.10.3................................ 7–193, 12–101, 12–102, 12–103

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TABLE OF CONTRACT CLAUSES

r.10.4 .......................................12–101 r.10.6 .......................................12–101 r.13 ..........................................12–095 r.42 ..........................................12–092 TC08 .............. 3–036, 3–044, 4–221, 13–140 cl.2.5 ......................................... 7–205 cl.2.13.1 .................................... 4–088 cl.2.13.3 .................................... 4–088 cl.2.14 ....................................... 4–088 cl.2.27.6.1 .................. 11–023, 11–027 cl.2.28.1 .................................... 4–114 cl.2.28.2 .................................... 4–117 cl.2.28.2.1 ...........4–088, 4–172, 4–264 cl.2.28.2.2 ................................. 4–236 cl.2.28.4 .................................... 4–038 cl.2.28.5 ..............4–170, 4–183, 4–254 cl.2.28.7 .................................... 4–127 cl.2.28.11 .................................. 4–181 cl.3.13 ....................................... 4–172 cl.3.21.2 .................................... 4–264 cl.3.22.1 .................................... 4–254 Pt 3........................................... 7–205 TC/C 2002 .......................................... 4–339 VOB/B ........................................................... cl.2 (6) .....................................25–012 WC87................ 4–021, 4–199, 4–248, 7–218 cl.1.3.2.1 ................................... 4–114 cl.1.5 ......................................... 4–088 cl.1.10.2 ......................... 4–021, 4–088 cl.2.8 ........................................11–023 cl.2.10 ....................................... 4–200 cl.2.10.1 .................................... 4–061 cl.2.10.2 ......................... 4–088, 4–127 cl.2.10.4 ......................... 4–244, 4–246 cl.2.10.5 ......................... 4–117, 4–195 cl.2.10.5.1 ...........4–088, 4–114, 4–264 cl.2.10.5.3 ................................. 4–236 cl.2.10.6 .................................... 4–215 cl.2.10.7.2 ................................. 4–196 cl.2.10.8.1 ................................. 4–183 cl.2.10.8.2 ................................. 4–184 cl.2.10.9 .................................... 4–181 cl.2.10.11 .................................. 4–179 cl.2.10.12 .................................. 4–165 cl.2.10.13 ....................... 4–169, 4–199 cl.2.10.14 .................................. 4–099 cl.8............................................ 4–196 WC98...........................4–021, 4–199, 4–221, 4–248, 7–218 cl.1.3.2.1 ................................... 4–114 cl.1.5 .............................. 4–087, 4–088 cl.1.5A.1 ................................... 4–100 cl.1.10.2 ......................... 4–021, 4–088

cl.2.8 ........................................11–023 cl.2.10 ....................................... 4–200 cl.2.10.1 .................................... 4–061 cl.2.10.2 ......................... 4–088, 4–127 cl.2.10.4 ..............4–099, 4–244, 4–246 cl.2.10.5 ......................... 4–117, 4–195 cl.2.10.5.1 ..................... 4–088, 4–100, 4–114, 4–264 cl.2.10.5.2 ................................. 4–087 cl.2.10.5.3 ................................. 4–236 cl.2.10.6 .................................... 4–215 cl.2.10.7.2 ................................. 4–196 cl.2.10.8.1 ................................. 4–183 cl.2.10.8.2 ................................. 4–184 cl.2.10.9 .................................... 4–181 cl.2.10.11 .................................. 4–179 cl.2.10.12 .................................. 4–165 cl.2.10.13 .................................. 4–169 cl.2.10.15 .................................. 4–248 cl.2.10.16 .................................. 4–118 cl.2.10.17 .................................. 4–254 cl.2.10.18 .................................. 4–038 cl.2.13 ....................................... 4–199 c.4.21.2.6 .................................. 4–264 cl.8............................................ 4–196 WC08 .............................4–199, 4–221, 7–196, 7–218, 13–060, 13–140 cl.2.9.1 ...................................... 4–088 cl.2.9.3 ................4–021, 4–088, 4–100 cl.2.10 ....................................... 4–088 cl.2.11 ............................ 4–087, 4–088 cl.2.12.2.1 ................................. 4–118 cl.2.12.2.2 ................................. 4–097 cl.2.18.6.1 .................. 11–023, 11–026 cl.2.19.1 .................................... 4–114 cl.2.19.2 .................................... 4–117 cl.2.19.2.1 ...................... 4–087, 4–088 cl.2.19.2.2 ................................. 4–236 cl.2.19.3 .................................... 4–169 cl.2.19.4 .................................... 4–099 cl.2.19.8 ......................... 4–183, 4–254 cl.2.19.9 .................................... 4–179 cl.2.19.10 .................................. 4–127 cl.2.19.12 .................................. 4–251 cl.2.19.14 .................................. 4–181 cl.2.19.16 .................................. 4–061 cl.4.21.2.6 ................................. 4–264 WCD81 ...........................1–022, 1–023, 2–019, 2–130, 4–094 cl.2.3.1 ...................................... 4–093 cl.2.4.1 ........................... 4–021, 4–094 cl.12 ............................... 4–094, 4–114 cl.12.2 ....................................... 4–094

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TABLE OF CONTRACT CLAUSES

cl.12.3 ....................................... 4–119 cl.22.2.3.5 ................................. 4–250 cl.23.2 ....................................... 4–172 cl.25.3 ....................................... 6–089 cl.25.3.1 .................................... 6–026 cl.25.3.4 ...................................11–023 cl.25.4.1 .................................... 4–061 cl.25.4.2 .................................... 4–127 cl.25.4.4 ......................... 4–244, 4–246 cl.25.4.5 .................................... 4–117 cl.25.4.5.1 ..................... 4–093, 4–094, 4–114, 4–119, 4–172, 4–264 cl.25.4.5.2 ................................. 4–236 cl.25.4.6 .................................... 4–215 cl.25.4.7 ......................... 4–175, 4–177 cl.25.4.8 .................................... 4–183 cl.25.4.8.2 ................................. 4–184 cl.25.4.9 .................................... 4–181 cl.25.4.11 ....................... 4–175, 4–179 cl.25.4.12 .................................. 4–165 cl.25.4.14 .................................. 4–169 cl.25.4.15 .................................. 4–248 cl.26.2.6 .................................... 4–094 cl.34.2 ....................................... 4–264 WCD98.............................. 1–023, 2–035, 2–130, 4–094, 11–053 cl.2.3.1 ...................................... 4–093 cl.2.4.1 ........................... 4–021, 4–094 cl.2.14.2 ...................................12–119 cl.12 ............................... 4–094, 4–114 cl.12.2 ....................................... 4–094

xcvii

cl.12.2.1 .................12–008, 12–066, 12–067 cl.12.2.2 ...................................12–066 cl.12.3 ....................................... 4–119 cl.22.2.3.5 ................................. 4–250 cl.23.2 ....................................... 4–172 cl.25 .........................................14–142 cl.25.3 ....................................... 6–089 cl.25.3.1 .................................... 6–026 cl.25.3.3.1 ................................14–144 cl.25.3.4 ...................................11–023 cl.25.4 ....................................... 2–035 cl.25.4.1 .................................... 4–061 cl.25.4.2 .................................... 4–127 cl.25.4.4 ......................... 4–244, 4–246 cl.25.4.5 .................................... 4–117 cl.25.4.5.1 ..........4–093, 4–094, 4–114, 4–119, 4–172, 4–264 cl.25.4.5.2 ................................. 4–236 cl.25.4.6 .................................... 4–215 cl.25.4.7 ......................... 4–175, 4–177 cl.25.4.8 .................................... 4–183 cl.25.4.8.2 ................................. 4–184 cl.25.4.9 .................................... 4–181 cl.25.4.11 ....................... 4–175, 4–179 cl.25.4.12 .................................. 4–165 cl.25.4.14 .................................. 4–169 cl.25.4.15 .................................. 4–248 cl.25.4.16 .................................. 4–254 cl.25.4.17 .................................. 4–038 cl.26.2.6 .................................... 4–094 cl.34.2 ....................................... 4–264

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O N LI N E R ES OU R CES

This edition of Delay and Disruption in Construction Contracts is supported by over one hundred bespoke figures that further illuminate some of the concepts in the book. They have all been made available as downloads, which you can access at your convenience from the book’s homepage. Whenever you see a reference to a figure in the text please go to https://www.routledge.com/9781138940666 and select the file you would like see from the Resources tab. If you would like permission to use any of the illustrations in Delay and Disruption in Construction Contracts then please contact our Permissions department at - mpkbooks [email protected].

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LI S T O F F I G U R ES References are to page number and the figures are to be found on the companion website

Figure 8.9 – Network by cascade diagram ............................................ 384 Figure 8.10 – The relationship between schedule density and predictability ..... XX Figure 8.11 – Process flow chart for creation, approval and update of schedule ....................................... XX Figure 9.1 – Revision, updating, monitoring and reporting flow chart .................... 386 Figure 9.2 – The planned schedule .............................. 407 and 428 Figure 9.3 – Schedule updated with retained logic .................................... 407 Figure 9.4 – Schedule updated with progress override ............................... 407 Figure 9.5 – Schedule updated with corrected logic .................................. 407 Figure 9.6 – Identifying a delay to progress by payment monitoring ..................... 415 Figure 9.7 – Monitoring a bar chart .......... 419 Figure 9.8 – CTS monitoring of progress ... 420 Figure 9.9 – “Jagged line” progress monitoring........................................ 421 Figure 9.10 – Schedule updated ................ 421 Figure 9.11 – Histogram of resources from count-the-squares method ......... 427 Figure 9.12 – Computerised comparative resource histogram ............................ 427 Figure 9.13 – Comparative cash flow graph ................................................ XX Figure 11.1 – Excusable delay to completion ....................................... 489 Figure 11.2 – Reimbursable disruption and prolongation ............................... 489 Figure 11.3 – Reimbursable disruption and acceleration ................................ 489 Figure 11.4 – Reimbursable disruption and ineffective acceleration ................ 489 Figure 11.5 – Recovery of constructive acceleration costs .............................. 494

Figure 2.1 – Incidence of timely completion in relation to project complexity........... 14 Figure 3.1 – Procurement routes between 2004 and 2007 .................................... 73 Figure 3.2 – Traditional “build only” procurement ....................................... 75 Figure 3.3 – Traditional “build only” procurement with project management ....................................... 75 Figure 3.4 – “Design and build” procurement ....................................... 78 Figure 3.5 – “Construction management” procurement ....................................... 80 Figure 3.6 – “Management contracting” procurement ....................................... 83 Figure 3.7 – PFI procurement by a joint venture ............................................... 90 Figure 5.1 – Example of a notice of delay................................................. XX Figure 7.1 – Principal method of time management employed ...................... 316 Figure 7.2 – Typical schedule design considerations ................................... 323 Figure 7.3 – Unique activity descriptions and activity IDs................................. 325 Figure 8.1 – A simple bar chart ................. 367 Figure 8.2 – Flow chart of procedures for determining jurisdiction under the HGCRA ..................................... 368 Figure 8.3 – Line-of-balance chart for a large number of elements ................ 369 Figure 8.4 – Line-of-balance chart ............ 369 Figure 8.5 – Time chainage diagram ............................... 370 and 372 Figure 8.6 – Network by arrow diagrams ........................................... 373 Figure 8.7 – Listing for the arrow diagram network ............................... 373 Figure 8.8 – Network by precedence diagram ............................................ 374

ci

LIST OF FIGURES

Figure 14.15 – Part of a completed Scott Schedule........................................... 674 Figure 14.16 – Identifying a delay to progress by payment monitoring ........ 675 Figure 14.17 – A simple bar chart ............. 677 Figure 14.18 – Cascade diagram with finish-to-start relationships ................ 677 Figure 14.19 – Cascade diagram with start-to-start relationships.................. 677 Figure 14.20 – Bar chart as-planned versus as-built ................................... 678 Figure 14.21 – Collapsed as-planned versus as-built ................................... 678 Figure 14.22 – Compensable and excusable delays by as-planned versus as-built ......681 Figure 14.23 – Compensable and excusable delays by collapsing technique.......................................... 682 Figure 14.24 – Flow chart of the layered nomenclature of RP/FSA................... 685 Figure 15.1 – As-planned impacted analysis ............................................. 709 Figure 15.2 – Collapsed as-built analysis ......719 Figure 16.1 – Positioning of different types of float in relation to a single activity time ...................................... 732 Figure 16.2 – Bridge work in float ............. 733 Figure 16.3 – Resource logic added........... 733 Figure 16.4 – Resource levelling ................ 734 Figure 16.5 – Bridge work in float ............. 735 Figure 16.6 – Delayed start to bridge work ................................................. 736 Figure 16.7 – Unconstrained completion of planned work ................................ 752 Figure 16.8 – Use of mandatory completion constraint on planned work ............... 752 Figure 16.9 – Use of non-driving link ........ 753 Figure 16.10 – Use of fixed lag.................. 753 Figure 16.11 – Use of time contingency activity.............................................. 754 Figure 16.12 – Use of contract duration bar ...................................... 754 Figure 16.13 – Activity in float .................. 757 Figure 16.14 – Float taken up by an excusable delay ................................. 757 Figure 16.15 – Inexcusable delay to completion ....................................... 758 Figure 16.16 – Excusable and reimbursable delay to completion ........................... 758 Figure 16.17 – Activity with float .............. 759 Figure 16.18 – Inexcusable delay to completion with reimbursable disruption ......................................... 759

Figure 11.6 – Relationship between time, recovery costs and likelihood of success.......................................... 494 Figure 11.7 – The planned schedule .......... 497 Figure 11.8 – The re-sequenced schedule ........................................... 498 Figure 11.9 – Increase in cost and reduced productivity related to increased working hours ................................... 503 Figure 13.1 – Percentage of respondents familiar with the recording of basic labour resource data .......................... 562 Figure 13.2 – Percentage of respondents familiar with the recording of workrelated data ....................................... 562 Figure 13.3 – Percentage of respondents keeping records of event-related data .................................................. 566 Figure 13.4 – Database relationships ......... 576 Figure 13.5 – What, when and resource table ................................................. 577 Figure 13.6 – Simple data-input form ....... 577 Figure 14.1 – The contractor’s planned schedule ........................................... 624 Figure 14.2 – Planned nomination sequence impacted on date of nomination ....................................... 624 Figure 14.3 – The contracted nomination sequence impacted on date of nomination ....................................... 624 Figure 14.4 – Listing of preparatory work activities ........................................... 645 Figure 14.5 – The contractor’s planned schedule ........................................... 645 Figure 14.6 – Impact of instruction for variation upon planned schedule ........ 646 Figure 14.7 – Activity interrupted or suspended by event ........................... 646 Figure 14.8 – Cumulative effect of disrupted progress on completion ...... 647 Figure 14.9 – Illustration of inferred causation .......................................... 652 Figure 14.10 – Impacted analysis calculating the effect of the causative event .......... 652 Figure 14.11 – Deciding on a method of analysis from the materials available ........................................... 662 Figure 14.12 – A simple cause and effect matrix............................................... 671 Figure 14.13 – A cause and effect matrix for delay-related costs ............. 671 Figure 14.14 – A complex multi-party cause and effect matrix ...................... 672

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LIST OF FIGURES

Figure 16.19 – Excusable delay to completion with reimbursable disruption and prolongation ..................................... 759 Figure 16.20 – Excusable delay to completion with reimbursable disruption ......................................... 760 Figure 17.1 – Calculation of productivity factors ................................. 766 and 798 Figure 17.2 – Categorisation of time periods ............................................. 767 Figure 17.3 – Distribution costs of recovery and acceleration ................................ 776 Figure 17.4 – Updated schedule of remaining work ................................. 788 Figure 17.5 – Calculation of lost labour productivity ...................................... 788 Figure 17.6 – MCAA industry norms of the effect of unproductive working .......XX Figure 17.7 – The basic measured mile approach .......................................... XX Figure 17.8 – Suspensions of work caused by D’s time and cost risk events.............. 798 Figure 17.9 – Identifiable lost productivity during working time .......................... 798 Figure 17.10 – Implied effect of lost productivity ...................................... 799 Figure 18.1 – The periods of delay found in Peak v McKinney ............................... XX Figure 18.2 – Calculation of subcontractor’s assumed liability ............................... 816 Figure 19.1 – Comparison of a global claim, total loss claim and modified total loss claim ................................................ 836 Figure 20.1 – The as-built schedule ........... 866 Figure 20.2 – Pattern of costs in addition to tender costs .................................. 866 Figure 20.3 – Separation of delay-related costs ................................................. 866

Figure 20.4 – Separation of all heads of loss ............................................... 866 Figure 21.1 – As-planned distribution of costs ............................................. 882 Figure 21.2 – The effects of recovery of loss of productivity on resources .......882 Figure 21.3 – The effects of recovery of loss of productivity on overheads ....... 882 Figure 21.4 – The effect on resources of additional work ................................. 882 Figure 21.5 – The effect of additional work on preliminaries ........................ 882 Figure 21.6 – The effect of additional work on head office overheads ........... 882 Figure 21.7 – The effect of change on recovered loss of productivity............. 882 Figure 21.8 – The effect of change on overheads in period of recovery .......... 882 Figure 21.9 – The effect of increased resources on change and recovery ...... 882 Figure 21.10 – The effect of loss of productivity on prolongation ............. 882 Figure 21.11 – The effect of change on prolongation caused by lost productivity ...................................... 882 Figure 21.12 – The effect of additional work on recovered lost productivity ......882 Figure 21.13 – Financing periods of additional costs ................................. 903 Figure 22.1 – Relationship of costs to the likelihood of settlement: traditional litigation procedures .......................... 965 Figure 22.2 – Relationship of costs to the likelihood of settlement with document management systems ......................... 965 Figure 22.3 – Relationship of costs to the likelihood of settlement with common information....................................... 965

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CHAPTER 1

Introduction and terminology

Introduction Terminology The contractor The developer The contract administrator The works Programme and schedule Critical path Delay Disruption

1–001 1–019 1–021 1–022 1–023 1–024 1–025 1–028 1–030 1–034

Introduction “Construction changes, delays and claims are a major problem for public work agencies, developers and facility managers – and for contractors and designers building their projects. Delays and claims siphon off a significant portion of the available funds for construction, often cost contractors and designers a significant portion of their anticipated profit, and sometimes create a loss, or even destroy a contractor and the owner’s lifetime savings.”1

1–001 The construction industry has suffered more than most other sectors within the United Kingdom in recent years with the industry reportedly experiencing a 24% decrease in output from 2007 to 2010. Many of these projects suffer delay to completion, together with associated disruption. 1–002 Delayed completion is not unique, however, to the construction industry. It also happens in aerospace projects, shipbuilding2, IT, oil and gas, rail transport, petro-chemical and process plants and civil engineering projects. Nor is delay unique to a particular culture, or jurisdiction: the same things happen in the United Kingdom as occur in Russia, the United States, Hong Kong, the Middle East, Pakistan, India, South Africa, Australia and the forests of Peru. In fact, it happens in all industries, jurisdictions and

1 S S Pinnell, “Survey of scheduling practices and results”. Risk assessment and best practices in scheduling, an occasional paper given to the PMI College of Scheduling (May 2005), p.2. 2 See the excellent article by E Blackburn and R Toney, “Delay and disruption in superyacht and other shipbuilding contracts” (2013) 19 JIML I, which quotes extensively from the 4th edn of this book.

1

INTRODUCTION AND TERMINOLOGY

cultures in which a unique product, the character of which is expected to change, is created over a period of time by a combination of specialised resources. 1–003 When time has not been managed effectively, the consequences can be devastating for all participants. However, it is not just the employer, consultants, contractors and suppliers who suffer as a result of mismanagement of time: the £150m spent in prolongation costs on the Scottish Parliament building could have funded a fully equipped general hospital and, whilst for many private developers, profit and loss on the bottom line are the primary driving forces, for public authorities, getting value for money and not frittering it away on the costs of mismanagement are equally important. High profile projects in the United Kingdom (such as the Shard) do not escape such problems and there are currently four “disaster” projects in Germany alone. 1–004 At a meeting of the Society of Construction Law in 2000, a group of members got together to discuss the manner in which delay issues were handled by both the parties and the courts, with a view to making the resolution of delay-related disputes more predictable. In October 2002, the Delay and Disruption Protocol was published. The thesis propounded was that, if the impact of intervening events could be impacted upon a network schedule which was up to date at the time, their effect could be calculated and measured instead of guessed; further, this would be greatly to the advantage of everyone concerned with managing time proactively, or dealing with extensions of time and compensation for delay. 1–005 Notwithstanding the obvious advantages, the industry did not take this message to heart; contract-drafting bodies ignored it and the SCL Protocol has been found to have been more often used as a stick with which to beat the opposition in disputes, rather than to avoid disputes in the first place. The SCL Protocol is in the process of being revised and updated and a critique thereof appears at Appendix 3 to this book. 1–006 Since the 1980s, the favoured theory has been that the failure to control time must be something to do with contractual relationships and that, if projects were less adversarial, better results would be achieved. In 2003, the OGC published their Constructing Excellence industry guidance, the essence of which was that, so long as the correct procurement route was selected, completion on time would follow3. To the myriad of standard forms and procurement methods already then available were added partnering and alliancing, and the New Engineering Contract. However, Constructing Excellence key performance indicators have shown that, since the adoption by government agencies of that procurement process, construction time standards have either remained stagnant, or declined4. If it was not apparent before, we now know that the type of contract, or procurement route, has no effect on the incidence of delayed projects and that is so whether the project is executed under a bespoke contract, PPP, partnering, NEC, design and build, EPC, traditional build only, or (that wonderfully reassuring misnomer) “guaranteed maximum price”. All that contracts can do is set a standard of performance and allocate liability for failure; they cannot produce success no matter how well they are written. 1–007 On the other hand, it is apparent that, over the years, little or no thought has been given in any of the standard forms discussed in this fifth edition (including the OGC-preferred NEC forms) as to what the employer might reasonably require as to 3 See, Office of Government Commerce, Achieving Excellence in Construction, Guide 6, Procurement and Contract Strategies (2003). 4 Office of Government Commerce, Construction Statistics Annual: 2008 edn, Table 16.2, “Summary of industry performance from 2004 to 2008 – Construction Industry KPIs”.

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the management of time, nor how it could be achieved with any certainty. It is generally the case that, whereas the provisions for cost control may run to several pages of conditions, the requirements for time control will not be mentioned at all or, if mentioned, then the requirements are hopelessly inadequate and unrelated to the provisions for extension of time, or time-related compensation. Such drafting renders it impossible for D to have any control at all over the effects of change, or the ultimate contract period. It is significant that, of all the standard forms considered here, only some 50% refer to a schedule at all, less than a third of those forms actually require the contractor to produce a construction schedule for the works and none provide any effective control of progress records, or the quality of the schedule, or say for what, or how the schedule and progress records are to be used5. 1–008 The only consistency over the last 100 years or so, between all the attempts to manage time, is that they have all been based upon getting the contractor to devise a static programme, usually on paper, at the beginning of the job (in the form of a target), against which a failure to achieve it can be measured and then reporting against any divergence, in the hope that, in response to threats and/or financial encouragement, some recovery, or acceleration could be made. This is at the root of the problems with time management. Historical reporting of failure to achieve a notional fixed target is not an effective way to manage time on complex projects. That is so, with, or without threats, or financial encouragement. 1–009 However, experience also tells us that there are two factors common to all projects which fail to be completed on time all over the world, in all industries and jurisdictions, under all forms of contract. These are: poor project programming; and poor record keeping; competence in both of which is essential for effective project control. 1–010 For the last 30 years or so, construction management has been at the cornerstone of the CIOB’s policies for improvement of the construction industry. Conscious of several high profile disastrous failures in time management over the years since the SCL Protocol was published, and with a view to examining the state of the industry in this field, between December 2007 and January 2008, the CIOB conducted a survey of the industry’s knowledge and experience of different methods of project control and time management. The report, based upon data provided on nearly 2,000 projects over a three-year period6, concluded that, amongst other things, the growth in training, education and skill levels of the industry in the use of time-management techniques has not kept pace with the technology available. 95% of the respondents thought that the standard of education and training in the management of time was unsatisfactory. In summary, it was found that the state of proficiency in time management was roughly comparable to the state of proficiency in cost management over 100 years ago: no standards to work to, no training, or education in the process and no accreditation for those doing it. Indeed, it was felt that the absence of standards, training and education

5 Only EEC3 and C21/09 make any attempt to tie entitlement to the time-effect of a D’s risk event on an updated CPM schedule, but both fall short of what is required. Now see, however, the CPC and the MPF. 6 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008).

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in this field might be the reason why the recommendations of the SCL Protocol have not been taken up more widely7. 1–011 It was against this background that, in September 2008, the CIOB set up a working group (under the previous author’s direction) of varied professional interests from as far apart as Australia, America and the United Kingdom to develop a practical standard to which the industry could work. The result, entitled A Guide to Good Practice in the Management of Time in Complex Projects, was published in 2010. This work was very much a team effort, which could not have been produced without the variety of experience provided by the “Working Group” which wrote it. It is widely referred to in this fifth edition. 1–012 In Mirant v Ove Arup8, the late HH John Toulmin CMG QC (a service of thanksgiving for whose life was held at The Temple church on 5 November 2012) paid glowing tribute to the third edition of this book. The structure of the fourth edition was a departure, in many ways, from the structure of its three predecessors; the fourth edition added commentary on 22 additional standard forms of contract from the United Kingdom, Ireland, the US and New Zealand, including the 2009 amendment of the JCT forms, the 2007 AIA form, the 2008 edition of PPC 2000 and the 2009 edition of the Irish government standard forms. In total, there are now 97 standard forms compared and commented upon, including a detailed commentary on and comparison between the CPC and the MPF (contributed by the previous author and Nick Lane). 1–013 A number of reported cases have dealt in detail with, amongst other things, the way in which delay should be analysed in different circumstances with different materials, what sort of evidence is admissible from non-experts and when, and so on. Accordingly, there has been much legal development and the fourth edition contained reference to over 110 new cases from around the world, including over 64 from the courts of England and Wales, 24 from the US Boards of Contract Appeals and state and federal courts, 19 from the Australian state courts and seven from across the courts of Hong Kong, New Zealand, Canada and Scotland. This fifth edition contains reference to well over 100 new authorities, many of which are presented in the form of illustrations, in the style originally adopted by the late, great previous editor of Hudson, Ian Duncan Wallace QC. 1–014 For many of the subjects under discussion, we have necessarily relied much upon the interpretation of American contracts by the various Boards of Contract Appeals and the Federal Courts of Claims of the United States. US construction case law is achieving recognition in the United Kingdom and the Commonwealth. It was given a healthy airing in the first edition of this book when it was published in 1997 and more has been added over the last 15 years; the eleventh edition of Hudson9 (published in 1995) referred to several US cases, and the Scottish Court of Session both referred to and relied upon US case law in the case of John Doyle v Laing10. In his

7 K Pickavance, Managing the Risk of Delayed Completion in the 21st Century: The CIOB Research (Society of Construction Law, 2009). 8 Mirant Asia-Pacific Construction (Hong Kong) Ltd v Ove Arup International [2007] EWHC 918 (TCC). 9 I Duncan Wallace QC (ed), Hudson’s Building and Engineering Contracts, 11th edn (London: Sweet & Maxwell, 1995). 10 John Doyle Construction Ltd v Laing Management (Scotland) Ltd [2002] Scot CS 110, [2002] BLR 393.

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article in the ABA Journal in 200011, Lord Irvine, (the then Lord High Chancellor of Great Britain), observed: “Certain details of substance may have departed from English law, but the commonlaw method has remained intact, preserving the active and effectual judiciary that is the defining characteristic of any common law system. This prominence of judicial function in both England and America has ensured that the common origins of the two systems remain relevant today. As two systems with a common origin, English law and American law have learned a great deal from each other in the past and will continue to do so in the future.”

1–015 Whilst the laws of the various countries whose construction contracts are discussed are similar, their construction contracts are not and the case law must be read with that in mind. US government procurement contracts (the subject of the Boards of Contract Appeals cases cited) generally require the contractor to use a CPM network to plan the work, to update the CPM network regularly and for it to be approved by the government agency. For the last 30 years, US government procurement contracts have commonly required entitlement to be demonstrated using time impact analysis and specifically state that neither the contractor nor the government has the benefit of float as a contingency. To that extent, they are similar in form to that recommended by the SCL Protocol. However, by way of contrast, the US domestic forms (such as that published by the American Institute of Architects, under which much construction work is carried out in the US) do not contain such stringent conditions and many of the forms of contract currently in use in the United Kingdom do not even require a schedule, let alone a CPM network. It is for this reason that the fourth edition continued to offer a comparison between the principal provisions of the Irish, Australian, New Zealand, American, Hong Kong, Singapore and FIDIC forms with their UK counterparts. Whilst they are not directly relevant to the interpretation of contracts in use in the United Kingdom those concerned with the nuances of contract drafting will discover them to be interesting, informative and helpful in understanding decisions made in relation to those contracts. 1–016 In both American government and private contracts, when delay is caused by an event at the risk of the developer as to cost, the contract administrator is required to make an “equitable adjustment” to the contract sum and, if it is caused by an event at the developer’s risk as to time, the contract administrator is required to make an equitable adjustment to the time for completion. To this extent, the requirements as to cost in the American forms tend to be more along the lines of valuation than compensation for loss and expense suffered (as is more normal with UK forms) but, as to time, it seems that an equitable adjustment of the time to complete is probably not substantially different from the “fair and reasonable” extension of time often referred to in UK building and civil engineering contracts. 1–017 Apart from case law, there has also been much published academic discussion on the manner in which delay, disruption, concurrency, parallelism, pacing, apportionment, global claims, total loss and modified total loss and time claims should be handled. 1–018 As a consequence, the previous author rewrote many of the chapters and the trend continues. This has resulted in three new chapters, new sections and others significantly

11 The Right Honourable Lord Irvine of Lairg, “Common Origins, Common Future” (May 2000) ABA Journal at p.55.14.

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expanded. I have also made many alterations to the content and sequence of subject-matter within the individual chapters. All this would not have been possible without my expert team of specialist advisory editors, listed in the opening pages, to whom I express my gratitude for their assistance and support. Thanks are also due to Andrew Stewart12, for his assistance with the design of the 4th edition diagrams, which are now generally accessible on the companion website, save for those diagrams contained in Appendix 1, the Glossary of Terms and Definitions.

Terminology “I begin, then, with some remarks about ‘the meaning of a word’. I think many persons now see all, or part of what I shall say: but not all do, and there is a tendency to forget, or to get it slightly wrong. In so far as I am merely flogging the converted, I apologise to them.”13

1–019 The work carried out by the AACE (in refining its recommended practice on Forensic Schedule Analysis14) and the CIOB Guide15 have made significant contributions to the clarity with which terms are to be used with regard to both the proactive management of time and the proof of cause and effect of delay and disruption. Despite these and many other published sources (including the useful introduction to terminology provided by Wideman16 and the extensive Wikipedia17), the Glossary of Terms and Definitions, is still considered necessary. 1–020 Nonetheless, in light of commentary upon 97 standard forms of contract, some simple form of abbreviation is necessary and we include a Table of Acronyms which we have thought it appropriate to adopt. Apart from the acronyms, there are a few terms adopted, for which readers may also find an initial explanation helpful.

The contractor 1–021 The party responsible for carrying out the works is generally referred to as “the contractor”, or “management contractor”18. Some authors choose to refer to this party as the “main contractor”, or “prime contractor”, so as to distinguish the contractor from subcontractors. However, in this book, the party responsible for carrying out the works will generally be referred to as “the contractor” and be represented by the letter “C”.

The developer 1–022 Throughout the standard forms, the party that agrees to pay for the construction works may be variously referred to as “the government”19, “the employer”20, “the 12 A senior software developer at Universalsprout. 13 JL Austin, Philosophical Papers 2nd edn (Oxford: Oxford University Press, 1970). 14 American Association of Cost Engineers International, Forensic Schedule Analysis, Recommended Practice No 29R-03 (2009). 15 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010). 16 RM Wideman, Comparative Glossary of Project Management Terms (2002). 17 http://www.wikipedia.org/ (accessed 29 July 2010). 18 MC87 and MC98. 19 Contracts construed by the US Boards of Contract Appeals. 20 The majority of the JCT forms, ACA, NEC and ICE forms, the 1998 edn of the GC/works and the FIDIC and Irish government suite of contracts.

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owner”21, “the client”22, “the authority”23, “the purchaser”24, or “the principal”25. The party agreeing to pay for the contract works is not always the party intending to use the works and it may not even be the freeholder of the land upon which the works are to be carried out. It may not provide the finance from its own resources and may not even be a single body26. Joint ventures (in which the financiers can be both the contractor and designer), can blur the distinctions even further. The one thing that they all have in common is the desire to carry out some form of operational development of land. The term “operational development” is one familiar to those who carry out development for which permission is required under the Town and Country Planning Acts in England and Wales. This party (the party required to pay for the works) will be referred to as “the developer” and will be identified by the letter “D”27.

The contract administrator 1–023 The term given to the person responsible under the contract for determining and certifying what delay may be excused, or what loss, or expense, suffered is to be compensated, varies extensively. Depending upon the form of contract, the person may be referred to by such terms as “employer’s agent”28, “employer’s representative”29, “contract administrator”30, “contract manager”31, “project manager”32, “supervising officer”33,“superintendent”34, “superintending officer”35, or be specified as a particular professional, such as an architect36, or engineer37. It is often the case that, in contracts undertaken by local authorities, government departments and statutory bodies, the contract administrator is one of D’s employees38. Other authors have overcome this by listing the alternative description given in the particular contract forms. In this book, however, this person is called the “contract administrator”, under the acronym “CA”.

21 AIA forms. 22 PPC2000. 23 The pre-1998 versions of the UK government contracts. 24 CE06, IChemE, and MF/1. 25 AS2124, AS4000 and C21/03 and C21/09. 26 For example, in Alfred McAlpine Construction Ltd v Panatown Ltd (1998) 88 BLR 67 (CA), in order to avoid VAT on the construction cost, a company called Panatown Ltd had been nominated as the “employer” under the WCD81, who were neither the owners of the site nor the landlords of the offices and car park, the subject of the development. 27 It is no accident that the letters, which I have chosen as “C” and “D” to represent the “contractor” and “developer”, are also commonly used in litigation and arbitration to identify the “claimant”, and “defendant”. 28 WCD81, WCD98, DB05 and FIDIC/DB95. 29 Irish government suite of contracts. 30 The JCT minor works and intermediate forms. 31 IChemE. 32 GC/Works forms. 33 JCT80, JCT98 and JCT05, Local Authorities edition. 34 Australian standard forms. 35 SGC99. 36 JCT80, JCT98, JCT05, ACA82, ACA98 and, in the alternative, in the JCT minor works and intermediate forms. 37 ICE7, ICE/MW, MF/1 and the FIDIC suite of contracts. 38 Balfour Beatty Civil Engineering Ltd v Docklands Light Railway Ltd (1996) 78 BLR 42. See also the 2007 edn of the Irish government standard forms of contract. In these forms, the architect, engineer, or quantity surveyor is not required to act independently but is specified to be D’s representative and, for some purposes, with restricted powers.

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The works 1–024 The subject-matter of all the standard forms of construction contract is referred to as “the works”. This is one of the few consistencies between the contract forms. The works are the subject of the construction contract, the completion of which is the responsibility of C and which results in the building, or engineering, project, or the execution of that part of the construction project. The contract agreement may be for the construction only, or for the assembly of a building, or part of a building, or it may be a civil engineering project in, over, or under ground, which is designed by others, or it could also entail an element of design on C’s part. The contract agreement may require C to manage the execution of work by others, or to design and construct it, in “turnkey” projects, to equip it and, in PFI contracts, to finance and manage the end product as well. In all cases, the construction work on site is referred to herein as “the works”.

Programme and schedule 1–025 In US contracts and those based upon US contracts, the timing of the works is set out on what is referred to as a “schedule” and, in US government contracts, it is always required to be a critical path network. The Project Management Institute, AACE and the PMI College of Scheduling all refer to the manifestation of the timing of the works as a “schedule”. By contrast, if anything has been required to record the proposed timing of the works in UK contracts and those based upon the UK model, it has generally been referred to as a “programme”: none of those forms (other than C21/0939, the CPC and the MPF) currently explicitly require a critical path network and the forms usually assume a paper copy of a chart, which is usually not expected to be revised, or updated40. Both the SCL Protocol and the CIOB Guide acknowledge that, unless updated regularly, the actual timing of the works will vary from the planned, with the result that the works then become out of control. Further, the CIOB Guide observes that, on complex projects, it is impossible to lay out the timing of the works at initiation and render the proposed timing meaningful, unless it is constantly reviewed and revised against better information, as the project proceeds, a process not envisaged by any of the UK, or Commonwealth-based standard forms. 1–026 The CIOB Guide adopts the term “schedule” to describe the tool for managing time and advises in its Core Principles41: “The word ‘programme’, often used in the past to describe a printed paper copy of a listed process, and dates on which the proposed activities might be carried out, is not used in connection with the management of time in complex projects. The word ‘schedule’ is used to describe the computerised calculated activity dates and logic, the process is to be referred to as scheduling and the occupation that of the scheduler. It is a process manifest in an editable computer file.”

39 This uses the term “program” to describe a CPM network. 40 C21/09 requires the programme to be a CPM network, properly updated and impacted by events, and also provides the power for the CA to require it to be produced electronically. Unfortunately, there appears to be no obvious redress if, contrary to those requirements, a competent CPM programme is not so provided. 41 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), at Core Principles 4 and 5.

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1–027 Nevertheless, unless the context requires otherwise, in preference to “schedule”, the word “programme” has been used herein to refer to the manifest proposed timing of the works.

Critical path 1–028 The “critical path” always relates to the completion of a sequence of work. Whilst in simple projects comprising few activities, engineering logic and hence a possible critical path may be inferred, resource logic can never be inferred reliably, simply because there are so many possibilities. In complex projects, it is unlikely that a critical path can be identified inductively, that is, by assertion; it can then only reliably be deduced from the mathematical sum of the durations of the activities indicated upon C’s programme to be completed in sequence before the completion date can be achieved. There have been many varied attempts to define the “critical path”. For example, the British Standards Institute describes it as: “the sequence of activities through a project network from start to finish, the sum of whose durations determines the overall project duration”.

Some prefer to think of the critical path as that with zero float; however, that will be true only if the network is unconstrained, but the longest path from commencement to project completion will always be critical to completion, irrespective of the constraints in the schedule. Irrespective of the algorithm used, the practice of calculating a critical path from a construction project is widely termed the “critical path method” and, in this book and elsewhere, is abbreviated as “CPM”. As with many other terms to consider in relation to delay and disruption, the critical path cannot have an existence independent of the programme to which it is related. Because every critical path is an unbroken linked sequence of activities to the completion date to which it is referable, any delay to progress on any activity within the path will inevitably cause delay to the completion of that path, unless the path is subsequently changed before completion is achieved. 1–029 In City Inn v Shepherd42, whilst accepting that “The critical path of a construction contract is a sequence of activities through the project from start to finish, the sum of whose durations determines the overall duration of the project”, Lord Drummond Young then produced a somewhat unusual and, perhaps, unhelpful interpretation of that definition by equating any work that was required to achieve practical completion as being on the critical path to completion43. On the other hand, in quoting extensively from the third edition of this book, in Mirant v Ove Arup44, the late HH Judge Toulmin CMG QC observed: “The term ‘critical path’ was used frequently in the course of the hearings by programming experts and non-experts alike. I was concerned to have a precise definition of what it and associated terms meant and after the hearing the parties provided me with an agreed reading list45.

42 City Inn Ltd v Shepherd Construction Ltd [2007] Scot CS CSOH 190, [2008] BLR 269, (2008) 24 Const LJ 590. 43 City Inn Ltd (2008) 24 Const LJ 590 at [33], [95] and [98]. In the Inner House, Lord Calloway thought that it was not possible to determine criticality without a critical path analysis of some sort, see City Inn Ltd v Shepherd Construction Ltd [2010] CSIH 68 at [109]. 44 Mirant Asia-Pacific Construction (Hong Kong) Ltd v Ove Arup & Partners International Ltd [2007] EWHC 918 (TCC). 45 Mirant Asia-Pacific Construction (Hong Kong) Ltd [2007] EWHC 918 (TCC) at [104].

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The Critical Path Method requires detailed and sophisticated analysis and in complex projects it is unlikely that a critical path can be identified inductively, ie by assertion. ‘It can only reliably be deduced from the mathematical sum of the durations on [C’s schedule] to be completed in sequence before the completion date can be achieved’46. This is an important cautionary word in this case where a number of witnesses were convinced, without the benefit of any such analysis, that they knew where the critical path lay47. It is important to have in mind that there may be more than one critical path. The Society of Construction Law Delay and Disruption Protocol (page 54) confirms: ‘There may be more than one critical path depending on workflow logic of delay to the progress of any activity in the critical path which, without acceleration or re-sequencing, may cause the overall Project to be extended’48. I accept, that the critical path analysis is a tool or technique to assist in the management of construction projects and not an end in itself. Indeed [C] makes the same point in its final submissions49. It is also used as a tool for analysing, as at the given date, what has caused any delay that has occurred and what is the extent of that delay”50.

Delay 1–030 To paraphrase HH Judge Hicks QC51, “delay” tends to be bandied about as if it were a term of art with a precise technical meaning, but there is nothing to demonstrate that this is the case. First, of course, the word can be used as a verb meaning to make something happen at a time later than planned, or expected, as in “the delivery was delayed by a week”, or to cause someone, or something to be slow, or late, as in “the work will be delayed by the subcontractor”, or it can be used to mean that there was a failure to act immediately, as in “if you delay now, the work will not finish on time”. Secondly, the word can be used as a noun, as in “there will be a delay to the completion of the contract”, or “there has been a delay in the roofing”. It can also be used as an adjective, as in “most delayed contracts are the result of the absence of competent management of change”, or “the works are in delay”. 1–031 By way of example (and notwithstanding that nearly every reader will say in relation to one or more, of these examples: “oh, that is not delay!”), it is the common experience of those in the construction and engineering industries that the word “delay” is from time to time used to mean at least 23 different things: 1.

an impact upon: a. the date upon which C plans to complete where that is earlier, or later than the contract completion date; b. the date C agreed to complete; and c. the contract completion date, as extended;

2.

a critical shift in timing of: a. the start, or finish, of a discrete activity; and b. the start, or finish, of a resource;

46 47 48 49 50 51 p.136

A quotation taken from the 3rd edn of this book. See 3rd edn at [107] See 3rd edn at [108]. See 3rd edn at [110]. See 3rd edn at [115]. Ascon Contracting Ltd v Alfred McAlpine Construction Isle of Man Ltd (1999) 66 Con LR 119, at concerning the meaning of acceleration.

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3.

a non-critical shift in timing of: a. the start, or finish, of a discrete activity; and b. the start, or finish, of a resource;

4.

an increase in the duration of: a. a discrete critical activity, or series of critical activities; and b. a discrete non-critical activity, or series of non-critical activities;

5.

the a. b. c.

addition of: quantities; resources; and activities;

6.

the a. b. c. d.

duration of: additional work; additional work as executed on site; additional work off site; and a suspension of work;

7.

the occurrence of: a. an event at the risk of D under the contract; and b. an event at the risk of C under the contract;

8.

the a. b. c. d.

9.

the absorption of more resources for a given activity, or series of activities, than was intended.

cause of: a shift in timing of a discrete activity; an increase in duration; an increase in resources; an increase in quantities; or

Many disputes emanate from this imprecision, which extends to the standard forms of contract and to the judgments of many tribunals. Many standard forms of contract fail to define “delay”, so that, whatever it is for which an extension of time, or compensation, may be awarded, must be inferred from the phraseology employed. 1–032 It is therefore apparent that “delay” has no intrinsic quality. That is to say, it does not have an existence in its own right; it is a comparative term and, in order to gauge what is meant by it, it must be related to something else. For a given work content, “delay” is really no more than the difference between an intention and reality as to the timing of the work where the reality is in derogation from the intent. In construction and civil engineering contracts, the intention is generally manifested either in a completion date that is contractually binding, or in C’s planned programme for the work. 1–033 In order to minimise the difficulties of interpretation, in this book, the word “delay” will not be used to mean a causal event, nor will it be used as a noun in isolation, except where, in the sense in which it is used, it refers to all types of delay. For precision, it will be expressed as: “Delay to completion of the works by the completion date”: An adverse effect upon completion by the date by which C is contractually obliged to complete the works, or any contractually defined section of the works, whether as a result of the agreement, or as a result of extensions of time granted.

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“Delay to completion of the works by the date for completion”: An adverse effect on completion the date by which, from time to time, C intends to complete the works, or any contractually defined section of the works. “Delay to progress of the works”: An adverse effect on the date by which, from time to time, C intends to start and/or to finish any identifiable activity, sequence, or resource.

Disruption 1–034 Dictionaries will provide the meaning of “disruption” as a prevention, or hindrance, to something intended, expected, or proceeding, an interruption in continuity, dislocation, discontinuity, or disorder. As with the word delay, disruption is also a comparative term and has no intrinsic meaning. In order to give it effect, it must therefore be related to something else. In construction and engineering contracts, for a given work content, disruption is the difference between an intention and reality as to productivity, or achievement, where the reality is in derogation from the intent. Disruption is not delay. Although disruption may cause delay and it may be caused by delay, delay is not a precondition of disruption and, indeed, disruption may be caused when the progress of the works previously delayed is recovered, or accelerated. Disruption is the term used to signify the condition precedent to a reduction in productivity, which results in an increase of cost for a given quantity of work.

Illustration Facts: Dynalectric (D) sent notices as the work proceeded and sought to negotiate a resolution to its equitable adjustment claim on a performing arts centre in Kentucky. Whittenberg (W) never rejected any of the notices and even attempted to negotiate a settlement to the claim, although it offered to pay less than the $682,480 sought by D. D refused that offer and submitted the equitable adjustment claim for $682,480 to court. D argued that it was entitled to recover additional costs, which it incurred because of the cardinal change it had suffered as subcontractor and argued that a cardinal change had occurred when the project work areas became seriously congested with numerous sub-contractors and W failed adequately to manage the conflicting schedules and ensuing delay and disruption. Held: that a cardinal change only occurs if an alteration in the work effectively requires the subcontractor to perform duties materially different from those foreseeable in the subcontract. The existence of a cardinal change would mean that the prime contractor breached the subcontract. The fact that the site became crowded with contractors was insufficient to prove a cardinal change. The court rejected the cardinal change claim, because the electrical installation was still in essence the same work as that which had been originally bargained for when the subcontract was awarded. The court therefore granted summary judgment in favour of the prime contractor: Dynalectric Co v Whittenberg Construction Co.52

52 US Dist LEXIS 110136 (WD Ky 2010).

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CHAPTER 2

The risk of development

Introduction Standard form provisions Allocation of risk Project planning and programming risk Legal risk Dispute risk Design risk Buildability risk Biddability risk Construction risk Financial risk Political risk Insurable risk Consumer Insurance (Disclosure and Representations) Act 2012 Tortious and statutory duties Introduction The importance of the statutory framework Private nuisance Utilities and statutory undertakers Building control Development control

2–001 2–018 2–038 2–051 2–064 2–086 2–095 2–109 2–113 2–125 2–142 2–148 2–150 2–163 2–165 2–165 2–181 2–183 2–185 2–189 2–193

Introduction “No construction project is free of risk. Risk can be managed, minimised, shared, transferred or accepted. It cannot be ignored.”1

2–001 Construction is a risky business. Research carried out in 2002 by the then Department of Trade and Industry2 showed that 58% of all construction projects were late in completion and 50% were over budget. In 2005, it was reported that time 1 Sir M Latham, Constructing the Team (London: HMSO, 1994), Final Report of the Government/ Industry Review of Procurement and Contractual Arrangements in the Construction Industry, at para.3.7. 2 Department of Trade and Industry, Construction Industry KPIs – Industry Progress Report, 2002.

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predictability had worsened over the previous 12 months, with the proportion of government agency projects delivered on time, or better falling from 49% to 44%3. In 2007, it was conservatively estimated that, since the first wave of PFI schemes began in 1994, £100m had been lost to overruns on 40 major PFI hospital projects alone4. Research, carried out under the Constructing Excellence initiative5, revealed that fewer than half of respondents (48%) believed that the projects they work on had been completed on time, or to budget. These statistics are discomforting. 2–002 Recent research carried out by the Chartered Institute of Building6 has shown that the more complex the project, the less likely it is to be completed on time. [Please refer to Figure 2.1] 2–003 The respondents to the CIOB questionnaire reported that, in their experience of over 2,000 projects, low-rise offices, commercial, industrial, and educational buildings, housing, shops and shopping malls, have a reasonable chance of being completed on, or before, the completion date, without recourse to modern, scientific methods and using only a traditional intuitive approach to time management. 2–004 On the other hand, it was also the respondents’ experience that hospital, clinic and health-related buildings, prisons and security, stadia, sports-related, railway and high-rise projects have a poor chance of being completed on time and that a high proportion of complex projects was likely to be completed more than six months late, when managed without the benefit of scientific methods of project control. 2–005 High-rise building projects necessarily have more complex services, security, vertical circulation systems and construction logistics, requiring a high standard of pre-planning and project control if success is to be achieved. The CIOB report found that performance of these projects was not good; only one-third were completed on, or before, the completion date and 18% completed more than six months late. The report also found that, when taken in the round, engineering projects tended to fare less well than building projects. A little over half of those engineering projects reported upon were completed on, or before, the completion date and 18% were more than six months late in completion. 2–006 As a result of the CIOB research, it has become apparent that time management in the construction industry in the United Kingdom has now reached a comparable level of advance to that which quantity surveying had reached in respect of cost management at the turn of the twentieth century, just over 100 years ago7. There are currently no accepted standards to work to; no formal educational schedule for those who set out to do it; no formal training for those doing it; and no accreditation, or qualifications, to demonstrate competence. 2–007 At the root of the industry’s difficulties is the fact that project planning and scheduling are currently carried out by those whose primary profession (if any) is another discipline: they may have come from an industry trade, be construction managers, project

3 Constructing Excellence, “Report on Key Performance Indicators” (2005) Building magazine, 7 June. 4 Confederation of British Industry Building on Success; the Way Forward for PFI (June 2007). See also Ch.3 – “Project Procurement” at paras 3–056 to 3–072. 5 Constructing Excellence, Never Waste a Good Crisis (2009), at p.9. 6 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008). 7 K Pickavance, Time for Change: Time Management in Construction projects, Practical Aspects of the CIOB Reforms, Herbert Smith Construction Conference, London, 29 September 2009. See also K Pickavance, Managing the Risk of Delayed Completion in the 21st Century: The CIOB Research (Society of Construction Law, 2009).

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managers, architects, engineers (of one form or another), quantity surveyors, or just an employee with an understanding of how the software works, but without professional education, or training at all in the management of time. 2–008 The experience of those involved with delayed construction projects is that the quality of performance of project planners and schedulers is patchy. Notwithstanding the absence of formal education training and qualifications, some to whom the task of time management is allocated are extremely talented and experienced. On the other hand, some are not. However, without a standard against which to work and some form of accreditation, it is apparent that the industry is at a loss to follow the recommendations of the SCL Protocol 8 and maintain a high quality of performance in time management, or to avoid the pitfalls and inevitable consequences of poor time management. The absence of any standards, education and training in time management perhaps goes some way in explaining why the trend over the last 20 years or so, of transferring more and more risk to C, has not resulted in a higher success rate in securing completion on time. 2–009 Whilst for many private developers, the bottom line is the primary driving force, for public authorities getting value for money and not frittering it away on the consequences of mismanagement are equally important. Perhaps one of the most spectacular failures to keep to time of recent years has been Holyrood, the Scottish Parliament building, which completed some three years late and in relation to which, in his report9 Lord Fraser of Carmyllie QC said: “It is difficult to be precise but something in the region of £150m has been wasted in the cost of prolongation flowing from design delays, over-optimistic scheduling and uncertain authority.”

As Mead observes10, the fallout from such disasters can have far-reaching consequences, way beyond the interests of the immediate parties to the contract, including: “political and social impacts extending from public hostility to future projects right through to the burden placed upon judicial resources, as a result of the inevitable disputation that can arise as a result of risks and projects spiralling out of control”.

2–010 Risk of delay to the completion of construction works may stem from six primary sources. First, there are those for which C, its subcontractors and suppliers are responsible. These normally include such risks as a failure to obtain the necessary resources, breakdown of plant and absenteeism, defective workmanship and materials, but perhaps the most insidious of C’s risks, is one that is rarely discussed, namely the risk of a failure properly to plan, programme and control the works. 2–011 There are five other sources of risk, responsibility for the effects of which D is commonly required to take, namely: 1. 2. 3. 4. 5.

variations voluntarily instructed; variations impliedly instructed; the acts, or omissions, of third parties; other interferences, which cannot be foreseen by C, or D; and D’s own acts of impediment, or prevention.

8 Society of Construction Law, Delay and Disruption Protocol (2002). 9 The Rt Hon Lord Fraser of Carmyllie QC, The Holyrood Enquiry (2004). 10 P Mead, “Current trends in risk allocation in construction projects and their implications for industry participants” (2006) 22 BCL 407; (2007) 23 Const LJ 23.

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2–012 From D’s point of view11, there are three broad variables in the success of any construction project which can be influenced by these categories of risk: 1. 2. 3.

cost; time; and quality.

2–013 The American Society of Civil Engineers has summarised the principles of how the risk of the effect of these variables should be allocated as follows12: “(a) (b) (c)

a risk should be assigned to the party best able to evaluate, control, manage, bear and reduce the cost of, and benefit from the assumption of that risk; many risks are best shared; and every risk has an associated and unavoidable cost which must be assumed somewhere in the process”.

Similarly, in the United Kingdom, Professor Max Abrahamson has summarised these principles as13: “A party to a contract should bear a risk where: 1. 2. 3. 4. 5.

The risk is within that party’s control; The party can transfer the risk (eg by insurance), and it is most economically beneficial to deal with the risk in this fashion; The preponderant economic benefit of controlling the risk lies with the party in question; To place the risk upon the party in question is in the interests of efficiency; If the risk eventuates, the loss falls on that party in the first instance and it is not practicable, or there is no reason under the above principles, to cause expense and uncertainty by attempting to transfer the loss to another.”

2–014 For the last 50 years, at least, it has been apparent that, if time is not managed effectively, cost never can be14. Notwithstanding, identifying risk, the allocation thereof and managing it by cost allowance alone appears to be the approach still taken in many complex projects involving multiple developers. The institutions concerned are identified as requiring advice on the following issues15: cost; design; environment; facilities management; financial; insurance; legal; 11 If the viewpoint of other “stakeholders” in the construction industry is considered, other variables, such as safety and environmental factors, also come into play. 12 RJ Smith, “Risk identification and allocation: saving money by improving contracts and contracting practices” [1995] 40 ICLR 40. 13 P Megens, “Construction risk and project finance – risk allocation as viewed by contractors and financiers” [1997] ICLR 4. 14 For a short historical perspective on the various attempts to manage time over the last 150 years, see K Pickavance, Managing the Risk of Delayed Completion in the 21st Century: The CIOB Research (Society of Construction Law, 2009). 15 See A Akintoye and C Hardcastle, et al, “Achieving best value in private finance initiative project procurement” (2003) 21(5) Construction Management and Economics p.461 referred to in P Mead, “Current trends in risk allocation in construction projects and their implications for industry stakeholders” (2006) 22 BCL 407; (2007) 23 Const LJ 23 at 25–26.

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supply chain; surveying; tax; technical; town planning; traffic.

In light of the industry’s continuing problems in managing time and the risk of delayed completion, it is perhaps of some significance that no mention appears on this list of a project controller and time manager, without whom time is not readily manageable, except on the simplest of projects. 2–015 Allocating the risk is one thing, but managing the risk that has been allocated is another matter entirely; Mead refers to the results of an Australian survey conducted by Engineers Australia and the Chamber of Commerce and Industry of Western Australia, who concluded that, in practice, the generally accepted principles of risk management are not being followed by the construction industry16. He observes that the survey concluded that: risks were not allocated to the party best able to manage the risk; formal risk assessments were not undertaken; risk clauses varied from those in standard contracts; risks were transferred to consultants and contractors, which were impossible for them to manage; risks were not costed in tenders; cost savings would have occurred had risks been more effectively allocated; the implications of changing risk allocation were not known; and disputes and claims increased as a consequence of changes to risk allocation.

It is often thought that one of the principal aspects of risk management in construction is the appropriateness, or otherwise, of the choice of construction contract, but the CIOB research indicated that the choice of contract has no material influence on the likelihood of completion on time17. In terms of timely completion, all that different procurement routes might achieve is a change in the allocation of liability for failure. 2–016 For risk of delay to be managed, it must first be identified. Once identified, a risk is not so much a risk as a management problem. This is because the likelihood of its occurrence and the consequences of that occurrence can then be assessed and steps taken to minimise its impact, or to accommodate it. The magnitude of the effects of the risk can then be assessed. Such an assessment is based upon the premise that experience of the past can be extrapolated into the future and that it will remain the same, unless something happens to change it, when the risk must be reassessed. Thus, there are five stages to the process of managing the risk of delayed completion: 1. 2. 3. 4. 5.

identifying the risk; considering how the possibility of the occurrence of the risk might be reduced; assuming that the risk matures, suggesting possible action to reduce the consequential effects of the risk; posing what the future will be like without action; and posing any effects mitigatory action might have.

16 P Mead, “Current trends in risk allocation in construction projects and their implications for industry stakeholders” (2006) 22 BCL 407; (2007) 23 Const LJ 23 at 24. 17 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008).

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2–017 Risks can be categorised in several different ways and academics have identified as many as 100 different types. However, for the purposes of discussing the risk of delay to completion and cost enhancement to construction contracts, those risks considered here will be: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

project planning and programming; legal; dispute; design; buildability; biddability; construction; financial; political; and insured.

Each of these will be dealt with in turn.

Standard form provisions “The type of contract or procurement route selected from those currently available will have no effect on the incidence of delay to completion, simply because current standard forms of contract do not encourage and, in some cases, even inhibit effective management of time. All that current standard forms of contracts do is set a standard of performance and allocate liability for failure; they do not produce success.”18

2–018 The specification, the type of project and the intended relationship between the parties should influence the choice of contract19, but perhaps the most important aspect of procurement is the degree to which time can be effectively managed under the chosen form of construction contract. 2–019 A Survey of Building Contracts in Use20 carried out by the RICS in 2001 showed that, by the end of that year, the JCT family of standard forms of contract accounted for over 90% by number and 79% by value of works being let on the standard forms. Of those, JCT98 accounted for 24% of contracts let by value. The remainder of the JCT forms, that is PCC92, MWA80, IFC84, WCD81, MC87 and so on, accounted for 25% by value. By value in the sample, GC/Works forms accounted for 1.3%, the ICE forms 0.6% and the ECC2 form 0.7%. The partnering form (PPC2000) accounted for 1.2% and MF/1 and IChemE were used on just eight occasions. 2–020 In 2006, the RICS published another survey21, reporting that, by 2004, 92% of building projects used a standard form of contract, down from 95% in 2001. 78% of all contracts employed one of the JCT standard forms, down from 91% in 2001; GC/Works and ICE7 both accounted for 1% each, ECC2 was used by 7%; PPC2000 was used by 2% and other standard forms accounted for 3%.

18 K Pickavance, Managing the Risk of Delayed Completion in the 21st Century: The CIOB Research (Society of Construction Law, 2009). 19 P Capper, “Overview of Risk in Construction” in J Uff, QC and M Odams (eds), Risk Management and Procurement in Construction (Centre of Construction Law and Management, King’s College, London, 1995). 20 A Survey of Building Contracts in Use during 2001 (Royal Institute of Chartered Surveyors, 2002). 21 A Survey of Building Contracts in Use during 2004 (Royal Institute of Chartered Surveyors, 2006).

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2–021 However, in light of the prolific standard forms of contract published by the various bodies concerned with the building and engineering industries, the CIOB research (carried out in 2007) revealed that a surprisingly large proportion (18% of all projects) were being constructed under a bespoke contract form22. Only 25% were being constructed under a standard form of lump-sum contract. Partnering contracts accounted for 11% of projects underway, but by far the greatest percentage of projects, 31%, was being constructed using a standard form of design and build contract. The research results showed no correlation between the types of procurement route taken and the incidence of delayed completion. 2–022 The standard forms of contract are generally drawn up by a committee of representatives from most of the typical interested parties, developers, contractors, specialist contractors and licensing authorities all being represented23. Those forms cover most of the risks in construction and they represent a compromise. Many commentators, however, consider that they favour one party, or the other, too much in their allocation of liability. 2–023 Notwithstanding that the majority of those who encounter the standard forms of contract will be without any specialist legal knowledge, the contract form is the first reference by which risk is assessed and, in the event of a dispute, the first source of reference for an analysis of the respective powers and duties of the parties. For this reason, any commentary on the standard forms must, to an extent, deal with the interpretation of the contract. 2–024 A construction contract is a trade-off between C’s price for undertaking the work and its willingness to accept risk. The purpose of the contract form is thus to delineate, with some sophistication, the powers and duties of the parties, thereby apportioning risk in a way considered acceptable in the industry24. A contractor carrying risk should expect to see that reflected by an increase in the contract price, whilst a developer who carries a risk should thus expect to have to pay less for the project. However, experience tends to show that contracts that appear to transfer risks to the contractor without proper consideration as to whether C is the best-placed party to bear them are often ineffective and sometimes even deceptive. 2–025 The fact that so many important public and private projects, both domestically and internationally, have consistently run late and significantly over budget demonstrates that ill-considered risk transference simply does not work. It fails to achieve its objective because under no form of commercially viable contract can the risk of change be borne by C when D is the only one empowered to make that change. Moreover, delay, disruption and overspend are inevitable when all the risk of change, whether express or implied, is borne by D, but the only party given the tools to manage that risk25 is C, which is also promised that it will receive more time26 and more money27 when

22 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008). 23 On the other hand, most subcontracts, apart from the FCEC subcontract (“the blue form”), are drafted without the benefit of consultation with representative bodies. 24 For a listing of those risks often borne by D under the standard forms, see Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), at App.1. 25 The programme and method statement, the records of progress achieved and the availability and productivity of resources. 26 Via the contract provisions for extensions of time. 27 Via the contract provisions for compensation for loss and/or expense.

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those risks are not managed. Despite this approach being illogical, it is the approach that governs the administrative framework contained in all the current standard forms of construction and engineering contracts. 2–026 The first essential characteristic of a standard form should be that it is drafted with clarity, so that it is possible easily to ascertain from the wording precisely where the risk falls. However, this is a standard which has not yet been met by any of the standard forms of contract, discussed here, other than the 2009 edition of the Irish government standard forms and the CPC. 2–027 The absence from most of the standard forms of contract of any clear and unambiguous mechanism for calculating C’s entitlement to compensation and time is one of the major sources of risk for D28. Take, for example, ICE7. This form leaves the noun “delay” open to at least two different interpretations in sub-clauses of the same clause. Clause 44(1) requires that C must notify the CA within 28 days of the date upon which the delay has arisen. Now “the delay (that) has arisen” must be a delay to progress (of one variety, or another), since otherwise it would have to be a delay to the completion date and that could not have occurred until after the completion date had passed, would be patently obvious and would not require any notice. Clause 44(3), however, goes on to say that, provided the CA is satisfied that “the delay suffered fairly entitles [C] to an extension of time”, the CA is to grant an extension of time. An extension of time is for the relief of liquidated and ascertained damages, which are not recoverable for a delay to progress; they are only recoverable if there is a delay to a certain, specified, completion date. The second “delay” must therefore mean a delay to the completion date, and that cannot have been “suffered” (in the past tense) until after that completion date29 has passed. It follows that, notwithstanding that they are given the same name, in this form, the “delay” for which an extension of time must be granted cannot be the same “delay” in respect of which notice must be given. 2–028 Unfortunately, this sort of problem is not unique in construction and civil engineering contracts and it is, perhaps, not surprising that the parties have difficulty identifying their rights and liabilities arising out of delay. Indeed, many CAs think it perfectly proper to receive applications for and to grant extensions of time under this form for periods of time entirely unrelated to the contract completion date. 2–029 Similar interpretational problems are provided by the new Hong Kong standard form of building contract, HK05, in which the word “delay” is not defined, but it is apparent from the phraseology used in Cl.25 that the word is probably used to mean at least three things: 1. 2. 3.

an event at D’s risk as to time and/or cost; a delay to progress of the works; and a delay to the completion of the works.

Under this contract form, C is required to provide final “particulars of the cause and effect and length of the ‘delay’ to the works or a section beyond the completion date”30 and those particulars are to be provided “within 14 days after the ‘delay’ ceasing”31. 28 PM Lane, “Disruption and delay: fair entitlement and the regulation of risk” (2006) 22 Const LJ 92. 29 The completion date in this sense must be the date after which liquidated and ascertained damages may be deducted, ie the contract completion date or the completion date as extended by an extension of time granted. 30 Cl.25.2(3)(c). 31 Cl.25.2(3)(c).

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The “delay” to the works is obviously a delay to the completion date and the “delay” that ceased must be a delay to progress. Again, one of D’s time risk events is described as “‘delay’ caused by a ‘delay’ on the part of a nominated subcontractor”32. It seems that the “‘delay’ on the part of a nominated subcontractor” is probably a delay to the completion of the subcontract, but it is not necessarily so. 2–030 It is a common misconception amongst developers that, irrespective of the form of contract chosen, once the lowest tender has been accepted, the contract has been signed between C and D and work has commenced on site, most, if not all, of the risk of failure will rest with C33. Unrealistic expectations of the standard forms of contract, the failure to appreciate the strength of a claim because of a difference in appreciation of the facts, the law and the illusion of certainty are all common sources of dispute34. 2–031 Managing the risk of change is a serious business. When people start thinking about construction, they are almost always thinking in at least six figures and sometimes in tens, hundreds or thousands of millions of pounds. They will also usually be thinking of using what they intend to construct for a specific purpose and, sometimes, that means other time-based commitments and, often, an anticipated financial return which must be achieved in order to justify the expenditure35. 2–032 When a simple contract is entered into, for example to build, at a price, and within a particular period of time, the contract period is fixed by the contract terms and the risk of failing to complete on time is assumed by C. Thus, if C is delayed for any reason whatsoever, other than through D’s default, C must, in theory, compensate D for any loss it may suffer as a result of its not having completed on time. On the other hand, the standard forms of contract have provisions for excusing C from many risks affecting completion time and placing those risks on D36. In most standard forms of contract, apart from voluntary design changes, D will typically also be required to take the risk of: implied variations arising out of express, or implied, instructions; a number of other interferences, including those arising out of the acts, or omissions of D, the CA, or of third parties; and delay to the completion of the works beyond the date arising out of the effects of a number of events, over which neither D nor C can reasonably have any control. Unusually, amongst standard forms, the Irish government standard forms of public works contract37 provide a device for rendering some of the standard form risks job-specific by listing the apportionment of risk of time, or both time and cost. 2–033 Risk registers fulfil the useful purpose of cataloguing the pitfalls that may be encountered in the future. However, it is readily apparent that, no matter how many risk registers are set up and no matter how many times they are reviewed and revised, it is not possible to predict, for example: what plant will break down, or when; whether

32 Cl.25.1(3)(m). 33 In contradiction of that common perception, see Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), at App.1, where the common time-related risks which can be borne by D under the standard forms of contract are listed. 34 I Ndekugri, “Computer-aided resolution of construction contract claims and disputes” (1996) Arbitration Journal 62.1, 57. 35 For further discussion as to how contractors and developers allocate and manage risk, see Ch.10, “Project Control”. 36 See Ch.4, “Standard form provisions for time and cost”. 37 See, for example, IGBW/09.

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D will change its mind about what it wants, or when; what drawings the architect will revise, or when; or when the weather will turn nasty. Moreover, it is not possible to predict what activities will be affected by such events, nor how they will be affected. Most of the standard forms provide that C is to notify D if a delay to progress occurs as a result of one of D’s risks, but, in terms of risk management, it is of little use to D to be told that one of those events has adversely affected progress when it is too late to do anything about it or, even if there is an opportunity, in the absence of the power to do anything to manage the risk of the likely delay to the completion of the works, which will otherwise follow. 2–034 If D is to be able to manage those risks, it needs always to know what C intends to do, in what sequence C intends to achieve its aim, when it intends to execute particular activities, what resources it intends to use and how C’s progress matches its intent. D also needs to know what other permutations are possible and the cost and time implications of any change to C’s intent, but D has no enforceable right to any of that information under any of the current standard forms, same for the CPC. 2–035 One of the many difficulties with the currently available standard form contracts is that there is no commonality between the forms as to the distribution of risk and each must be considered individually. Indeed, there is not even any commonality between the forms as to the way the distribution of risk is set down in the forms. In the Irish government standard forms, the opportunity has been taken to follow the recommendations of the CMS38 and list all the risks individually, in a separate schedule. In JCT98 and WCD98, D’s time risk events are listed in Cl.25.4, with cross-references to the specific clauses in which the risks are described. A similar structure is contained in HK86 and in HK0539. By contrast, the engineering forms tend to refer enigmatically to “any cause of delay referred to in these conditions”40, and the AIA forms, whilst referring to causes of delay at various clauses of the contract, do not cross-reference these to the extension of time clause at all, leaving the reader to familiarise itself with the document as best it can41. 2–036 Another example of inconsistency can be found in “re-measurement” contracts42. Under this method of procurement, payment is made according to the amount of work actually carried out, at rates predetermined by the contract. Thus, for example, if significantly more earth needs to be excavated in a tunnelling contract than was estimated by D, or its advisers, under re-measurement forms, the risk is D’s and it must pay for the additional work. Similarly, under lump-sum contracts based on quantities, a change in the quantities is a variation of the contract and, if based on drawings only, a change in the drawings that changes the quantities will also be a variation. On the other hand, in a contract that fails to provide for a method of adjusting the cost in relation to variations in quantity, C is entitled to be paid the contract price, even if it can be shown that what was accepted as complete did not comprise all the work for which C tendered. In SWI v P&I Data43, the Court of Appeal upheld the decision of the district judge to the effect that, in a contract based upon a tender and drawings,

38 Pickavance Consulting and Fenwick-Elliott, PFE Change Management Supplement (2003) for use with the JCT98, 2002 edn series of standard forms of contract. See Appendix 2 to the 4th edn hereof. 39 Cl.25.1. 40 See, for example, ICE7, Cl.44(1)(c). 41 See A201/97 and A201/07 at Cl.8.3.1. 42 See, for example, GC/Works/1, ICE6, ICE7, PCC92, PCC98, PCC06 and ECC2 and ECC3. 43 SWI Ltd v P&I Data Services Ltd [2007] EWCA Civ 663.

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in which any additional work required had been priced by reference to further tenders and drawings, it amounted to a lump sum contract and not a re-measurement contract. Waller LJ stated44 as follows: “It seems to me that the question whether [D] can seek a reduction in the quoted price comes back to identifying the terms of the contract. If [D] had established that it was expressly agreed that [D] could reduce the contract work and pay less if they did so, they would be entitled to succeed, but they failed to establish that term as an express term. Even if there was an implied term that [D] could request variations and [C] were bound to agree, it cannot be said to be necessary to imply a further term that the price would necessarily be reduced if the contract was substantially the same as the one quoted for.”

Furthermore, under lump-sum contracts based on approximate quantities, a variation in the measured quantities is not normally reimbursable unless the measured quantity is significantly different from the actual quantity45. 2–037 In the absence of a completed design at project commencement, management contracting is sometimes considered to be a viable method of procurement and the Standard Form of Prime Cost Contract46 is perceived by the construction industry to be a natural alternative to a management contract, since it occupies a middle ground between the JCT lump-sum form of contract, eg JCT05, and management contracts like MC08. Whilst PCC92, PCC98 and PCC06 resemble a management contract in form, because they are also prime cost contracts, they differ from a management contract in several respects. For example, in relation to claims by the management contractor against individual works contractors, there is an argument that a management contractor cannot successfully sue a works contractor. The reasoning is that, since the management contractor is itself indemnified by D under the management contract, the management contractor cannot itself suffer any loss, or damage, for which it can establish a claim. This problem does not, of course, apply under PCC92, PCC98 and PCC06 because of C’s performancespecific obligations to D.

Allocation of risk 2–038 There is nothing intrinsically bad in assuming risk. The challenge is in identifying and quantifying the risk assumed and identifying a method of managing it. It is also important to recognise that the transfer of risk to others does not guarantee that it will be managed by them47 and a risk which is transferred under some circumstances, may be retained under others. 2–039 There is usually a large number of parties involved in a building, or civil engineering project, with differing responsibilities: architects, quantity surveyors, civil structural engineers, mechanical and electrical engineers, project managers, main contractors, subcontractors and suppliers. Their different responsibilities inevitably lead to different priorities.

44 SWI Ltd [2007] EWCA Civ 663 at [25] 45 Compare, for example, Cl.51(4) of ICE7 with Cl.25.4.14 of JCT98 and see Ch.12, “Variation and change”, at paras 12–075 to 12–109 and 12–190 to 12–195. 46 PCC06. 47 See, for example, the effect that a GMP contract is thought to have had on the management of risk on the Wembley Stadium project, G Bewsey, “No room for manoeuvre” (May 2006) Construction Manager.

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2–040 It is in the nature of contracting (despite the good intentions of Latham48 and the promotion of partnering through contracts, such as ECC3 and PPC2000) that the contracting parties will have conflicting interests: it is only during the construction period that C can profit from its labours but, for D, the only benefit occurs after construction has been completed and the works put into use and contractors by their nature tend to want to be paid as much as possible for as little risk as possible, whilst developers generally want to pay as little as possible and to transfer as much risk as possible49. 2–041 Within limits, who bears what risk and at what cost is a matter of commercial negotiation and the outcome often depends upon the negotiating strength of the parties. However, even in terms of self-interest, this approach can be overly simplistic. If all the risk is transferred to C50 and it has priced for those risks, then, if those risks do not materialise, D will probably have paid more than was necessary. 2–042 How risks are distributed will depend not only upon the method of procurement, but also the form of agreement under which the works are procured and the duration of the contract under which the risk is assumed. For example, a risk of an adverse economic shift in the demand for property, or materials, may be manageable over three months, but over a period of a few years that risk may be of an entirely different character. 2–043 There are many and varied theories of risk apportionment, some of them contradictory and none of them entirely satisfactory51. Some risks may result from several factors and be controllable by more than one party. Other risks, in particular financial and political, may not be susceptible to control at all. These latter types of risk are often insurable risks. The management of that risk is borne by the insurer, as opposed to C, or D, and the level of risk is reflected in the insurance premium, which may change over time if the risk changes. However, taken together, the following principles of risk apportionment are generally assumed to be efficient and fair in the industry at the moment: 1. 2. 3.

Risks should be allocated to the party best able to control them, ie the party that is best able to forestall the risk, or to minimise its consequential effects, if it materialises52. Risk should not be allocated to a party that is unable to sustain the consequences if the risk does materialise53. Risk allocation should encourage risk management by the party best able to manage the risk. For example, under a management contract, the management contractor should shoulder the risk of delay caused by works contractors54.

48 Sir M Latham, Constructing the Team (London: HMSO, 1994), Final Report of the Government/ Industry Review of Procurement and Contractual Arrangements in the Construction Industry. 49 J Critchlow, Practical Issues in Construction Contracts “Risk Allocation”(London: S J Berwin & Co, 1996). An occasional paper. 50 There is always the possibility of conditions being encountered which neither D nor C could have foreseen, the risk of which is to be borne by C instead of, as traditionally, by D. 51 See for example, DS Jones, “Philosophies of risk allocation – the case for foreseeability” [1996] ICLR 570 and RJ Smith, “Allocation of risk – the case for manageability” [1996] ICLR 549. See also the discussion of the theories of optimal risk allocation at paras 2.3–2.5, above. 52 Whether the draftsmen of the standard forms have produced contracts which allocate risk according to this principle is doubtful. See Ch.10 – “Project control”, generally. 53 On the other hand, risks which have very high financial consequences are frequently insurable. 54 However, whilst this may be sound in theory, it is not reflected in the standard forms. For example, MC87, MC98 and MC08 limit the management contractor’s liability for the failure of works contractors to those costs it is actually able to recover from the works contractors. In other words, if the management contractor cannot recover the costs from the works contractor, D carries the cost.

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4.

The party that does not assume primary responsibility for risk should nevertheless be motivated to manage the consequence of the risk if it materialises55.

2–044 How the risk of contracts is apportioned is usually a product either of the terms of a bespoke contract form written by D and/or of its advisers, or one of the standard building, or civil engineering, forms. The only thing that is certain in this is that, where a standard form is used, the risks of uncertainty will be left almost entirely with D and, where a bespoke form is used, then any ambiguities or inconsistencies in exclusions of liability for the effects of change are likely to be construed contra proferentem56, again leaving liability with D. 2–045 The standard forms of building contract lay down specific rules for distinguishing the risks assigned to the parties. Unless there is also available an action outside the contract, for breach at common law, those risks stated to be in the control of D and those risks only, are risks that carry with them the possibility of C recovering its costs for disruption, or delay57. 2–046 On the other hand, if it were only acts of “prevention” by D that gave rise to relief from damages for delay, the standard forms would deal only with such matters as late possession of the site, late supply of drawings and information, interference by D’s workmen, variations and extras. In distributing the risk, there would then be no need to provide for an extension of time to be granted for neutral events, or those whose effect is sometimes thought to be containable by C, such as weather and strikes or events that go well beyond what most would regard as neutral, in ordinary circumstances58. 2–047 How the risks on a construction project are allocated can be influenced not only by the contract and the parties themselves, but also by judicial interpretations of common law and statute. For instance, there is often scope for uncertainty as to whether it is the materials incorporated into construction works, or the works themselves, that are subject to implied terms of either good quality, or fitness for purpose. This uncertainty persists despite relevant statutory control59 and irrespective of how tightly drawn the technical specification may be. In the United Kingdom, the courts have held that contracts that involve the supply of materials, together with labour and skill, as opposed to goods only, are governed by the common law as it stood before the Sale of Goods Acts60 and therefore the fact that a particular transaction did not fall within the Sale of Goods Acts was of little consequence61.

55 Whilst some of the standard forms of contract proceed on the basis that this can be by sharing the consequence of risk, for example, Cl.25 of JCT98 provides for C to be excused from the risk of bad weather delaying the work, but the costs of that delay are not recoverable from D under Cl.26. Rarely works as a risk-management device, see D Bordoli, “Weather claims in the United Kingdom construction industry” (2010) 26(1) Const LJ 18. 56 The legal doctrine that the interpretation least favourable to the person putting forward the term should be adopted against them. 57 In the latter part of the twentieth century, it became fashionable to exclude an action at common law by an “entire contract” clause. See, for example ECC3, Cl.12.4. and IGBW/09, Cl.10.1.2. 58 Such as C’s inability, for reasons beyond its control, to obtain labour, or materials, in time. 59 See Supply of Goods and Services Act 1982 and Defective Premises Act 1972. 60 In Young and Marten v McManus Childs [1969] 1 AC 454, Lord Reid held that the distinction between a contract for “sale of goods” and a contract for “work and materials” was generally that, where C bought defective materials from a merchant, it would have a remedy under s 14 of the Sale of Goods Act 1893. But, if it was known to D and C when the contract was made that the sole manufacturer of the specified materials was only willing to sell on terms which specifically excluded that liability, it would be unreasonable to put on C a liability for latent defects in those materials. 61 This has now been codified in the Supply of Goods and Services Act 1982.

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2–048 The apparent inconsistency between the obligation of the professional and that of the tradesman is a problem that has exercised both the courts and the draftsmen of construction contracts. Whilst professionals generally owe an obligation of reasonable skill and care and will be liable for a lack of fitness for purpose only if they are negligent, there is a growing tendency in the standard forms to seek to limit the obligation of the contractor who carries out design to that of a professional62. 2–049 In general, professional advisers only accept a duty of “reasonable skill and care”, leaving a residual risk with D63. This is also the case with contractors under the JCT design and build form and under ICE/DC. However, that is not the case with the FIDIC forms, which impose a duty of “fitness for purpose”. In the event that C agrees to accept an absolute responsibility of “fitness for purpose”, the assumption of such a liability, even if it can be insured, can reasonably be expected to result in a higher price being paid and a greater degree of control being required by C over the project than is normally available to it. 2–050 It has also become common for suppliers to exclude liability for fitness for purpose and to limit their liability for goods to be free of defect to an obligation to carry out the replacement of a defective product. Many suppliers include such restrictions in their standard terms of trading. It is not unusual for subcontractors to seek to cap damages, howsoever incurred, both liquidated and unliquidated, in order to attempt to restrict their exposure in a way that is commercially realistic.

Project planning and programming risk 2–051 Effective project planning and programming are at the very root of time control64. There are fundamental aspects of planning that require a conceptual approach similar to designing and it involves making decisions concerning: the overall strategy of how the work process is to be broken down for control; how the control is to be managed; what methods are to be used for design, procurement and construction; the strategy for subcontracting and procurement; the interface between the various participants; the zones of operation and their interface; maximising efficiency of the project strategy with respect to cost and time; and risk and opportunity management.

2–052 The importance of the project programme to time management cannot be over-emphasised. Without a dynamic time model that will react dynamically to change, it is not possible to forecast when work is to be carried out, assess its criticality, the impact upon successor activities, the required resources, identify the likely effect of intervening events, nor to calculate and quantify liability for the consequences of delay to progress. The absence of any enforceable requirement for this compounded by the absence of consistency of approach to the requirements for programming does not encourage time control under any of the standard forms of construction, or civil engineering contract, same for the CPC. Some forms, whilst requiring a programme, give 62 J Uff, QC, “Standard contract terms and the common law” (1993) 9 Const LJ 108. 63 Architects, engineers and quantity surveyors are generally required to carry professional indemnity insurance and are thus restricted by the terms their insurers will accept. 64 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010).

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no definition of its content, nor specification for its integrity and some have no requirement for a programme at all. The requirement, in some forms of contract, for a target schedule to be produced prior to contract, which is not to be changed without the CA’s permission, actually inhibits effective time control. 2–053 By way of example, on the one hand, the requirements for the programme in HK05 appear to be detailed and a significant improvement upon HK86 (which contained no provision for a programme at all); but, on the other hand, the programming provisions are not well thought out, are based upon archaic provisions in earlier UK and Hong Kong forms and are unworkable as a result of the way they are expressed. In this regard, it is worth observing that HK0565 provides that: “where any other part of the contract sets out requirements in respect of the submissions made by [C] under clause 3.1, the submissions shall be made in accordance with those requirements”.

This appears to be a veiled invitation to draft in the contract specification, or bills more detailed functional requirements for the programme, to take priority over Cl.3.1. However, if that was the intention, then it is rather clumsily expressed and, in view of the fact that the conditions of contract are to take priority over anything written in the contract specification or bills66, anything written therein, intended to overcome the inadequacy of this clause, would seem to fall foul of that hierarchy and provide a circularity that can only be overcome by a variation instruction to resolve it67 (and that, in turn, is both a D’s time and cost risk event). 2–054 Similarly, neither the AIA forms nor the JCT family of contracts make any provision at all as to the methodology of linking progress to a programme, or as to monitoring. The Irish government forms contain an eclectic mixture of desirable standards, irrelevance and ambiguity in their programming requirements. Except in the minor works form, which has even simpler requirements, these standard forms require C to provide a detailed programme to the CA before the starting date68. Bearing in mind that the starting date is identified as not more than 20 working days from the date of contract, in order to achieve that, within that period, C would have had to have, for every part of the works: the the the the

detailed design completed, subcontractors appointed, subcontractor’s programmes agreed, and subcontractor’s resources and productivity identified.

Thus, in all but the simplest of build-only projects, to provide anything meaningful would appear to be impossible to achieve. Where it is anticipated that C will complete the design after commencement of the works (as in IGDB/09 and IGCEDB/09), the requirement to programme the works in detail within 20 days of the contract being awarded is difficult to rationalise. 2–055 On the other hand, Cl.4.9.1 only requires that the programme should be sufficient for “effective monitoring of the works” and it does not require that it should be sufficient for project control, nor for managing the parties’ time risks under the contract and facilitating

65 66 67 68

Cl.3.1(4). Cl.5.1. Cl.2.4. See for example, IGBW/09, at Cl.4.9.1.

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a competent calculation of entitlement to an extension of time and/or compensation for prolongation of the works. In this, as with the JCT forms, the Irish government forms fall significantly short of what is reasonably necessary for effective time control. 2–056 Of all the standard forms currently available, only ECC3, C21/09 and the CPC contain anything like a sensible contractual link between the programme and C’s entitlement to an extension of time. However, again, those forms are lacking in any requirement as to the integrity of the programme, or any enforcement provisions. Experience shows that, in the absence of powers of enforcement in the contract, the administrative arrangements contemplated are rarely followed69. 2–057 In considering the effect of risk on timing of activities at the project-planning stage, it is one thing to acknowledge that time estimates are unlikely to be 100% accurate and that unforeseen events may occur, but a different thing entirely to do nothing at all about it. A common solution to the problem of estimating uncertainty is to add a contingency. For example, the Irish government public works contracts provide that C is to include in its programme a contingency period for delay to the completion date caused only by the compensation events identified in the schedule, Pt 1, section K to the conditions of contract70. 2–058 Alternatively, in the absence of any contingency planning, C might hope to use float as contingency71; however, when float is thought of as contingency and is embedded in the programme, it is not unusual for it to cease to become contingency from the moment it is hidden. Another way of dealing with the estimate of risk in proactive planning is to use a Monte Carlo simulation to demonstrate the potential variances in duration of a particular activity and ultimately of the project as a whole. A simple risk analysis such as this can be helpful at the outset of a project, not only in identifying the options available to achieve completion on time, but also in assessing the amount of time and/or cost contingency that may reasonably be required in a programme, or budget. 2–059 Whilst most construction and engineering works will have many activities that can be categorised as “conventional” and that have low uncertainty levels, a few activities on most projects will have medium, or high uncertainty levels. Based upon probability estimates for each activity, in the early stages of a project the Monte Carlo model can be used to derive a probable completion date, although the date calculated will be dependent on how task uncertainties are modelled. In the end, the result calculated will simply be the result of the probabilities assumed. 2–060 The potential downsides of this type of risk analysis, however, are threefold: 1. 2. 3.

it is difficult to apportion liability for the risks notionally provided for; at anything other than low density, high level programming, it can inhibit efficient time management; and there is an understandable reluctance, born of commercial pressure, to avoid using terms like “probably” and “a good chance that” when determining project time scales, but it is axiomatic that few things are certain.

2–061 Computerised simulation using systems dynamics techniques72 can also be highly effective in identifying the potential effect of time risk events upon activities comprising

69 70 71 72

See, for example, Masons v W D King [2003] EWHC 3124 (TCC). See, for example, IGBW/09, Cl.9.4.2. See Ch.16 “Float and time contingencies”. The software employed was “I-Think”, a product of Isee Systems Inc.

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an amalgam of clearly identifiable repeated cycle times such as piling, pipelaying and tunnelling. The previous author used this technique successfully in identifying the potential risks of events and recovery measures in LNG gas pipelines and it has also been used in tunnelling73. Whereas a Monte Carlo simulation will produce a static set of multiple results accounting for the variety of potential input conditions, a systems dynamics model will produce a single output result, which can be dynamically adjusted in real time by altering the input to achieve the optimum balance of time and cost. 2–062 In essence, the process involves an analytical model of the operational cycle made up of statistical elements that can be addressed to achieve a model of the likely outcome of a combination of contingencies and recovery measures. The benefit of this sort of modelling is that the final model can be adjusted by varying the values to be applied, instead of using the deterministic values required by the Monte Carlo simulation, or spreadsheet modelling. 2–063 In relation to assessment of the credibility of completion periods at tender stage, BCIS74 has conducted research over a broad range of project types and values to produce a report on typical construction periods75. It is accompanied by a computerised calculator, which can usefully be employed to assist in the assessment of the credibility of tender periods offered by contractors for a given project type and cost, or to assist in measuring the practicality of achieving the construction period required by D.

Legal risk “It goes without saying that attention should be paid to the clear drafting of contracts. Uncertainty as to the meanings of contract terms reduces the effectiveness of project management as resources need to be channelled into discussions about the division of responsibility within the project. Ultimately, uncertainty may lead to conflict.”76

2–064 Those issues typically addressed by the standard forms of contract are: 1. 2.

which party is responsible for any inadequacy; and whether the professionals, the contractor, specialist subcontractor, or the material supplier bears the risk of: 2.1 the quantity of work required; 2.2 the quality of work required; 2.3 the cost of the work required; 2.4 completion to the agreed dates; 2.5 a defect occurring as a result of errors in design; 2.6 latent defects arising as a result of bad workmanship, or faulty materials; 2.7 safety and accidents; and 2.8 damage and liability to third parties arising from the works.

2–065 Legal risks can arise in two ways. On the one hand, there is the possibility of a change in the law (or a change in the way the law is interpreted) after contract, which 73 PT Haylen and JC Senogles, Application of Computer Simulation Techniques in Tunnel Construction, Planning and Risk Management, Proceedings of the International Conference on Process Re-engineering, Queensland, Australia, July 1997. 74 Building Cost Information Service, a trading arm of the Royal Institution of Chartered Surveyors. 75 Building Cost Information Service, Guide to Building Construction Duration, 2004, and Building Construction Duration Calculator. 76 M O’Reilly, “Risk, construction contracts and construction disputes” (1995) 11 Const LJ 343 and see Linden Gardens Trust Ltd v Lenesta Sludge Disposal Ltd [1994] 1 AC 85.

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affects the method of building, the acquisition of plant and materials, or the way in which labour is employed. In some contracts, such changes are treated as force majeure (defined under the contract, or otherwise). In others, they are separate risks, usually borne by D. Changes affecting the subject-matter of the contract, or the manner of construction, are unlikely to have retrospective effect, except in extraordinary circumstances. On the other hand, changes in the law affecting the acquisition of materials, plant and labour by, for example, import and export regulations, may come into force during the currency of a contract and, in some cases, can have significant effects on time and on cost. 2–066 The other form of legal risk arises out of a change in the way courts interpret contracts, legislation77 and other legal obligations78. Unfortunately, however carefully the contractual provisions are drafted, it cannot always be guaranteed that the interpretation of the respective duties of the parties, as set out in the contract agreement, will be beyond doubt when subjected to review. In subcontracts and bespoke primary contracts, for example, it is often the case that the provisions for resolving claims apply in one direction only and they are either silent, or ring-fenced by an exclusion clause in the other direction. In such circumstances, the applicable law of the contract may imply various additional terms into the agreement and impose further obligations on the parties. To this extent, the introduction of implied terms into a contract is nothing short of a reallocation of risk by the court. 2–067 The risks arising out of a construction contract will fall either where they are designed to fall in the form of the contract used or, by interpretation, where the courts determine they should fall. It is sometimes the case, for example, that argument will be adduced to give what one party believes to be a “business common sense” interpretation so as to enable it to avoid the express terms of the contract to which it has failed to adhere. This interpretation may be quite different from what is expected by construction professionals, by those who have drafted the forms79, or where the other party to the contract thought the risk might fall. 2–068 In Cary v United of Omaha80, for example, the court determined that, in the American State of Colorado, every contract contained an implied duty of good faith and fair dealing, violation of which amounted to a breach of contract. This implied term was relied upon in New Design v Hamon81, in which C was responsible for planning, scheduling and reporting the progress of the contracted work, but the subcontract gave C discretion to control the terms of the subcontractor’s performance after the subcontract formation, by requiring the subcontractor to: “prosecute the work undertaken in a prompt and diligent manner whenever such work, or any part of it, becomes available, or at such other time or times as [C] may direct”.

However, in spite of the express wording of the contract, in circumstances in which C failed to provide the subcontractor with a revised schedule showing how it had changed its method of working, C was held to have been acting unfairly and was unable then to hold the subcontractor responsible for delay to the date for completion of its work. 77 As to the risk arising from statutory duties and duties in tort, see paras 2–165 to 2–192, below [?]. 78 Consider, for example, the continuing debate about what constitutes concurrency or a global claim and how it should be treated. See Ch.18, “Concurrency, parallelism and pacing”, Ch.19, “Total time, total loss and global claims” and Ch.20, “Apportionment”. 79 J Uff, QC, “Standard contract terms and the common law” (1993) 9 Const LJ 108. 80 Cary v United of Omaha Life Insurance Co 68 P 3d 462, 466 (Colo, 2003). 81 New Design Construction Co Inc v Hamon Contractors Inc, Colorado Court of Appeals No: 06CA2011, 26 June 2008.

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Illustration Facts: This was an appeal from the decision of Cranston J in Compass Group UK and Ireland Ltd (Medirest) v Mid Essex Hospital Services NHS Trust. The NHS Trust engaged Medirest to provide catering and cleaning services for two hospitals over a period of seven years. There were many shortcomings in Medirest’s performance, which, together with reported, or observed, failures, attracted “service failure points”. The service failure points awarded by the Trust were, however, often arbitrary. The parties fell out and each claimed that the other had repudiated its obligations and so sought to terminate the contract using the contractual machinery, both parties claiming substantial damages. Cranston J found that the Trust had breached its obligation to “co-operate in good faith” and that there was an implied term that, in operating the deductions from monthly payments and in awarding service failure points, the Trust would not act in an arbitrary, capricious, or irrational manner. He found that the Trust had breached its obligation, but that, since both parties were in breach, the termination notice given by each was valid. Since both parties were entitled to terminate, neither could recover post-termination losses. The Trust appealed. Held, by Jackson LJ, that the award by the Trust of an excessive number of service failure points did not amount to a “material breach”; that Medirest’s notice of termination was invalid; that the Trust was entitled to pursue its claim for financial relief and therefore its appeal was allowed: Mid Essex Hospital Services NHS Trust v Compass Group UK and Ireland Ltd (Medirest)82.

2–069 The interpretation of the standard forms by the courts generally creates legal authority, subject to the hierarchy of the courts. However, it has been argued that:82 “The decision on a particular contract cannot amount to a principle of law. It follows that a court should be open to persuasion that a decision, even of a higher court, on the construction of the same standard form was erroneous. The same applies a fortiori to arbitration.”83

2–070 The late Ian Duncan Wallace QC also identified a divergence between the courts’ expressed intention to interpret the parties’ intentions under the contract and the express words used in the form of contract employed: “There seems to be an increasingly wide gap in the English courts between their rhetoric (which often effusively purports to offer liberal interpretation in the interest of business efficacy) and their practice which seems to fall back onto the most extraordinary degree of literalism, coupled with an expressed respect for the knowledge and experience of the draftsman, which defies reality and seems more appropriate to the construction of Parliamentary statutes.”84

2–071 The learned commentator criticised the apparent divergence between what he called the “rhetoric” of such cases as Antaios v Salen Rederierna85, in which Lord Diplock reiterated the long-established principle that the construction of a commercial contract must be made to yield to “business common sense”86, and what the courts actually did 82 [2013] EWCA Civ 200. 83 J Uff, QC, “Standard contract terms and the common law” (1993) 9 Const LJ 108. 84 I Duncan Wallace, QC, “Beyond the contractor’s control” (1991) 7 Const LJ 3. 85 Antaios Compania Naviera v Salen Rederierna [1985] AC 191, 201D. See further, Lord Wilberforce’s express approval of Cardozo J’s seminal “genesis and aim of the transaction” approach in Utica City National Bank v Gunn [1918] 118 NE 607 in Prenn v Simmonds [1971] 1 WLR 1381, 1384E–F and 1385. 86 Eg Glynn v Margetson [1893] AC 351, 357, per Lord Halsbury LC. Ian Duncan Wallace QC, above, fn 84 alluded to the even earlier formulation of the principle in Ford v Beech (1848) 11 QBD 852.

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in such cases as Hosier and Dickinson v Kaye87. Moreover, in BCCI v Ali88, Lord Bingham indicated that a commercial contract ought properly to be construed in the following way: “the object of the court is to give effect to what the contracting parties intended. To ascertain the intention of the parties the court reads the terms of the contract as a whole giving the words used their natural and ordinary meaning in the context of the agreement, the parties’ relationship and all the relevant facts surrounding the transaction so far as known to the parties. To ascertain the parties’ intention the court does not of course inquire into the parties’ subjective states of mind, but makes an objective judgment based on the material already identified. The general principles summarised by Lord Hoffmann in ICS vWest Bromwich apply.”

2–072 The approach of Lord Bingham, who was then the senior Law Lord, indicated the appropriate way to go about interpreting commercial contracts under English law and his approach still holds good today. In order to give practical effect to this passage, however, reference also needs to be made to the decision in ICS v West Bromwich89, in which Lord Hoffmann restated the principles by which contractual documents are to be construed, as follows: 1. 2. 3. 4. 5.

Interpretation is the ascertainment of the meaning that the document would convey to the reasonable person who had all the background knowledge, which would have been available to the parties at the time of the contract. The background is the “factual matrix”. However, it will include anything that would affect the way in which a reasonable man would have understood the language of the document. Previous negotiations between the parties and the declarations of subjective intent are excluded from admissible background. The meaning that a document would convey to a reasonable man is not the same as the meaning of its words. The meaning of the document is what the parties using these words against the relevant background would have understood them to mean. Although words should be given their natural and ordinary meaning, if one concludes from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention they could not have had.

Lord Hoffmann subsequently sought to summarise the position as follows, in Attorney General of Belize v Belize Telecom90: “There is only one question, is that what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?”

2–073 The application of the above principles to construction disputes and, in particular, the manner in which words in a building contract should be construed, was subsequently confirmed by Dyson LJ in Aqua v Kier91, in which the Court of Appeal declined to follow dictionary definitions of words and placed them in the context of the parties’ objective intention in order to give the contract its true meaning and effect.

87 [1970] 1 WLR 1611. Other examples of recent cases criticised as leading to unbusinesslike results include Northern Regional Health Authority v Derek Crouch Construction Co Ltd [1984] QB 644 (later determined by the House of Lords to have been wrongly decided). See Beaufort Developments (NI) Ltd v Gilbert Ash (Northern) Ltd [1998] 2 WLR 860 (HL); Scott Lithgow Ltd v Secretary of State for Defence (1989) 45 BLR 1; Crown Estate Commissioners v John Mowlem & Co Ltd (1994) 70 BLR 1 and Balfour Beatty Civil Engineering Ltd v Docklands Light Railway Ltd (1996) 78 BLR 42, expressly disapproved in Beaufort. 88 Bank of Credit and Commerce International SA v Ali (No 1) [2001] 1 All ER 961, 965. 89 Investors Compensation Scheme Ltd v West Bromwich Building Society Ltd [1999] Lloyd’s Rep 496. 90 Attorney General of Belize v Belize Telecom [2009] 1 WLR 1988. 91 Aqua v Kier (2002) 82 Con LR 107.

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Illustration Facts: RWE Npower Renewables Ltd (RWE) engaged J N Bentley Ltd (JNB) to carry out civil engineering work in relation to the Black Rock Hydro Scheme in the North of Scotland under the NEC 3 Engineering and Construction Contract. That contract provided for sectional completion and liquidated damages for delay. The critical issue was whether, or not, completion of penstock pipelines and associated facilities had to be achieved before a section of the works could be certified as complete. RWE argued that this could be determined by construing the contract without reference to the priority of the documents forming the contract, whilst JNB argued that there were irreconcilable differences between the works information and the contract data part 1. Held, by Akenhead J, that there was no material ambiguity as between the descriptions in section 2 in relation to the pipelines, or intake, in the two contractual documents and the priority of documents clause was not therefore engaged: RWE Npower Renewables Ltd v J W Bentley Ltd.92

2–074 Many developers and, in particular,92 “habitual” developers, indulge in editing the standard forms in an attempt to change the balance of risk. In order to avoid the possibility of the effect of the new standard forms being neutralised by such subsequent revisions by individual government agencies, the Second Secretary-General to the Irish Department of Finance has specifically instructed93 that the new Irish government standard forms of contract are to be the norm, that no amendments should be made to them and that only in exceptional and rare circumstances will amendments to non-core elements of the new forms be permitted by prior approval of the government, in writing. 2–075 It follows that, whilst most standard forms of contract raise the question of what might usefully be amended in order to render them more attractive to D, with the Irish government standard forms, the only consideration is what D, C and the CA have to do in order to make them work satisfactorily in the form in which they are published. 2–076 Editing standard forms is potentially dangerous and, if not executed meticulously, can result in an interpretation by the courts by virtue of implied terms that neither party intended. For example, because a particular standard form contractual provision had been deleted, it was held in Gaymark94, that, in the circumstances, D had no power to extend time, time was at large and D not entitled to any liquidated damages. However, the reasoning underpinning this decision has been widely criticised95. 2–077 On the other hand, there are occasions when the standard form must be edited because it fails to deal with a specific situation. Examples include the provision for C to prepare a critical path network programme, construction records, or acceleration provisions96. With regard to amendments to the phraseology used in the standard form of contract, in Aberdeen HB v Heating Enterprises97 the court observed: “It may be that the footnote in the standard form of conditions which suggests that matters should be arranged between the parties at the tender stage and the clause amended although 92 93 94 95 96 97

[2014] EWCA Civ 150. At para.7 of his open letter dated 27 October 2007. Gaymark Investments Pty Ltd v Walter Construction Group (1999) NTSC 143, (1999) 16 BCL 449. See Ch. 5, “Notices, claims and early warnings” at paras 5–136 to 5–144. Masons v W D King [2003] EWHC 3124 (TCC). Aberdeen Harbour Board v Heating Enterprises (Aberdeen) Ltd (1988) 4 Const LJ 195, 200.

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it refers to cases where it may be impossible to cover some of the risks, is intended to extend to such a situation as the present. Whether or not that is so, where such a case as the present occurs the clause seems inapt to achieve the result claimed by [D]. If that result was the one which they intended then in my view they should have amended the standard condition at the time of entering into the contract and the court should not try to improve the contract for them.”

2–078 The rule of widest application as to implied terms is that new terms will only be implied if they are necessary to give “business efficacy” to the contract. The test is sometimes illustrated by asking whether, if an officious bystander, on hearing the parties in negotiation, had asked the parties whether they had included a particular term in negotiation, both would have answered “of course”98. It is therefore an objective test. 2–079 In BP v Shire of Hastings, Lord Simon of Glaisdale said (in the Privy Council) that, for a new term to be implied, it must not contradict any express term of the contract and must fulfil further criteria in that it must be: 1. 2. 3.

reasonable and equitable; so obvious that “it goes without saying”; and capable of clear expression99.

2–080 The principles to be applied in determining whether a particular term can be implied into a contract were summarised by Lord Pearson in Trollope and Colls v NWHB as follows: “The basic principle [is] that the court does not make a contract for the parties. The court will not even improve the contract however desirable that improvement might be. An unexpressed term can be implied if, and only if, the court finds that the parties must have intended that term to form part of their contract; it is not enough for the court to find that such a term would have been adopted by reasonable men if it had been suggested to them; it must have been a term that went without saying, a term necessary to give business efficacy to the contract, a term which, although implicit, formed part of the contract which the parties made for themselves.”100

2–081 Thus, where the courts find that the terms are not effective to deal with the rights of the parties, they will intervene and adjust the commercial risk allocation, but not otherwise. So, where development land was transferred from one national housebuilder to another101 and the purchaser complained that roads and drains on the land had not been constructed to a standard satisfactory for adoption by the local authority in breach of an alleged implied term, HH Judge Bowsher QC said: “It was essential to the project that the roads and drains should be to the standard required by the local authority, but it was not necessary either for the project or for the agreement that the liability for any failure to achieve that standard should be borne by the defendants. The agreement is a workable and sensible agreement without the implication of any term placing liability for standards of roads and drains on the defendants. It was a matter for commercial decision and negotiation whether the plaintiff extracted a warranty as to standards from the defendant or whether they relied on their own inspection or whether they took a chance without inspection. If an express warranty as to standards of the roads had been insisted on, that would be a matter which might have been expected to influence the amount of the sum paid.”102 98 Shirlaw v Southern Foundries (1926) Ltd [1936] 2 KB 206 (CA), 227–228, per McKinnon LJ, affirmed [1940] AC 701 (HL). 99 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1978) 52 ALJR 20, 26. 100 Trollope and Colls v North West Hospital Board [1973] 2 All ER 260, 267–268. 101 Barratt Southampton Ltd v Fairclough Building Ltd (1988) 27 Con LR 62, 72–73. 102 Barratt Southampton Ltd (1988) 27 Con LR 62, 74.

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2–082 In Merton v Leach103, a contract for the erection of 287 dwellings at Mitcham was completed 101 weeks late. Having been granted extensions of time amounting only to some 26 weeks, C commenced arbitration regarding the cause of the delay and the extent of C’s entitlement to extensions of time. It was argued by C that the following terms should be implied into JCT63: 1. 2. 3. 4. 5.

D would not hinder, or prevent, C from carrying out its contractual obligations; D would not hinder C in executing the works in a regular and orderly manner; D would take all steps reasonably necessary to enable C to carry out its obligations; the CA would provide C with correct information concerning the works; and the CA would administer the contract efficiently and in accordance with normal practice, and, in particular, would record the issue of every drawing on an instruction sheet, every drawing would have a unique reference and any amendment to a drawing would be recorded in the notebook and the fact of the amendment indicated in the reference.

2–083 In considering these implied terms, Vinelott J said that a term would only be implied into a contract if it could “fairly be said to be a part but not an explicit part of the rights and obligations conferred or imposed by the Contract”. He then referred to the three situations in which the courts had shown their willingness to imply terms into a standard form contract: 1. 2. 3.

a term would be implied if it were necessary in order to make the contract work (the “business efficacy” doctrine derived from The Moorcock104); the courts would imply a term if it represented an established trade usage, which both parties, if asked, would have unhesitatingly agreed to be part of their bargain; and a term would be implied if it were inherent in the legal relationship between the parties, in the sense that, as a matter of law, it would apply to all contracts of that type, unless excluded expressly, or by implication from the circumstances surrounding the contract.

2–084 In the Nala Engineering case105, it was pleaded that there should be an implied term to the effect that, where the subcontractor had tendered on the basis of working a 12-hour, seven-day working week, C should afford all necessary access and information to enable the subcontractor to perform at that rate. Distinguishing Merton v Leach, HH Judge Wilcox held that C did not have the agency role performed by the CA in Merton and, whilst it must be implied that C should not prevent, or impede, the subcontractor, there was no commercial necessity for also requiring C to provide facilities that were not within its control, notwithstanding that that was the basis upon which the subcontractor had tendered. 2–085 In the United States, the courts have found that D impliedly warrants the availability of materials and goods specified to be obtained from a sole supplier106 and that D has a duty, in good time, to: 1. 2.

103 104 105 106 107 108

provide access to the site107; review and respond to submittals in good time108;

London Borough of Merton v Stanley Hugh Leach Ltd (1985) 32 BLR 51. The Moorcock (1889) 14 PD 64. Nala Engineering v Roselec Ltd (1999) CILL 1534. Edward M Crough Inc v Department of General Services (1990) 572 A 2d 457 JA Jones Construction Co v City of Dover (1997) 372 A 2d 540. JA Jones Construction Co (1997) 372 A 2d 540.

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3. 4. 5.

make decisions that affect the progress of the works109; effect delivery of D’s materials and equipment110; and co-ordinate the work of separate D’s contractors111.

It has also been established in the United States that, in the absence of express terms, D has an implied duty not to: 1. 2.

delay, hinder, or interfere with progress, or completion112; nor to interfere with C’s attempt to finish early113.

Dispute risk “While viable contracts must incorporate suitable claims provisions, it is the abuse of such provisions, whether by exaggerated claims or over-zealous suppression/rejections, that has often led to notoriety.”114

2–086 Dispute risk is the risk both parties carry that the contract will end up in dispute and that one or the other will suffer an unfavourable outcome. Vast sums of money are spent daily, in building and civil engineering disputes, evaluating before tribunals the effect of fine distinctions between written words, two-dimensional drawings115 and three-dimensional site conditions. It is significant that, in the event of a dispute going to trial, because of the difficulties of recovering all of the costs116 (and, in adjudication, no costs at all) even the winning party could be out of pocket by several hundred thousand pounds, or more117. 2–087 One of the most disastrous contracts of recent times in this regard must be the Multiplex contract for the refurbishment of the Wembley Stadium in the United Kingdom. Three years after commencement on site, Multiplex announced that any profit would come from winning a court battle against Cleveland Bridge, its initial steelwork subcontractor, but, in May that year, it announced that it would lose £45m and later that, if talks to cap steel costs with Cleveland Bridge’s successor failed, losses would hit £73m. The following year, Multiplex’s estimated losses rose to £106m. The viability of the GMP118 contract for the job lay in tatters as ultimately Multiplex announced its intention to claim £150m from Wembley National Stadium Ltd for 560

109 Ajax Paving Industries Inc v Charlotte County (2000) 752 So 2d 143. 110 Ben C Gertwick v United States (1961) 152 Ct Cl 69. 111 Paccon Inc v United States (1968) 399 F 2d 162. 112 Farrell Heating, Plumbing, Air Conditioning Contractors Inc v Facilities Development and Improvements Corp 414 NYS 2d 767 (1979). 113 Angelo v State of New York, 362 NYS 2d 283 (1974). 114 MM Kumarasawamy, “Common categories and causes of construction claims” (1997) 13 Const LJ 21. 115 Technological developments have resulted in much design now being carried out in 3D and open source Building Information Modelling serving to reduce to some extent, the problems of integration of specialist designs. But see also Ch.13, “Construction records”. 116 In Jackson LJ’s Preliminary Report (May 2009) in his Review of Civil Litigation Costs, he remarked that, in the TCC, “the percentage of costs recovered by the winning party is generally quite high, often in the region of 75% or more” (Pt 7 Ch.34 para.3.2). 117 Although the claimant in John Barker Construction Ltd v London Portman Hotel Ltd (1996) 83 BLR 31 won its case, the costs of the action coupled with the delay in payment by the defendants are thought to have been a significant contribution to their subsequent insolvency. 118 See Ch.3, “Project procurement”, at paras 3–056 to 3–059.

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design changes and proceedings were commenced with subcontractors119. Apart from those disputes which have been settled by negotiation, or in lower tribunals, by 2009, there had been ten separate visits to the courts120, with at least one more to come and with estimated litigation costs in excess of £65m121. 2–088 Those who recognise the inevitability of uncertainty are perfectly at ease with the proposition that claims are a natural part of the contractual mechanism. However, all agree that the goal must be to reduce their frequency, to make their settlement less contentious and to shorten the dispute settlement period, whether it is in the TCC, or arbitration, adjudication, or otherwise, and not merely to reduce the cost of injustice. Shortening the duration of litigious disputes was a key aim of the Civil Procedure Rules, which the courts have enthusiastically adopted122. 2–089 In the general run of things, parties to a building contract are optimists and often proceed on the assumptions that nothing will go wrong and that their project will be completed on time, under budget and without dispute123, as if the mere setting of a contract sum and completion date makes these achievable. Indeed, it is often the case that the parties proceed in a state of denial, in which the mere mention of the possibility of delay to completion is viewed as defeatist, or even evidence of a lack of moral fibre. The CIOB research124 into this issue revealed that it was the experience of 38% of respondents that delay would be notified if it was likely to delay completion, but not otherwise; only 20% would notify delay if the contract required it; 37% said they would notify delay irrespective of whether the contract required it and 5% said they would occasionally notify delay, irrespective of the predictive consequences. When asked for the reason for failing promptly to notify a delay to progress, 12% said it was because it was not an obligation under the contracts they were working on; 41% said that that it was because they thought they might get over it; 32% said that it was because they did not want to upset the client; 5% because they did not want to upset the contract administrator; and 10% said that it was because they thought they might be able to blame someone else for it. On the one hand, these results demonstrate a failure of

119 For a brief history of the project see G Bewsey, “No room for manoeuvre” (May 2006) Construction Manager. 120 Cleveland Bridge UK Ltd v Multiplex Constructions (UK) Ltd [2005] EWHC 2101 (TCC) (31 August 2005); Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2006] EWHC 1341 (TCC) (5 June 2006); Multiplex Constructions (UK) Ltd v Mott MacDonald Ltd [2007] EWHC 20 (TCC) (10 January 2007); Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd (No 2) [2007] EWHC 145 (TCC) (31 January 2007); Multiplex Construction (UK) Ltd v Honeywell Control Systems Ltd [2007] EWHC 236 (TCC) (8 February 2007); Honeywell Control Systems Ltd v Multiplex Constructions (UK) Ltd [2007] EWHC 390 (TCC) (27 February 2007); Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd (No 2) [2007] EWHC 447 (TCC) (6 March 2007); Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd (No 3) [2007] EWHC 659 (TCC) (12 March 2007); PC Harrington Contractors Ltd v Multiplex Constructions (UK) Ltd [2007] EWHC 2833 (TCC) (30 November 2007); Multiplex Construction (UK) Ltd v Cleveland Bridge UK Ltd [2008] EWHC 231 (TCC) (7 February 2008); Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2008] EWHC 569 (TCC) (19 March 2008); Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2008] EWHC 2220 (TCC) (29 September 2008); Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd [2008] EWHC 2280 (TCC) (29 September 2008). 121 Construction News, 29 July 2009. 122 See, for example, Stevens v Gullis and Pile [1999] 1 BLR 394. Commented upon in Ch.22, “Settlements and dispute resolution”, paras 22–030 to 22–037. 123 RJ Lane, “Cause-effect analysis for delay and disruption claims” (1994) 12 Construction Briefings. 124 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008).

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project control; on the other, an issue of relationships, transparency and even deceit, all of which go to increasing the likelihood of dispute. 2–090 Although the parties to a building contract may start off with the best intentions, they all walk a tightrope in trying to get the work completed to an agreed timescale and with as low a contract value as possible, whilst ensuring that C and its subcontractors make a profit. 2–091 It is a widely held view among those who have experience of construction disputes that a primary cause of the disputes is inadequate legal knowledge. Since the early 1980s, the universities have recognised this problem and revised their curricula to reflect the growing importance of legal issues in construction. Since 1990, King’s College London has been offering a master of science course in construction law for both lawyers and construction professionals and similar courses are offered elsewhere. Correspondence courses were subsequently made available in the United Kingdom to assist those wishing to take an interest in the subject and, more recently, home study courses, available by webinar125. 2–092 Notwithstanding such advances in legal awareness, it seems that contracts are often entered into without a thorough understanding of the conditions of contract, which may remain unread, even by those who have signed the contract, on the basis that “who needs a contract if the job is successfully completed and the contractor gets paid?” Predictably, this approach often results in disastrous mistakes, which are resolved only at great expense. The law reports are replete with examples of construction professionals failing to comply with contractual provisions because of inadequate understanding of basic legal principles, or the terms of contracts. In Barker v London Portman Hotel126, for example, although interpretation of the contract bills depended upon it, the CA admitted that he had never even set eyes on SMM7 (the applicable standard method of measurement) until it was handed to him in the witness box.

Illustration Facts: Liberty Mercian Ltd (LML) invited Cuddy to tender for certain works and a bid was received from “Cuddy Group”. That bid was accepted. When assembling the contract documents, LML’s solicitors undertook a Companies House search and found Cuddy Civil Engineering Limited (CCEL) and assumed that this must be the contractor. It was not apparent which entity was “Cuddy Group” from its website. LML’s solicitors passed on CCEL’s details to other lawyers finalising the contracts for the development. Notwithstanding that CCEL was a dormant company, it was asked to sign the building contract. Cuddy Demolition and Dismantling Ltd (CDDL) actually performed the works on site. All the invoices were issued by CDDL and were paid to it. The project was fraught with problems and CCEL’s contract was eventually terminated. Following termination, LML sought specific performance of CCEL’s obligation to procure warranties from one of its sub-contractors, a bond and a parent company guarantee. LML also sought a declaration that CDDL was the party with which it actually contracted. Held, by Ramsey J, that LML and CCEL were the actual parties to the contract; that there was no misnomer regarding the contractual party; that there was no common, or unilateral, mistake in respect of the

125 See, for example, http://www.i-lawcongress.com/ (accessed July 2010). 126 John Barker Construction Ltd v London Portman Hotel Ltd (1996) 83 BLR 31.

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contracting party; that CDDL was not CCEL’s parent company and that CCEL did not have a parent company; that CCEL remained obliged to supply the performance bond and the two remaining warranties from Quantum (GB) Ltd to Liberty Mercian and Waterman; that CCEL was not obliged to provide a parent company guarantee from CDDL and that there was no other parent company; and that CCEL was in breach of contract in failing to supply the performance bond and the two remaining warranties from Quantum (GB) Ltd to LML and Waterman: Liberty Mercian Ltd v Cuddy Civil Engineering Ltd127.

2–093127 Barker128 concerned a more traditional arrangement of architect and quantity surveyor under JCT80, in connection with the refurbishment of the London Portman Hotel. Mr Recorder Toulson QC (as he then was), sitting as an Official Referee, considered what the architect had done and the way he had gone about his decision-making process and found it faulty at law, unfair and unreasonable. He said: “this is a case in which the contractual machinery established by the parties has broken down to such an extent that it would not now be practicable or just for the matter to be remitted to the architect for re-determination . . . in those circumstances the court must determine on the present evidence what was a fair and reasonable extension of time”.

2–094 In the DLR case129, the ICE 5th edition standard form of civil engineering contract was amended so that the duties normally undertaken by the CA were in fact to be undertaken by D. For C, it was argued that D could not be left to its own devices to certify, because this would give D an almost unfettered right to rule on the level of its own liability. It contravened a basic principle of natural justice, that no one ought to be a judge in their own cause. The Court of Appeal did not accept this and said that this did not amount to an unfettered discretion but, if C could impeach D’s decisions by showing that D had misdirected itself in law, or that it had acted dishonestly, unfairly, or unreasonably, the courts would not uphold D’s decisions, but would grant appropriate relief130. The effect of Beaufort v Gilbert Ash on this is to restore to the court the same power to “open up review and revise” the decisions of the CA as those enjoyed by arbitrators under their express powers131.

Design risk 2–095 Design risks arise as a result of the possibility of error in the drawings and in specifications, in accordance with which the works are to be constructed. Under this head also comes the risk of efficient buildability, but this is dealt with under a separate head below.

127 [2013] EWHC 2688 (TCC). 128 John Barker Construction Ltd (1996) 83 BLR 31. 129 Balfour Beatty Civil Engineering Ltd v Docklands Light Railway Ltd (1996) 12 Const LJ 259 (CA). 130 The limitation of the Court’s discretion in this case has been severely criticised by I Duncan Wallace QC in “Another loose cannon in the Court of Appeal: not what the parties meant and the shadow of Crouch” (1997) 13 Const LJ 3, 8–16. 131 Beaufort Developments (NI) Ltd v Gilbert Ash (NI) Ltd [1998] 2 WLR 860. There is a subtle distinction between a power to review a CA’s decision based on the facts available to the CA at the time the certificate was issued and a power to review the CA’s decision in the light of the information currently available. However, it appears to be a distinction which has not yet been judicially considered.

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2–096 There are two key concepts affecting design risk. These are, on the one hand, the adoption of the duty to use reasonable skill and care or, on the other, warranting that the end product will be fit for purpose. Reasonable skill and care is the duty of care imposed upon a professional consultant who provides advice, or a service. It is effectively a matter for professional judgement whether, in providing that advice, or service, the consultant has exercised all the skill and care which can reasonably be expected. Only if professional negligence can be proved is the consultant liable for the failure of the end product. On the other hand, fitness for purpose is a statutory requirement under the Sale of Goods Act and a term that would normally be implied (in the absence of express words to the contrary) in any contract for the design and supply of a finished product. If the product is proved unfit for the intended and mutually understood purpose for which it was supplied, then, irrespective of whether the provider of the product has been negligent, there will be liability for failure of that product. 2–097 Studies in the United States have shown that over 60% of claims have their basis in defective and deficient drawings and specifications132. Although still a significant proportion, research in Hong Kong133 found that design errors formed the third highest category of claims at 54%. Design errors were perceived by 57% of those participating in the survey as the most significant cause of complaint. Commonly, the causes of problems with professional services include: 1. 2. 3. 4. 5.

misinterpretation of the design; incomplete design information; misunderstanding of the responsibilities of the parties; unclear performance criteria; and interference and change during the design and production information stage.

2–098 The higher degree of detail design usually employed on complex buildings (as opposed to heavy civil engineering works) generally brings with it a higher risk of failure fully to co-ordinate the detail and consequential change. Research in the US during a six-month period on a $1.1bn refinery expansion project demonstrated that more than 40% of improvements to overcome delay related to design improvements134. Whilst the scale of the project is obviously an important consideration, other factors such as location, complexity and design are relevant to projects of any size and it is no coincidence that the incidence of delay and escalation of cost to a complex, highly serviced, hospital building, for example, tends to be greater than that to a warehouse of a similar capital value. 2–099 Design risk is also increased whenever work is started before the designers have had a sufficient opportunity fully to ascertain their client’s needs. Preparing a brief is a very specialised task to be undertaken by an experienced person, who can treat it with great care. The designer should try to gain a full insight into D’s operations and then provide it with the fullest possible picture of what is possible and what is not within the parameters of the designer’s brief. In the event that D fails to analyse its needs sufficiently, is unable to read drawings, or is unaware of what the designer intends to produce for it, the risk of change, with consequent delay to progress, increased cost and disputes, usually follows.

132 The Kellogg Corporation, Avoidance and/or Mitigation of Construction Claims (1993, Kellogg Corporation). A seminar paper given to The Colorado Department of Transport. 133 MM Kumaraswamy, “Common categories and causes of construction claims” (1997) 13 Const LJ 21. 134 JT O’Connor, “Buildability – time for reassessment” (1985) Building Technology and Management.

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2–100 Remedial work during the course of a contract, causing delay and increased cost, is often the product of incomplete design information and consequent change and the consequence of attempting to “shorten” the design programme prior to construction and failure to implement adequate check procedures135. 2–101 Frequent and full communication between D and the designer is essential in order to minimise risk. D must organise itself so as to be able to answer designer queries authoritatively and at short notice. If any doubts remain about the finality of the decision, eg if design changes seem likely in the light of information not yet to hand, special arrangements with the designer should be made, including the fixing of deadlines for changes and consideration of different procurement methods, which do not presuppose a completed design before construction starts. In the case of HOK Sport v Aintree136, HOK was engaged by Aintree Racecourse (D) to design a new stand of specified capacity to be completed in time for the 1998 Grand National. Notwithstanding that it was completed on time, it was found that HOK were negligent in failing to warn D that the designs for the stand would lead to 685 fewer standing places than specified by D in their brief. D alleged that, had they known, they would have postponed the construction and instructed a re-design to achieve the desired capacity. 2–102 In accelerated design programmes, there is an inherent risk in the nomination of specialists required to both design and construct specialist parts of the works. Sometimes this is essential, because of the technical complexity of the work to be carried out, or it may come about as a result of a desire to reduce, or defer, the workload of the main designers and specifiers. Following this course can lead to disruption of the construction programme, either because of incompatibilities between the main design and the requirements of the specialist contractors, who may be identified too late into the construction sequence, or simply because the proper flow of finalised working drawings to the project is disrupted. 2–103 Mechanical and electrical (M&E) engineering consultants must interact fully and co-operatively with other consultants in order to enable a design team to function properly, late supply of M&E engineering details being a frequent cause of delay. Sometimes consultants are reluctant to finalise the choice of plant, in order to keep options open for competitive selection on the basis of price. But unless the contractor has specifically agreed to produce detailed designs itself incorporating schematics from the consultant, the drawing supplied to it must incorporate full details and not merely line diagrams of services. Where part of the design is to be contributed by specialists, this contribution should be built in at an early stage and not left as an area of uncertainty, which may require later modifications. It is essential that M&E consultants regard themselves (and are regarded by others) as full partners in the design team and that their contribution to the design is made at the appropriate point, early in the design process, and is also properly co-ordinated. 2–104 In assessing the risk associated with the design element of a programme, the general objective should therefore be to “freeze” the design at the scheme design stage and before detailed design is commenced. If changes of design policy continue to be made during the detailed and production information stages of design, then the risk of inconsistent and inadequate design information is increased exponentially.

135 JT O’Connor, “Buildability – time for reassessment” (1985) Building Technology and Management. 136 HOK Sport Ltd v Aintree Racecourse Co Ltd [2002] EWHC 3094 (TCC).

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2–105 The issue of whether post-contract design required in relation to a design and construct contract amounts to design development at the risk of C under this form of contract, or amounts to a variation of D’s requirements that is at D’s risk, was addressed in Skanska v Egger137. The court held that additional process plant steelwork required as a result of a later drawing of the process plant provided by D was simply design development upon which D was entitled to provide information. The court accepted that, although it was poorly defined, there was an indication of a requirement for process steelwork on the tender drawings illustrating D’s requirements and that it was part and parcel of the risk accepted by C that D’s requirements would be perfected at a later stage. 2–106 It has been suggested138 that, when a contractor is chosen after the design has been finalised, it should even then be invited to suggest modifications that will improve buildability and construction speed, or reduce cost, either during construction, or in subsequent maintenance. In this regard, it is perhaps surprising that the partnering contract, PPC2000, encourages the constant reappraisal of the design during the construction phase139, whilst leaving the liability for the time and cost effects of change entirely with D140, but, unless expressly provided otherwise, the power and responsibility for managing D’s risks lie entirely with C141! MPF and MP05 (which are design and build forms), however, provide for all the usual risks of change to be borne by D, without providing anything by which D can manage those risks. When one takes into account that these are said to be for use on “major projects”, which can reasonably be expected to take a long time to design and construct and which are likely to change considerably between inception and completion, this criticism is likely to have more serious consequences than with smaller projects142. 2–107 Experience suggests that, if the risk of delay due to design faults is to be minimised, the desire for post-design change is better achieved by post-contract completion change. In other words, when D is satisfied that the balance achieved between competing and conflicting requirements is the best obtainable, it should “stick with it” until C has finished on site. The additional construction costs of post-contract completion change are almost always smaller and more easily controlled than if changes are made when C is on site and when, which is sometimes the case, the design team is still trying to complete the production information. 2–108 Bills of approximate quantities are sometimes used with a view to obtaining a competitive choice of price before the design is fully developed. The NEDO report143 found that the effort taken to prepare approximate bills was generally about half that required for a full bill, that this in itself would contribute something to the pre-construction phase and that approximate bills proved sufficiently effective in identifying the (TCC) lowest, or most suitable, tender. The report also found that they were also accurate in their estimates

137 Skanska Construction Ltd v Egger (Barony) Ltd [2002] EWHC 773 (TCC) at [30]–[44] and [191]–[204]. 138 The National Economic Development Office, Faster Building for Industry (London: HMSO, 1983). The Report of the Building and Civil Engineering Economic Development Committee’s Joint Working Party. 139 Cll.23.4 and 23.5. 140 Cl.17. 141 Cl.18.2. 142 K Pickavance, Putting the Protocol into Practice – Is It What the Industry Wants? (Society of Construction Law, 2004), an occasional paper. 143 K Pickavance, Putting the Protocol into Practice – Is It What the Industry Wants?

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of the final cost of the project if the design had been substantially defined at the point of tender and no major changes were made during construction. On the other hand, it must be recognised that approximate quantities are not intended to be accurate and, in the event that they do not constitute a “reasonably accurate forecast”144, or are not circumscribed by an exemption clause145, any delay, or disruption, arising out of an increase in the quantities measured will be both excusable and reimbursable.

Buildability risk 2–109 “Buildability” is the term given to the ease with which a project design can be turned into a physical reality. Good “buildability” should make it easy for C to plan the procurement of materials, labour and plant and the logistics of moving the materials and waste, various trades and plant on and off site, and to minimise the possibilities of disruption by external factors. 2–110 There is a significant difference between the risk arising out of a simple project and that arising out of the design and construction of a complex project but, whatever the nature of the project, the most effective time control starts on the drawing board146, where the designer can have a considerable influence upon productivity by considering buildability and potential zonal separation and sequencing from the start of its design work147. Simplicity, repetition and ensuring that the work of each trade is as continuous and as independent as possible of the work of other trades, can all affect the potential for effective time management. Whenever there is a complicated interface between trades, there is a higher demand on management skills and, unless managed scientifically, delay and disruption tend to follow. 2–111 Whereas designs that require individual subcontractors to return to the site for several phases of work can be expected to produce sequencing problems and associated delays, simple designs using readily obtainable standard materials and components generally facilitate more efficient construction. On the other hand, it is one thing for a trade to have the opportunity to work in many different places on a project at the same time, but it is another thing entirely for separate trades to return to the site for multiple phases of the same work, such “second visits” inevitably producing an exacerbated risk of delay. 2–112 There can be no doubt that, because of the inherently linear processing of activities required in certain designs, the risk of delay is enhanced, whereas in others the possibility of different logical assemblies of activities gives C an opportunity to avoid delay caused by changes, or errors.

Biddability risk 2–113 The risk of biddability is really the risk of misinterpreting what is required to be priced or, to put it another way, the risk of not being able to get to grips with the

144 JCT80, and JCT98 Cl.25.4.14. 145 For example, “There will be no adjustment to the contract period for any increase in quantities up to 20% above that measured”. 146 Guide to Good Practice in the Management of Time in Complex Construction Projects (Chartered Institute of Building, 2010). 147 RMW Horner, and BT Talhouni, Effects of Accelerated Working Delays and Disruption on Labour Productivity (Chartered Institute of Building, 1995).

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nature and extent of the work to be priced at the outset of the project. Although it is open to the criticism that it is something of a straitjacket, a contract sum based upon a bill of quantities prepared under the rules of the Standard Method of Measurement148 is a very much more certain basis for price than C’s own quantities produced from a plan and specifications. Whenever there is no power to vary and the price is fixed for work described in a specification and drawings, that fixed price will still be payable, notwithstanding that not all the work referred to in the specification and drawings may actually be required to be carried out149. 2–114 It is common experience in the construction industry that a price that expressly excludes anything not specifically mentioned will be different from a price that is deemed to include everything necessary. That is so even if the prices are based on identical plans. So, for example, a specification that instructs C to inspect the site, drawings and documents and to: “adequately acquaint himself with the local conditions, accessibility of the works and site and nature of the ground and subsoil, the supply of and conditions affecting labour, availability and supply of materials, water, electricity and telephones all in relation to the execution of the works as no claim on the ground of want of knowledge will be entertained. The drawings and specification are to be read together. The contractor is to include for all materials plant labour and overheads and everything else necessary for the proper completion of the works whether or not shown on the drawings or the specification,”

will impose upon C an entirely different risk from one that contains no such clause and a different risk again from that accepted by a party that qualifies its tender price with the words: “Any works not specifically mentioned on plans or quotation are strictly omitted, but additional works may be carried out to your instructions for which a fixed price can be given.”

2–115 A different risk again will be taken by the contractor who tenders on bills of quantities where the conditions state that “the quantity and quality of the works is set out in the bill of quantities”150 and where C is not required even to look at the drawings, or other specifications, for guidance upon the quantity of work required. 2–116 Even on “greenfield” sites, where the entire building works are new work, it is not practically possible to foresee everything that will be required and a degree of risk is inevitable in a price deemed to include everything necessary. Where there is an existing building to be altered, the degree of unforeseeable change is greatly increased. 2–117 Thus, wherever there are omissions from the specification, or drawings, there is likely to be a degree of uncertainty as to the quality and quantity of work to be carried out and hence its price and the time needed to complete it. Apart from any enhancement in quality and quantity, the quality and thoroughness of the preparation of the tender documentation will inevitably have an effect upon the risk of time and cost in the tender. Where the method of procurement is incompatible with the standards required in respect of time, quality, or cost, the risk of delay, disagreement, claims and dispute will almost certainly increase.

148 From 1 May 2009, the RICS New Rules of Measurement: Order of Cost Estimating and Elemental Cost Planning (NRM) has taken effect to bring cost-estimating procedures in line with the RIBA Plan of Work and the OGC Gateway project management processes. 149 SWI Ltd v P&I Data Services Ltd (CA) [2007] BLR 430. 150 As in JCT80 and JCT98 With Quantities.

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2–118 There is an unnatural reluctance on the part of developers to select a contractor and negotiate a mutually satisfactory price, even though this is probably the most effective way of reducing the risk of delay owing to buildability difficulties, co-ordination of design difficulties and enforced change. It is self-evident that, when in competition for the contract at the lowest price, the lowest tendering contractor is also the one faced with the highest danger of loss. Only the very naive developer can be unaware of how much time is spent by the lowest tendering contractor in search of ways to reduce losses and redress the balance after the contract has been let. Indeed, this was reflected upon by LLoyd LJ in Humberoak, when he famously opined that: “It seems to be the practice in the construction industry to employ consultants to prepare a claim almost as soon as the ink on the contract is dry”151. 2–119 Similar remarks have been made in the US, although the courts there seem to have adopted a more resigned attitude to contract claims. In the Titan Pacific case, the Armed Services Board of Contract Appeals said: “While it is important that a contractor has recognized that he is primarily in the construction as distinguished from the claim business, it is foolhardy to assume that claims do not exist in our industry and even more foolhardy not to be prepared to recover the costs generated by a claim. Moreover claim conditions on a project have an insidious and adverse effect on the time for performance which also translates into dollars lost. If a contractor does not prepare himself for claims on the project from day one of the contract the chances of ultimate recovery are minimal”152.

2–120 Precision in communication is essential if disputes are to be minimised. By way of example, consider a contract that has been amended so that a bill of quantities prepared for the purpose of tender is noted “for guidance only”. Is this intended to be relied upon by the contractor? If not, what are its purpose and status? It would be legitimate for C to question whether it is required to enter into a fixed-price contract where its quotation is prepared on the bill of quantities prepared by the CA (which it has not had the opportunity of checking) and whether it must ignore “the guidance” and take off its own quantities. This is particularly important since the quantity of work set out would no doubt go to demonstrate the amount of work involved and the amount of time required to complete the contract. 2–121 In the event of a manifest error, not only will the price be wrong, but also the time period. As a result, not only would C not receive payment for work which it is required to do, but it would also have damages levied against it for not completing on time! The contractor is either prepared to take the risk of the accuracy of the CA’s quantities that D is attempting to transfer to it, or it is not. 2–122 The Irish government standard forms of contract contain provision for itemised bills of quantities to be subservient to any other works requirements, even if included within the works requirements153 and the default provisions154 are that C is entitled neither to additional time, nor to compensation arising out of delay caused by errors, or omissions from the bills of quantities. Under these forms, it is thus incumbent upon C either to make a particularly thorough check of any quantities provided, or to take off its own quantities for the purposes of its bid. If C takes the risk but, at a later date, 151 McAlpine Humberoak Ltd v McDermott International Inc (No 1) (1992) 58 BLR 1 (CA), 24. 152 Titan Pacific Construction Corporation (1987) ASBCA Nos 24,148, 24,616, 26,692, 87–1 BCA (CCH) p.19,626. 153 IGBW/09 Cl.1.3.4. 154 IGBW/09 Sch, Pt 1 section K.

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finds that the quantities upon which its prices were based are manifestly incorrect, then it has a limited chance of relief. That is probably limited to saying that the misrepresentation in the bill of quantities amounted to one that goes to the root of the contract, enabling it to set aside the fixed price and to claim repayment on the basis of unjust enrichment. 2–123 The requirement in GC/Works/1, GC/Works/1/98155, ECC2 and ECC3156, JCT80 and JCT98157, JCT05158, FIDIC/M&E87159, FIDIC/Build99160, FIDIC/DB95161 and IChemE162 and the possibility under MF/1163 and the Irish government standard forms164 to agree a predetermined cost and time effect of variations represents a change in the risk perspective. It is important to set out clearly what elements of cost and time are included in, or excluded from, any such instruction. Imprecise wording in variations, or agreements to accelerate, relating to the costs to be included in the agreed price for the change can cause significant problems165. 2–124 For example, at the end of a project, C may argue that the CA’s variation order addressing indirect costs, or time-related costs, did not include C’s loss of productivity, or consequential delay costs. C might argue that there was no way that it could have foretold the eventual impact of D’s changes at the time the variation was priced, so it waited until the end of the project to develop its consequential delay costs and loss of productivity claim. D, on the other hand, may refuse to pay any more than that which C earlier agreed to be the price for the changes requested by the CA, arguing that the pre-priced variation instruction amounted to an “accord and satisfaction”. In Bell v US166, D had rejected C’s claim for a further $6.2m for cumulative impact and disruption costs over and above the value of agreed variations of $21.4m on the basis that the contract modification orders contained an accord and satisfaction release from subsequent liability. However, this defence was rejected by the court because, in this case, there was no mention in the change orders of any agreement for cumulative impact, or inefficiency costs and the circumstances giving rise to the inefficiency and lost productivity had not arisen until after the value of the relevant modification orders had been agreed between the parties.

Construction risk 2–125 In the absence of express provision for these, D cannot unilaterally impose a change of requirements upon C. On the other hand, although all the standard forms of building and civil engineering contract contain provision for change167, there is an implied term that such a power to direct variations will not be abused to the extent

155 156 157 158 159 160 161 162 163 164 165 166 167

Cll.40(5) and 42(2). Cl.62. Cl.13A. Cl.5.1 and Sch.2. Cl.31.2. Cl.13.3. Cl.14.3. Cl.19.3. Cl.27.3. IGBW/09, IGDB/09, IGCEDB/09, IGCE/09 and IGMW/09, under Cl.10.4. RJ Lane, “Cause–Effect analysis for delay and disruption claims” (1994) 12 Construction Briefings. Bell BCI Co v United States Fed. Ct Cl No 03–1613C, 21 April 2008. See Ch.12, “Variation and change”, paras 12–030 to 12–157.

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that it changes the very subject-matter of the contract beyond the scope of what was contracted for168. 2–126 The burden of showing why it should not accept an instruction under the contract to carry out work not contemplated by the content of the contract works is generally placed upon C. C has either to show that the additional work instructed is outside its area of expertise, or that the point has been reached at which the variations instructed are not referable to the nature of the works and are such as to render it unreasonable to require C to carry them out under the terms of the contract. So, for example, in a case where C was to remove and replace a bridge, on discovering that the design did not work, C claimed for both delay and extra expense in respect of the changed method and sequence of work169. 2–127 Although the claim failed, Lord Cairns identified additional, or varied work which, in theory, might be: 1. 2. 3.

so peculiar; so unexpected; and so different from what any person reckoned, or calculated upon, that it was not within the contract at all.

In such a situation, Lord Cairns stated that a contractor would have available to it two courses of action: 1. 2.

refusing to go on with the contract on the basis that it was never intended to construct the work upon this new and unexpected footing; or saying “I will go on with this but this is not the kind of extra work contemplated by the contract. If I do it, I must be paid on a quantum meruit basis for it”170

in which case, time would presumably then be at large171. 2–128 Delays are frequently caused by changes in connection with the site, the need for which are discovered only after work has actually started on site. It would be foolish to suggest that even the most thorough ground investigation could overcome all risk of delay arising out of groundworks, but often the difficulties are connected either with soil conditions, or obstructions, or with services that were either wrongly located on plans, or not identified at all. An increasing amount of development in the United Kingdom is taking place on sites where building, or engineering, works have been carried out before, and such “brownfield” sites generally need more detailed investigation than greenfield sites. Clearly, a balance must be struck between the substantial cost of an exhaustive site survey and the risk of extra cost and delay arising from an inadequate one. 2–129 However, it seems to be accepted wisdom that ground conditions provide the primary cause of cost escalation and delay after that of D’s changes. Often, the design team will instigate a ground investigation during the design process, adequate to give a good general picture of what is to be built on, or in, it, but a thorough ground investigation is seldom sufficient to avoid change and consequential delay. This poses a difficulty for D where a tendering contractor is provided with a ground investigation report, with the intention that it should rely upon it in preparing its tender; a claim for additional cost and time arising out of changed work will follow if the report does not enable C to foresee the actual ground conditions encountered. On the other hand, if no information about 168 In IChemE Cl.16.7(a) there is an express provision to the effect that the sum total cost of all variations shall not decrease or increase the contract value by more than 25%. 169 Alexander Thorn v The Mayor and Commonalty of London (1876) 1 App Cas 120 (HL). 170 Alexander Thorn (1876) 1 App Cas 120 (HL) pp.127–128. 171 See Ch.6, “Extensions of time and time at large”, paras 6–106 to 6–173.

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ground conditions is given, C cannot properly price the work. Nor is it economically efficient for the industry to determine that C, during the tender process, should carry out its own ground investigation. Apart from the larger number of competitive investigations which would result, the costs would be prohibitive in all but the simplest of projects. 2–130 The standard forms of building contract, unlike the standard forms of civil engineering contract, tend not to deal with differing ground conditions as a specific risk. The JCT family of “build-only” contracts, for example, deals with discrepancies between the contract documents and variation from the design contained in the contract documents. In WCD81 and WCD98, unless it is the subject of “[D’s] Requirements”, or circumscribed by a provisional sum, ground works are entirely at the risk of C. In the civil engineering contracts FIDIC4172, ICE6 and ICE7173, D specifically adopts the risk of C’s encountering “adverse physical conditions”, or “physical obstructions” that “could not have been foreseen by an experienced contractor”. GC/Works/1174, GC/Works/1/98175, GC/Works/1DB176 and GC/Works/1DB98177 adopt a more subjective approach in referring to “ground conditions which [C] did not know of, and which he could not reasonably have foreseen having regard to any information which he had or ought reasonably to have ascertained”. 2–131 In ECC2 and ECC3, a similar approach to that of GC/Works/1/98 is taken, in that the subjective approach to experience and competence is adopted and, for the risk to revert to D, the physical conditions must be such that C could not have expected them to be a “significant probability”. 2–132 IGCEDB/09 and IGDB/09 signal a departure from the norm by shifting to C the liability for the following risks, which, under other forms of contract, are usually borne by D: 1. 2.

C encounters on the site unforeseeable ground conditions, or man-made obstructions in the ground, other than utilities; and C encounters unforeseeable utilities in the ground on the site.

On the other hand, the procedure under IGMW/09 is that, by virtue of the Schedule, Pt 1, section K178, both of these events are at D’s risk as to both time and cost. 2–133 By default, under IGDB/09 and IGCEDB/09, delay to completion caused by an item of archaeological, or geological interest, or human remains found on the site (which was unforeseeable) entitles C to an extension of time. Whether it entitles C to compensation for prolongation is to be determined on a job-specific basis and, if not so determined, is not compensable. However, under the Schedule to IGMW/09179, the risks are both excusable and compensable. 2–134 Where bills of quantities are provided as part of the contract documents180, then the Standard Method of Measurement and the rules for dealing with abnormal ground conditions will generally ser.1. to place the risk with D, regardless of whether the ground conditions are foreseeable by C. But the new Irish government standard forms of contract, in which the default position in regard to the build-only forms181 is that C is not entitled 172 173 174 175 176 177 178 179 180 181

Cll.12.2 and 44.1.(b). Cll.12(1) and 44(1)(c). Cll.7(3) and 36(2)(d). Cll.7(3) and 36(2)(d). Cll.7(3) and 36(2)(d). Cll.7(3) and 36(2)(d). Items 19 and 20. Pt 1, section K, Item 18. For example, JCT98 With Quantities edition. IGBW/09, IGCE/09 and IGMW/09.

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to an extension of time for delay caused by an error, or omission, in the bills of quantities (and may thus be required to pay liquidated damages for delay to completion caused thereby), whilst paradoxically, D may also specify, on a job-specific basis, that C is to be compensated for its prolongation costs arising out of the same event. 2–135 Separate contracts for site preparation can be helpful in ensuring that any problems are dealt with at the proper stage and with the minimum risk of uncontrollable consequences in the event of substantial change. 2–136 Against the backdrop of today’s complex construction process, the employment of subcontractors has become more widespread. The term “subcontractor” is an allembracing one, covering organisations ranging from individuals solely offering labour to large specialist firms operating nationwide and offering specialist design services. Research has shown that projects tend to proceed at a pace relative to the level of subcontracting182. Properly managed and co-ordinated subcontracting can lead to speedy and efficient construction, but, possibly because poorly informed contractors think that, in subletting the work, they are disposing of the risk, there are many examples of delays in construction arising out of bad co-ordination and integration of the work of subcontractors. 2–137 Management difficulties with sub-subcontractors can enhance the risk of delay. C is normally responsible for securing the performance of both nominated and domestic subcontractors and has similar contractual relationships with each. However, where sub-subcontractors are involved, it is often difficult to establish a sufficiently effective working relationship with a party constructing the work where the other party is not responsible for that party’s payment. 2–138 Employment of specialist subcontractors is essential for some of the highly specialised tasks in modern construction. In such circumstances, the specialists should be identified and selected at an early stage. The co-ordination of the design work of such subcontractors must be the responsibility of the architect, or engineer, during the design stage, but they must also be involved in the programming of the job, both at tender and at production stage, when the responsibility for co-ordination must pass to C. 2–139 The risk of delay, or disruption, being caused by contractors, or suppliers, in direct contracts with D to supply goods, or work, to a project in the general control of C is broadly the same as the risk of delay through any other late design information, or work co-ordination, difficulty. Suppliers of lifts, process plants, or air-conditioning equipment, for example, tend not to have the same priorities as C and to be difficult to co-ordinate satisfactorily as independent contractors. Lack of precision, coherence and timing of information about such specialist installations tends to create delays183. 2–140 Weather can also have a significant impact upon the construction process. For instance, continuous rain may necessitate a change to the indoor and outdoor schedule of work, high winds may cause a change to the structural steelwork erection, or roof and wall cladding programme, low temperatures may change the sequence of concreting operations, or render roofing work impossible, and high temperatures may inhibit such things as external rendering proceeding efficiently184. 2–141 Whilst the physical environment cannot be controlled, its latent risks can be identified and steps taken to mitigate their effects in the event of their occurrence. For 182 The National Economic Development Office, Faster Building for Industry (London: HMSO, 1983). The Report of the Building and Civil Engineering Economic Development Committee’s Joint Working Party. 183 The 1985 NEDO report found that direct contracts were seldom successfully completed without delay. 184 For a description of the sort of difficulties various weather conditions can cause, see D Bordoli, “Weather claims in the United Kingdom construction industry” (2010) 26 Const LJ 18.

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instance, reprogramming particularly vulnerable operations to periods when there is the greatest probability of favourable weather conditions is one way of minimising climatic interference. This can be vitally important in some climates, where it is predictable that there will be prolonged periods of adverse weather185.

Financial risk 2–142 A developer makes an investment decision. Whether it is a decision to commission an office building, a factory, or a school building, the capital committed could instead be invested in stocks and shares, or an interest-bearing bank account. The decision to invest in a building must therefore provide a return on risk that is competitive with the best that the financial markets can provide.186

Illustrations (1)

(2)

Facts: Celtech International Limited (D), a subsidiary in a group of UK companies, involved in the paper industry, hired Dalkia Utilities Services Limited (C) to provide energy services through an energy plant, in the region of £3m, to be used by D’s paper mill. By an agreement dated 24 October 1995, D leased C the property that would house the plant (the agreement for lease). The lease and the agreement for lease were interdependent. Clause 4 of the latter provided for C to charge D for the energy service. Later, D signed with C a second agreement for “New Works” (the first amendment agreement), which C would finance. A third agreement was signed (the second amendment agreement) on 1 June 1997, providing, amongst other things, specifications regarding the termination sum. Clause 15 became a milestone. The plant did not result in the expected savings by D, with the latter also arguing that the terms of the agreement for lease were unfair and uncompetitive, trying unsuccessfully to renegotiate the principal agreement. By June 2003, the market was adverse to D and it looked to merge with the LPC Group. Negotiations started soon after between D and C, regarding the potential merger and the outstanding bills owed to C. In August 1997, C suspended the performance of its obligations under the contract in view of D’s inability to pay. At 5.50pm on Tuesday 12 August 1997, C emailed to D a termination letter, attaching a schedule of termination sums due for £3,131,732.26. Both parties did not pay regard to the fact that schedule D was no longer applicable. Held, by Clarke J that, since C had validly terminated the agreement, D was liable to pay the termination sum, together with the other payments called for by Cl.15; that, after payment, D would be entitled to keep the plant: Dalkia Utilities Services plc v Celtech International Ltd.186 Facts: City and General (Holborn) Ltd (D) was the freehold owner of a property in London (the property), which property was divided into four separate parts, namely Quality Court, 10 Furnival Street, the Library and Staples Inn. The profit-share agreement signed between D and Cambridge Gate Properties Ltd (Cambridge) and Temple Guiting Manor Ltd (No 2) (Temple), set out the share of profits and losses of the development of the property as between those three parties, including the

185 For example, tropical rains, semi-arctic winters and summers with high temperature and humidity. 186 [2006] EWHC 63 (Comm).

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(3)

following provision: “On completion of the development it is intended to let on best terms reasonably obtained on the open market and thereafter sell the completed investment to enable the disbursement of profits being increased, with the option to take place at the earliest possible date”. D entered into a building contract with Kier Regional Ltd (C) to carry out the development of the Library and Staples Inn. As the relationship between the C and D soured, there were a number of adjudications. Before the adjudicator, C was awarded £719,295.40 for loss and expense resulting from the delays for which C had already received extensions of time, pursuant to previous adjudications. D failed to pay this sum and C applied for summary judgment. Judgment was obtained and C later obtained a charging order in respect of the property. C subsequently made an application for third party debt orders against Cambridge and Temple and an interim order was made by Akenhead J, based upon the accounts of Cambridge and Temple recording that D was a creditor for substantial sums relating to the property. C sought to make the order final. Cambridge and Temple sought to persuade the judge, as follows: (1) that no debt was in fact due under the profit-share agreement until at least completion, and (2) that, in the alternative, to use this discretion pursuant to Civil Procedure Rule (CPR) 72 not to make the orders final. Held, by Coulson J, that no debt was due; that the proper construction of the profit-share agreement was that no payment was due until completion, the building costs were ascertained and the profit and loss payable under the agreement could be assessed; that, if there were a debt, the discretion should be exercised against making final orders; that, in this case: (1) the order would significantly prejudice Cambridge and Temple since the adjudication principle of “pay now and arbitrate later” would not apply to them not being parties to the building contract; (2) the fact that the original adjudicator’s decision was based upon the adjudicator’s failure to take into account the two expert’s reports as pointed out by Jackson J; that the stay of execution should be ordered as there were two ways in which to enforce Jackson J’s judgment, namely by way of a charging order and by way of a third party order; that imminence of the arbitration and the issues to be resolved within it justified making the stay sought by D: Kier Regional Ltd (trading as Wallis) v City and General (Holborn) Ltd.187 Facts: TSG Building Services plc (TSG) and South Anglia Housing Ltd (SAH) entered into a contract for the provision by TSG of a gas-servicing and associated works programme relating to the housing stock of SAH. The contract was based upon the ACA standard form of contract for term partnering and had an original duration of four years, extendable at the sole option of SAH for a year. SAH gave notice of its intention to terminate the contract early in the second year of the contract. TSG disputed its right to do so, arguing that Cl.1.1 thereof obliged SAH to act reasonably when exercising any obligation under the contract, alternatively, an implied obligation of good faith, which prevented SAH from terminating. Held, by Stuart-Smith J, that, properly construed, Cl.1.1 did not require SA to act reasonably as such in terminating under Cl.13.3; Cl.1.1 was primarily concerned with the assumption, deployment and performance of the role, expertise and responsibilities set out in the partnering documents; and that there was no need to imply an obligation to act in good faith by reason of the presence of Cl.1.1: TSG Building Services plc v South Anglia Housing Ltd.188

187 188

187 (2009) 25 Const LJ 36. 188 [2013] EWHC 1151 (TCC).

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2–143 For C, the argument is not so straightforward, but is equally valid. A contractor bidding for the relevant part of a building project is committing resources, labour and capital that have other potential uses. Money may have been borrowed, or reserves used to bridge the shortfall between income and expenditure, while profit, if it is made, will arise at some time in the future. When C is borrowing, or committing tangible resources, such as labour, a comparison must be made between potential return on the project in contemplation and the potential return in the projects that could otherwise be undertaken. 2–144 Financial risks typically encompass adverse changes in economic climate, or they can be money-related risks relevant to the specific contract, such as delays in payment, or one party’s bankruptcy, liquidation, or receivership. Reducing the risk of non-payment by D is one of the most important matters to be considered in the preparation of the contractual documents. 2–145 A contractor whose tender is well below the average of the tenders for a given project is likely either to have made a substantial mistake, or to be trying to “buy” the work at little, or no, profit. Indeed, over a period of several years following “Black Monday”189, because work was scarce in the construction industry, it was not uncommon for contractors to tender below cost in order to secure work to stay in business with the hope (often forlorn) that they could make a profit out of claims, or the future liquidation of their subcontractors and suppliers. This phenomenon also affected subcontractors, although their solution to it was different: it was not unusual over the same period to see M&E subcontractors tender below cost in the hope of recovering from the effects of variations and C’s inability adequately to co-ordinate the work! 2–146 Under such difficult economic circumstances, should an unpriced risk materialise and C be unable to bear the financial consequences, its resultant insolvency would cause D problems and expense that could far outweigh any benefit thought to have been gained from the original low contract price. Thus, unless C’s financial position has been carefully investigated and proved to be secure for the duration of the contract190, D should exercise considerable caution if the lowest tender is far below the main body of tenders191. The courts appear to have recognised the mutual advantage to the parties in maintaining a contractor’s (or subcontractor’s) solvency. In Williams v Roffey192, whilst works were in progress, the claimant subcontractor informed C that, if the subcontract price was not increased, they would be unable to complete the subcontract and would become insolvent. C promised to pay additional money for the works, which were then completed. In the end, C refused to pay the additional money it had promised on the ground that there was no consideration for the extra payment. However, the court held that there was good consideration: after the subcontracts had been entered into, the material circumstances had changed. The subcontract could only be completed by payment of additional money. If the main contract were completed late, C would face a heavy claim for liquidated damages from D. On the facts, the Court of Appeal saw no element of economic duress in this and therefore, in paying 189 On Monday, 19 October 1987, the world stock market prices crashed. Over £50bn was wiped off the value of shares on the London Stock Market, followed the following day by a fall on Wall Street which far exceeded the 1929 crash. 190 A precondition which is virtually impossible to perform. 191 Bonds, or bank guarantees, may provide some insurance against part of the risk of C’s financial failure during the course of the contract. 192 Lester Williams v Roffey Brothers & Nicholls (Contractors) Ltd [1989] EWCA Civ 5, (1990) 48 BLR 69.

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more money and keeping the subcontractor in business, C was obtaining good value and the agreement could be upheld193. 2–147 Inflation is a risk that is inherently beyond the control of both parties. Whether that risk is to be borne by C, or D, in the terms of the contract is largely a question of timing and the nature of the project in terms of duration and policy. In times of low inflation, or for short contract periods, it is quite normal for C to carry the risk by an appropriate adjustment of the contract base price to allow for an anticipated rise in the costs of materials, or labour over the contract period. On the other hand, in times of high inflation, D may find it unattractively expensive, or impossible, to pass on that risk to C, who, with a fixed price tender, must allow a substantial premium to compensate for the high-risk exposure that must then be faced.

Political risk 2–148 Political risks are brought about by changes at government level, such as those affecting employment laws, and may involve sanctions regarding the use of particular products, or methods of building, or import and trade regulations. 2–149 Deliberate acts of State, such as outright nationalisation, or expropriation of the project, a declaration of moratorium on international payment and changes in local law such as the imposition of controls to employ only indigenous labour, or restrict the import of goods, can all have a critical effect on the future of the project. However, C will also need to bear in mind that there may be other risks giving rise to increased costs that would not normally be included in definitions of political force majeure, which are in fact outside C’s control and which could have a political aspect. For instance, there could be a politically inspired strike, which would force up the price of key raw materials, to prevent the import of materials, which C is obliged to purchase locally.

Insurable risk 2–150 All standard forms of building contract include a clause that requires either C, or D, or both in their joint names, to insure against disaster. In some contracts, these are called “specified perils”194; in others they may be called “excepted”195, or “accepted”196, or “special” risks197, or even “[D’s] risks”198. In JCT contracts, there is provision for the insurance to cover all risks by selection of an alternative to the clauses in the contract. 2–151 In JCT80 and JCT98, the specified perils are set out in Cl.1. Clause 1.3 of JCT98 defines the specified perils as “fire, lightning, explosion, storm, tempest, flood, bursting or overflowing of water tanks, apparatus or pipes, earthquake, aircraft and other aerial devices or articles dropped therefrom, riot and civil commotion but excluding the excepted risks”. Similar phraseology is employed in HK05199.

193 Lester Williams v Roffey Brothers & Nicholls (Contractors) Ltd [1989] EWCA Civ 5, (1990) 48 BLR 69, 93. For more on economic duress, see Ch.22, “Settlements and dispute resolution”. 194 JCT family of contracts. 195 ICE family of contracts. 196 Government contracts. 197 FIDIC4. 198 See FIDIC/Build99, FIDIC/PD+B99 and FIDIC/DB99. 199 Cl.25.1(3).

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2–152 Apart from the insurable risks, there are also those generally referred to as “excepted risks”, which are borne by D and are generally not insurable, even under so-called “all risk” cover. In JCT80 and JCT98, those include such things as: “ionising radiations or contamination by radioactivity from any nuclear fuel or from any nuclear waste from the combustion of nuclear fuel, radioactive toxic explosive or other hazardous properties of any explosive nuclear assembly or nuclear component thereof, pressure waves caused by aircraft or other aerial devices travelling at sonic or supersonic speeds”200. 2–153 Most of the other forms of contract contain similar provisions. HK05, whilst referring to the same excepted risks as JCT98, also includes damage caused by the consequences of war, revolution, civil rebellion, terrorism, riot, civil commotion, or disorder, the architect’s design, and any neglect, or default on the part of D, or those for whom it is responsible. The provisions of ECC2 and ECC3, on the other hand, are quite different. They specify D’s risks under the contract, but do not necessarily require D to insure against them. At Cl.80 of the ECC forms, a whole variety of risks is listed. The contract provides for insurance cover for those risks (if D wishes to take it) to be set down in the contract data. Irrespective of whether insurance is taken, or not, in all standard forms, the primary risk of all these “insured risks” is that of D and only in the event that that risk is passed to an insurer is D able to transfer that risk under any of the standard forms of building contract.

Illustrations (1)

Facts: Genesis Housing Association (GHA) appealed a first instance decision that it could not recover under its insurance policy with the respondent insurer, LSM. GHA had engaged a property company, TT Bedford (TTB), to construct a housing development, TTB (acting as agent for GHA) sought insurance from LSM, but its representative signed a proposal form that incorrectly identified the builder as another company in TTB’s group, TT Construction (TTC). The proposal form contained a declaration that the information contained therein was correct to “the best of the knowledge and belief of the insured” and also that the proposal formed the basis of the insurance contract. Clause 7 of the policy stated that the policy would be: “voidable in the event of misrepresentation, misdescription, error, omission or non-disclosure by the policy holder with intention to defraud”. TTB went into administration during construction and GHA sought an indemnity from LSM, which refused this on the grounds that TTB was not the builder specified in the proposal form. Held, that the appeal should be dismissed: where a proposal form contains a “basis of contract” clause (assuming that it is not a consumer contract), the proposal form has contractual effect, even if the policy contains no reference thereto. The identity of TTC was a contractual term and all statements in the proposal form constituted warranties upon which the insurance contract was based. This principle could not be displaced by the mere omission of the proposal form

200 See Ch.4, “Standard form provisions for time and cost”, para.4–261 for a further note in relation to nuclear installations and associated damage.

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(2)

(3)

from the list of contractual documents. Genesis Housing Association Ltd v Liberty Syndicate Management Ltd 201. Facts: Gleeson engaged sub-contractors for a development and Axa provided insurance cover, with an extension (memorandum 23) in respect of subcontractors’ defective workmanship. A dispute arose regarding, amongst other things, the cover provided under memorandum 23. Axa argued that memorandum 23 did not displace the general insuring clause, under which cover was only provided where the defective workmanship caused physical loss, or physical damage, to something other than the defective part. Gleeson responded that memorandum 23 was a self-contained insuring clause and that compliance with the general insuring clause was not a precondition to cover. Held, by Raynor J, that the words “the company will indemnify” used in the general insurance clause and the words “this section of the policy extends to indemnify” at the beginning of memorandum 23 made it abundantly clear that it was never intended to provide a self-standing form of cover; and that it was to be triggered only where the general clause also responded: MJ Gleeson Group v Axa Corporate Solutions Assurance 202. Facts: Teal Assurance Company Ltd (Teal) (a captive insurance company, which insures companies in the Black and Veatch Group (BV)) provided a number of layers of insurance to BV engineers in respect of professional liability claims. The top layer (unlike the layers beneath) excluded claims from the United States and Canada. BV notified various claims, some from the US and Canada. A preliminary issue was raised as to whether BV and Teal were entitled to choose which claims to meet first in order to ensure that the remaining claims falling to the upper layer were not from the US, or Canada. There were various layers, “pi tower” referring to the layers of BV’s professional indemnity programme. Held, by Smith J, that, where there is a programme of top and drop policies, the criterion that determines the order in which losses erode the pi tower is when liability arises under the original insurance programme, including the underlying cover, in this case including the pi tower as well as the original policy: Teal Assurance Co Ltd v W R Berkley Insurance Europe 203.

2–154 In201 Aberdeen202 Harbour203 Board204, the claimants were the proprietors of premises in Aberdeen and the defendants were engaged by C as plumbing subcontractors. The subcontract tender provided that either C, or D should bear the sole risk of loss, or damage by fire as defined under Cl.20(c) of JCT63. Under Cl.20(c) of that contract, the existing structures were at D’s sole risk as regards loss, or damage by fire. However, D was the occupier of only part of larger premises and, in fact, was not even the proprietor of the part affected by the defendants’ negligence in handling blowlamps, which caused a fire that virtually destroyed the property. The court decided that Cl.20(c) did not entitle the defendants to an indemnity in relation to damage by fire caused not to existing structures owned by D, but to structures owned by a third party. In this regard, the purpose of Cl.20 (c) was said to give cover for fire to the contract works and to D’s existing structures. It was not to give C and the subcontractors cover for

201 202 203 204

[2013] EWCA Civ 1173. [2013] Lloyd’s Rep IR 677 (Comm). [2011] EWHC 91 (Comm). Aberdeen Harbour Board v Heating Enterprises (Aberdeen) Ltd (1988) 4 Const LJ 195.

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fire damage to the property of a third party. The court favoured the more limited meaning and in so doing commented: “If the clause is construed as relating to damage to a neighbour’s property then presumably the final provision would apply to such property with the somewhat curious result that [C] could be required to reinstate the neighbouring property out with the contractual control of [D] of that property as part of the contract works. Moreover if the scope of the phrase ‘the existing structures’ is extended and particularly if it is taken to equate with the scope of any real property referred to in Clause 18(2) then questions of an insurable interest may well arise. Whether or not the qualifying words strictly apply to the phrase ‘the existing structures’, I take the view that that phrase is to be understood as limited to a like effect.”

2–155 In SSHA v Wimpey 205, in a case relating to the modernisation of SSHA’s homes, it was held that it was D’s obligation under Cll.18(2) and 20(c) of JCT63 to insure against the risk of damage by fire, including fire caused by C’s negligence, and that C was not liable to D in respect of damage to D’s property due to a fire caused by the negligence of its subcontractor. 2–156 On the other hand, in National Trust v Haden Young 206, the Court of Appeal determined that, under MWA80, C was liable for the results of a subcontractor’s negligence under Cl.6.2, notwithstanding that the negligence caused a fire which, under Cl.6.3B, it was D’s duty to insure against. 2–157 Clause 6.2 (headed “injury or damage to property”) provided that: “[C] shall be liable for, and shall indemnify [D] against, any expense, liability, loss, claim or proceedings in respect of any injury or damage whatsoever to any property real or personal (other than injury or damage to the works) insofar as such injury or damage is due to any negligence of [C], his servants or agents, or of any person employed or engaged by [C].”

D’s insurance provision207 provided that: “[D] shall in the joint names of [D] and [C] insure against loss or damage to the existing structures (together with the contents) and to the works by fire.”

2–158 C contended that the effect of these clauses, read in conjunction, was that C was not intended to be liable for damage to the existing structures and their contents by fire, even if the fire was caused by C’s, or its subcontractor’s, own negligence. However, Nourse LJ thought that there was an overlap between the provisions, saying: “The liability (under clause 6.2) is unlimited and the requirement to insure against it ancillary. In contrast, clause 6.3B requires [D] to insure specific property, namely the existing structures and their contents, the works and all unfixed materials and goods pertaining thereto, against specific risks. More significantly, it says nothing at all about liability, and the only basis on which it can be suggested that it was intended to limit that which has been declared to be unlimited, is a probability that [D’s] insurance would cover a fire caused negligently by [C] or a subcontractor. That is no basis for doing such violence to the terms of clause 6.2. It only means that the parties must be taken to have contemplated a potential overlap between the two provisions, with [D’s] recoverable damages under clause 6.2 being liable to be reduced by the amount recoverable under the insurance or vice versa. Further than that it does not go.”208

205 206 BLR 1 207 208

Scottish Special Housing Association v Wimpey Construction (UK) Ltd [1986] 1 WLR 995. The National Trust for Places of Historic Interest or Natural Beauty v Haden Young Ltd (1994) 72 (CA). Cl.6.3B. Cl.6.3B at p.10.

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2–159 In construing the same contract form with similar facts, in Barking v Stanford Asphalt209, the Court of Appeal said that, because D could comply with Cl.6.3B and still properly exclude from cover any damage caused by C’s negligence, there was no overlap of cover. Those events to be insured under Cl.6.3B were natural phenomena, for which neither party was responsible. If it were also to cover the same damage caused by C’s negligence, there would be an unnecessary duplication of insurance cover where both parties were insuring against the same catastrophe and it could not have been contemplated by the draftsman, or the parties to enable C to escape liability for its own negligence. 2–160 A similar approach was taken by the Court of Appeal in Skanska v Egger. The contract was there based upon a modified JCT design and build form whereby C agreed to design, manage the construction of and construct a timber-processing facility for D in which, by Cl.22(1)(a), C took “full responsibility for the care of the works”. By Cl.22(2)(a), D agreed to insure, in the joint names of itself and C, the works “against all loss or damage from whatever cause arising for which [C] is responsible under the terms of the contract”. 2–161 Disputes arose out of substantial defects in the floor slab of the factory warehouse, which D contended were the result of defective design, inadequate materials, or poor workmanship and which, by the terms of the insurance policy it had taken out, were excluded. At first instance, the defective floor had been held to be covered by the specified all risks insurance clause210. However, the Court of Appeal held that the obligation of D to insure the works in the joint names of itself and C against loss, or damage, arising “from whatever cause” did not extend to obtaining cover against loss and damage caused by defective design, inadequate materials, or poor workmanship for which C alone was responsible211. 2–162 Whilst the standard forms of contract tend to deal primarily with insurance against damage caused by specific risks, certain contract forms require C to take out insurance to cover its liability for liquidated damages. The manner in which that liability and, hence, the premium for such insurance might reasonably be calculated depend upon a perception of the risks likely to occur and also a perception of C’s ability to manage these and their consequential effects upon the completion date during the course of the project212.

Consumer Insurance (Disclosure and Representations) Act 2012 2–163 This statute came into force on 6 April 2013 and makes significant changes to the law concerning pre-contractual disclosure and representations in contracts with consumers, seeking to simplify the existing legal framework. 2–164 “Basis of contract” clauses are abolished, so that insurers can no longer include a declaration in a proposal form, or policy document, the effect of which is that the consumer insured warrants the accuracy of the answers given. The Act also

209 Barking and Dagenham London Borough Council v Stanford Asphalt Co, The Times,10 April 1997; (1998) CILL 1333. 210 Skanska Construction Ltd v Egger (Barony) Ltd [2001] All ER (D) 362. 211 Skanska Construction Ltd v Egger (Barony) Ltd [2002] EWCA Civ 310, 83 Con LR 132, [28]–[38]. 212 See FH Griffis and S Christodoulou, “Construction risk analysis tool for determining liquidated damages insurance premiums: case study” (2000) Journal of Construction Engineering and Management 407.

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abolishes a consumer’s duty to disclose material facts and replaces it with a duty to take reasonable care not to make a misrepresentation during pre-contractual and/or variation negotiations. The Act places the onus upon insurers to ask specific questions about what they want to know. If there is an honest and reasonable misrepresentation, insurers cannot avoid cover, but must pay the claim. If there is a “careless” misrepresentation, the insurer has a compensatory remedy based upon what the insurer would have done had the insured answered the question accurately and in full. An insurer may treat a policy as void from inception and decline all claims where there has been a deliberate, or reckless, misrepresentation. The insurer may also retain the premium, unless the insured can demonstrate some good reason why it should be returned. Further, more general insurance law reform is anticipated, although not imminently.

Tortious and statutory duties Introduction 2–165 The basic concept of a tort arises out of public policy identifying man’s relationship with the society in which he lives and seeks to provide compensation where the act, or omission, of one or more, individuals has led to loss, or damage, being suffered by another, notwithstanding that there is no contractual relationship and, indeed, the parties may never have met. Primarily, delay-related issues may be expected to arise in the torts of nuisance and negligence. The essential elements of a successful action in tort are: 1. 2. 3.

a duty of care; breach of the duty; and damage resulting from breach of the duty.

Illustrations (1)

Facts: AEW Architects and Designers Ltd (AEW) was retained by the Museum as the contract administrator for the new Museum of Liverpool project (the Museum). AEW subsequently took the role of the architect in addition. The project was beset with problems. The suspended ceilings collapsed. Amongst other defects, there were substantive defects in the steps and terraces that formed an external amphitheatre link between various levels of the Museum. AEW sought to resolve these problems by instructing the contractor to install a plinth (which did not fit the aesthetic of the project), without seeking permission from the Museum. The construction of the Museum was delayed, only opening in part in July 2011, works having commenced in spring 2007. During the course of the works, the contractor referred a dispute to adjudication against the Museum to establish its design responsibilities. The adjudicator decided that the reinforcement detailing and placement was the contractual responsibility of the contractor. The Museum sought damages from AEW and a contribution from the contractor. As part of the damages sought, the Museum sought to recover the costs of adjudicating with the contractor. Held, by Akenhead J, that AEW had failed to discharge its duties in respect of the design for the steps, seats and terraces and was in breach of contract for not informing the Museum about the installation of the plinth before instructing the contractor to install it; that it was AEW’s contractual responsibility to procure the provision

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(2)

(3)

of the necessary design criteria so as to enable the contractor to design effectively and that AEW had not discharged this duty; AEW has also failed to exercise any reasonable care in relation to the whole issues it had delegated; AEW was also negligent in relation to defects in the ceiling, both for failing to appreciate that what was being proposed was inadequate and for not inspecting the ceilings adequately; that architects must put themselves in a position (physically) where they can inspect: The Board of Trustees of National Museums and Galleries of Merseyside v AEW Architects and Designers Ltd 213. Facts: Mr and Mrs Jenson (the claimants/respondents) bought a house in Battersea, London from Mr Green. In 2003, Mr Green had arranged for Spencer Roy Faux (the defendant/appellant), an interior specialist and project manager, to carry out building works, namely: loft re-modellation and extension, floor re-modellation, gutting the ground floor, kitchen replacement, and replacement of the coal cellar for a basement. The Cs issued proceedings against D, under s 1(1) of the Defective Premises Act 1972, claiming to have suffered loss resulting from damage caused by flooding to the new defective basement area. D applied for summary judgment, arguing that s 1 of the 1972 Act only applies to a new dwelling and (on the facts here) the house was the same dwelling, both before and after the works. Held, (at first instance) that the question whether a new dwelling had been provided was a question of fact and degree, unsuitable for summary determination. D appealed. Held, by Etherton LJ, that, despite the extensive renovation works in the house, it had not become a new dwelling, “the identity of which was wholly different from the old”; extension, or refurbishment, would have to be much more substantial; that buyers can always have surveys done as the Cs did; that, in consequence, the appeal should be allowed: Jenson v Faux 214. Facts: J Robinson (C) entered into an agreement with P E Jones Limited (D) in 1991 for the sale and building of a new house of a plot in Cheshire. Once completed, the house was conveyed to C in April 1992 with gas fires in the lounge and the family room. The parties had signed a National House-Building Council (NHC) agreement, with the D warranting that the house had been built in an efficient and workmanlike manner. Twelve years later, in September 2004, C arranged for a British Gas engineer, who conducted a spillage test. The family room gas fire failed the spillage test, and it was also found that the gas fire had a “poor flue run”. The gas fires were then disconnected for safety reasons. In December 2006, C issued proceedings against D for breach of contract, breach of duty of care and D was found guilty of misrepresentation. In anticipation of the limitation defence, C pleaded s 14A of the Limitation Act 1980. In March 2009, the action was transferred to the TCC, which ordered the trial of the following preliminary issues: (1) whether D owed a duty of care in tort to C regarding the matters complained of; (2) whether C’s claims were statute-barred by the limitation period. Held, by Davies HHJ, that: D did not owe a duty of care in tort to C; consequently s 14A of the Limitation Act 1980 does not apply, and thus that the claim must fail as statute-barred; that should D have owed a duty of care in tort, the action would had not have been statute-barred, because C’s constructive knowledge would not have been for more than three years before proceedings were commenced: Robinson v P E Jones (Contractors) Ltd215.

213 [2013] EWHC 2403 (TCC). 214 [2011] EWCA Civ 423. 215 [2010] EWHC 102 (TCC).

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2–166 Where there is physical injury, or damage to property, the redress in damages usually follows. However, where the loss is purely economic, the courts will generally only award damages in the circumstances in which a “special relationship” can be found between the tortfeasor and its victim.

Illustrations (1)

(2)

Facts: Optima, the developer of a block of flats, engaged Strutt and Parker to inspect the flats and to provide an architect’s certificate certifying that they had been properly built. The certificates were issued, but there were numerous defects and the purchasers of the flats claimed damages. Claims were made against Strutt and Parker for breach of warranty and negligent misstatement. Personal proceedings were also brought against the architect who issued the certificates. Akenhead J held, at first instance, that: “the duty of care applied not only to the making of the statement of the certificates, but extended also to the performance of the services which were necessary in order to enable Strutt and Parker to issue the certificates through their employee architect; that the claimants had relied upon the statements in the certificates; the claimants were therefore awarded damages against Strutt and Parker on the capital diminution of the flats at the date of sale although, the claims against the architect in person were dismissed”. Strutt and Parker appealed. Held, by Christopher Clarke LJ, that the judge was incorrect in law (at [120] of his judgment), in so far as he envisaged the existence of two independent duties of care owed by Strutt and Parker through Mr Egford to the claimants; that the appeal should be allowed on all three heads of claim and that Strutt and Parker and Mr Egford should have no liability to any of the claimants, other than Mr and Mrs Sahi: Hunt v Optima (Cambridge) Ltd 216. Facts: Igloo Regeneration Ltd (IRL) purchased an historic mill (Marshall Mills) and engaged Powell Williams Partnership (PWP) to survey the building prior to purchase in 2003. PWP noticed cracks of recent origin in three of the brick piers on the ground floor and suggested that remedial wall ties should be installed as a holding procedure, that the cracks should be monitored and that £20,000 should be set aside for strengthening the piers, if deterioration continued. A few years later, the cracks were noted to have worsened. However, they were not repaired until 2009 and at a substantially higher cost than the amount reserved. IRL brought a claim in negligence against PWP, alleging that PWP ought to have recognised that the piers were, or might be, subject to compression failure and, furthermore, that calculations ought to have revealed that the piers were at a very real risk of compression failure. Held, that PWP had not failed to exercise the standard of care and skill to be expected of reasonably competent surveyors (and engineers) in connection with their inspections, advice and reporting of this type. Expert witnesses for both parties accepted that engineering judgement was to be applied and there was nothing to suggest that compression failure was anything other than a remote possibility. The mill was 172 years old, with no other obvious signs of structural failure in the brickwork. There was no other material damage visible anywhere. An engineer does not always have to carry

216 [2013] EWHC 681 (TCC).

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(3)

(4)

out calculations purely because of crack damage. A survey would not necessarily have revealed all defects in any event. Furthermore, IRL was an experienced commercial purchaser and ought to have understood the proper ramifications of PWP’s advice. Further held, by Akenhead J, that breach of duty (contractual, or tortious) had not been established on the evidence, neither had PWP failed to exercise the standard of care and skill to be expected of reasonably competent surveyors (and engineers) in connection with their inspections, advice and reporting in relation to Marshall Mills; in regard to “old” buildings, an engineer’s professional judgement is to take precedence over codes of practice and strict adherence to modern technical guidance: Igloo Regeneration (General Partner) Ltd v Powell Williams Partnership 217. Facts: The four claimants (Cs) were a group of Danish corporate entities, created in the United Kingdom by a company called Scanplan, a Danish property investment advisor. CB Richard Ellis Hotels Ltd (D) provided investment advice to the Cs. Through Scanplan, eight budget hotels were acquired throughout the UK. The Cs subsequently discovered that D had made misrepresentations with regard to the earnings of the hotels and that the estimate of the capital value of the hotels was beyond the normal margin of error and they therefore sued for negligent misstatement. Held, by Coulson J, that D was not liable for negligent misstatement. Upon a true construction of the limited documents available, it was unlikely that the failure to disclose the turnover rent arrangement to the investors was inadvertent. However, since the documents relied upon by the Cs’ investors were drawn up by Scanplan, D was not liable: it had communicated the full terms of the rent arrangement to Scanplan. Similarly, although the Ds had undervalued the capital worth of the hotels, the underestimate was within the reasonable threshold of 10%. The lack of disclosure by the Cs was not capable of prejudicing the case, but it was observed that this had made the trial difficult: K/S Lincoln v CB Richard Ellis Hotels Ltd 218. Facts: TSG Building Services plc (TSG) and South Anglia Housing Ltd (SAH) entered into a contract for the provision by TSG of a gas-servicing and associated works programme relating to the housing stock of SAH. The contract was based upon the ACA standard form of contract for term partnering and had an original duration of four years, extendable at the sole option of SAH for a year. SAH gave notice of its intention to terminate the contract early in the second year of the contract. TSG disputed its right to do so, arguing that Cl.1.1 thereof obliged SAH to act reasonably when exercising any obligation under the contract, alternatively, an implied obligation of good faith, which prevented SAH from terminating. Held, by Stuart-Smith J, that, properly construed, Cl.1.1 did not require SA to act reasonably as such in terminating under Cl.13.3; Cl.1.1 was primarily concerned with the assumption, deployment and performance of the role, expertise and responsibilities set out in the partnering documents; and that there was no need to imply an obligation to act in good faith by reason of the presence of Cl.1.1: TSG Building Services plc v South Anglia Housing Ltd 219.

217 [2013] EWHC 1718 (TCC). 218 [2010] EWHC 1156 (TCC). 219 [2013] EWHC 1151 (TCC).

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2–167 In Salliss v Cahil 220, for example, it was argued that the CA named in the contract owed a duty to act with reasonable expedition in certifying to C an extension of time and compensation for delay and disruption arising out of D’s time risk events. The loss that C sought to recover against the CA was economic. It was argued that, if the CA negligently promoted D’s interests by late certification, or merely failed properly to exercise reasonable skill and care in certification, it was reasonable that C should not only have the right as against D to have its certificate reviewed in arbitration, but also the right to recover damages against the CA in tort. In rejecting this argument, HH Judge Fox-Andrews QC said: “I find that to the extent that [C] was able to establish damage resulting from the [CA’s] unfairness in respect of matters which, under the contract, the [CA] was required to act impartially, damages are recoverable and are not too remote. But in many respects a [CA] in circumstances such as these owes no duty to [C], he has no duty of care to [C] in respect of the preparation of plans and specifications or in deciding matters whether or not he should cause a survey to be carried out. He owes no duty of care to [C] whether he shall order a variation. Once, however, he has ordered a variation he has to act fairly in pricing it. The reason why [CAs] owe no duty in the kind of circumstances I have just set out is because [CAs] are not required to act fairly. In many cases, for example variations, he will be acting on [D’s] instructions. It would be bizarre if, for example, having been instructed by [D] not to incur the expense of a survey, the [CA] was found to be in breach of some duty to [C] in not having done so.”

2–168 Apart from the possibility of a claim by C against members of the design team, there is a variety of conceivable situations in which a tortious duty could arise between D and third parties involved in development. For example: 1.

2.

3.

A local development control officer visits the site and finds that some aspect of the work in progress is not in his opinion satisfactory, even though it conforms to the agreed plans. He therefore seeks to impose an enforcement notice on the site, which is not complied with, whereupon a stop notice follows. On appeal, the notice is quashed because of the officer’s negligence, but in the interim D has incurred costs owing to delay. A building control officer, on visiting the site, tells C unfairly, or through his negligence that he does not like the way in which an aspect of the work being undertaken is being performed. C is therefore caused delay and unnecessary expense, even though no enforcement notice has been served221. A statutory undertaker engages in works affecting land neighbouring the site during progress of work, thereby causing obstruction to C’s access and resultant delay 222.

In all of these cases, under the standard forms of building and engineering contract, C will be relieved of the effects on time and cost, either because of express provisions, or “sweeping up” clauses excusing C from delay. The point to then consider is whether D can recover its losses from the third party.

220 Michael Salliss & Co Ltd v Cahil and William F Newman & Associates (1987) 13 Con LR 68 (QBD). 221 In this situation, since C is under a duty to D to avoid delay, C should challenge the officer to issue an enforcement notice. If it does not, then arguably the delay should fall at C’s own risk. 222 Most situations involving statutory undertakers and delay are, since privatisation of the utilities, to be determined by reference to provisions within the supply contract.

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Illustrations (1)

(2)

223 224 225 226 227 228

Facts: Liberty Syndicate Management Ltd (C) was the underwriter of a latent defects insurance scheme for residential properties, offered in the United Kingdom and Ireland. Campagna Ltd (D) was employed as technical auditor, to carry out inspections of properties under the policy, which involved three inspections at foundation, pre-plaster and completion stages of construction for a fee of €75 per property. After a large number of claims under the policy in Ireland, C sued D for breach of contract on the grounds that they had not met the required standard of care for the role of technical auditor. Held, by Edwards-Stuart J, that the role of technical auditor was not analogous either to that of a building surveyor, or a building control officer, but should be considered as encompassing some of the duties of each; that a professional inspecting the works could not be expected to notice every defect, and this principle should certainly apply in an insurance context, where an overly intrusive regime of inspections would raise the cost of insurance to prohibitive levels; that, in the absence of some reasonable cause for concern, a technical auditor would not be expected to call for the opening up of work that has been executed. Per curiam: “I would expect a technical auditor going to any site where roofs might have to be inspected from the ground on a final inspection to carry a pair of binoculars because he could not rely on the availability of any means of access to roof level. An inspection using a pair of binoculars would be far from perfect, but I am quite satisfied that any serious defects would have been seen through binoculars”: Liberty Syndicate Management Ltd v Campagna Ltd 223. Facts: The appellant issued proceedings against the respondent hirer to be indemnified according to the Model Conditions of the Construction Plan Hire Association Agreement for the Hiring of Plant agreed between them. Clauses 8 and 13 thereof provide that the hirer bears full responsibility in connection with the operation of the plant and should completely indemnify the owner in respect of any claims arising out of the use of the plant during the hire period. The trial judge held that Cl.8 sought to cover a situation in which the actions of the operator caused an accident and there was some loss and damage. As a result, Cl.13 could not be invoked by the owner because an exception from the owner’s own act of negligence had not been specifically set out, and he was bound by E Scott (Plant Hire) Ltd v British Waterways Board224. Held, dismissing the appeal, that: (1) Clause 8 did not make the hirer responsible for the claim against the owner in respect of the owner’s own breach of duty: Arthur White (Contractors) Ltd v Tarmac Civil Engineering Ltd225 applied; (2) The owner could not claim to be indemnified under Cl.13 for the injuries to its driver arising out of the use of the plant when that damage arose due to its own negligence: E Scott (Plant Hire) Ltd v British Waterways Board226 applied; Yarm Road Ltd (formerly Kvaerner Cleveland Bridge UK Ltd) v Hewden Tower Cranes Ltd227 distinguished: MacSalvors Plant Hire Ltd v Brush Transformers Ltd228.

[2011] EWHC 209 (TCC). Unreported, 20 December 1982, CA. [1967] 1 WLR 1508, 3 All ER 586, HL. See fn 225 at page 204B. [2003] EWCA Civ 1127, (2004) 90 Const LR 1. [2009] EWCA Civ 1329, [2010] TCLR 2.

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2–169 The application of the law of tort to disputes concerning risk allocation in which delay is involved is difficult. First and foremost, the terrain is uncharted. In addition, there are peculiarities that stem from the practicalities of construction in general and, in particular, from the interrelationships between the various parties. Apart from the complex statutory background, the practitioner is also faced with a second problem in adapting an inadequate law of tort to meet the inadequacies of the statutory materials. 2–170 It is all too reasonable to foresee that the negligent exercise of regulatory power principally causes economic loss through delay. Tort, then, in the context of development projects, limited as it is in compensating for pure economic loss, is of little benefit in settling disputes and compensating for losses incurred by developers through third parties. 2–171 Relatively recent developments in the law militate strongly against the idea that a duty of care should arise in the relationship between private individuals and public authorities where economic loss is concerned. The law relating to claims for economic loss, the primary consequence of delay, does not provide confidence in determining the extent to which developers can recover for delays attributable to the negligent acts, or omissions of third parties. Nevertheless, within the statutory framework, the possibility of recovery in building and development control generally must be provided for in the form of general compensation. It appears that a fundamental reason for not imposing a common law duty of care in the case of local authorities is the presence of such an alternative remedy229. 2–172 The possibility of a successful common law claim for delay-induced loss caused by the negligent issuance of a restrictive order by third-party local authorities is remote. That is due in part to the unlikelihood of proving damage in cases of delay which go beyond pure economic loss. In the context of building projects, it is especially remote because of the unlikelihood of a situation arising in which a contractor would be forced to rely upon a local authority officer’s representation. 2–173 Since the reversal of Anns v Merton230 by the House of Lords in Murphy v Brentwood231, claims against local authorities have been restricted to those for death and personal injury. However, D’s claim for idle time arising solely out of a third party’s negligent interruption by misstatement in the course of a development’s progress might yet come within the principle expressed in Hedley Byrne v Heller232 and refined in Caparo Industries233, whereby tortious claims for economic loss might succeed

229 This is implied by Bingham MR in E v Dorset County Council [1994] 4 All ER 640. Indeed, a fortiori arguments crop up in the Court of Appeal’s decision in M v Newham London Borough Council [1994] 2 WLR 554 as to why a duty of care should not be found where no compensation is provided by statute. 230 Anns v Merton London Borough Council [1978] AC 728. 231 Murphy v Brentwood District Council [1991] AC 398. 232 Hedley Byrne & Co Ltd v Heller & Partners [1964] AC 465. The objective meaning of “assumption of responsibility” was considered by Lord Slynn in the House of Lords in Phelps v Hillingdon LBC [2001] 2 AC 619, 654, and is the subject-matter of apparently conflicting first instance decisions as to whether it arises in the contractual setting: compare Samuel Payne v John Setchell Ltd [2002] BLR 489 with Tesco Stores Ltd v Costain Construction Ltd [2003] EWHC 1487 (TCC) and Robinson v P E Jones (Contractors) Ltd [2010] EWHC 102 (TCC). 233 Caparo Industries Plc v Dickman [1990] 2 AC 605. Lord Oliver’s notion of “voluntary assumption of responsibility” was subsequently endorsed by Lord Goff in Henderson v Merrett Syndicates Ltd [1994] 3 WLR 761 and extended to cover the performance of services at p.766.

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in the context of reliance upon a negligent misstatement, or action made within a relationship of special proximity. 2–174 Perhaps of more importance is the case of X v Bedfordshire, in which Lord Browne-Wilkinson classified private law claims for damages against public authorities into four categories: “(a) (b) (c) (d)

actions for breach of statutory duty simpliciter (ie irrespective of negligence); actions based solely on the careless performance of a statutory duty in the absence of any other common law right of action; actions based on a common law duty of care arising from the imposition of the statutory duty or from the performance of it; misfeasance in public office, ie the exercise of statutory powers with the intention to injure the plaintiff or in the knowledge that the conduct is unlawful.”234

2–175 He found that (b) could never succeed and did not consider (c). He proceeded to put forward a three-stage test for whether an authority owed a duty of care: “(a) (b) (c)

Is the negligence relied upon negligence in the exercise of a statutory discretion involving policy considerations: if so the claim will pro tanto fail as being non-justiciable; were the acts alleged to give rise to the cause of action within the ambit of the discretion conferred on the local authority; if not is it appropriate to impose on the local authority a common law duty of care.”235

2–176 This remains the law relating to local authority liability for negligence and, it is submitted, any claim against a local authority for negligence arising out of its exercise of a statutory power, or discretion, would still need to overcome the hurdles set out in Lord Browne-Wilkinson’s test before it could succeed. 2–177 The two questions then to be posed are whether, or not, the relationship between, in particular, a regulatory authority’s officer and C can be characterised as one of special proximity, and, if so, can C reasonably be said to act “in reliance” upon a local authority officer’s representation made outside the statutory framework, C, in this context, being D’s agent? The Court of Appeal has held that a local authority was liable in damages for economic loss sustained by the owner of a food premises when it was wrongfully required by an environmental health officer to carry out work to secure compliance with statutory requirements when, in fact, those works were unnecessary236. It was held that the relationship here gave rise to a duty of care within the ambit of Hedley Byrne v Heller and Henderson v Merrett Syndicates237. 2–178 One can envisage a situation in which C halts work after the inspector makes an unfair oral representation to it. So far as C is concerned, this may, or may not, be a matter covered by the contract which provides it with relief, or compensation. However, if it is, and D fails to show that the inspector’s representation satisfies Lord Browne-Wilkinson’s test in X v Bedfordshire CC, then, as the law presently stands, it seems to be the case that, if C relies upon the representation, D may be left without a remedy, even though it knows that, in all likelihood, if C

234 235 236 237

X v Bedfordshire County Council [1995] 2 AC 633, 730H–731A (HL). X v Bedfordshire County Council [1995] 2 AC 633, 740E. Welton v North Cornwall District Council [1997] 1 WLR 570 (CA). Henderson v Merrett Syndicates Ltd [1994] 3 WLR 761, [1994] 2 AC 145.

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does not comply with the inspector’s requests, the inspector will issue a stop notice on proceedings. 2–179 The effect of this is that C’s practical experience cannot be taken into account, even though it would have saved wasted time and money on D’s part, on the part of the local authority, and on the part of the tribunal that must eventually resolve problems arising from the local authority’s resort to the enforcement notice. 2–180 The approach in the New Zealand courts has been more flexible than that of the English courts and, it is thought, more in tune with commercial realities238. To force C to comply with an enforcement notice which, out of negligence on the regulator’s part, causes economic loss to D, and ultimately the local authority itself, is an oppressive policy for the courts to maintain when, were the negligent enforcement to cause actual damage (but effectively economic loss in righting the defect), D may have recourse to compensation from the local authority under statutory provisions.

The importance of the statutory framework 2–181 Given the immunity afforded to public authorities by the English courts in certain circumstances, it is important that C puts itself within the scope of any relevant statutory compensation scheme wherever possible. This includes situations where local authority officers make oral representations upon which they expect C to rely, because in being distracted from the statutory procedural provisions, D, through the actions of C, is effectively taking any risk of economic loss on itself. 2–182 In a case involving a local authority’s negligent refusal to furnish applicants with hackney carriage licences, Schiemann J said that he sympathised with persons who, through this policy, found themselves left without an action for economic loss caused by public authorities, but he did not think that he was at liberty to extend the law to cover the hiatus239. Similarly, in Feakins v Dover Harbour240, it was held that an exporter of live animals was not entitled to damages for loss caused by a breach of statutory duty under s 33 of the Harbours Docks and Piers Clauses Act 1847, which provides that the harbour, dock and pier shall be “open to all persons for the shipping and unshipping of goods, and the embarking and landing of passengers”. In December 1994 and January 1995, the claimant’s business had been adversely affected when, in order to placate animal rights protesters, the defendants resolved that the harbour should not be used for the shipping of live animals for slaughter. In this case, Tucker J said that, whilst earlier cases suggested that s 33 did give rise to a private law claim in damages, there were a number of countervailing considerations that dissuaded him from following them: 1.

The statutory duty imposed by s 33 was not enacted for the protection of a limited class. Instead it was a regulatory provision intended for the benefit of society as a whole. That view was fortified by the statement of Lord Penrose

238 [1992] 239 240

See, for instance, Bowen v Paramount Builders [1977] 1 NZLR 394; Lester & Hughes v White NZLR 483. R v Knowsley Metropolitan Borough Council, ex parte Maguire (1992) 90 LGR 655. KA and SBM Feakins Ltd v Dover Harbour Board, The Times, 9 September 1998.

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2.

3.

4.

in Peterhead Towage v Peterhead BA241 as approved by the Divisional Court in R v Coventry CC242. Where Parliament intended to impose financial penalties under the 1847 Act it said so, as in s 70 and ss 74–76. In other statutes passed at, or about the same time, where Parliament intended to confer a right to damages for breach of duty, it did so expressly, as in s 55 of the Railway Clauses Consolidation Act 1845. The purpose of s 33 was to impose a general administrative function involving the exercise of administrative discretion. In those circumstances, it would be very unusual to find that a breach of statutory duty gave rise to a remedy in damages. Section 33 was not devoid of remedies. It was open to any aggrieved person to apply with little delay for judicial review and, if appropriate, to seek a declaration or injunctive relief.

Private nuisance 2–183 The policy underpinning an action in nuisance is that occupants of property should be able to enjoy their land without interference. 2–184 In the case of a private individual causing nuisance by delay, there seems to be little authority. However, there has been a successful action in nuisance arising out of a landlord’s scaffolding being left in place for over two years in pursuance of its obligation to repair defective cladding, but inhibiting the trade of one of its tenants243. The action was based upon identifying the periods of delay to the progress and completion of repairs, without which the scaffolding would have been unnecessary, and seeking compensation in pure economic loss for the damage to trade suffered as a result of that delay to completion of the repairs.

Utilities and statutory undertakers 2–185 Gas, electricity, water and telecommunications works are often causes of delay. Where a utility company, or statutory undertaker, has started work unconnected with the development on a road that blocks C’s access to the site, thereby causing it delay, the appropriate redress would at first sight appear to be an action in tort for nuisance. The claimant would have to show that it has suffered particular damage (financial, or otherwise) and that the damage suffered through the nuisance was greater (even if only temporary, although the less transitory the interference, the more likely a claim is to succeed) than that suffered by the general public. However, the power of utility companies and statutory undertakers to cause nuisances often stems from statutory provisions. 2–186 In Allen v Gulf Oil Refining Ltd244, it was suggested that, because in a situation where statutory compensation had been provided for within an authorising Act, there was an assumption that it extinguished any common law action, so where there was

241 242 243 244

Peterhead Towage Services Ltd v Peterhead Bay Authority (1992) SLT 593, 595. R v Coventry City Council, ex parte Phoenix Aviation [1995] 3 All ER 37. An unreported case of the previous author’s experience. Allen v Gulf Oil Refining Ltd [1980] QB 156 (CA), 168–169, per Lord Denning MR.

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no statutory compensation, it followed that the common law action in tort remained. However, in the House of Lords, the decision of the Court of Appeal was reversed and the House was content to leave the claimant without a remedy where the nuisance had actually exceeded the authorised level. 2–187 There is a difference between gas, electricity and telecommunications works on the one hand and water works on the other. This is because compensation under the Telecommunications Act 1984 incorporates earlier provisions under the Compulsory Purchase Act 1965. The Gas Act 1986 and the Electricity Act 1989 do not incorporate such provisions and are instead merely silent with regard to compensation for loss, as opposed to damage245. Judicial interpretation of the earlier statute has limited compensation to that for physical damage246. Nevertheless, the fact that pecuniary loss is not envisaged within the Gas, Electricity and Telecommunications Acts implies that the normal principles as to establishing a tortious claim for nuisance ought to apply. However, in order to claim successfully for nuisance, the defendant must have failed to establish that it acted reasonably so as to minimise the harm caused to the claimant247. Once the defendant has discharged this burden, the claim for nuisance must fail. 2–188 The Water Industry Act 1991 envisaged a situation in which street works could cause loss. Schedule 12 to that Act provides for compensation under similar terms to those found in the Town and Country Planning Act 1990248. However, the provision incorporates the gist of the qualification expressed by Webster J in Department of Transport v Northwest Water249, that liability will only arise where the statutory undertaker is in breach of its duty to minimise the damage suffered by the affected party250. In light of this, claims under the statutory scheme are limited in scope in the same way as those at common law.

Building control 2–189 Under the Building Act 1984, building inspectors are given the discretionary power to attach enforcement notices to projects (and/or parts of projects) in order to compel C to comply with Building Regulations. In theory, if C adheres faithfully to previously approved plans, then the building inspector is estopped from issuing such a notice except upon compensation. However, because in practice it is rare that C, during the performance of the work, is able strictly to adhere to the plans, the inspector is given a wide power to interfere with the progress of work on site251. 245 Damage is compensated in the Gas Act 1986 Sch.4 para.1(3), and the Electricity Act 1989 Sch.4, para.1(6). 246 See Argyle Motors (Birkenhead) Ltd v Birkenhead Corporation [1974] 1 All ER 201. Telecommunications works causing injury other than economic loss attract compensation under s 10(2) of the Compulsory Purchase Act 1965, incorporated into the Telecommunications Act 1984 by Sch.2 paras 2–15. The pedantry is well exhibited in Jolliffe v Exeter Corporation [1967] 2 All ER 1099. 247 Department of Transport v NorthWest Water Authority [1983] 3 WLR 105. But cf. the House of Lords’ caveat that the imposition of a duty of care in a particular case is of an “intensely pragmatic character”, in Rowling v Takaro Properties Ltd [1988] AC 473, 500–503, per Lord Keith of Kinkel. 248 Para.2(a) and (b). This has now been replaced by the Town and Country Planning Act 1990. 249 Department of Transport [1983] 3 WLR 105, 109. 250 See, for example, Tate & Lyle v Greater London Council [1983] 2 AC 509. 251 As to the duty of parties to comply with building regulations and the liability in tort that can arise therefrom, see the interesting Australian case Toomey v Scolaro’s Concrete Constructions Pty Ltd [2001]

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2–190 There remains the “umbrella” compensatory provision offered by s 106 of the Act, which would also apply where no plans have been deposited, or the plans have been rejected by the local development authority within the prescribed time. The section provides that the local authority “shall make full compensation to a person who has sustained damage by reason of the exercise by the authority of any of their powers under this Act”252. 2–191 As a discretionary power, a s 36 notice would fall squarely within the scope of the intended compensation. However, whether this applies to claims for delayinduced economic loss depends upon how the courts understand the term “damage”253. Under the wording of the analogous s 278(1) of the Public Health Act 1936, the Court of Appeal found in Lingke v Christchurch254 that a three-month obstruction to the claimant’s furniture shop was compensable. Economic loss in the form of prevention of trade (which can be regarded as analogous to delay in contractual progress) must therefore be covered by the wording by analogy with the earlier statute. However, there is a long line of authority to the effect that, under that Act, the “exercise of authority” must be lawful to found a claim for compensation255. Where, therefore, the exercise of authority has been negligent, authorities have attempted to plead that negligence as a statutory defence. Nevertheless, it is thought that a court would be slow to find in favour of an authority which relied upon its own negligence to defend a claim against it. 2–192 The law is quite clear that claims for pure economic loss arising out of negligence should not succeed outside the ambit of the Hedley Byrne/Caparo principle. In light of Murphy, the English courts have been left with little room for manoeuvre visà-vis recovery of economic loss from public authorities providing regulatory services. This is exemplified in Davis v Radcliffe256, which involved the regulation of banking procedure. In Canada, on the other hand, the scope for recovering such loss from public authorities appears broader257. This seems sensible from a policy perspective, although it is “policy” which has purportedly fuelled the incremental approach to negligence now adopted by the English courts. Moreover, there seems to be no logical justification in the case of privatised utility companies for allowing them to retain statutory and “policy” protection.

Development control 2–193 In the event of delay that causes economic loss as a result of a local planning authority’s stop notice which has subsequently been quashed, varied, or withdrawn (other than on grounds of “planning policy”), s 186(2) of the Town and Country

VSC 279. In that case, a claimant was rendered quadriplegic as a result of falling over a stairway landing during a drunken brawl. The stairway balustrade, although compliant with earlier building regulations, was found shorter than a later set of regulations required, by a couple of inches. C and the CA were ultimately held liable for a large proportion of the several million dollars of damages claimed. 252 Emphasis added. Claims below £50 go to the magistrates’ court and claims over that amount to arbitration. 253 By contrast, in the Town and Country Planning Act 1990 s 186(2), it is specifically “any loss or damage” that is compensable. 254 Lingke v Christchurch Corporation [1912] 3 KB 595. 255 See, for example, Imperial Gas Light and Coke Co v Broadbent (1859) 7 HL Cas 800. 256 Davis v Radcliffe [1990] 1 WLR 821. 257 Rotherfield v Manolakos (1990) 63 DLR (4th) 449, per LaForest J.

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Planning Act 1990 becomes operative. This provides that the local authority should compensate the party affected for “any loss or damage directly attributable to the prohibition in the notice”. Although there are few reported cases from which to flesh out a watertight interpretation of the provision, the statutory wording is precise, and in Sample v Alnwick258, which concerned s 177 of the Town and Country Planning Act 1971, the plaintiffs were awarded damages for the delay-induced idle time of the labour force. This tends to confirm the legitimacy of the broad statutory description of damage259.

258 Sample (Warkworth) Ltd v Alnwick District Council (1984) JPL 670. 259 The Lands Tribunal did not consider the costs of the appeal recoverable because they were not “directly attributable” to the prohibition in the notice itself.

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CHAPTER 3

Project procurement

Introduction CIOB Contract for Use with Complex Projects (CPC 2013) Types of contract Traditional “build-only” contracts “Design and build” contracts “Construction management” contracts “Management-contracting” contracts Procurement arrangements Guaranteed maximum price and target cost Partnering and alliancing Private finance initiative and public private partnership

3–001 3–007 3–016 3–016 3–030 3–036 3–047 3–056 3–056 3–060 3–064

Introduction “When a man is buying a basket of strawberries it can profit him to know that the bottom half of it is rotten.”1

3–001 Procurement method is inextricably linked to the other sources of risk. Although the technical standards that affect the quality, function, fitness for purpose, and safety or environmental protection of a construction project may remain unaltered, the method of procurement of the works will have a significant effect on the contract construction cost and time. 3–002 One of the principal aspects of risk management in construction is the appropriateness or otherwise of the choice of construction contract. The specification, the type of project and the intended relationship between the parties should influence this choice2, but perhaps the most important consideration of procurement should be the choice of a construction contract that provides D with the opportunity to manage the consequences of those delaying events that are D’s risks.

1 SC Langhorne, M Johnson (ed), More Maxims of Mark (1927), p.941. 2 P Capper, “Overview of risk in construction” in J Uff QC and M Odams (eds), Risk Management and Procurement in Construction (London: Centre of Construction Law and Management, King’s College, 1995).

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3–003 Recent CIOB research3 has found that there is a significant difference between the requirements of simple and complex projects as to their management requirements. The CIOB Guide4, published as a result of that research, observes: “Whilst it is apparent that simple projects can be managed intuitively by experienced construction managers, it is also apparent that the management of complex projects cannot. Attempts to manage time on complex projects by intuition alone will result in failure. In complex projects there are simply too many consequential possibilities for time to be managed by intuition alone. A more scientific approach is required to assess the consequences of express and implied changes and the effect of other intervening events on the multiplicity of activities in a changing time-frame.”

3–004 It is thus apparent that, whatever the procurement route selected, unless the method selected for a complex project takes account of the sort of scientific approach to time management described by the CIOB Guide, the chances of success of the project will be significantly reduced5. In that regard, the Guide defines projects both exclusively and inclusively as follows6: “Simple projects comprise those in which construction has all the following characteristics: design work is completed before construction starts; work comprises a single building (or repetition of identical buildings); construction is lower than five-storey height; without below-ground accommodation; carried out to a single completion date; without phased possessions or access dates; with services not exceeding single-voltage power, lighting, telephone, hot and cold water and heating; with a construction period of shorter than nine months; with a single contractor; and with fewer than 10 subcontracts. Complex projects comprise those in which construction has any one or more of the following characteristics: design work is to be completed during construction; work comprises more than one building; construction is higher than five-storey height; contains below-ground accommodation; to be completed by multiple key dates and/or sectional completion dates; with multiple possessions or access dates; with short possessions; work contains services exceeding single-voltage power, lighting, telephone, hot and cold water and heating; construction work is accompanied by work of civil engineering character; the construction period is greater than 12 months; construction is to be carried out by multiple contractors; or construction is to be carried out by more than 20 subcontractors.”

3 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008). 4 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), para.1.4.8. 5 See, Ch.2, “The Risk of Development”, at paras 2–051 to 2–063. 6 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), paras 1.5.2 to 1.5.3.

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3–005 Recent research carried out by the CIOB7 has shown that during a three-year period ending in December 2007, a surprisingly large proportion (namely 18%) of all construction projects were being constructed under a contract specially prepared by, or under the direction of D and 25% were being constructed under the standard form of lump-sum contract (with or without quantities). Partnering contracts accounted for 11% of projects underway and 31% were being constructed using standard forms of design and build contracts. [Please refer to Figure 3.1] 3–006 Consistent with design and build and bespoke contracts being the predominant form of contracting and with the trend of such forms of procurement being to transfer more risk to the contractor than is apparent in other contracting forms, in two-thirds of the projects reported upon, the CIOB report found that the costs of delayed completion were predominantly at the risk of the contractor.

CIOB Contract for Use with Complex Projects (CPC 2013) 3–007 CPC 2013 (considered further at paragraph 4–325 below was issued in April 2013 and is stated to be suitable for use on works of high value, or complexity, including major real estate projects and engineering/infrastructure projects, but less suitable for simpler works, or those of short duration, projects procured using construction management/EPCM without amendment and projects being undertaken by inexperienced clients, or contractors. It is intended for use on UK and international projects. 3–008 The contract documents comprise the contract agreement special conditions, the conditions of contract, the contract appendices and the specification. There is a standard form of subcontract, agreement for appointment of contract administrator, agreement for appointment of the project time manager, agreement for appointment of the design, co-ordination, manager and collaborative services agreement for use with building information modelling. 3–009 There is a heavily placed emphasis upon collaboration and transparency. For example, all documentation and site information must be published either in a common data environment (to which all participants have access), or by electronic transfer, or email. Essential risk management information (including progress records) must be submitted in native file format to the participants having a role in management, supervision, or design during the works. Because certain of that information is likely to be commercially sensitive, there is to be a data security manager in order to manage the process. 3–010 The transparency obligations include an obligation placed upon the contractor to produce as its working schedule a critical path network, accompanied by a planning method statement, which complies with the CIOB’s Guide to Good Practice Management of Time in Complex Projects and with the default specification for its design production and maintenance. The working schedule must be published electronically in native file format, so that it can be interrogated and the underlying assumptions and logic understood. Defined layers of information are required. A new role of auditor is credited, the auditor being obliged (before work commences and at regular intervals) to examine the contractor’s planning method statement, working schedule and progress records in order to ensure compliance with the requirements of the contract.

7 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008).

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3–011 As part of the time management process, the contract creates a new role of project time manager to advise the contract administrator on time-related issues. The project time manager, who is obliged to act independently and fairly, must “…check on a regular basis whatever is produced by the Contractor by way of time related information and to accept it, if satisfactory, or reject it, or accept it subject to conditions…”. 3–012 The contract takes a proactive approach to the provision of information required by the contractor, but, ultimately, an employer’s time and cost risk event will occur only if, at the latest, information that is genuinely required is not provided by the date it is actually needed. 3–013 The approach to dispute resolution is also proactive. The parties may settle any dispute by mediation, but there is provision for the expert determination of disputes. There is also a contractual right to adjudicate any dispute, with arbitration as the forum for final dispute resolution. However, disputes concerning specified matters (such as the rejection, or conditional acceptance, of a submittal) cannot be referred to adjudication, or arbitration, until an expert determination has been made and a notice of adjudication, or arbitration, has been issued within 20 business days of its issue. There are strict time limits to be complied with regarding the referral of disputes for expert determination and, if those time limits are not complied with, the issue is deemed to be agreed. The expert has only 20 days in which to determine a dispute which has been referred and parties new to the contract must therefore be wary of these matters: see www.ciob.org/contract-complex-projects for further details. 3–014 In addition to the existing NEC3 contract documents, the NEC published (in April 2013) the NEC3 Professional Services Short Contract (PSSC) for use on simple projects and seven “how to” guides (ie how to write the EEC Works Information, how to use the Engineering and Construction Contract communication forms, how to write the “Professional Services Contract Scope”, how to use the Professional Services Contract communication forms, how to write the Term Service Contract Service information, how to use the Term Service Contract communication forms and how to use BIM with NEC3 Contracts)8. Project Bank Account provisions and clauses and amendments have been incorporated throughout the suite in order to reflect the changes brought about by the payment and adjudication provisions in the Local Democracy, Economic Development and Construction Act 2009. 3–015 The RIBA Plan of Work 2013 was launched in May 2013 (along with a Guidance Note), replacing the 2007 Plan of Work. The architectural work stages have been reduced in number (from 11 stages A–L, to stages 0–7, with eight task bars), the Plan of Work having been aligned with the CIC/BIM Task Force co-ordinated work stages. The tendering stages have been deleted and replaced with a procurement task bar. Sustainability is stressed at each stage and there are checklists for its inclusion in the design. The Plan of Work was developed with the Government Soft Landings Initiative in mind.

Types of contract Traditional “build-only” contracts 3–016 The traditional process, illustrated at Figure 3.2, involves D in separate relationships with each of its consultants, whose job it is to prepare the design and specification or bill of quantities. C’s job is then to carry out the designed work under the 8 See also, J Chan, D Chan and B Clifford, “New Engineering Contracts (NECs) in practice: empirical evidence from a pilot case study in Hong Kong” (2014) 13 Const LJ 217.

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direction of the CA. Thus, the essential features of what has sometimes been called “general contracting” are the existence of D, C, and possibly subcontractors and the separation of the design elements of the process from the construction elements. In this form of procurement C and the designers (and sometimes a project manager) are employed directly by D, but under separate contracts. This is usually characterised by the appointment of a CA who, for some purposes, is D’s agent but who has an obligation to act fairly in certifying, amongst other things, extensions of time for delay9. [Please refer to Figures 3.2 and 3.3] 3–017 Where D comprises a multiplicity of end users, communications can sometimes be improved by the appointment of a project manager to act as an interface between D and the design team. The project manager then acts as a useful single point of focus for information exchange between the design team and D. (See Figure 3.3.) Unfortunately, in practice, unless the project manager is as adept at the design team functions as they are knowledgeable about D’s requirements, the insertion between D and the design team of a project manager can tend to act as a barrier to communications instead of an improvement in them10. 3–018 This method offers the advantage of independent professional advice, and hence control of the quality of the building process and also makes the introduction of variations as the work proceeds relatively easy and controllable. Variations can be priced directly on the basis of rates quoted for the various categories of labour and materials in the contract bills, or priced independently of the bill rates11. Variations of the traditional process are commonly used, whereby tenders are detailed on the basis of approximate quantities, or on a specification and drawings-only basis without bills where C has to take off its own quantities. This sometimes enables parts of the preconstruction activities to be run in parallel with contracts offering potential savings on pre-contract time, but with this method the attendant risk of voluntary change during the construction period is enhanced. 3–019 The traditional “build-only” method of procurement is intended to be a linear approach to the various processes involved in producing a building. Savings in time over the linear approach can be made by parallel processing of design and construction, but at a risk. All parallel processing carries with it a degree of risk proportionate to the degree of overlap, but is often easier to achieve and at less risk than in other methods of procurement. 3–020 Unrealistic time estimating by D prior to tender, procrastination in the making of key decisions during the design stage and poor definition of the contract scope are often the cause of the need for the time-shortening process of producing the bills of quantity, whilst the architect or engineer produces the design, so that the essentially linear process of the production information is concatenated. This can be a recipe for inconsistencies, change, delay and increased costs. Although the view has been expressed12 that drawings and bills of quantities, which together contain design and specification, 9 See Balfour Beatty v Docklands Light Railway Ltd (1996) 78 BLR 42 and John Barker Construction Ltd v London Portman Hotel Ltd (1996) 83 BLR 31. 10 For an indication of the contractual responsibility of the parties where a project manager is involved see Chesham Properties Ltd v Bucknall Austin Project Management Services Ltd (1996) 82 BLR 92 (QBD). 11 JCT80 and JCT98 Cl.13A. 12 The National Economic Development Office, Faster Building for Industry (London: HMSO, 1983). The Report of the Building and Civil Engineering Economic Development Committee’s Joint Working Party.

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can be produced largely in parallel if the architect and quantity surveyor work effectively together, in the author’s experience, whilst possible, it is not a risk-free process and only seems to enhance the likely risk of implied change arising out of inconsistencies. 3–021 On the other hand, the preparation of approximate bills13 for negotiation and selecting a contractor whilst the detailed drawings are being prepared does tend to save time and to enhance effective contract management. This is because C can effectively use the time taken in completing the design to organise and prepare for the project and to incorporate the work of subcontractors in the schedules, whilst it proceeds with the site establishment. 3–022 The principal causes of delay in traditional “build-only” contracts have been found14 to be: 1. 2. 3. 4. 5. 6.

changes required by licensing authorities during construction; design information not being complete at the start of construction; ground conditions; late design information; poor communication and information flow; and tenant indecision and changes in tenant’s requirements.

Whilst these causes tend to follow from inadequate pre-contract preparation of the design, experience also shows that a failure to appreciate, or take responsibility for the requirements of an efficient interface between C’s work and specialist subcontractors’ work (whether under standard subcontractor forms or bespoke forms) is also a major source of failure in traditional construction procurement methods. 3–023 It is self-evident that delay due to unforced errors, or omissions, should be avoided, in this form of procurement. However, the CA must have sufficient opportunity to complete the design and ensure that it is fully co-ordinated before C starts work on site. It can only lead to financial disaster if the design is not completed before commencement on site. Indeed, any CA who fails to warn D of the inadequacy of incomplete design information, whilst simultaneously advising that the work should be carried out under a “build-only” form of contract, may find it difficult to demonstrate that it has fully discharged its professional duty of care in the selection of an appropriate contract form. 3–024 Under design and build contracts C is responsible for its own supply of information and is therefore required to exercise a fair degree of foresight, anticipation and creativity in its choice of method. However, when operating under a “build-only” contract, such as JCT05, IFC05, ICE6 and ICE7, GC/Works/1/98, HK86, HK05, SIA80, AS4000 and so on, the forms are written in such a way that C is entitled to ask for any further information it requires sufficiently in advance of the time that it needs it and, under JCT9815 and JCT0516, to be entitled to the information it needs, whether or not it is asked for. In this type of contract, whenever there is a less than perfect flow of design information, there will be an enhanced risk of D being liable for the effects of delay and disruption over that for which D can be expected to be liable under design and build methodology.

13 14 15 16

For use under JCT98 with approximate quantities, for example. For use under JCT98 with approximate quantities. Cl.5.4.2. Cl.2.12.

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3–025 The 2009 edition of the Irish government standard forms of contract makes no express provision for the supply of further information, drawings, details, or levels but, on the other hand, it does make provision for “instructions”. Thus, under these forms, any request must be framed as though it were a request for instructions. 3–026 IGCE/09 and IGBW/09 provide17 that the parties “support” each other and by Cl.4.1.2, that “such support may be relevant particularly to (4) efficient order and timing of information provided for in the contract”. They also identify18 that C is to give the CA 10 days’ advance notice, in every case, of its need for any instruction that the CA is to provide. 3–027 There are essentially two forms of “build-only” contract: 1. 2.

the lump sum contract; and the re-measurement contract.

The theory behind a lump sum contract is that the risk as to fluctuations in cost and time falls on C, because the price and contract period is predetermined. Therefore, in theory, C is not entitled to further payment if the work costs it more to complete than it estimated, nor may it have more time to complete if the work takes longer19. That theory, however, becomes little more than superstition in relation to the rigidity of price and time under the standard forms of construction contract, where the risk of virtually every change in circumstances is borne by D20. 3–028 A re-measurement contract is for use in connection with projects where it is impossible, or very difficult to formulate a complete design before the commencement of the work on site. It usually relies upon a “fixed fee”, or approximate quantities method of tendering and is normally used because D is either: 1. 2.

unable to complete the design prior to the commencement date of the project and is thus unable to produce full and unabridged bills of quantity; or D considers that the work is better procured by way of trade packages, in a similar way to a management contract, but without the complex provisions and organisation, and some of the administrative disadvantages of construction management and management contracting.

3–029 Where it sometimes proves impossible to produce all the details of drawings, bills of quantities, specifications and so forth before the commencement of the work on site and JCT05 with approximate quantities is not attractive, then a fixed fee form of price cost, such as PCC06, is also a possible solution to this problem. However, under that form, the contract does rely on a definition of the works, from which D should not depart. If the works cannot be defined with accuracy, it may well be dangerous to invite contractors to tender on a fixed fee to cover all their overheads and

17 See Cl.4. 18 Cl.4.11.1. 19 See also SWI Ltd v P&I Data Services Ltd [2007] BLR 430, in which it was also found that D is not entitled to pay less than the lump sum, even if less work was actually carried out than was contemplated under the contract. 20 See, for example, the schedule of the time-related risks which can be borne by D under the standard forms of contract in Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), at App.1.

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profit. Inevitably, as the scope changes, their fee will increase and this may lead to spiralling costs and claims.

“Design and build” contracts 3–030 Under a “design and build contract”, C takes the lead role and is responsible to D for both the design and construction of the works. The communications and contractual nexus are illustrated in Figure 3.4. The nature of the responsibility can range from a duty of reasonable skill and care in carrying out the design services21 to that which, in a “turnkey” contract, can amount to an absolute obligation to ensure that the facility is fully functional, or meets certain specified performance criteria, often referred to as “fitness for purpose” liability, or “ready to occupy” status. 3–031 Before any “design and build” tenders can be worked, D must first produce its statement of its requirements and design and standards criteria to be adopted. In order to make this as relevant, clear and unambiguous as possible, D will require extensive professional advice and will almost always need to carry out ground investigation and complete a design to a scheme design standard in order to make sure that D’s requirements are adequately specified. The risk of errors in the conceptual design are then likely to reside with D, unless there is later some sort of novation agreement, by virtue of which, in some circumstances, C may agree to accept responsibility for elements of the project design originally prepared by D. Indeed, it seems to be part of the trend in risk transfer to edit the standard forms to provide that C is to be responsible for errors in D’s requirements. However, in accepting D’s design by novation, C should be aware that, amongst other things, a survey provided by D upon which D’s scheme design is based cannot always be relied upon for construction purposes and, unless C again tests the ground and checks the design against its own survey, problems will often follow. [Please refer to Figure 3.4] 3–032 Cost control of a “design and build” project is likely to be easier than in a traditional contract structure, particularly since, by comparison with a traditional contract, there should be fewer events entitling C to extensions of time and loss and expense. On the other hand, unless D takes particular care to keep good records and to enforce effective scheduling requirements (which do not appear in the standard forms of contract) it may be difficult to ensure value for money, control the quality of the finished work and secure timely completion. 3–033 In this form of procurement, C’s exposure to design liability, in addition to liability for the quality of workmanship and materials, potentially increases tender prices, but, on the other hand, C has greater control over the interface of the design and construction functions. In theory, this leads to greater efficiency and, from D’s point of view, theoretically a single point of liability. Thus, if there is a building failure, or delay in completion, D does not have to ascertain whether the architect, engineer, or CA is responsible (even though C may have to!). 3–034 In spite of the theory underpinning its attractiveness, this form of procurement does not, however, relieve D of all risk. There are four inherent difficulties: It is difficult for D to evaluate tender prices, because the tenderers may have produced different design solutions, which are not easy to compare. 21 As is the case with an architect, or engineer.

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It is more difficult to ensure that under-design is not incorporated into the specification and that low-grade workmanship does not occur on site. In handing both design and construction to D, unless unusual measures are taken, it will be more difficult to secure good records of progress made against a working schedule. Perhaps the most pernicious but commonly occurring of all risks under procurement routes that require the contractor to design is the risk of design development. The problem is not just one of standards, but also concerns work content. In order for C to receive approval of its design, it will be required to submit its proposals for checking. If not approved then D will reject the submittal and require a resubmittal, or request changes conditional to approval. Whilst D will see these as no more than is necessary in order to comply with its wishes and contemplated by the contract to be at C’s risk, such rejection, or requested changes, may well be construed by C to be a change in D’s requirements which, under the contract, are at D’s risk. For a good example of the difficulties that the risk of design development can bring, see Skanska v Egger22, in which HH Judge Wilcox reflected: “At the heart of the dispute between the parties, however, lies the question of what was originally contained in the contract and what was that which was genuinely a change or additional. In relation to many of the disputed claims, [C] advance the argument that they arise from changes of [D’s] requirement and [D] says they are merely instances of design development, clearly comprehended within [D’s] Requirements in the contract. In financial terms, the differences are very substantial. [D’s] design development amounts to £1.5m, [C’s] change amounts to £12m.”

Apart from other things, the court held, for example, that additional process plant steelwork, required as a result of a later drawing of the process plant provided by D, was simply design development, on which D was entitled to provide information under the contract. The court accepted that, although it was poorly defined at contract, there was an indication of a requirement for process steelwork on the tender drawings illustrating D’s requirements and that it was part and parcel of the risk accepted by C that D’s requirements would be developed at a later stage. 3–035 The principal reasons for delay in “design and build” contracts appear to be quite similar to the sort of risks that attend the traditional form of contracting23. The only significant differences seem to be that, under the standard form provisions, D is unlikely to have access to C’s working schedule and progress records, rendering it more difficult to defend itself against claims and global claims24, and disputes regarding design defects will be between C and its architect, or engineer, rather than between D and its architect or engineer.

22 Skanska Construction Ltd v Egger (Barony) Ltd [2002] EWHC 773 (TCC) at [30] to [31]. 23 The National Economic Development Office, Faster Building for Industry (London: HMSO, 1983). The Report of the Building and Civil Engineering Economic Development Committee’s Joint Working Party. 24 See Ch.19, “Total time, total loss and global claim”. See also K Pickavance, “A case for the defence” (September 2006) RICS Construction Journal, at 18.

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“Construction management” contracts 3–036 The essential difference between “construction management” and “management contracting” is in the nexus of the contracting parties. In “management contracting”, the CM is in direct contract with the contractors who carry out the works contracts. In “construction management”, on the other hand, the construction manager does not contract with the works contractor. In “construction management”, illustrated at Figure 3.5, D directly employs all the works contractors, or whatever they are called under the contract25, and provides the co-ordination of management through a consultant CM, leaving D itself to absorb the risks associated with the co-ordination26. [Please refer to Figure 3.5] 3–037 “Construction management” is a common method of procurement in the United States27 and is a procurement method that has been used in the United Kingdom on some major projects. Although the CM is often a major contractor, or a “management” arm of a major contractor, it is also entirely practical and efficient for the management of the separate trades to be undertaken by the architect, engineer, quantity surveyor, or project manager. A major feature of this approach is the way in which it elevates the status of the contractors actually doing the work to a major participating role, thereby recognising their complete involvement with design, construction and scheduling in their particular specialisation. 3–038 Under this structure, D employs a number of contractors, of the size and specialisation that would be appropriate for subcontractors under a traditional main contract. D is therefore effectively its own main contractor and has responsibility for finding and tendering the works contract packages and co-ordinating the performance of the work. Unless D has the in-house expertise, in addition to the usual professionals, it must also employ a construction manager, or one of the design team to manage the works contractors and co-ordinate the works on its behalf. The importance of D’s role in this method of procurement is exemplified in Lee Masonry28, in which, in affirming the lower court’s decision, the Tennessee Court of Appeal held D liable to two trades contractors for failing to take reasonable measures to guard against delay and disruption caused by other trades contractors in its co-ordination, management, and scheduling of the works. The Court of Appeal said: “We agree with the trial court that [D’s] failure to issue new schedules properly constituted a material breach. [D] failed to issue a fully integrated schedule before construction began and issued four revised schedules without change orders as required by [the contract]. These breaches preceded any failure of [C] to give notice and were of sufficient magnitude to justify [C’s] failure to continue and complete its performance of the contract. Thus, any failure by [C] to fully perform their contractual obligations should not prevent them from seeking damages from D.”

25 See CM08 and TC08, in which works contractors are referred to as trade contractors. 26 A report of the working group at Reading University entitled “Construction Management Forum: Report and Guidance 1991” sponsored by the British Property Federation, the Department of the Environment and the developers Olympia & York found that construction management was more advantageous to D than management contracting because it tended to be less confrontational. In construction management it was found that, because the works contractors had a direct contract with D, their chances of being paid regularly and promptly were increased and the price for the works contract package was therefore reduced and communications improved. This is also the author’s experience. 27 See E Rojas and I Kell, “Comparative analysis of project delivery systems cost performance in Pacific Northwest public schools” 2008 ASCE 134. 28 Lee Masonry Inc v City of Franklin, Tennessee, M2008–02844-COA-R3-CV (28 April 2010).

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3–039 Whilst liquidated damages are the normal sanction, there is a risk that the damages that can be imposed upon a particular works contractor will not represent D’s likely loss in the event of late completion of the project as a whole. The increased risk for developers involved in contracting with and co-ordinating a large number of works contractors is attributable to the fact that, because the separate contract values tend to be quite low in proportion to the total project value, liquidated damages for delay to completion payable by those works contractors (which, for commercial reasons, should not be disproportionately high in relation to the contract value) will tend to be less than under a traditional main contract for the totality of the work, notwithstanding that the unmitigated knock-on effect may be the same. For example, in this method, except in periods of economic depression29, a works contractor, say, for tiling with a contract value of £400,000, is unlikely to consider entering into a contract for the completion of an office block, which will justify liquidated damages of £200,000 per week in the event of non-completion. 3–040 On the other hand, the advantages of this form of procurement include: early involvement of specialist designers meaning that “buildability” can more easily be incorporated into the design;

design and construction phases can overlap and reduce the overall development period substantially more than the traditional methods; variations are relatively easy to incorporate; the construction manager, as a professional, has equal status with the other professionals and is closer to D; there is a flexibility of approach to progress and scheduling; individual construction contracts can be tailored to particular work; D has direct contracts with the works contractors and the risk of insolvency of the main contractor is avoided; because of their direct contracts with D, the works contractors have a higher expectation of being paid, or paid promptly, without set-off, than when paid via a principal contractor as subcontractors. This tends to promote a higher degree of co-operation; and no single works contractor has possession of the site. 3–041 The practical difficulties in this form of procurement are associated with: the greater involvement by D, both tactically and administratively, than is needed in other methods of procurement;

the co-ordination of the works contractors; the difficulty of getting the works contractors to accept their elevated role in the management of the contract; dealing with overlapping responsibilities; the apportionment of liability for delay and disruption; and the assessment of sanctions for delay and disruption.

29 When the financial climate is not so buoyant, in order to stay in business (even in the short term), the works contractor may be forced to accept such liability simply because of the scarcity of work and credit facilities (despite the insanity of it) the relationship of the value of the liquidated damages to the value of the contract then seems not to be such an important consideration in the short term.

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In particular, the combination of factors 2 and 3, above, presents problems of a conceptual nature, which whilst theoretically challenging, tend to be more easily solved in practice. 3–042 The schedule to which each works contractor is to work must be a fully integrated project-wide schedule for the construction management system to work. If the works contractor is simply given a date by which its works must be completed, but it is left to the works contractor as to how it achieves this completion date, it will be very difficult for the construction manager to control the progress and integration of the works contractors’ works (eg to have works contractors working contemporaneously), and the “fast-track” benefits of construction management will be jeopardised. 3–043 Thus, the schedule must in fact be a “developer’s schedule” and be designed by the construction manager to sequence each works contractor’s package. The works contractors cannot be given the power to co-ordinate their work amongst themselves: not only do they generally lack the practical ability to oblige each other to work in a certain sequence, or on certain parts of the site, but, because of the intermittence of their interest, they cannot have command of the overall concept of how each part of the project fits together. In so far as it is the construction manager’s task to schedule the works contractors, the control of the works contractor (to ensure that the works contractor does not delay other works contractors) must come about as a result of the works contractor’s participation in the schedule and its acceptance of its part in it as a contractual obligation30. 3–044 Whilst TC08 is specifically designed for use with the CM08 construction management form, commonly bespoke forms and minor works agreement such as MWA98 and MWA05 or GC/Works/2/98 are used for a works contractor in this form of procurement. There is no need here for the more complicated forms of dealing with complex interrelationships and long contract periods, since the works contractors are only required to perform discrete parts of a project (generally their particular trades only). 3–045 In this form of procurement, the flexibility31 and the attendant benefits of reduced cost and enhanced quality make this an attractive alternative to the traditional “build only” method of procurement, but it is a method of procurement in which D must remain part of the project team and decisive. Where D is a government department, or another institution of like-kind, which lacks a mechanism for taking responsibility and making decisions, other than through a committee32, it can be a recipe for disaster33. 3–046 In The Holyrood Enquiry34, Lord Fraser found that the principal cause of the failure to keep control of the cost and time of the new Scottish Parliament building 30 In this respect, the programming and integration requirements are no different from the procedures that C should adopt in regard to its domestic subcontractors and nominated subcontractors under traditional forms of contract. 31 The construction manager can have as many works contractors decorating on the site as they can manage. 32 Delegatus non potest delegare is one of the fundamental principles of administrative law. When a higher authority delegates an authority, or decision-making power to a person, or institution, that person, or institution cannot delegate such authority to another, unless there is explicit authorisation for it in the original delegation. 33 This is perhaps why this method of procurement is not a preferred procurement strategy in the Office of Government Commerce, “Procurement Guide 06 – Procurement and contract strategies”, 2003, Achieving Excellence in Construction, HMSO. 34 The Rt Hon Lord QC Fraser of Carmyllie, The Holyrood Enquiry (HMSO, 2004).

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was the adoption of the procurement route of “construction management” and an early completion date, coupled with an incomplete design and a desire for a fixed price, on which Ministers had not been kept well informed. In concluding on this issue, Lord Fraser said: “virtually none of the key questions were asked. Similarly none of the disadvantages of construction management appear to have been identified and evaluated. If the key questions had been asked and subjected to rigorous assessment, I cannot speculate whether the requirement for an early completion date would have been revisited, enabling a less risky procurement method to be adopted, or whether the construction management route would in fact still have been followed. It is, however, evident that the Scottish Office, while working to publicly declared fixed budgets and being highly ‘risk averse’, was preparing to follow a procurement route for which there could be no fixed budget and a high degree of risk would rest with the client.”

However, it would seem that, in requiring an early completion date, coupled with an incomplete design and a desire for a fixed price, the failure was not so much the selection of the procurement route, but in communication. The combination of requirements was always going to be irreconcilable.

“Management contracting” contracts 3–047 “Management contracting” is a procurement route in which D has a contract only with the management contracting firm on the basis of a fixed fee. This contracting construction management firm then enters its own contracts with the works contractors for doing the work. This is to be distinguished from the term “construction management”, in which D enters into direct contracts with the works contractors doing the work. The communications and contractual nexus of management contracting are illustrated in Figure 3.6 below. There is, at present, considerable confusion over the use of these terms, and unfortunately “management contracting” is frequently used to refer to both that and “construction management”. [Please refer to Figure 3.6] 3–048 Under this structure, D will employ the professionals to design the facility and the management contractor to construct it. This is similar to a traditional structure, except in the case of the risk of default by subcontractors (known as works contractors), which, under this form of procurement, is borne by D and not by the management contractor35. In other words, it is somewhat like the traditional form of “build-only” procurement method, but with a guaranteed profit for the contractor with limited responsibility, even for domestic subcontractors. Copthorne Hotel v Arup36 arose out of an appeal against the determination by HH Judge Hicks QC, in which he had been asked to determine whether the management contractor under MC87 could be liable for any defects arising in whole, or in part out of a breach by a works contractor37. The Court of Appeal38, following the authority of Lord Diplock in Modern Engineering v 35 See MC87 Cl.4.1 and Sch.2 thereto and MC08 Cl.4.1 and Sch.1 thereto. 36 Copthorne Hotel (Newcastle) Ltd v Arup Associates [1998] 85 BLR 22 (QBD/CA). 37 At first instance, (Copthorne Hotel (Newcastle) Ltd v Arup Associates [1998] 85 BLR 32, (QBD)), HH Judge Hicks QC had held that Cl.3.21 did not exempt the management contractor from liability for its own breaches of contract or where loss flowed from the management contractor and the works contractor being in breach. The purpose of Cl.3.21 was to provide the management contractor with a measure of protection against the otherwise strict consequences of Cl.1.7 where a potential liability arose from default of the works contractor alone. 38 Copthorne Hotel (Newcastle) Ltd v Arup Associates [1998] 85 BLR 50 (CA).

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Gilbert Ash39, held that, whereas the management contractor was not liable for loss flowing from a breach by a works contractor, Cl.3.21 should be given a narrow interpretation so as not to provide the management contractor with immunity from the consequences of its own breaches of contract. 3–049 The relationship between risk and tender premiums was a critical factor in the emergence of “management contracting” as a method of project procurement. In a technologically sophisticated development project, the contractual risks for the contractor can lead to unrealistically inflated tenders. The theory behind the use of this form of procurement is thus that D will be in a strong position to bear the risk, especially if D is a property developer that builds frequently. It is an established principle of risk assessment that, where D builds frequently and has large resources, the uncertainty associated with contractual risk is reduced. However, it is not so much that the risk is reduced, but that the uncertainty of a risk factor occurring is reduced. Indeed, the likelihood of a risk factor occurring (such as delay, or escalation of cost) is greater to a habitual developer. This method of procurement is often encouraged on the basis that, if the risk is almost certain to occur, it is meaningless to pay someone else to adopt it40. It is this philosophy which is employed to justify the choice of a contract form that used to be said to eliminate risk to C41. 3–050 The usual mechanism is that the management contractor is paid a fee, together with all amounts due to the works contractors under the works contracts. Although it can require competitive tendering of the works’ contract packages and can approve the terms of the works contracts, the risk of failure of co-ordination by the management contractor can give rise to delays, claims by works contractors and escalation in the cost of the works, the risk of which resides with D, unless it can show that the loss that the works contractor has suffered has arisen as a result of a breach by the management contractor. There can be significant difficulty in obtaining redress from the management contractor. 3–051 Mowlem v Eagle Star42 illustrated the nature of the management contractor’s obligations. It used to be a common misconception of management contractors that management contracting was a risk-free enterprise and that all it had to do was management, a quasi-professional task. Management contractors also assumed that, so long as they tried their professional best, they could expect to be paid on a cost-plus basis. Thus, where it says in the management contract: “ensure the regular and diligent progress” and “secure the completion of the same on or before the completion date”, the words “ensure” and “secure” really meant no more than use best endeavours. Since all delays caused by the works contractors were beyond the control of the management contractor, they therefore allowed the management contractor an extension of time without liability. In Mowlem, the decision of HH Judge Bowsher QC that, in order to become entitled to an extension of time, the delay by the works contractor had to be beyond the control of both the works contractor and the management contractor, was subsequently upheld on appeal. In practice, redress will depend largely upon what indemnities are given by the respective works contractors to the management contractor.

39 Modern Engineering (Bristol) Ltd v Gilbert Ash (Northern) Ltd [1974] AC 689. 40 The National Economic Development Office, Faster Building for Industry (London: HMSO, 1983). The Report of the Building and Civil Engineering Economic Development Committee’s Joint Working Party. 41 But see Copthorne v Arup, fn 36, above. 42 John Mowlem & Co Plc v Eagle Star Insurance Co Ltd (1992) 62 BLR 126.

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3–052 The advantages of the structure are similar to those of construction management, in that the works contracts can be entered into after settlement of the management contract, as and when the project schedule requires. There is also the similar disadvantage to working under a traditional main contract, even when the contract has a fixed price, since liquidated damages for delay are likely to be less for each of the works contracts than would be the liquidated damages for the works as a whole. In the past the completion of collateral warranties with each of the works contractors was the normal way of dealing with this. 3–053 Under the construction management and management contracting systems, the strategy is for all the work to be let out to works contractors, often in numerous, relatively small packages. This often enables design to continue in parallel with construction, without the attendant risk inherent in the use of the “build-only” forms. Management contracting and construction management thus tend to lead to faster pre-construction times and have been used in some of the fastest projects43. Just how successful that can be when D takes the management of its risks seriously was demonstrated by the construction of a European car plant at Swindon for Honda Manufacturing UK Ltd44. 3–054 On the other hand, when D does not involve itself in the management of its own risks, management contracting has also resulted in some of the most spectacular failures45. In the case concerning the Great Eastern Hotel46, the Technology and Construction Court stated that a construction management agreement requires the construction manager to manage the construction of the project without accepting the principal risks of time and cost, which remain with D. However, the construction manager was obliged to plan, schedule and organise, so that risks in relation to time and money were minimised. In this case, the court found that, although the contract did not impose absolute obligations on the construction manager, it obliged the construction manager to perform its duties to the standard of a professional man performing professional services. The court said that, if the construction manager did not put safeguards in place to minimise the risks to D under the trade contracts, then the construction manager might be more vulnerable to an allegation of breach of contract. In this case, the construction manager had breached its obligations under the contract by failing adequately to manage, administer, plan and co-ordinate the work of the trade contractors and was held responsible for periods of delay to the completion of the works. 3–055 Main influences on site times in management contracting were found, in the NEDO report47, to be much the same as with other means of procurement, save that there appeared to be an enhanced risk with regard to default through:

43 The National Economic Development Office, Faster Building for Industry (London: HMSO, 1983). The Report of the Building and Civil Engineering Economic Development Committee’s Joint Working Party. 44 R. Bayfield and P. Roberts, “Insights from beyond construction: collaboration – the Honda experience”, an occasional paper presented to the Society of Construction Law, Oxford (September 2004). 45 For example, The British Library and Holyrood, the Scottish Parliament Building, in relation to which see Fraser of Carmyllie, The Rt Hon Lord, QC, The Holyrood Enquiry (HMSO, 2004). 46 Great Eastern Hotel Co Ltd v John Laing Construction Ltd [2005] All ER 368 at [20]–[85], [189]–[331]. 47 The National Economic Development Office, Faster Building for Industry (London: HMSO, 1983). The Report of the Building and Civil Engineering Economic Development Committee’s Joint Working Party.

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1. 2. 3. 4. 5. 6. 7. 8.

friction with works contractors; materials not ordered/delivered in time; poor pre-preparation; poor supervision; poor workmanship; supply authorities; subcontractors; and sub-subcontractors.

Procurement arrangements Guaranteed maximum price and target costs 3–056 Guaranteed maximum price (GMP) is not so much a system of contracting, but a procurement strategy48, which can be applied to virtually any type of contract, but is typically used in connection with design and build, construction management and management contracting. However, guaranteed maximum price is a misnomer; in contracts containing the GMP conditions, neither the construction period, nor the price, is either guaranteed, or the maximum49. Indeed, in their research into the combination of construction management and GMP contracts in the construction of schools in the United States, Rojas and Kell found that: “Only 6 of the 24 CMR school projects, or 25%, finished at or below the GMP. This observation does not support the expectation that the GMP is a guarantor, and thus few CMR projects would exceed the GMP. The analysis shows that the average CMR school project exceeded the GMP by 4.74% by the end of construction.”

Whilst naming a construction procurement method by a term designed to give a warm feeling of confidence to finance directors who simply want a fixed number to put in their accounts, the reality is that it tends rapidly to become a millstone around the necks of their colleagues who have to work with it50. 3–057 Target cost contracts, whilst not using the same emotive language, are usually designed to limit D’s liability for its risks by penalising C for any time, or cost increases, but usually with a mechanism for C to benefit from any cost, or time savings over the “target”. 3–058 Put simply, the problem with both these risk-shifting strategies is that, no matter how extensive is the attempted risk transference to C, in any contract in which D is empowered to change its mind about what it wants, any difference between what is expressly, or implicitly, required at tender (in terms of quantity, quality, method, or timing) is deemed to be a variation and accordingly, C cannot guarantee the outcome because only D has control of the variables.

48 E Rojas and I Kell, “Comparative analysis of project delivery systems cost performance in Pacific Northwest public schools” 2008 ASCE 134. 49 E Rojas and I Kell, fn 48, above, and see also G Bewsey, “No Room for Manoeuvre”, Construction Manager (May 2006) and Skanska Construction Ltd v Egger (Barony) Ltd [2002] EWHC 773 (TCC) at [25]–[44]. 50 See, for example, the effect that a GMP contract is thought to have had on the management of risk on the Wembley Stadium project, G Bewsey, “No Room for Manoeuvre” (May 2006) Construction Manager.

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3–059 Typically, the pinch point in GMP contracts will be in the approval of C’s submittals. In the same way as this causes a problem in design and build contracts in which D attempts to transfer the risk of design to C, so it is with GMP contracts51.

Partnering and alliancing 3–060 The terms partnering and alliancing are interchangeable. Whereas, in the northern hemisphere, the word partnering seems to be used to describe this relationship, in the southern hemisphere, the word alliancing is commonly applied to the same effect. Partnering is not a contracting method, but is a procurement strategy that, in order to function, requires a different relationship, between C and D, than is commonly found in construction contracts. “Underpinning the case for partnering is the presumption that the key to effective change within the industry lies in developing an appropriate culture of relations to support the contracting mechanisms needed for a partnering approach to work. Therefore essentially partnering is seen as about changing behaviour and/or attitudes – encouraging clients and contractors to transgress the conflicting interests that lie at the heart of their exchange relationship by appealing to common interests centred around specific project goals.”52

3–061 In light of the inherent conflicting interests of the parties53 and the tendency of construction contracts to result in claims for more time and more money irrespective of the contract, construction partnering may be thought by some as something of an oxymoron54. However, notwithstanding entirely excusable doubts as to the commercial practicality of such an arrangement, there can be no doubt that over the last ten years or so, partnering and alliancing frameworks have become established features of both public-sector and private-sector led construction projects in the United States, United Kingdom and other Commonwealth countries. 3–062 Partnering in the construction sense is a contractual arrangement that attempts to pool the interests of both parties with the same risks, in the hope of achieving success by both parties and without either suffering any loss alone. Typically, at the root of a partnering agreement, is a collaboration clause, such as: “The overriding principle guiding [D] and [C] in the operation of this contract is that of collaboration. It is their intention to work together with each other and with all other project participants in a co-operative and collaborative manner in good faith and in the spirit of trust and respect. To that end [D] and [C] agree they shall each give to, and welcome from, the other, and the other project participants, feedback on performance and shall draw each other’s attention to any difficulties and shall share information openly, at the earliest practicable time. They shall support collaborative behaviour and address behaviour that does not comply with the overriding principle.”55

3–063 Partnering is sometimes crudely referred to as a “gain-share/pain-share” mechanism. The idea is that:

51 Above at para.3–034, point 4. 52 M Bresnen and N Marshall, “Partnering in construction: a critical review of issues, problems and dilemmas” (2000) Construction Management and Economics 18, 229. 53 It is only during the construction period that C can profit from its labours, but for D the only benefit occurs after construction has been completed and the works put into use. 54 See also M Bresnen and N Marshall, “Partnering in construction: a critical review of issues, problems and dilemmas” (2000) Construction Management and Economics 18, 229. 55 CE06, Cl.2.1.

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So far as quality is concerned, anyone who finds an error reports it to the management board and the party responsible for it puts it right at its own cost, provided that the error was not caused by another party’s error.

So far as cost is concerned, a target cost is established based upon actual net cost, together with a fixed profit margin. Any savings against the target cost are then shared under an agreed percentage, which can be adjusted based on agreed key performance indicators, such as safety, community involvement, consent compliance, or timely delivery and any overspend, measured by the amount by which the actual out-turn cost exceeds the target cost, is shared by a different percentage up to the contractor’s profit on the project. So far as time is concerned, whereas C is usually entitled to an extension of time for all of D’s usual risks, the management of those risks is delegated to C and, whilst C is entitled to an extension of time, it is also entitled to a bonus payment for early completion. However, all that partnering agreements can reasonably achieve is a different allocation of liability than is available under other standard forms, together with (through its “board of management” dispute resolution structure)56 the avoidance of the possibility of formal dispute resolution. On the other hand, the adoption of a different cultural approach to procurement has been anecdotally responsible for significant cost reductions, reduced project times, elimination of learning curves, improved quality, improved customer relations and enhanced investment in training and research57. Perhaps it is a procurement method best viewed in this light; whilst at the core of partnering agreements is often a desire to complete the works on time and cost, without defects, or claims for additional time or money, that simply cannot be achieved by a form of contract.

Private finance initiative and public private partnership 3–064 Under what is alternatively called private finance initiative (PFI), or public private partnership (PPP)58, a government typically grants a concession to D, under which D has the obligation to build and, for a fixed period, operate the facility (for instance, road, tunnel, bridge, electricity, water, or other public, or large-scale services). D usually finances the development, either from one bank, or a syndicate of banks, and the loans are repaid from tariffs paid by the State, or the users of the facility, over the life of the concession. At the end of the concession period, the facility is usually expected to be transferred into State ownership. 3–065 In this method of procurement, D can thus be a concession company, the shareholders of which comprise a construction company, one or more financiers, and possibly a local interest, or other shareholders in the equity. The financiers will expect to share with the other shareholders some construction, or operational risk, but may

56 See, for example, J Walton, “Alliancing contracts, a panacea to all that ails construction and infrastructure development?” (October 2008) E.NZ Magazine, the Institution of Professional Engineers of New Zealand. 57 M Bresnen and N Marshall, “Partnering in construction: a critical review of issues, problems and dilemmas” (2000) Construction Management and Economics 18, 229. 58 The UK Labour government did not want to keep the Tory name for it.

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require some protection against political risk, such as a change in local law, which might result in the project becoming non-viable as a private development. 3–066 Apart from political risk, the other major problem in this form of procurement arises out of the relationship of the shareholders in the development concession and the construction company. If the development is a joint venture and one of the joint venturers is C (who will owe duties to that company), then the other joint venturers will be concerned to ensure that the subsidiary contracts are at arm’s length. They will also be concerned to see that the contracts are monitored and enforced on an entirely impartial basis. (See Figure 3.7.) By way of example of the difficulties that can ensue, in February 2010, it was announced in the UK press that, for the second time, the UK government were being urged to intervene in a funding dispute over the London Underground. On this occasion it was pursuant to the announcement that, in spite of a predicted shortfall in funding of £400m to Tube Lines over the next seven years, Tube Lines intended to pay out £1.1bn in secondment fees to the consortium shareholders59. 3–067 The avoidance of such conflicts might be achieved by providing that the directors nominated by the contractor-joint-venturer are not entitled to vote on the relevant resolution, or by ensuring that, for these matters at least, there are independent directors who will, if required, provide a majority vote binding on the development company. It will also be important to ensure that a single joint-venturer cannot prevent a company meeting being held to deal with these matters. 3–068 Another source of risk in this method of procurement is that, at the root of it is a risk transference of capital and running cost from the government agency to the PFI partner, whose income from the government agency is to finance both capital and running costs. The PFI partner, however, will often sublet construction to a “special purpose vehicle” as D, the purpose of which is to procure the construction by an independent contractor. 3–069 The PFI partner normally receives regular income from the government agency based upon a “rental” of the capitalised ultimate value, but it has no assets apart from the projected project income stream. As the SPV usually has no assets other than its income stream, it is common for such PFI contracts to attempt to defer payment rights on claims until after the PFI partner can secure payment to D via the government agency. 3–070 The idea is that, in the event of significant claims from C to D, which D is unable to fund, either the risk is transferred to the government agency in obtaining increased funding, or C can be placed in the invidious position of finding an impecunious client that can be easily wound up and unable to fund its claim. In order to avoid such a possibility, it is not unusual, in PFI contracts, to find a restriction on the ability of C to pursue a claim until after D has been paid. However, in Midland Expressway v Carillion60, an action for a declaratory injunction to inhibit C from pursuing its claim under HGCRA61, Jackson J (as he then was) found that such a restriction on

59 The Guardian, 2 February and 1 March 2010. 60 Midland Expressway Ltd v Carillion Construction Ltd [2005] EWHC 2963 (TCC). 61 Section 113 of the Housing Grants Construction and Regeneration Act 1996 renders ineffective any payment under a construction contract conditional upon the payer receiving payment from a third party (except in certain limited circumstances) and s 108 gives a right to any party to a construction contract to refer a dispute for adjudication “at any time”.

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payment was in conflict with the Act and unenforceable and that C was entitled to pursue its claim. 3–071 The spectacular failure of Metronet demonstrates that the frailty of such arrangements can result in economic disaster for both parties. Under the terms of this particular PFI arrangement, Metronet Rail, a consortium of five major companies, was to carry out for London Underground (a division of Transport for London) the maintenance and capital-project management of 347 trains, over 471 miles of track, 155 stations, 77 miles of deep tubes, and over 2,000 points, crossings, and bridges on a pain-share/gain-share arrangement geared to performance of the underground network. In the event Metronet’s performance was poor, its income fell well below its expenses and, on 7 February 2008 following a period of 12 months in administration, it was announced in Parliament that Transport for London would take over Metronet and pay off what were then announced as debts of £1.7bn! [Please refer to Figure 3.7] 3–072 Current arrangements in this form of development include: “DBFO”62 for toll roads; “DCMF”63 for prisons; “BOO”64 for both sewerage and water schemes, and “BOT”65 and “BOOT”66 for a variety of major projects, as well as smaller schemes, in the rail, light rail, health and education sectors.

62 63 64 65 66

Design-build-finance-operate. Design-construct-manage-finance. Build-own-operate. Build-operate-transfer. Build-own-operate-transfer.

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CHAPTER 4

Standard form provisions for time and cost

Introduction Classification of change Standard clauses of delay Acts and/or omissions of the developer Failure to pay Circumstances beyond C’s control Special circumstances Force majeure Errors and inconsistencies Instructed variations and changes Weather Unforeseeable physical conditions Access, ingress and egress Postponement Acts of third parties Nominated subcontractors and suppliers Delay in receiving instructions Quality control Strikes and civil commotion Health and safety Damage caused by carrying out the works Catastrophes Antiquities Standard provisions for recovery of loss or expense Introduction Compensable events Claims procedure Compensation for disruption to progress Cost and time management in the JCT Major Projects Contract and the CIOB Complex Projects Contract – a comparative analysis MPC CPC Differences between MPC and CPC

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4–001 4–011 4–028 4–028 4–037 4–042 4–052 4–053 4–081 4–103 4–121 4–144 4–164 4–171 4–173 4–189 4–204 4–232 4–241 4–254 4–255 4–260 4–264 4–267 4–267 4–280 4–300 4–322

4–325 4–326 4–348 4–365

STANDARD FORM PROVISIONS FOR TIME AND COST

Introduction “Words differently arranged have a different meaning, and meanings differently arranged have different effects.”1

4–001 This chapter deals with the circumstances which can affect the execution of a construction project and which (either by the rules of common law, or the explicit terms of a contract) excuse C from the consequences of delay and/or compensate it for any loss and/or expense it may have incurred as a result of delay. 4–002 In a simple form of contract where, for example, C is to build a specific structure for a fixed price, C’s obligation would be to provide a completed building. D might state its objectives and perhaps choose from a series of predefined patterns, or illustrations the type of building it requires2. From this, C would give a delivery date and a price and these specifics would constitute the terms of the simple contract. Without more, those terms would bind both parties to absolute performance of their respective obligations. D would not be able to impose any change upon the specification of the building once the contract had been made, C would not be entitled to charge any more if the circumstances, under which C was building, changed3, D would not be able to pay less, even if all that was originally intended was not ultimately required4, and if C did not provide the product by the date it had promised to deliver it, the contract might be cancelled in its entirety5. 4–003 Anyone familiar with the construction industry will soon realise that such an inflexible contract would be quite unpalatable for both D and C. It is for this reason that the standard forms of building and civil engineering contract provide scope for changing the entitlements of the parties under certain circumstances. So, for example, once D has entered into the contract and C has started to build, D can change its mind about what it wants, when it wants it, where it wants it and how it wants it. In response, the contract provides a mechanism for C to vary its price and the time within which C is to provide the work in the light of the changes requested by D. 4–004 Similarly, the price and time to build, which C quotes at the outset, is based upon incidental circumstances, which C may be deemed to have taken into consideration at the time the offer is made but, if those circumstances change, then the standard forms generally provide for C’s price and time to be varied to accommodate them. 4–005 In all but one of the standard forms considered here, the most important consideration in construing clauses that entitle C to an extension of time6 is that, no matter what the risk and no matter which form of contract, it is only a delay to a completion date which, if it is not met, will render C liable in liquidated damages7,

1 2 3 4 384. 5 6 7

B Pascal, Pensées, No 23 (1670) (translated by London: J M Dent & Sons, 1931). Such as a standard book of house plans. Unless the parties vary the contract by a subsequent agreement with supporting consideration. SWI Ltd v P&I Data Services Ltd [2007] EWCA Civ 663; [2007] BLR 430; (2009) 25 Const LJ As constituting repudiation of the contract. See Ch.6, “Extensions of time and time at large”, throughout. See Ch.21, “Damages”, throughout.

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and which, if caused by D, ranks for an extension of time8. For example, under Cl.2.28.2 of JCT05, C is to be granted an extension of time to complete the works in so far as a D’s time risk event9 is likely to cause a delay to completion of the works, or any defined section of the works, beyond the respective completion date. It does not provide for C to be granted an extension of time if D’s time risk event in question causes a delay to progress, but does not cause a delay to the completion of the works beyond the completion date. It is thus of paramount importance to be able to distinguish between an activity that is not critical to completion and one that is, because D’s time risk events affecting activities that are not critical to completion will prima facie be unlikely to be capable of being shown to have caused delay to the completion of the works and qualify for an extension of time. 4–006 Amongst the standard forms discussed here, the unique exception to the rule that extensions of time are only awarded for delay to a defined completion date bearing liquidated damages is the original version of the Australian New South Wales government contract C21/0310. This is one of the “partnering” types of design and build contract based upon a concept of collaboration and early warnings. However, its administrative operation is quite different from the other forms discussed. In relation to extensions of time, for example, this form expressly states at Cl.43.1 that: “If progress of the Works has been delayed, [C] is entitled to an extension of time for completion, for the number of days assessed by [D], if [C] satisfies [D] that all11 these conditions apply: Either (a) (b)

a clear majority of work in progress or planned to be started during the period of the delay could not be proceeded with; or a clear majority of work will not be able to be proceeded with in the future as a result of the delay which has occurred.”

4–007 For those more used to CPM-based processes and attempting to put that into the context of a critical path analysis of cause and effect, the explanatory notes make it clear beyond doubt that it is not necessary under this form of contract to identify a critical path to completion which has been affected by a specified D’s time risk event in order to justify an extension of time. The notes state: “To avoid the issue of whether or not delays affect the critical path to completion and, indeed, the issue of which activities constitute the critical path, [C] is not required to prove that a delay to an activity will ultimately cause a delay in completion. Rather, the key concept of this clause is that an extension of time can be justified if there is a delay to a clear majority of work in progress, or planned to be started, or if [C] can demonstrate that such a delay will occur in the future.”

8 It can be inferred from the speeches of most of their Lordships in Jarvis (J) and Sons v Westminster Corp [1970] 1 WLR 637 and indeed it is expressed in the speech of Viscount Dilhorne that C’s obligation to “complete” by the date for completion, or in default become liable to pay liquidated damages, is an obligation to achieve “practical completion” and not final completion. 9 In the JCT forms of contract, this is referred to as a “Relevant Event”. 10 The 2009 edition, C21/09, follows the orthodox pattern of requiring, at Cl.25.9, that C is to provide a competent, updated CPM schedule. It also recognises, at Cl.54.4, that extensions of time are only to be awarded for those of D’s risk events that delay work which is on the critical path to completion at the time. This is also the only current standard form of contract which requires, at Cl.25.9, that C should provide its schedule electronically, if requested to do so. 11 There are three other preconditions unnecessary to this issue.

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4–008 Under this form, it is therefore only a delay to progress that entitles C to an extension of time for completion if it affects “a clear majority of work”. Unfortunately, whatever it is that could be construed as comprising at any one time “a clear majority of work” is not one of the 72 terms defined in Cl.78. Rather unhelpfully, the guidance notes say: “For these purposes, a ‘clear majority of work’ is measured in terms of the number of workers held up, the number of significant activities delayed, or a similar indication of [C’s] ability to make progress in carrying out the works.”

4–009 This was a novel and innovative approach to the problem of competence in the production of critical path networks. However, in replacing the perceived difficulty and uncertainty of identifying the critical path in an incompetent schedule with weasel words that obfuscate the root cause and pass the result onto a court or tribunal to determine, it failed to produce a workable solution. As they probably found, passing the matter to the court to sort out can be a hostage to fortune. For an example of the difficulties some courts have in dealing with causation and criticality, see City Inn v Shepherd12, in which the court described the critical path in accurate terms as the longest path from commencement to completion13, but then proceeded to determine criticality under a JCT80-based contract, not by reference to that path, but by reference to a concept of “content”, along the lines of the process envisaged by C21/03. 4–010 In so doing, the court determined that, in some instances, because the project could not be completed without the work in question, it thereby became “critical”, a definition far removed from that of the critical path and, in fact, directly opposed thereto. The court stated, amongst many other examples, that the change in the variety of trees in the garden caused delay to completion because, notwithstanding that they were planted nearly a month before completion, the contract “could not be completed” without them14. The court also found the floodlighting to be critical to completion, notwithstanding that the works were actually taken over without this15! This appears to do such violence to the concept of criticality that it would probably have been better if the court, in this case, had simply rejected the concept of critical path as being inapplicable to its reasoning and not mentioned the term at all.

Classification of change “The liquidated damages and extension of time clauses in printed forms of contract must be construed strictly contra proferentem. If [D] wishes to recover liquidated damages for failure by [C] to complete in time in spite of the fact that some of the delay is due to [D’s] own fault or breach of contract, then the extension of time clause should provide, expressly or by necessary inference, for an extension on account of such a fault or breach on the part of [D].”16 12 City Inn Ltd v Shepherd Construction Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590 affirmed, City Inn Ltd v Shepherd Construction Ltd [2010] CSIH 68, but see the dissenting judgment of Lord Carloway at [109], who thought that “although a formal critical path analysis is not essential, it is that type of exercise that has to be carried out to see what effect a [D’s time risk event] will have on the completion date”. 13 City Inn Ltd [2007] CSOH 190 at [33]. 14 City Inn Ltd [2007] CSOH 190 at [126]. 15 City Inn Ltd [2007] CSOH 190 at [118]. 16 Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd (1970) 1 BLR 111 CA at 121.

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4–011 There are four major classes of change in the principal standard forms which are sweeping-up clauses. There is then a number of detailed classifications. The four main classes of change are: 1. 2. 3. 4.

voluntary and implied acts, or omissions of D, or the CA, or those employed by D, acting on D’s behalf; acts and omissions of third parties; causes beyond the control of C; and force majeure and other special circumstances.

4–012 The actual phraseology used in regard to these clauses changes from form to form and must be looked at in some detail. Apart from the fact that all the foregoing may be deemed to be “causes beyond the control of the contractor” save for the generic sweeping-up clauses, the clauses, in general terms, deal with: 1.

2.

3.

4.

Express, or implied instructions to: 1.1. correct an ambiguity, or discrepancy in D’s requirements; 1.2. correct an error in description (or quantity) in the bills, specifications, or drawings; 1.3. suspend the carrying out of the works; 1.4. avoid a legal, or physical impossibility; 1.5. rectify any loss, or damage arising from any of the insured risks; 1.6. ensure conformity with any Act of Parliament, Regulation, or Statute; 1.7. investigate, or dispose of archaeological findings; and 1.8. uncover, or make openings in work where the works are found to have been carried out in accordance with the contract. Other acts, or omissions of D, the CA, or those employed by them: 2.1. compliance with, or non-compliance with the health and safety regulations; 2.2. a failure to respond within due time to C’s submittal; 2.3. a failure of the design team to issue in due time any information, drawings, details, or instructions (and under some forms, that risk is not dependent upon whether such information is ever requested); 2.4. a failure to give, or deferment of, possession of, or access to, or egress from any part of the site; 2.5. a failure to obtain any third-party consents necessary for the development; 2.6. a failure to make prompt payment; and typically 2.7. any delay, impediment, or prevention caused by, or attributable to D, D’s personnel, or D’s other contractors. Acts, or omissions of third parties: 3.1. civil commotion, strike, or lock out; 3.2. the default of a nominated subcontractor, or nominated supplier; 3.3. the execution of work, or supply of materials, or goods by others; 3.4. C’s unforeseen inability to obtain the labour or materials it needs; and 3.5. the execution of work under a statutory obligation. Force majeure and associated risks: 4.1. force majeure; 4.2. exceptionally adverse weather; 4.3. the discovery of unforeseeable ground conditions; 4.4. the occurrence of an insured risk such as fire, storm, tempest, flood, etc;

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4.5. a change in the law; 4.6. the exercise of a statutory power that affects the supply or use of labour, plant, or materials; 4.7. the use of, or threat of the use of, terrorism; and 4.8. damage to the works caused by uninsured risks. 5. In addition, the American Institute of Architects’ forms also make provision for an extension of time claim to be made for the effects of: 5.1 unavoidable casualties17; 5.2 delay authorised by D pending mediation, or arbitration18; 5.3 other causes the CA determines may justify delay (sic)19; 5.4 delay caused by the rejection of a competent domestic subcontractor20; 5.5 delay caused by the removal of hazardous materials21; 5.6 delay caused by action taken in an emergency22. 4–013 In essence, the standard forms of construction contract can be classified in three ways, according to: 1. 2. 3.

the manner of identifying D’s time and cost risk events; the types of D’s time and cost risk events identified; and the procedure that is to be adopted, or the change in the parties’ entitlements as a result of the occurrence of the specified circumstances.

4–014 In the classification of types of D’s time risk events, the standard forms of contract fall into three sub-groups. There are those which: 1. 2. 3.

provide no indication at all of the circumstances under which C may be granted more time, or be compensated for change; or indicate a brief list of D’s risk events; or have a single clause that collects together either directly or by cross-reference the circumstances that will give rise to a change in the rights of the parties.

4–015 In those forms that provide no indication as to the circumstances under which C will be excused, or compensated for change, C is generally excused for any cause beyond its control23. That expression could be construed to exclude those matters that are within D’s control (which, according to the judgment in Peak v McKinney, must be clearly set out if they are to enable D to grant an extension of time for its own acts)24. However, there is room for a great deal of interpretative scope in determining what is and what is not within C’s control25. In the United States, for example, the expression “beyond the control and without the fault or negligence of [C]” has been interpreted to encompass acts of the government in either its sovereign, or contractual 17 A201/97 and A201/07 Cl.8.3.1. 18 A201/97 and A201/07 Cl.8.3.1. 19 A201/97 and A201/07 Cl.8.3.1. 20 A201/97 and A201/07 Cl.5.2.3. 21 A201/97 and A201/07 Cl.10.3.2. 22 A201/97 Cl.10.6.1 and A201/07 Cl.10.4. 23 HK05, MWA80, MWA98, MWA05 GC/Works/1/98, GC/Works/2/98, and MTC89 excuse any cause beyond C’s control. 24 See also Wells v Army and Navy Co-operative Society (1902) 86 LT 764; Perini Pacific Ltd v Great Vancouver Sewerage and Drainage District, 57 DLR (2d.) 307 (1966). 25 An instance of the court’s reluctance to narrow the meaning of such clauses can be found in Scott Lithgow v Secretary of State for Defence (1989) 45 BLR 1, per Lord Keith of Kinkel at 6. However, this case has received little support and, it seems, is unlikely to be followed.

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capacity and delays of subcontractors, or suppliers at any tier arising from unforeseeable causes beyond the control, without the fault or negligence of both the contractor and the subcontractors or suppliers26 and, although not pursued on appeal, it has also been claimed to include the death of the contract director’s grandmother27. 4–016 In the second class are those forms that, whilst having a brief list of D’s risk events, also include a sweeping-up clause such as: “and any other cause referred to in these conditions”. This is the structure of the Singapore Institute of Architects form SIA80, the Singapore public sector form of contract SGC95, the American Institute of Architects forms A201/97 and A201/07 and AS2124, and is also the type of form generally used for engineering contracts. So, for example, SIA8028 and SGC9529 provide a list of specified events and then excuse “any other grounds for extension of time expressly mentioned in the contract documents”. A201/07 also provides a list of specified events and then excuses “other causes which the [CA] determines may justify the delay”30, and HKGC99 provides a list of ten risks and concludes with “any special circumstances of any kind whatsoever”31! 4–017 Clause 44(1) of ICE6 similarly provides that [D] is to bear the time risk of: 1. 2. 3. 4.

any variation order; increased quantities; any cause of delay referred to in the conditions of contract; exceptional adverse weather conditions;

and then adds the sweeping-up clause: 5.

other special circumstances of any kind whatsoever which may occur.

4–018 ICE7 treats D’s time risk events in a similar, but not identical, way. Clause 44(1) of ICE7 provides that C is entitled to an extension of time if completion is adversely affected by: 1. 2. 3. 4. 5.

any variation order; increased quantities; any cause of delay referred to in the conditions of contract; exceptional adverse weather conditions; any delay, impediment, prevention, or default by D;

and then adds the same sweeping-up clause: 6.

other special circumstances of any kind whatsoever which may occur.

4–019 Clause 10.3 of NZ03 contains a similar formula, providing for an extension of time to be granted for: 1. 2. 3.

the net effect of any variation; or weather sufficiently inclement to interfere with the progress of the work; or any strike, lockout, or other industrial action; or

26 R P Wallace Inc v The United States, COFC 96–222 (2004); (2005) 21 Const LJ 378. 27 R P Wallace Inc, COFC 96–222 (2004); (2005) 21 Const LJ 378. 28 Cl.23(1)(p). 29 Cl.14(2)(q). 30 The words “the delay”, in Cl.8.3.1 of this form, seem to be used to mean “an extension of time”. 31 Cl.50(1)(b)(xi).

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4. 5.

loss, or damage, to the contract works, or materials; or flood, volcanic, or seismic events;

and then adds: 6.

any circumstances not reasonably foreseeable by an experienced contractor at the time of tendering and not due to the fault of the contractor.

4–020 The FIDIC suite of contracts treats the excusable events in a similar, but not identical, way. Clause 8.4 of FIDIC/Build99, for example, provides that C is entitled to an extension of time if completion is adversely affected by: 1. 2. 3. 4.

a variation, or other substantial change in quantity; a cause of delay referred to in the conditions; exceptional adverse climatic conditions; unforeseen shortages in personnel, or goods caused by epidemic, or government actions;

and then adds the sweeping-up clause: 5.

any delay, impediment, or prevention caused by, or attributable to D, D’s personnel, or D’s other contractors on site.

4–021 The other “causes” of delay referred to in the conditions of contract referred to in A201/97, A201/07, ICE6 and ICE7 under sub-cl.(c) and the FIDIC suite of contracts are not easily located. Although there is a detailed index in both forms, nowhere is it possible to find a listing of the circumstances under which C will be excused the consequences of delay, or which will provide for C to receive compensation if, as a result of such events, it should suffer loss. The FIDIC, ECC2 and ECC3 forms are perhaps the most misleading in also containing a clause entitled “Employer’s risks”32, which neither lists nor makes cross-reference to D’s time, or cost risk events set out in other parts of the contract. The difficulty of finding the risks that are to be borne by D under this type of form is caused by the drafting technique. The technique employed is that of specifying that a variation is at D’s risk, but then going on, in the body of the document, to specify that certain occurrences “shall be regarded as instructions” (for which relief and compensation is provided)33, “shall be deemed to be a variation”, “shall be treated as if it were a variation”34, “shall be treated as a change”35, “shall be treated as a change in [D’s] requirements”36, or as employed in A201/9737 and A201/0738, “if [C] believes that additional time or cost is involved [C] shall make claims”. Alternatively, whilst determining that the risk of delay caused by instruction shall be at D’s risk, the draftsman specifies that, for certain contingencies, the CA “shall issue instructions”39, or “the work and materials shall be treated as if they had

32 33 34 35 36 37 38 39

Cl.17.3. ICE7, Cl.5. See, for example, WC/87 and WC/98 Cl.1.10.2 and WC/08 Cl.2.9.3 See, for example, DB05 Cll.2.10.1 and 2.12.2. GC/Works/1DB/98 Cl.2(3); WCD81 and WCD98 Cl.2.4.1. See, for example, Cl.3.2.3. See, for example, Cl.3.2.4. JCT80 and JCT98 Cl.34.2.

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been executed and supplied pursuant to [a CA’s] instruction”40. Without reading the document itself in its entirety and, in the case of MC87 and MC9841 and MC0842, the documents together with the relevant works contract forms entirely43, it is impossible to understand what those risks are. 4–022 Similar problems arise out of the technique used in NZ03 in that, whilst defining a variation as a change in the quantity, quality, position, or instructed change of method, or the omission of work44, it goes on in the body of the contract to require a default under a large number of other clauses to be treated as if they were a variation45. However, those other clauses provide that the event in question is only to be treated as if it were a variation if “[C] suffers delay in the completion of the works, or incurs additional cost by reason of [the event]”46. Such a definition provides real practical difficulties for both C and the CA where C is required to give notice within a limited period of the circumstances of an event having arisen47, but the event defined does not occur unless it has an effect upon completion, which, without critical path network scheduling48 and the techniques of contemporaneous change management49 (which are not expressly required by the contract in question) the specified effect cannot be known until long after the event has run its course. In this context (surprisingly, as the preceding clause requires C to give notice of the effect on the schedule), NZ03 provides that the effect of unforeseen physical conditions is only to be defined as a variation if “[it] will in the [CA’s] opinion substantially increase [C’s] costs”50. 4–023 Anyone who has tried to read the standard forms of contract without having a detailed understanding of the construction industry, a good understanding of the rules of interpreting contracts and some experience in reading them, will find it difficult to understand what it is from which C is excused and for what D is contracting to take the risk. At times, it requires a high degree of concentration and several readings of the contract, inter-linking different documents and several clauses, to be able to get a handle on the matter. 4–024 The failure to specify the circumstances in which D is to assume the risk of change in the contract is most unsatisfactory. Such complicated drafting does nothing to help the parties understand their respective rights and obligations, or the risks that they are undertaking. On the face of it, without further complicating the drafting, it 40 IFC84 and IFC98 Cl.5.4.3 and IFC 05 Cl.2.16.3. 41 Cl.2.13.2. 42 Cl.2.19.2. 43 WC/87 and WC/98. 44 At Cl.9.1. 45 See, for example: Cl.2.2.5 (discrepancies in contract documents); Cl.2.3.2 (omissions from schedules of prices); Cl.2.3.4 (discrepancies in quantities); Cl.5.11.6 (changes in legal requirements); Cl.5.13.4 (locating utilities); Cl.5.16 (late supply of D’s goods and materials); Cl.6.7.3 (instructed postponement of work); Cl.6.7.4 (omission of postponed section of work), and Cl.12.11.2 (expenditure of contingency sums). 46 See, for example: Cl.2.8.4 (instructions to explain ambiguities); Cl.2.87 (late issuance of instructions, documents, drawings or specifications); Cl.4.2.6 (failure of a nominated subcontractor to enter into a subcontract, or repudiation by a nominated subcontractor); Cl.5.5.2 (the activity of D’s contractors); Cl.5.6.6 (loss, or damage caused by “excepted risks”); Cl.5.8.5 (defective instructions regarding setting out); Cl.5.14.2 (antiquities); Cl.6.2.4 (failure of the CA to carry out its duties); Cl.6.4.4 (failure to carry out testing); Cl.6.4.7 (investigating work found not to be defective); Cl.6.6.4 (failure promptly to issue a completion certificate), and Cl.10.7.4 (partial possession). 47 Cl.10.3.2. 48 See Ch.7, “Planning and programming”, throughout. 49 See Ch.10, “Project Control”. 50 Cl.9.5.2.

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would not be impossible for the draftsman to provide a useful index indicating where those risks are referred to and which of them are to be excused, or compensated. 4–025 An attempt to achieve this degree of clarity has been made in the new FIDIC/ SF98. Although, in the guidance notes to FIDIC/SF98, FIDIC says that the developers’ risks sub-clause51 gathers together in one place the grounds for extension of times and monetary claims, it is still necessary to read the document in full. For example, Cl.9.2 must be read in conjunction with Cl.6.1(m) so as to understand that, if work is opened up and found to be satisfactory, any delay to the completion date caused thereby will be a D’s time risk event. It is not possible to deduce that from reading Cl.6.1 in isolation. 4–026 But perhaps the clearest definition of risks is to be found in the 2009 edition of the Irish government standard forms of contract, which contain a listing (in the Schedule at Pt 1, section K to each of the conditions of contract) setting out the apportionment of risk of time, or both time and compensation for the majority of events usually described in standard forms and, depending upon the form used, some for which the cost risk may be allocated to C, on a job-specific basis. 4–027 The third category, where a single clause of the contract collects together either directly, or by cross-reference, all the circumstances that will give rise to a change in the entitlements of the parties, is made up principally of the JCT family of contracts (excluding MWA80, MWA98, MWA05 and MTC/08) but also includes ECC2 and ECC3, NEC/SF99 and FIDIC/SF98, HK86 and HK05 and the Australian forms AS2124, AS4000 and C21/09.

Standard clauses of delay Acts and/or omissions of the developer 4–028 NZ03 is one of the few modern standard forms which make no attempt to provide for an extension of time in the event of breach by D. On the other hand, D’s acts and/or omissions are generally specified as a generic excusable clause in many of the engineering forms and in some forms also used for building. So, for example, GC/ Works/1 and GC/Works/1DB excuse any act, neglect, or default of D, or the CA which causes delay52. 4–029 GC/Works/1/98 and GC/Works/1DB/98 do not follow the same phraseology, but use the expression: “[A]ny act, neglect or default of [D], the [CA] or any other person for whom [D] is responsible (not arising because of any default or neglect by [C] or by any employee, agent or subcontractor of his).”53

4–030 A similar approach is used in the 2005 and later editions of the JCT contracts where, for example, JCT05 excuses: “[A]ny impediment, prevention or default, whether by act or omission, by [D], the [CA], the [QS] or any of [D’s] persons, except to the extent caused or contributed to by any default, whether by act or omission, of [C] or of any of [C’s] persons.”54 51 52 53 54

Cl.6.1. Cl.36(2)(b). Cl.36(2)(b). Cl.2.29.6.

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4–031 A less extensive clause to the same effect is contained in MP0555, MC0856 and CE0657. HKGC9958 excuses “late delivery of material, plant or equipment by [D]”, and NZ03 (Cl.5.16) provides that default by D in the supply of materials, services, or work by D “shall be treated as if it were a variation”, which is an excusable event59. 4–032 IChemE60 and the Australian standard form AS212461 excuse “a breach of contract on the part of [D]”, SIA8062 and SGC9563 excuse “any act of prevention or breach of contract by [D]”, and MF/1 excuses “any act or omission on the part of [D] or (the CA)”64. MC9865 excuses “any default, whether by act or omission, of [D] or any persons for whom [D] is responsible in regard to the Project”. Under the March 1998 amendment to ICE6, a new Cl.44(1)(e) was inserted referring to D taking the risk of “any delay impediment prevention or default by [D]”, which has also been carried through into ICE7 under the same clause number. Similarly, under the March 1998 amendment to ICE/DC, a new Cl.44(1)(d) was inserted referring to D taking the risk of “any delay impediment prevention or default by [D]”. ICE/DC excuses delay by[D], by those employed by [D], or statutory bodies which could not be foreseen by an experienced contractor66. ACA82 and ACA98 excuse “any act, instruction, default or omission negligence of [D] or the [CA]” which in the CA’s opinion has caused, or is likely to cause delay to the completion date67 and “any act, instruction, default or omission of [D], or of the [CA]” which [C] proves has caused delay to the completion date68. NZ03 provides that, in the event of “the activity of [D’s] separate contractors”69, “the failure, or inability of the [CA] to carry out properly his, or her duties as described in the contract documents”70, or the failure of the CA to “issue a certificate of practical completion, or a defects liability certificate within the time provided under the contract documents”71 and “[C] thereby suffers delay in the completion of the contract works, or incurs additional cost” as a result, the event will be treated as if it were a variation and hence an excusable event entitling C to an extension in respect of its “net effect”72. 4–033 C21/0973 excuses any “Act, default, or omission of [D]” and the successor to AS2124, the Australian standard form AS4000, similarly excuses “any act, default or omission of the [CA] or [D] or its consultants, agents, or other contractors (not

55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73

Cl.18.1.8. Cl.2.19.1.2. Cl.5.7.2. Cll.63(e) and 50(1)(b)(vii). Cl.10.3.1(a). Cl.44.1(d). Cl.35.5(b)(x). Cl.23(1)(o). Cl.14(2)(n). Cl.33.1. Cl.2.13.2. Cll.31(2) and 44(1)(b). Cl.11.5 alternative 1. Cl.11.5(e). Cl.5.5.2. Cl.6.2.4. Cl.6.6.4. Cl.10.3.1(a). Cl.54.1.1.

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being employed by [C]”74 HK05 also excuses any “act of prevention, a breach of contract, or other default by [D] or any person for whom [D] is responsible”75, and A201/97 and A201/07 excuse “an act of neglect of [D] or [CA] or of an employee of either, or of a separate contractor employed by [D]”76. The JCT 2005 and later suite of forms rephrase this as: “[A]ny impediment, prevention or default, whether by act or omission, by [D, the CA, the QS] or any of [D’s] persons, except to the extent caused or contributed to by default, whether by act or omission, of [C] or any of [C’s] persons”

where, under Cl.1.1, D’s and C’s “persons” are defined terms. 4–034 FIDIC4 excuses “any delay, impediment or prevention by [D]”77. FIDIC M&E87 excuses the: “[A]ct, neglect or omission or breach of contract or of statutory duty of the [CA], [D], or other contractors engaged by [D] or of their respective employees or agents.”78

FIDIC/SF98 excuses “any failure of [D]”79. FIDIC/Build99, FIDIC/DB99 and FIDIC/ PD+B99 excuse “any delay, impediment or prevention caused by or attributable to [D], [D’s] personnel or [D’s] other contractors on the site”80. 4–035 ECC2 and ECC3 excuse C from any “breach of contract by [D]” that is not one of those other compensation events referred to expressly within the contract81. NEC/SF99 modifies the scope of the generality of this to a compensation event comprising any “event” which: 1. 2. 3.

4.

delays completion by more than two weeks; C could not reasonably have prevented, or controlled; an experienced contractor would have judged, at the date of C’s offer, to have such a small chance of occurring that it would have been unreasonable to have allowed for it; and is not one of the other types of compensation event stated in the contract82.

4–036 Rather confusingly, the clause adds the rider that “In assessing this event the first two weeks are excluded”83. Unfortunately, it is not at all clear whether the “two weeks” referred to in the rider is the same “two weeks” referred to in the first line. If it is not, then, having established that the “event” has manifested itself by delaying the completion date by two weeks, the first two weeks of delay caused by the event are not a D’s risk event, thereby putting C at risk to the extent of four weeks’ delay to the completion date for this cause, instead of two. If that is what is intended, it is very badly expressed. On the other hand, if it is not what is intended, there seems little point in repeating in the rider the definition in the first line of this event, that it is one which prolongs the completion date by two weeks.

74 75 76 77 78 79 80 81 82 83

See the definition of qualifying cause of delay in Cl.1. Cl.25.1(3)(v). Cl.8.3.1. Cl.44.1(d). Cll.37.2(k) and 26(1)(e). Cll.6.1(k) and 7.3. Cl.8.4(e). Cl.60.1(18). Cl.60.1(13). Cl.60.1(13).

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“Negligence, breach of statutory duty or interference with any legal right by [D] or those employed by [D]” is also excused under ECC2 and ECC3 by virtue of Cl.80.1 and Cl.60.1(14). The Irish government standard forms take a similar line as the ECC contracts where, in the schedules, they also provide (subject to the provisos on notice of delay to progress and claims) that C is entitled to both an extension of time and compensation for “A breach by [D] of the contract delaying the works that is not listed elsewhere in this table”84. Unlike PPC2000, which, in common with other contracts of the “partnering” type, excuses a “breach of the partnering contract by [D] or any consultant of which [C] has given early warning”85, CE06 does not require any early warning to be given.

Failure to pay 4–037 Apart from the right to terminate employment under the contract, formerly only ICE686, ICE/DC87, FIDIC/DB9588, FIDIC/M&E8789, FIDIC/Build9890 and ECC2 and ECC391 provided any redress for a failure to pay C on time and that redress was compensation for loss of interest on the money outstanding. However, by virtue of the provisions of the Housing Grants, Construction and Regeneration Act 1996 (the “HGCRA”), there is now a statutory provision in the United Kingdom entitling anyone carrying out construction operations as defined by that Act92 to suspend the carrying out of the contract works if they are not paid promptly93. Similar provisions appear in A201/9794 and A201/0795 and have also been made a term of most of the “new” contracts. For example, C21/09 provides96 that C is entitled to both an extension of time but not compensation for delay to completion of the works beyond the completion date caused by C suspending work for a failure to make due payment. On the other hand, the 2009 edition of the Irish government forms provides97 for both an extension of time and compensation for a failure to make due payment in accordance with Cl.12.3 of those forms. Similarly, under the 2005 and later JCT forms, typically, D takes the risk of: “suspension by [C] under clause 4.14 of the performance of his obligations under this contract”98 where Cl.4.14 provides that, in the event of a failure to make payment and following notice, C may suspend its performance until payment is made in full.

84 85 86 87 88 89 90 91 92 93 94 95 96 97 98

See, for example, the schedule to IGBW/09, at Pt 1, section K, item 16. Cl.18.3(xiv). Cl.60(7)(a). Cl.60(7)(a). Cl.13.8. Cl.33.6. Cl.14.8. Cl.51.2. HGCRA s 105. HGCRA s 112. Cl.9.7.1. Cl.9.7. Cl.58.4. See, for example, the Schedule to IGBW/09, Pt 1, Section K, item 4. See for example, JCT05 Cl.2.29.5.

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4–038 Similar phraseology is used in JCTsub/0599, WCD98100, and DB05101, PCC98102, PCC06103, IFC98104, IFC05 and IFWCD/05105, TC08106, WC/98107, MC98108, MC08109, GC/Works/1/98 and GC/Works/1DB98110, and in GC/Works/2/98111. PPC2000112 and PCC92 Amendment 6113 also incorporate wording to the same effect. However, MP05 uses different phraseology to the same effect, excusing “the valid exercise by [C] of his rights under section 112 of the HGCRA 1996”114. 4–039 Where other standard forms have not been reprinted, amendments have generally been made which, whilst not expressly providing for excusable delay as a result of “failure to pay”, incorporate terms that will probably have the same effect. For example, the March 1998 amendments to ICE6115, ICE/DC116 and ICE/MW117, together with FIDIC4118, FIDIC/DB95119 and FIDIC/Build99, FIDIC/DB99 and FIDIC/ PD+B99120 excuse “any delay, impediment or prevention caused by or attributable to [D]”. This is the way that the MC08121 deals with this issue and identifies that C is to be excused and compensated for, amongst other things, the effects of “any default, whether by act or omission, by [D]”. Under ECC2 and ECC3, similar obligations can be deduced from a combination of clauses, where a failure to make payment in accordance with the HGCRA is a “breach of statutory duty, or interference with any legal right by [D]” is a compensation event122. 4–040 MF/1 and IChemE contain no provisions along these lines, probably because it is not envisaged by the draftsman that these forms are likely to be used for work falling within the definition of a “construction contract” under the HGCRA. 4–041 MWA98, MWA05, CE06 and NEC/SF99 appear to be alone among the new forms suitable for use for building works in making no express provision for a D’s risk event to arise as a result of delay caused by suspension of work following D’s failure to pay C on time. However, under the JCT minor works forms, C is excused for any cause beyond its control and MWA98 and MWA05 acknowledge C’s right to suspend

99 Cl.2.19.5. 100 Cl.25.4.17. 101 Cl.2.26.4. 102 Cl.2.6.18. 103 Cl.2.21.4. 104 Cl.2.4.18. 105 Cl.2.20.5. 106 Cl.2.28.4. 107 Cl.2.10.18. 108 Cl.2.13.2. 109 Cl.2.19.5. 110 Cl.36(2)(g). 111 Cl.23(d). 112 Cl.18.3(xii). 113 Cl.2.6.18. 114 Cl.18.1.7. 115 Cl.44(1)(e) becomes 44(1)(f), Cl.44(1)(f) becomes 44(1)(g) and a new Cl.44(1)(e) is inserted. 116 Cl.44(1)(d) becomes 44(1)(e) and a new Cl.44(1)(d) is inserted. 117 Cl.44(1)(h) becomes 44(1)(i), Cl.44(1)(i) becomes 44(1)(j) and a new Cl.44(1)(h) is inserted. 118 Cl.44(1)(d). 119 Cl.8(3)(e). 120 Cl.8(4)(e). 121 Cl.2.19.2. 122 Cll.60.1(14) and 80.1.

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performance for D’s failure to pay C on time, providing also redress for D’s failure to pay promptly by way of interest on late payment123.

Circumstances beyond C’s control 4–042 In Scott Lithgow124, the Ministry of Defence had been unwise enough to agree to pay C, the shipbuilder of a submarine, the cost of delay caused by, amongst other things, “any other cause beyond [C’s] control”. A subcontractor installed a defective cable in a submarine that was discovered during construction and replaced with good cable. This caused delay and loss to C and C proceeded against the subcontractor under the terms of the subcontract for the loss that it had suffered. However, C compromised its claim for a sum less than its full loss and claimed the balance from D as being due to a “cause beyond C’s control”. 4–043 Lord Keith of Kinkel upheld this contention briefly in one paragraph. He thought that prima facie it was not within the power of a contracting party to prevent breaches of contract as to quality on the part of a supplier, or subcontractor such as might lead to delay. He said that C had no means in the ordinary case, or in this case on the facts, of supervising the manufacturing procedures of its supplier, or detecting the defects in the cables prior to installation. It had correctly stipulated in the subcontract for delivery on time by the subcontractor. 4–044 The obvious objection to this interpretation is that “contract” in this case has been interpreted in such a way that it effectively removes all risk from C for the effects of the contracts C enters into with its subcontractors. Contrary to what was decided in this case, there appears to be good sense in saying that, in so far as C is affected by the acts of its subcontractors, its redress should be against its subcontractors. In such a case, the courts should not allow C an action against D for a breach, the effects of which are entirely outside D’s control. Lord Keith noted that Lord Jauncey, who, as a Judge of the Court of Session, had sat as arbitrator in the matter, made the point when he said: “Can it then be said that, in a situation where [C] has responsibility for the supply of material, the failure by a subcontractor to perform his contractual obligations in relation to that material is a cause beyond the control of [C]? I do not think it can. [C] dictates his requirements to the subcontractor and can decide what contractual provisions he will or will not accept. He can proceed against the subcontractor in the event of the latter failing to perform his obligation. It would be curious if [D] had accepted the risk of a price variation caused by an event in respect of which, at the date of the contract, they would have had no recourse against a subcontractor, whereas [C] would have had.”125

4–045 The Court of Appeal, in John Mowlem v Eagle Star 126, considered, amongst other things, the meaning of the phrase “any cause beyond the control of the [C], his (subcontractors) or materials suppliers”. In rejecting the rationale of the Scott Lithgow case, the Court of Appeal dismissed C’s claim for an extension of time for delays caused by a subcontractor.

123 124 125 126

NEC/SF99 Cl.51, MWA98 Cl.4.2.2 and MWA05 Cl.4.6. Scott Lithgow Ltd (1989) 45 BLR 1. Scott Lithgow Ltd (1989) 45 BLR 1 at 11. John Mowlem & Co Plc v Eagle Star Insurance Co Ltd (1992) 62 BLR 126.

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4–046 In the US case of Wallace v US127, the expression “beyond the control and without the fault or negligence of the contractor” was interpreted to include delay to progress caused by defective specifications provided by D, but not delay caused by prolonged fabrication, or installation of subcontract works, which the court held caused a delay to progress for which C was responsible, or indeed the death of the contract director’s grandmother, a claim which was withdrawn before the appeal. The court also noted that, in other cases, the expression “beyond the control of the contractor” had been held to include “acts of the government in either its sovereign or contractual capacity”128 and: “[D]elays of subcontractors or suppliers at any tier arising from unforeseeable causes beyond the control and without the fault or negligence of both the contractor and the subcontractors or suppliers.”

4–047 Both the engineering and building forms stipulate causes beyond C’s control as excusable events. So, for example, under MC87, MC98129 and MC08130, C is excused for delay caused by “any cause which impedes the proper discharge by the management contractor of his obligations”. In GC/Works/2, C is excused delay caused by “any circumstance which is wholly beyond the control of [C]”131, in C21/03132, and C21/09133 C is excused delay caused by anything “beyond the control of [C] (including an act, default or omission of [D])”, in MWA80, MWA98134 and MWA05135 C is similarly excused for “any cause beyond [C’s] control”. GC/Works/l, GC/Works/1DB, GC/ Works/1/98, GC/Works/1DB/98136 and GC/Works/2/98137 also dictate that D carries the risk of: “[A]ny other circumstances (other than weather conditions) which are outside the control of the [C] or of any of his subcontractors, and which could not have been reasonably contemplated.”

4–048 Similar provisions are included in NZ03, which describes the event as: “Any circumstances not reasonably foreseeable by an experienced contractor at the time of tendering and not due to the fault of [C].”138

4–049 The expression used in MF/1139 is simply “circumstances reasonably beyond the control of [C]” and A201/97 and A201/07 refer to “other causes beyond [C’s] control”140. 4–050 CE06 provides an entirely different (and potentially deceptive) formula for dealing with excusable events in that it specifies, as D’s time risk event, “the occurrence

127 128 129 130 131 132 133 134 135 136 137 138 139 140

R P Wallace Inc, COFC 96–222 (2004); (2005) 21 Const LJ 378. R P Wallace Inc, COFC 96–222 (2004); (2005) 21 Const LJ 378. Cl.2.13.1. Cl.2.19.1. Cl.16(2). Cl.43.1.2. Cl.54.1.1. Cl.2.2. Cl.2.7. Cl.36(2)(e). Cl.23(b). Cl.10.3.1(f). Cl.33.1. Cl.8.3.1.

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of any risk referred to in the risk allocation schedule to the extent that the risk allocation schedule does not apportion responsibility for the consequences of the risk to [C]”141, but then goes on to add as being at D’s risk: “[T]he occurrence of any risk which is not referred to in the risk allocation schedule, is not reasonably foreseeable at the date of this contract, and is beyond the control of [C].”142

4–051 Such phraseology will require D to use a great deal of ingenuity in expressing its risks and their consequences in the risk allocation schedule if it is not to be left carrying the risk of virtually everything in a complex project, in which the nature of the risks and their consequences tend to develop over a long period of time.

Special circumstances 4–052 The third class of sweeping-up provisions, namely, the “special circumstances” clause, tends to be included in the engineering forms, but not usually in the building forms. So, for example, ICE6143, ICE7144 and ICE/DC145 excuse C from “any special circumstances of any kind whatsoever”. The ICE/MW form excuses “other special circumstances of any kind whatsoever outside the control of [C]”146. Under FIDIC4, but not under any of the other FIDIC forms considered, D carries the risk of delay caused by “other special circumstances which may occur, other than through a default of or breach of contract by [C] or for which he is responsible”147. HK05 excuses any “special circumstance considered by the [CA] as sufficient grounds to fairly entitle [C] to an extension of time”148 and A201/97 and A201/07 excuse “other causes which the [CA] determines may justify delay” (sic)149.

Force majeure 4–053 Force majeure and the doctrine of frustration are inextricably linked150, so that, in the absence of express terms providing otherwise, such as an extension of time for the effects thereof, force majeure frustrates the purpose of the contract and brings it to an end151. 4–054 The expression force majeure is borrowed from continental usage152 and has been interpreted in the English courts by Bailhache J in Matsoukis v Priestman153 and by McCardie J in Lebeaupin v Crispin154.

141 Cl.5.7.3. 142 Cl.5.7.4. 143 Cl.44(1)(f ). 144 Cl.44(1)(f ). 145 Cl.44(1)(e). 146 Cl.4.4(j). 147 Cl.44(1)(e). 148 Cl.25.1(3)(u). 149 Cl.8.3.1. 150 J van Dunné, “The changing of the guard: force majeure and frustration in construction contracts: the foreseeability requirement replaced by normative risk allocation” [2002] ICLR 162. 151 Davis Contractors Ltd v Fareham UDC [1956] AC 696, per Lord Radcliffe at 728–729. 152 The Rt Hon Sir D Walker-Smith and HA Close, The Standard Forms of Building Contract (Charles Knight & Co Ltd, 1979) at pp.92–93. 153 Matsoukis v Priestman & Co [1915] 1 KB 681. 154 Lebeaupin v Crispin [1920] 2 KB 714.

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4–055 It was formerly contended that force majeure was substantially the same as “Act of God”, or “vis major”. However, since Matsoukis v Priestman, it seems to be accepted that, at common law, force majeure has a more extensive meaning than either vis major, or Act of God. McCardie J, in Lebeaupin v Crispin, quoted with approval Goirond’s statement that war, inundations and epidemics are instances of force majeure155. A strike of workmen is also a case of force majeure, but the reasonable apprehension of a strike is not156. McCardie J, in considering the meaning of force majeure, said that: “any direct legislative or administrative interference would of course come within the term: for example, an embargo”157. 4–056 In the opinion of Bailhache J, such a thing as a breakdown of machinery through an accident would also be deemed to come within the meaning of force majeure158. “Acts of God”, or uncontrollable disasters including war, earthquakes, weather, strikes, lightning and the like would be obvious examples of force majeure. 4–057 However, it is well established under English law that a change in economic/ market circumstances, affecting the profitability of a contract, or the ease with which the parties’ obligations can be performed, is not normally to be regarded as being a force majeure event. In the circumstances of the particular contracts, the following have been held not to be a force majeure event: insufficient financial resources159;

increase in the market price in comparison to the contract price160; a rise in price161; commercial impossibility162; a significant unexpected shortage of materials163. 4–058 In Tandrin Aviation v Aero Toy164 Aero Toy (as D) failed to take delivery and complete the purchase of an aircraft from Tandrin (as C) on the basis that it was relieved by the force majeure clause in the contract by reason of the “unanticipated, unforeseeable and cataclysmic downward spiral of the world’s financial markets”. In this case the specific clause said: “Neither party shall be liable to the other as a result of any failure of, or delay in the performance of, its obligations hereunder, for the period that such failure or delay is due to: Acts of God or the public enemy; war, insurrection or riots; fires; governmental actions; strikes or labour disputes; inability to obtain aircraft materials, accessories, equipment or parts from vendors; or any other cause beyond [C’s] reasonable control. Upon the occurrence of any such event, the time required for performance by such party 155 Lebeaupin [1920] KB 714 at 719 quoting Goirond, French Commercial Law 2nd edn, at p.854. 156 Hackney Borough Council v Doré [1922] 1 KB 431 at 437, per Darling J. 157 Matsoukis [1915] 1 KB 681 at 687. 158 Lebeaupin [1920] 2 KB 714 at 719–720. 159 The Concadoro [1916] 2 AC 199. 160 Thames Valley Power Ltd v Total Gas & Power Ltd [2006] 1 Lloyd’s Rep 441. 161 See, for example, Brauer & Co, (GB) Ltd v James Clark (Brush Materials) Ltd [1952] 2 All ER 497 concerning the need to pay more for an export licence and Clearwater Constructors Inc v United States, 71 Fed Cl 25 (2006) in which a difficulty in obtaining special quality steel for hangar doors was also found not to amount to a force majeure. 162 See Tennants (Lancashire) Ltd v CS Wilson & Co Ltd [1917] AC 495, concerning dislocation of business and breach of other contracts. 163 See, for example, Holder Construction Group v Georgia Tech Facilities Inc WL 2807182 (Ga Ct App, 2006), in which it was held that C was not entitled to an extension of time arising out of the steel crisis. 164 Tandrin Aviation Holdings Ltd v Aero Toy Store Llc [2010] EWHC 40 (Comm).

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of its obligations arising under this Agreement, shall be extended by a period equal to the duration of such event.”165

4–059 In rejecting the claim, Hamblin J held that the clause only protected C’s performance under the contract and not D’s and, in any event did not protect either from the effects of an economic downturn. It is apparent that in any particular case, much will depend upon the phraseology used in the contract and although not normally encompassing economic risk, there is nothing to inhibit the parties from including economic difficulties in the definition of force majeure, if they wish166. 4–060 Most standard forms of construction contract deal with many of the events that, at common law, come under the heading of force majeure as specific D’s risk events and make more comprehensive provisions as to how those risks are to be borne. The purpose of this is, presumably, to expand the field of unforeseeable events that might otherwise be deemed to have brought the contract to an end and to provide C with relief as to time and/or cost in its place. 4–061 The building forms, for example, refer generally to force majeure as being a D’s time risk event, the effects of which entitle C to more time, but do not bring the contract to an end, nor provide C with financial compensation167. 4–062 A number of standard forms have attempted to define force majeure. Under FIDIC/SF98168, it is defined as: “[A]n event or circumstance which makes performance of a party’s obligations illegal or impracticable and which is beyond that party’s reasonable control.”

4–063 Some of the FIDIC forms include under this heading risks already defined elsewhere in the same form. So, for example, FIDIC/M&E87169 defines force majeure as: “[A]ny circumstances beyond the control of the parties, including but not limited to: (a) (b)

(c) (d)

war and other hostilities, (whether war be declared or not), invasion, act of foreign enemies, mobilisation, requisition or embargo; ionising radiation or contamination by radio-activity from any nuclear fuel or from nuclear waste from the combustion of nuclear fuel, radio-active toxic explosives, or any other hazardous properties of any explosive nuclear assembly or nuclear components thereof; rebellion, revolution, insurrection, military or usurped power and civil war; riot, commotion or disorder, except where solely restricted to employees of the contractor.”

4–064 Risks (a) to (d) above are also described here as being at D’s risk under the heading of “Employer’s Risks”170. Similar phraseology appears in SGC95171, but this form also includes ionising radiation, or contamination by radioactivity and such like,

165 Tandrin Aviation Holdings Ltd [2010] EWHC 40 (Comm) at [8]. 166 Tandrin Aviation Holdings Ltd [2010] EWHC 40 (Comm) at [48]. 167 MPF at Cl.12.1.1, MP05 at Cl.18.1.1, HK86 Cl.23(a), HK05 Cl.25.1(3)(a), ACA82 and ACA98 Cl.11.5(a); JCT63 Cl.23(a); JCT80 and JCT98 Cl.25.4.1; JCT05 Cl.2.29.13; DB05 Cl.2.26.13; IFC84 and IFC98 Cl.2.4.1; IFC05 and IFWCD/05 Cl.2.20.13; WCD81 and WCD98 Cl.25.4.1; DB05 Cl.2.26.13, PCC92 and PCC98 Cl.2.6.1; PCC06 Cl.2.21.12; MC87 and MC98 Cl.2.13; MC08 Cl.2.19.2; WC87 and WC98 Cl.2.10.1; WC08 Cl.2.19.16 and CMTC/08 Cl.2.28.12. 168 Cl.1.1.14. 169 Cl.44.1. 170 Cl.37.2(a), (b), (c) and (e) with minor additions and omissions and slightly different wording. 171 Cl.14.1(d).

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together with pressure waves caused by aircraft, or other aerial devices travelling at sonic, or supersonic speed. 4–065 Under Cl.44.2 of FIDIC/M&E87, it is stated that: “Neither party shall be considered to be in default or in breach of his obligations under the contract to the extent that performance of such obligations is prevented by any circumstances of force majeure which arise after the date of the letter of acceptance or the date when the contract becomes effective, whichever is the earlier.”

4–066 In other words, after formal commencement of the contract, the losses lie where they fall. However, Cl.44.6 states that if, in consequence of force majeure: “[T]he works shall suffer loss or damage [C] shall be entitled to have the value of the work done, without regard to the loss or damage that has occurred, included in a certificate of payment.”

4–067 Notwithstanding the apparent intention of Cl.44.2 of this form to let the losses lie where they fall, the effect of Cl.44.6 seems to put the risk of force majeure as to costs entirely with D. Similarly, under Cl.44.8, when the work is terminated as a result of force majeure, C is entitled to receive from D the costs of preliminary items carried out (and a proper proportion of parts thereof partially carried out), materials, or goods ordered and delivered to C (or for which it is liable to accept delivery), any other expenditure reasonably incurred in expectation of completing the works, removing C’s equipment and repatriating its staff and workmen (the last two in so far as the costs are reasonable). 4–068 FIDIC/Build98 has a similar, but not identical, definition of force majeure. Whilst incorporating the same provisions (a) to (d) as are specified in FIDIC/M&E87, FIDIC/Build98 adds: “(e) operation of the forces of nature such as earthquake, hurricane, lightning, typhoon or volcanic activity, and (f ) a change in the laws of the country or in the judicial or official governmental interpretation of such laws, made after the contract becomes legally effective.”172

4–069 Yet another definition of force majeure is provided by FIDIC/DB95173. This includes those definitions from FIDIC/M&E87174 and adds a further clause175 specifying, rather superfluously, that “Act of God” is included within the definition. 4–070 FIDIC/Build99176, FIDIC/DB99177, and FIDIC/PD+B99178 define force majeure as including, but not being limited to: 1. 2. 3.

172 173 174 175 176 177 178

war, hostilities, (whether war be declared, or not), invasion, act of foreign enemies; rebellion, terrorism, revolution, insurrection, military or usurped power, or civil war; riot, commotion, disorder, strike, or lock out by persons other than C’s personnel and other employees of C and its subcontractors; Cl.19.1. Cl.19.1. Cl.44.1. Cl.19.1(a). Cl.19. Cl.19. Cl.19.

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4.

munitions of war, explosive materials, ionising radiation, or contamination by radioactivity, except as may be attributable to C’s use of such munitions, explosives, radiation, or radioactivity; and natural catastrophes such as earthquake, hurricane, typhoon or volcanic activity.

5.

4–071 It is clear from the phraseology employed that, in these forms, force majeure may in fact be anything that: 1. 2.

is beyond the control of one of the parties to the contract; such party could not reasonably have provided for before entering into the contract; having arisen, such party could not reasonably have avoided or overcome; and is not substantially attributable to the other party179.

3. 4.

4–072 The FIDIC forms also generally make provision for the contract to be terminated by either party if progress is suspended as a result of force majeure for a continuous period of 84 days, or an aggregate period of 140 days as a result of the same force majeure180. 4–073 MF/1181 defines force majeure as: • •

• • • •

“war, hostilities (whether war be declared or not), invasion, act of foreign enemies; ionising radiations, with contamination by radioactivity from any nuclear fuel, or from any nuclear waste from the combustion of nuclear fuel, radioactive toxic explosive, or other hazardous properties of any explosive nuclear assembly or nuclear component thereof; pressure waves caused by aircraft or other aerial devices travelling at sonic or supersonic speeds; rebellion, revolution, insurrection, military or usurped power or civil war; riot, civil commotion or disorder; any circumstances beyond the reasonable control of either of the parties.”

4–074 However, whilst making it clear that a force majeure event can be likely to cause delay to the completion date for which an extension of time may be granted182 (presumably along the lines of “circumstances beyond the reasonable control of the contractor”183), this form makes no provision for the allocation of costs, which presumably lie where they fall and, if the circumstances last for more than 120 days, on the application of either party, the contract can be terminated184. 4–075 At Cl.14.2, IChemE states that: “In the context of this clause, ‘force majeure’ shall mean any circumstances beyond the reasonable control of either party which prevents or impedes the due performance of the contract by that party including, but not limited to, the following: a) b) c) d)

179 180 181 182 183 184

government action or trade embargo; war, hostilities or acts of terrorism; riot or civil commotion; epidemic;

Cl.19.1. Cl.19.6. Cl.46.1. Cl.46.3. Cl.33.1. Cl.46.3.

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e) f) g) h)

earthquake, flood, fire or other natural physical disasters; exceptionally severe weather conditions or the consequences thereof; denial of the use of any railway, port, airport, shipping service or other means of public transport; or industrial dispute, other than any solely confined to [C] and/or his subcontractors or their employees including employees of any affiliate of [C] or its subcontractors.”

4–076 IChemE then goes on to say that “the mere shortage of labour materials or utilities shall not constitute force majeure unless caused by circumstances which are themselves force majeure”. 4–077 IChemE expressly states that “in the event that either party is delayed by force majeure each party shall bear its own costs arising from such delay”185, but similarly to MF/1, it also provides for termination on the expiry of 120 days from notice of the occurrence of a force majeure event186. 4–078 Neither C21/09, the 2009 edition of the Irish government standard forms of contract, PPC2000, the ICE forms, the Hong Kong government form HKGC99, nor the American Institute of Architects’ forms A201/97, or A201/07 contain any mention of force majeure as an excusable event, but the ICE forms and HKGC99 do contain provisions entitling [C] to an extension of time if the work is delayed by “any special circumstances of any kind whatsoever”187. Similarly, without any mention of force majeure, ECC3188 provides for C to be both granted more time and to be reimbursed its costs for the effects of: “An event which stops [C] completing the works, or stops [C] from completing the works by the date shown on the accepted [programme], and which neither party could prevent, an experienced [C] would have judged at the contract date to have such a small chance of occurring that it would have been unreasonable for him to have allowed for it, and is not one of the other compensation events stated in the contract.”

4–079 Whereas under SIA80, SGC95, HK86, and the JCT family of contracts, force majeure is generally undefined and a “neutral event” (in that D takes the risk as to time and C takes the risk as to any costs caused thereby)189, under FIDIC/ Build98190, FIDIC/SF98191, FIDIC/DB95192, FIDIC/M&E87193, FIDIC/Build99194, FIDIC/DB99195, and FIDIC/PD+B99196, force majeure is defined and is both a D’s time and cost risk event. 4–080 In contrast to the distribution of risk under other standard forms of contract, under IFC05 and IFWCD/05197, when C is in culpable delay to the completion date, 185 186 187 188 189 190 191 192 193 194 195 196 197

Cl.14.5. Cl.14.6. See para.4–047. Cl.60.2(19). See, for example, JCT05 Cll.2.29.13 and 4.24. Cll.19.1 and 19.5. Cll.1.1.14, 6.1(l) and 7.3. Cll.19.1 and 19.5. Cll.44.1, 44.5 and 44.6. Cl.19. Cl.19. Cl.19. Cl.2.19.2.

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C also takes the risk as to time198. This is also the case under IFC84 and IFC98199, in regard to the like event.

Errors and inconsistencies 4–081 Most standard form contracts provide for an extension of time and compensation if C is adversely affected by errors, or inconsistencies in the contract documents, or instructions that are given during the course of the contract. On the other hand many standard forms200 (including SGC95201 and the FIDIC forms)202 also attempt to minimise the scope for claims by C in this regard by providing “hierarchy of documents” clauses. Under HK05, perhaps somewhat confusingly, ambiguities, or inconsistencies are resolved automatically by a stated hierarchy203, by an implied variation, or by the CA’s power to issue instructions to correct an ambiguity, or inconsistency204. So far as the hierarchy of documents is concerned, the second tier is expressed to comprise: 1. 2. 3.

the form of tender; the letter of acceptance; and any correspondence between the parties expressed to form part of the contract, which are to rank pari passu.

4–082 Under the fifth tier, moreover, the clause provides for: 1. 2. 3.

the drawings; the specification; and the bills of quantities

which are also ostensibly to rank pari passu. 4–083 Thus, it is foreseeable that the power given to correct an inconsistency by instruction205 under this type of form will only then be used in regard to an inconsistency, or ambiguity between the drawings and specification that remains to be resolved or where, notwithstanding the contractual hierarchy, the CA prefers some other priority. 4–084 The 2009 edition of the Irish government standard forms of contract similarly contains a hierarchy of documents clause206, stating that, in the event of inconsistencies, the documents are to take the following priority: 1. 2.

the agreement, even if it has not been executed; the schedule, letter of acceptance and any tender clarifications in it;

198 Cl.2.20.13. 199 Cl.2.3. 200 See however, PPC2000, which, at Cl.2.4, states: “each partnering team member who prepares or contributes to any one or more partnering documents shall be responsible for the consequences of any error or omission in, or in discrepancy between, such partnering documents or its contributions to them, except to the extent of its reliance (if stated in such partnering documents) on any contribution or information provided by any one or more other partnering team members.” 201 Cl.3.1. 202 See for example FIDIC/Build99, FIDIC/DB99, and FIDIC/PD+B99 at Cl.1.5. 203 Cl.5.1. 204 Cl.2.4. 205 Cl.2.4. 206 Cl.1.3.

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3. 4. 5. 6. 7. 8.

the form of tender; the conditions of contract; the works requirements; the pricing document; the works proposals; any other documents in the contract.

4–085 MPF207 and MP05208 have no priority of documents clause, but state that “[C] shall not be responsible for the contents of the requirements or the adequacy of the design contained in the requirements” and that: “[W]here a discrepancy is identified within the requirements, [C] shall notify [D] which of the discrepant provisions it intends to adopt and proceed accordingly. If [D] wishes [C] to proceed otherwise, it shall so instruct [C] and that instruction shall be treated as giving rise to a change.”209

4–086 These forms say that such an instruction for change is a D’s time risk event210, but oddly, is not a D’s cost risk event211, notwithstanding that there is provision for loss and expense to be valued212. A similar, but not identical, structure is imposed in C21/09213 and in A201/97214 and A201/07215, under which [C] is required to inspect the construction information for inconsistencies and ambiguities before performing work and to report them to the CA. The forms then provide that: “[I]f [C] believes that additional cost or time is involved because of clarifications or instructions issued by the [CA] in response to [C’s] notices and requests for information [C] shall make claims.”216

4–087 Otherwise, except with CE06 and the minor works forms (which generally make no express provision for delay arising out of the correction of inconsistencies), irrespective of whether the form of contract has a general sweeping-up clause, contracts normally provide for excusable delay and compensation in the event that C is adversely affected by errors, or inconsistencies in the contract documents, or arising out of instructions that are given during the course of the contract. So, for example, MC98 and WC/98217 and MC08 and WC/08218 excuse the results of inconsistencies between contract documents and management contractor’s instructions. 4–088 Any discrepancy in, or divergence between, any two, or more contract documents, or between parts of any one of them, is excused under ICE6 and ICE7219, ICE/

207 208 209 210 211 212 213 214 215 216 217 218 219

Cl.5.1. Cl.11.1. MPF Cl.4.2 and MP05 Cl.10.2. MPF Cl.12.1.5 and MP05 Cl.18.1.5. MPF Cl.21.1 and MP05 Cl.27.2. MPF Cl.20.6.4 and MP05 Cl.26.6.4. Cl.42.1. Cl.3.2.1 Cl.3.2.2 A201/97 Cl.3.2.3 and A201/07 Cl.3.2.4. Cl.2.13.2 and WC/98 Cll.1.5 and 2.10.5.2. Cl.2.19.2 and WC/08 Cll.2.11 and 2.19.2.1. Cll.5, 13(3) and 44(1)(c).

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DC220, IFC05 and IFWCD/05221, JCT63222, JCT80 and JCT98223, JCT05224, WC/87 and WC/98225, TC08226, and PCC92 and PCC98227, and PCC06228. Any departure from the standard method of measurement is excused under JCT80 and JCT98229, JCT05230, IFC84, IFC98231, and IFC05 and IFWCD/05232, TC08233, WC/87 and WC/98234, WC/08235 and MC87 and MC98236, MC08237. Under ECC2 and ECC3, C is excused delay caused by “a fault of the [D] or a fault in his design”238. Any error in quantity, or description, or omission from the bills of quantities is excused under ICE6 and ICE7239, JCT63240, JCT80 and JCT98241, JCT05242, IFC84, IFC98243 and IFC05 and IFWCD/05244, WC/87 and WC/98245, WC/08246 and TC08247. GC/Works/1 and GC/ Works/1/98248 make provision for financial compensation for any error in quantity, or description, or omission from the bills of quantities, but do not expressly make provision for relief from delay caused thereby. 4–089 The 2009 edition of the Irish government forms takes a different position again, specifying that, if the works requirements include bills of quantities and these are inconsistent with any other works requirements, the other works requirements shall prevail249. The effect of this is to require C to price for everything illustrated on the drawings, or specified, irrespective of whether such elements of work have been competently measured in the bills of quantities. This is contrary to the formula used in the JCT contracts, in which the contract bills takes precedence over the drawings and specification and become the document by which the build-up of the tender price is proved. 4–090 However, and notwithstanding that, by default, there cannot be any extension of time granted for such an event, in the build-only Irish government standard forms

220 221 222 223 224 225 226 227 228 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243 244 245 246 247 248 249

Cll.5(1)(c)(ii) and 44(1)(b). Cll.2.20.2.1 and 2.13. Cll.1(2) and 23(e). Cll.2.3 and 25.4.5.1. Cll.2.15 and 2.19.2.1. Cll.1.5 and 2.10.2. Cl.2.28.2.1 and 2.14. Cll.1.10 and 2.6.5.1. Cll.2.21.1.2 and 2.10. Cll.2.2.2.2, 13.2 and 25.4.5.1. Cl.2.15. Cll.1.4, 3.6 and 2.4.5. Cl.2.13.1. Cll.2.28.2.1, 2.13.1 and 2.14. Cll.1.10.2 and 2.10.5.1. Cll.2.19.2.1, 2.9.1, 2.10 and 2.11. Cl.2.13.2 and WC/98, Cll.1.10.2 and 2.10.5.1. Cl.2.19.2 and WC/08 Cll.2.19.2.1, 2.10 and 2.11. Cll.60.1(14) and 80.1. Cll.44(1)(b) and 51(4). Cll.1(2) and 23(e). Cll.2.2.2.2, 13.2 and 2.5.4.5.1. Cl.2.14.3. Cll.1.4, 3.6 and 2.4.5. Cll.2.12.2, 2.13.1 and 2.20.2.1. Cll.1.10.2 and 2.10.5.1. Cl.2.9.3. Cl.2.13.3. Cl.3(3). Cl.1.3.4.

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of contract250 there is provision in the schedule, for D to identify, on a job specific basis, that C is to be compensated for prolongation, where delay to the completion date is caused by: “A difference between the contract value of the works according to the quantities and descriptions in a bill of quantities in the pricing document, if there is one, (taking into account the method of measurement and any amendments identified below) and the contract value of the works described in the works requirements, because the bill of quantities, when compared with the works requirements: includes an incorrect quantity; or includes an item that should not have been included; or excludes an item that should have been included; or gives an incorrect item description and the difference for an item in, or that should have been in, the bill of quantities is more than 500.”251

4–091 What is to happen if there are one or more errors causing delay, each of which amounts to less than 500 per item, is not identified. Presumably it would be covered by the Schedule, Pt 1, section K, item 16, which provides for compensation for loss caused by “a breach by [D] of the contract delaying the works that is not listed elsewhere in this table”, for which, in all versions of these forms, paradoxically, C is entitled to both an extension of time and to financial compensation. 4–092 NZ03 provides that discrepancies in contract documents252, omissions from schedules of prices253, discrepancies in quantities254 and changes in legal requirements255 are to be treated “as if” they were a variation and hence excusable and compensable events per se, rather than the instructions given to correct the same being the excusable event, which is the more customary phraseology. 4–093 Discrepancy in D’s requirements is excused in ICE/DC256 and any change in D’s requirements is excused under ECC2 and ECC3257, NEC/SF99258, GC/Works/1DB and GC/Works/1DB98259. Under WCD81 and WCD98260 and DB05261, any divergence between D’s requirements and the definition of the site boundary is also excused. 4–094 Any discrepancy between what D requires and what C offers is also excused under WCD81 and WCD98. Both forms are alike in this regard. Clause 2.4.1 provides that C is to inform D as to how it proposes to overcome any discrepancy and that D may agree C’s proposals, or decide itself how to overcome it. The clause goes on to say: “such agreement or decision shall be notified in writing to [C] and such notification shall be treated as a change in [D’s] requirements”. However, Cl.12, which defines a “change in [D’s] requirements”, provides, at Cl.12.2, for instructions for such change which, if not objected to by C, are excusable events under Cl.25.4.5.1. They are also

250 251 252 253 254 255 256 257 258 259 260 261

IGBW/09 and IGCE/09. See, for example, the Schedule to IGBW/09, Pt 1, section K, item 17. Cl.2.2.5. Cl.2.3.2. Cl.2.3.4. Cl.5.11.6. Cll.5(1)(c)(i) and 44(1)(a). Cl.60.1(1). Cl.60.1(1). Cll.2(3) and 36(2)(a). Cll.2.3.1 and 25.4.5.1. Cll.2.10.1 and 2.26.1.

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reimbursable under Cl.26.2.6. The structure under DB05 is the same262. Thus, under the JCT design and build forms, the failure of C to get its design to conform to D’s requirements is entirely at D’s risk in regard to both time and cost. In view of the reputation of such forms for putting the risk of design with the contractor, it should not be necessary to trace these risks through four separate clauses in order to find that the true contractual position is otherwise. 4–095 In contrast to the formula contained in the JCT forms (which provides that the C’s proposals take priority over D’s requirements), C21/09263 provides generally that C is to check D’s documents and is not entitled to compensation for loss and/or expense caused by any omission, or addition of work needed to overcome any ambiguity, inconsistency or discrepancy in the contract documents that could reasonably have been identified prior to tender, but which later has to be corrected by a variation. By way of an additional option, C21/09 also provides264 that D may require C to take all responsibility for the sufficiency of D’s design carried out before tender. If Cl.44 is identified as applicable, C is then also required to: “check, and notify [D] of details (together with appropriate supporting documents) of any fault in [D’s] documents; amend the documents to correct faults so that, on completion, the works and every part will be fit for the purposes required by the contract; accept and adopt [D’s] documents as if [C] prepared them so that they (amended by [C] as necessary) become [C’s documents]; [C] acknowledges that [D’s] design is incomplete and may contain faults or conflict with statutory requirements or other codes or standards which [C] is required to comply with under the contract; [D] makes no representation concerning [D’s] design and [C] is not entitled to rely on the completeness or accuracy of [D’s] design; and [D] relies on [C] to identify and remedy faults in [D’s] documents.”

At Cl 44.3, C21/09 also makes it plain that in the event that C fails to identify a fault in the documents, which later requires correction by way of a variation, then: “[C] will be responsible for, and not entitled to payment for delays or the cost of any aborted work arising out of the fault; and the value of any variation [D] instructs as a result of the fault must not include the cost of such delays or aborted work.”

4–096 The 2009 edition of the Irish government standard forms of contract also specifically requires C to make sure that its works proposals comply with D’s works requirements265 and the forms provide no relief by way of extension of time, or compensation for a failure so to do, stating that: “If any works requirements or works proposals do not comply with the contract or legal requirements or are physically impossible to comply with, or if any works proposals do not comply with the initial works requirements, [C] shall propose a change to the works requirements as necessary. The change shall not take effect until it has been agreed by the [CA]. [C] shall submit any change to the works proposals to the [CA]. (There shall be no extension of time, use of [schedule] contingency under sub-clause 9.4, or adjustment to the contract sum for changes or actions under this sub-clause 4.6 or their consequences.).”266 262 263 264 265 266

Cll.2.12, 5.1, 2.26.1 and 4.21.1. Cl.42. Cl.44. IGDB/09 and IGCEDB/09 Cl.4.6.1. IGDB/09 and IGCEDB/09 Cl.4.6.2.

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4–097 Divergence between statutory requirements and the contract documents (sometimes referred to as illegal, or impossible specification) is excused under ECC2267 and ECC3268, SIA80269, ICE6, ICE7 and ICE/DC270, ACA82 and ACA98271, GC/ Works/1 and GC/Works/1/98272, JCT63273, JCT80 and JCT98274, JCT05275, IFC84, IFC98276, IFC05 and IFWCD/05277, PCC92 and PCC98278, PCC06279, MC08280 and WC/08281. 4–098 HK05 contains the rather odd provision that, where carrying out the works in compliance with the contract infringes the statutory requirements, the CA may issue an instruction to resolve the infringement282. On its face, this implies that, in the absence of an instruction requiring a variation, it is possible to carry out the works in compliance with the contract and in breach of the statutory requirements. Normally, the standard forms require C to comply with statutory requirements, irrespective of what is in the contract and, in the absence of instructions to the contrary, provide that the work required to connect any inconsistency is an implied variation283. 4–099 Unreasonably inaccurate approximate quantities are excused under JCT80 and JCT98284, JCT05285, IFC84, IFC98286, IFC05 and IFWCD/05287, MC87 and MC98288, MC08289, WC/87290 and WC/08291. 4–100 JCT80 and JCT98292, JCT05293, ECC2 and ECC3294, MC98295, MC08296, WC/98297 and WC/08298 excuse divergence between performance specified work and the CA’s instructions. Discrepancy, or divergence between the contract documents and

267 268 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287 288 289 290 291 292 293 294 295 296 297 298

Cll.19.1 and 60.1(1). Cll.18.1 and 60.1(1). Cl.7(1). Cll.26(3)(b) and 44(1)(a). Cll.1.6 and 11.5(e). Cll.2(3) and 36(2)(a). Cll.4(1)(c), 11(1) and 23(e). Cll.6.1.2, 13.2 and 25.4.5.1. Cl.2.17.2.2. Cll.5.4.3, 3.6 and 2.4.5. Cl.2.15.2.2. Cll.5.2, 5.3, 3.3.2 and 2.6.5.1. Cll.2.21.1.2 and 2.11.2. Cl.2.19.2 and WC/08 Cl.2.12.2.2. Cl.2.12.2.2. Cl.6.2(2). See, for example, JCT98 Cll.6.1.1 and 6.1.5 and JCT05 Cl.2.18.3. Cl.25.4.14. Cl.2.29.4. Cl.2.4.15. Cl.2.20.4. Cl.2.13.2 and WC/98 Cl.2.10.4. Cl.2.19.2 and WC/08 Cl.2.19.4. Cl.2.10.14. Cl.2.19.4. Cll.2.4.1 and 25.4.5.1. Cl.2.14.3. Cll.17(1) and 60.1(1). Cl.2.13.2 and WC/98 Cll.1.5A.1 and 2.10.5.1. Cl.2.19.2 and WC/08 Cl.2.9.3. Cll.1.5A.1 and 2.10.5.1. Cl.2.9.3.

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any information provided under an information release schedule is added as an excusable event in PCC06299, JCT98300, JCT05301, IFC98302, IFC05 and IFWCD/05303. 4–101 SIA80 provides for a number of possibilities arising out of discrepancies, divergences and ambiguities. In essence, if any are discovered and if capable of resolution by “interpretation of the documents as a whole”, the CA may give a direction, as opposed to an instruction constituting a variation. Otherwise an instruction must be given to correct the error, which will constitute an instructed variation to the works and rank as both a D’s time and cost risk event. If C has “as a fact been reasonably misled” when pricing the works at tender stage, then an appropriate addition to the contract value and an extension of time may be granted or, if it was to C’s advantage, a deduction is to be made from the contract sum to account for the effects of the ambiguity, but not apparently any reduction in the contract period304. Similarly, HKGC99305 makes provision for the contract value to be adjusted in the light of any additional cost, or saving, but provides only for an extension of time for additional work and not a reduction of time for any saving. 4–102 Under FIDIC/Build98, D is at risk as to “any error in the positions, levels, dimensions or alignment of the works” in so far as those are specified, or notified, but C is under a duty to use its reasonable endeavours to verify their accuracy before use306.

Instructed variations and changes 4–103 Most construction contracts include a clause permitting variations and changes including additions, deletions and other changes in obligations, provided that they are within the scope of the contract. Instructed variation and change are usually both a D’s time risk event and D’s cost risk event307. In the event that they cause delay to the completion date, they are also excusable causes of delay, provided that there is provision for D or the CA to extend the contract period for that reason. 4–104 Although many contractor’s claims refer to such events as “late variations”, or “late changes”, no such event occurs under any of the standard forms of contract. City Inn v Shepherd 308 concerned an amended version of JCT80, in which there were two relevant events considered by the court, that concerning instructions requiring a variation309 and that concerning C not having received in due time necessary instructions310. Under JCT80, as with every other standard form of contract, C has no entitlement to an instruction to vary the works, the discretion as to the issue of which rests entirely with the CA. In the event that the CA does instruct a variation, then the effect

299 Cll.2.9, 2.10.4 and 2.21.1.2. 300 Cll.2.3.4 and 25.4.5.1. 301 Cll.2.12, 2.15.4 and 2.19.2.1. 302 Cll.1.4, 3.6 and 2.4.5. 303 Cll.2.11, 2.13.2 and 2.20.2.1. 304 Cl.14. 305 Cll.5(2) and 50(1)(b)(iii). 306 Cll.4.7 and 8.4(b). 307 But see MPF Cl.21.1 which deceptively states that C is not entitled to loss and expense arising out of the effects of an instructed change whilst providing for such loss and expense to be valued at Cl.20.6.1, an inconsistency that has been removed from MP05. 308 City Inn Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590 affirmed, City Inn Ltd v Shepherd Construction Ltd [2010] CSIH 68. 309 JCT80 Cl.25.4.5.1. 310 JCT80 Cl.25.4.6.

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of it is measured by reference to the content of the variation, as at the time it is issued. On the other hand, the provision for relief to be granted in relation to the issue of late instructions concerns the work that C is obliged to carry out under the contract, the timing of which is relevant to the pace at which the contract works are actually proceeding. These instructions must be issued in good time, but they have no additional content simply because, by their nature, C is already bound to carry out the work concerned. In this, the second visit to the Scottish Outer House, in this matter, it had earlier been decided (by the Scottish Inner House311 on appeal from a previous decision)312 that, in the absence of notice to the effect that a variation instruction would cause delay and/or loss or expense and subsequent confirmation by D, the risk of delay to the completion date, or pecuniary loss caused by that variation being put into effect passed to C. 4–105 In finding that, contrary to the earlier decision, affirmed by the appeal court, the risk of variations for which no quotation had been provided was at D’s risk, the court considered first the duration of the work content of the variation (in order to arrive at a date upon which, if it were not to cause delay to the original completion date, the variation ought to have been instructed) and then determined that it was not the content, but the lateness (gauged by reference to the contract completion date), which caused the delay. Although not expressly saying so, the court seems to have come to the conclusion that where C requested instructions which required a variation, by virtue of the request, it moved the issuance of the instructions from Cl.25.4.5 to Cl.25.4.6. It is respectfully suggested that there is no basis for such a construction of the contract and that the decision to excuse C’s liability based solely upon the timing of an instructed variation, was in error313. 4–106 As to changes within the scope of the contract, changes are defined in IChemE as any change that in aggregate does not increase, or decrease the contract price by more than 25%, or, in the case of a variation order issued after the works have been taken over, does not increase the contract price by more than 5%. In addition, such clauses usually provide a method of valuing changes and dealing with time for the execution of changes. 4–107 Unusually, PCC92 and PCC98 provide for relief from delay to the completion date caused by any change to the scope, or nature of the work314. Otherwise, C generally cannot be required, simply by an instruction for change, to carry out any work beyond the scope of the works. This is also acknowledged in PCC06, which says that C need not comply with an instruction that has the effect of changing the scope of the contract, unless a revision of the contract fee is agreed in regard thereto315. 4–108 In PPC2000, Cl.17 provides for the time and cost effect of changes to be pre-agreed between D and C, or pre-determined by the CA according to the agreed rates. In A201/07, a change order is defined as a signed document by which the cost and time effect of the change is pre-agreed316. Otherwise, PPC2000 provides for the CA to ascertain for itself the reasonable effect on time and cost, which is binding unless

311 312 313 314 315 316

City Inn Ltd v Shepherd Construction Ltd, 2003 SLT 885; [2003] BLR 468. City Inn Ltd v Shepherd Construction Ltd, 2002 SLT 781. See also the case commentary by the previous author at (2008) 24 Const LJ 667. Cll.3.4.2 and 2.6.5.1. Cl.3.6. Cl.7.2.

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disputed within 20 days of being notified to C317. A201/07 also makes provision for a construction change directive, which will set out either C’s agreement to, or reasons for non-agreement to either the time and cost effects, or method of calculating the time and cost effects of the variation318, or for minor changes which affect neither time nor cost the CA may issue a “written order”319. 4–109 The 2009 edition of the Irish government standard forms of contract contains a less disciplined change order procedure than the AIA forms. Under these standard forms, a change order is defined as: “[A]n instruction from the [CA] to change (including to add to or omit) the works or to change (including to impose or remove) any constraints in the contract on how the works are to be implemented”

that is given at any time up to the date of substantial completion320, unless it is in relation to work that was always to be done after substantial completion, or amounts to an acceptance of defective work under Cl.8.5.4. 4–110 By Cl.4.5.4 of these forms, a change order is to be given to correct a defect in the works requirements that renders it illegal, or physically impossible, to comply therewith. The sort of impossibility contemplated is no doubt the sort encountered in Wallace321, in which the specification called for the windows to match the Georgian glazing bars of the original windows, but also to withstand hurricane force winds, a requirement that the judge in that case graphically compared to the Sisyphean task of squaring the circle! 4–111 Under the Irish government standard forms, change orders may also be given to omit that part of the works which is the subject-matter of an order to suspend work that does not also result from C’s breach and has subsisted for more than three months322 and also to accept C’s proposals for value engineering323. However, bearing in mind that, under this regime, C is to take responsibility for any such proposals for value engineering, is not entitled to compensation for disruption caused thereby324 and its proposals, if accepted, will only result in C having less time and being paid less, it is not apparent why C should ever wish to make any such proposals. 4–112 In most cases, the provisions permit written instructions for changes in detail to be given retrospectively in order to prevent personal injury, or property damage in emergency situations. The adjustment in contract sum and/or contract time is usually either negotiated between the parties to the contract by acceptance of an agreed price325, or by reference to C’s cost and a mutually acceptable fixed, or percentage fee, or by pro rata adjustment of the rates and charges set down in the contract bills, or specification. 4–113 Uniquely, in PPC2000, the provisions to extend time for the effects of change fall outside the extension of time clause326 and are not cross-related to it. In Cl.17, it

317 Cl.17.4. 318 Cl.7.3. 319 Cl.7.4. 320 Cl.4.5.3. 321 R P Wallace Inc [2005] 21 Const LJ 378. 322 Under Cl.9.2.3. 323 Under Cl.4.8. 324 Cl.10.7.4. 325 See, for example, Cl.13A of JCT80 and JCT98, Cl.5.3 and Sch.2 to JCT05, Cl.61 of ECC2 and ECC3 and Cl.38 of GC/Works/1 and GC/Works/1/98. 326 Cl.18.3.

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appears that C is entitled to whatever additional time it can negotiate, or which the CA says it is to be awarded, without any obvious structure for ascertainment. ECC2 and ECC3, on the other hand, provide that any variation, or change327, CA’s change of instruction328 and the correction of an assumption about the nature of a compensation event329 is a compensation event in both time and cost, but provide for the time effect to be ascertained by reference to its actual effect on the progress of the works to be identified on the accepted, updated, schedule330. 4–114 Variation and change are expressly excusable under331 AS2124332, HK86333, HKGC99334, HK05335, SIA80336, SGC95337, MPF338, MP05339, ICE/MW340, ICE6, ICE7 and ICE/DC341, ACA82 and ACA98342, GC/Works/1 and GC/Works/1/98343, JCT63344, JCT80 and JCT98345, JCT05346, JCTsub/05347, IFC84, IFC98348 and IFC05 and IFWCD/05349, MC87 and MC98350, MC08351, WC/87 and WC/98352, WC/08353, TC08354, CE06355, FIDIC4356, FIDIC/M&E87357, FIDIC/Build98358, and FIDIC/SF98359, FIDIC/ Build99360, FIDIC/DB99361 and FIDIC/PD+B99362. GC/Works/1DB98, GC/Works/1 DB363, WCD81 and WCD98364 refer to “any change in [D’s] requirements”. Whilst the main body of the JCT forms uses the expression “variations and any other matters or instructions which under these conditions are to be treated as, or as requiring a

327 328 329 330 331 332 333 334 335 336 337 338 339 340 341 342 343 344 345 346 347 348 349 350 351 352 353 354 355 356 357 358 359 360 361 362 363 364

Cl.60.1(1). Cl.60.1(8). Cl.60.1(17). Cl.32.1. Cl.52.4. Cl.35.5(b)(iv). Cl.23(e). Cl.50(1)(b)(iv). Cl.25.1(3)(h) and (i). Cl.23.(1)(f), (g) and (h). Cl.14.2(h). Cl.12.1.5. Cl.18.1.5. Cll.4.4(a) and 2(3)(a). Cll.51(1) and 44(1)(a). Cl.11.5(e). Cl.36(2)(a). Cll.11(2) and 23(e). Cll.13 and 25.4.5.1. Cl.2.29.1. Cl.2.19.1. Cl.2.4.5. Cl.2.20.1. Cl.2.13.2 and WC/98, Cll.1.3.2.1 and 2.10.5.1. Cl.2.19.2 and WC/08 Cl.2.19.1. Cll.1.3.2.1 and 2.10.5.1. Cl.2.19.1. Cl.2.28.1. Cl.5.7.1. Cl.44.1(a). Cl.26.1(a). Cl.8.4(a). Cll.6.1(m) and 7.3. Cl.8.4(a). Cl.8.4(a). Cl.8.4(a). Cl.36(2)(a). Cll.12 and 25.4.5.1.

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variation”, DB05 excuses the same content, substituting the word “variations” by the word “changes”365 where change is widely defined366. A similar formula is used in MP05367, where change is also widely defined368. PCC06 uses a different formula again, excusing compliance with the CA’s instructions under Cl.3.15, where that clause contains a similarly wide definition of change. NZ03 defines variations369 as those within the scope of the contract, which: 1. 2. 3. 4. 5.

increase, or decrease, the quantity of work; omit any work; change the character, or quality, of any material, or work; require additional work to be done; change the level, line, position, or dimensions of any part of the contract works.

4–115 NZ03 also defines a CA’s instruction to change the order in which the works are carried out as a variation370. Apart from defining a variation as a D’s time risk event, HKGC99371 also identifies that C is to be relieved from the effects of time caused by “a substantial increase in the quantity of any item of work not resulting from a variation order”. In the 2005 and later edition of the JCT family of contracts, variation and change are typically372 defined as a change involving: “•

the alteration, or modification of the design, quality, or quantity of the works, including: 1. 2. 3.

•

the addition, omission, or substitution of any work; the alteration of the kind, or standard of any materials, or goods to be used in the works; the removal of any work, or goods which are not defective;

the imposition by D of any obligations, or restrictions, or the addition, or alteration, or omission of any obligations, or restrictions imposed by D, or the contract bills, or D’s requirements in regard to: 4. 5. 6. 7.

access to the site, or any specific parts of the site; limitations of working space; limitations of working hours; or the execution, or completion of the work in any specific order.”

4–116 This definition is expanded under the CMS373 to include the alteration, or modification of: “1. 2. 3. 4.

365 366 367 368 369 370 371 372 373

the CPM schedule network and method statement so as to reduce, overcome, or avoid the likely effects of any delay to progress caused by one or more D’s time risk events; the duration, sequence or timing of any activity, or activities; any period of time whether by reference to a lead, lag, or otherwise; the date of any milestone, or key date;

Cll.5.1 and 2.26.1. See, for example, DB05 Cl.5.1. Cl.18.1.5. Cl.1. Cl.9.1.1. Cl.9.1.2. Cl.50(1)(b)(v). See, for example, JCT05 Cl.5.1. See App.2 to the 4th edn.

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5. 6.

the resources to be used in connection with any activity, or activities; and the requirements of the schedules, which specify how the networks and method statement are to be prepared, to whom they are to be distributed and how records are to be kept of the progress of the work on site.”

4–117 By way of contrast, the 2009 edition of the Irish government standard forms of contract contains a departure from the normal standard form procedures in that, under these forms, the CA does not have an unfettered power to instruct changes to the works. The forms provide for D to impose a limit on the value of a single change order and the value of the maximum number of change orders issued in a three-month period (presumably rolling). The CA also has no authority to instruct a change that has the effect of causing, or contributing to, a reduction in safety, scope, quality, or usefulness of the works, or any proposal C might make to reduce the cost of the works, or accelerate the progress of the works374. It follows from this that, under these standard forms, C cannot simply comply with any instructions the CA might give and later expect to obtain relief from liquidated damages, in relation to delay to the completion date caused thereby, or to be paid compensation, as it can under most standard forms of contract. Compliance with the CA’s instruction is excusable under SIA80375, JCT63376, JCT05377, JCTsub/05378, IFC84, IFC98379 and IFC05 and IFWCD/05380, CE06381, MWA80, MWA98382, MWA05383, WCD81, WCD98384 and DB05385, MTC89386, TC08387, PCC92 and PCC98388, PCC06389, MC87 and MC98390, WC/87 and WC/98391, MC08392 and WC/08393 and FIDIC/M&E87394. 4–118 A change in performance specified work caused by a change in the statutory requirements is also excused under JCT80 and JCT98395, JCT05396, IFWCD/05397, MC98398, and WC/98399, MC08400 and WC/08401 and C21/09402.

374 375 376 377 378 [CA’s] 379 380 381 382 383 384 385 386 387 388 389 390 391 392 393 394 395 396 397 398 399 400 401 402

See, for example, the Schedule to IGBW/09 Pt 1, section A. Cl.23.(1)(n). Cll.11(1) and 23(e). Cl.2.29.2. Cl.2.19.2, where it is referred to as the “[C’s] directions, including those which pass on the instructions”. Cl.2.4.5. Cl.2.20.2. Cl.5.7.1. Cl.2.2. Cl.2.7. Cl.25.4.5. Cl.2.26.2. Cl.2.3.2. Cl.2.28.2. Cl.2.6.5. Cl.2.21.1. Cl.2.13.2 and WC/98 Cl.2.10.5. Cl.2.10.5. Cl.2.19.2 and WC/08 Cl.2.19.2. Cl.2.19.2. Cl.26.1(d). Cl.25.4.15. Cl.2.17.1. Cl.2.15.2.1. Cl.2.13.2 and WC/98 Cl.2.10.16. Cl.2.10.16. Cl.2.19.2 and WC/08 Cl.2.12.2.1. Cl.2.12.2.1. Cl.53.1.

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4–119 Delay caused by the effect of expenditure of any provisional sums is excused under SIA80403 and SGC95404, provided that it constitutes a variation from that work described. Instructions to expend provisional sums, or use provisional quantities under HK05, are subjectively described as being D’s time and cost risk events, only if the instruction results in: “[I]ncrease in the work to be carried out of sufficient magnitude to cause delay, provided that the variance was not apparent from the contract drawings.”

SIA80405 also provides for expenditure of a contingency sum to rank as a D’s time risk event. Under WCD81, WCD98406 and DB05407, it is excused in any event. Delay caused by the effect of expenditure of provisional sums only for undefined work is excused under JCT80 and JCT98408, JCT05409, IFC84, IFC98410 and IFC05 and IFWCD/05411. The significance of a defined provisional sum under these forms is set out in general rr.10.1 to 10.6 inclusive of SMM7. These are reproduced as a footnote in JCT80 and JCT98 (but not in JCT05). That note states: “10.1 Where work can be described and given in items in accordance with these rules but the quantity of work required cannot be accurately determined, an estimate of the quantity shall be given and identified as an approximate quantity. 10.2 Where work cannot be described and given in items in accordance with these rules it shall be given as a Provisional Sum and identified as for either defined or undefined work as appropriate. 10.3 A provisional sum for defined work is a sum provided for work which is not completely designed but for which the following information shall be provided: (a) The nature and construction of the work. (b) A statement of how and where the work is fixed to the building and what other work is to be fixed thereto. (c) A quantity or quantities which indicate the scope and extent of the work. (d) Any specific limitations and the like identified in Section A35. 10.4 Where provisional sums are given for defined work [C] will be deemed to have made due allowance in [scheduling], planning and pricing Preliminaries. Any such allowance will only be subject to adjustment in those circumstances where a variation in respect of other work measured in detail in accordance with the rules would give rise to adjustment. 10.5 A provisional sum for undefined work is a sum provided for work where the information required in accordance with rule 10.3 cannot be given. 10.6 Where provisional sums are given for undefined work [C] will be deemed not to have made any allowance in [scheduling], planning and pricing Preliminaries.”

4–120 Where undefined work is included in a provisional sum, it should thus be accompanied by a requirement for a contingency period to be allowed in the working schedule for the execution of the work. Otherwise, there is inevitably a reasonable likelihood of such work instructed under an undefined provisional sum causing a delay to progress and, depending upon its criticality when carried out, a delay to the completion date.

403 404 405 406 407 408 409 410 411

Cl.23.(1)(g). Cl.14.2(i). Cl.23.(1)(h). Cll.12.3 and 25.4.5.1. Cll.3.11 and 2.26.2.1. Cll.13.3.1 and 25.4.5.1. Cl.2.29.2.1. Cll.3.8 and 2.4.5. Cl.2.20.2.1.

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Weather 4–121 The variable weather conditions and corresponding units of measure that are usually relevant in construction are: 1. 2. 3. 4. 5. 6. 7.

rainfall (mm); snowfall (mm); snow cover (mm); temperature (°C); relative humidity (%); wind velocity (m/s); and wind gust speed (m/s).

4–122 The effects of weather on the progress of the work are excused under most of the forms in which there are not general sweeping-up clauses and also in some forms that have both force majeure and sweeping-up clauses. However, the phraseology varies. C21/09 and the GC/Works series of UK government contract forms expressly exclude bad weather as grounds for excusable delay and no provision is made for the reimbursement of cost. Thus, so far as concerns these standard forms, the risk of delay for bad weather rests entirely with C. By contrast, the currently recommended form for UK government contracts, ECC3, places the risk of both time and cost for bad weather with D412. 4–123 Under JCT63, C was excused for the results of “exceptionally inclement weather”413. This expression has been found in practice to be difficult to apply to any particular circumstance, since, whilst its general meaning is clear, it is difficult to quantify. The key word is “exceptionally”. A degree of inclement weather is usual and C must take the risk of it. It can only be granted an extension of time if the weather that causes delay to the completion date is bad to the point of being wholly unusual having regard to the place and the season414. 4–124 “Inclement weather” is also the form of words used in HK86415; although the form then goes on to describe that as: “[R]ainfall in excess of twenty millimetres in a twenty-four hour period (midnight to midnight) as recorded by the Royal Observatory or the hoisting of Typhoon Signal No.8 or higher.”

4–125 The Hong Kong government form, HKGC99416, provides three separate clauses associated with weather to define the time risk event: “(i)

inclement weather and/or its consequences adversely affecting the progress of the works, or (ii) the hoisting of tropical cyclone warning No.8 or above, or (iii) a Black Rainstorm Warning.”

Since it uses the expression “and/or” and potentially therefore is expressed in the alternative, it would appear that the consequences of any inclement weather at all which affects the progress of the work, such as the labour force declining to get wet, under these forms, will be at D’s risk as to time. NZ03 also provides for relief from “weather 412 413 414 415 416

Cl.60.1(13). Cl.33(b). Walker-Smith and Close, The Standard Forms of Building Contract (1979). Cl.23(b). Cl.50(1)(b).

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sufficiently inclement to interfere with the progress of the works”417. This appears to be the case also with AS2124418 and AS4000419 although, in both forms, D’s risk is stated to be limited to the contract period, after which the risk of delay caused by inclement weather reverts to C. 4–126 HK05 expands the weather provisions from those in HK86 into two clauses, stating that D’s time risk events under this form are: “(b) inclement weather conditions, being rainfall in excess of twenty millimetres in a twenty-four hour period (midnight to midnight) as recorded by the Hong Kong observatory station nearest the site, and/or its consequences adversely affecting the progress of the works (c) the hoisting of tropical cyclone warning No. 8 or above or the announcement of a black rainstorm warning.”

4–127 As a result of the particularly long and hot summers of the late 1970s, the words: “exceptionally inclement weather” have been changed in most of the standard forms to excuse delay caused by the effects of “exceptionally adverse weather” and this is broadly the phraseology used in SIA80420, ICE/MW421, ICE6 and ICE7422, ICE/ DC423, JCT80 and JCT98424, JCT05425, JCTsub/05426, IFC84, IFC98427, IFC05 and IFWCD/05428, WCD81, WCD98429 and DB05430, PCC92 and PCC98431, PCC06432, MC87 and MC98433, MC08434, WC/87 and WC/98435, WC/08436, TC08437, FIDIC438 and FIDIC/M&E87439. 4–128 Under these forms, a delay to the completion date caused by weather is only a D’s time risk event if the weather is “exceptionally adverse”. It must, therefore, be out of the ordinary. The weather is often adverse during the winter, but the weather must be worse than expected, ie in comparison to average previous years for the same location. The term “exceptionally adverse weather” covers any conditions of an exceptionally different degree from those that could be expected and prima facie would thus also include extended periods of very hot weather. 4–129 However, the problem that exceptional is a comparative term, remains. In practice, it is often difficult to establish at what point the adversity of the weather 417 418 419 420 421 422 423 424 425 426 427 428 429 430 431 432 433 434 435 436 437 438 439

Cl.10.3.1(b). Cl.35.5 (a). Cl.1, definition of “qualifying cause of delay” (b)(ii). Cl.23.(1)(a). Cl.4.4(g). Cl.44(1)(d). Cl.44(1)(c). Cl.25.4.2. Cl.2.29.8. Cl.2.19.10. Cl.2.4.2. Cl.2.20.8. Cl.25.4.2. Cl.2.26.7. Cl.2.6.2. Cl.2.21.7. Cl.2.13.2. Cl.2.19.2 and WC/08 Cl.2.19.10. Cl.2.10.2. Cl.2.19.10. Cl.2.28.7. Cl.44.1(c). Cl.26.1(b).

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condition becomes exceptional because so many factors are involved and what could be exceptionally inclement over the period of an hour, when taken in the context of a day, may not be exceptional at all. One source of information in the United Kingdom on which measurements may be based is Meteorological Office records. By comparing records over a period of time, it may be demonstrated that the adverse weather conditions that have been experienced on the project under consideration have been above, or below, the average for the time of year in relation to the long-term average. However, these records do not normally take into account the time of day, or night when the conditions occurred, nor do they take into account the nature of the site, which can lead to distortions of the picture. 4–130 PPC2000 does not reduce the difficulty in using the expression: “weather conditions which the Meteorological Office records for the area nearest the site indicate are exceptionally adverse for the time of year”440 because the Meteorological Office does not record “exceptionally adverse” weather. It records objective data of the actual weather conditions and calculates whether they are higher, or lower, than the long-term average for the time of year. 4–131 A potentially more detailed report on weather information may be obtained via the internet, in relation to a particular location. See, for example, “Wunderground”441 and “Windguru”442. Windguru will produce a visual chart of data of, amongst other things, the current, predicted and historical wind speed and direction, precipitation, humidity and temperature, on an hourly basis, in numerous districts in various countries of Africa, Asia, Australasia, Caribbean, Central America, Europe, North America, Oceania and South America443 The weather-monitoring positions reported upon can also be identified by position, amongst other things, on Google Earth444. 4–132 Apart from the difficulty of finding sufficient data to determine whether the weather is above, or below, average, there is also a conceptual difficulty in determining that anything above, or below the long-term average automatically falls into the category of exceptional. It seems doubtful whether exceptional in this sense can be construed to mean, for example, “above average” since, as “average” necessarily implies, it must be normal to experience levels of adverse weather both above and below the average in order to have an “average”. Logically, it seems then that “exceptional”, in this sense, must therefore be something in excess of the ultimate highs and lows used to calculate the average. In some design calculations, a 100-year period is the norm; however, it would seem that, in relation to weather conditions, “exceptional” could reasonably be construed as, say, above the ten-year high point, or below the ten-year low point used to calculate the “average”. 4–133 However, causation in regard to exceptionally adverse weather is by no means straightforward. Take, for example, the effect on tower cranes of exceptionally high winds. Bearing in mind that a tower crane might normally cease working if the wind speed exceeded 15–20kph (a speed which is not unusual and by no means exceptional), a wind speed of say 100kph, which might be exceptional, would have no effect on

440 Cl.18.3(v). 441 http://www.wunderground.com/history/ (accessed 13 July 2010). 442 http://www.windguru.cz/int/ (accessed 13 July 2010). 443 By way of example, http://www.windguru.cz/int/historie.php?id_spot=416&model=gfs (accessed 13 July 2010) will illustrate the weather experienced at Draycote Water, England, between 16 March 2003 and the current date. 444 http://earth.google.com/ (accessed 13 July 2010).

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progress because the crane would have ceased working long before the wind reached that speed. On the other hand, if the wind maintained a speed in excess of 20kph for several days without dropping, it might be possible to show that to be exceptional. However, in England, it is not unusual to have two or three windy days together, or to have high wind at some time during every day for long periods. 4–134 SGC95445 ducks the issue in the contract form and leaves the specification to determine what exceptionally adverse is to mean. On the other hand, ECC2 attempts more precision and refers to weather which “is shown to occur on average less frequently than once in ten years”446. In ECC3447, weather is identified as being both an excusable and compensable event, adding the proviso that: “[O]nly the difference between the weather measurement and the weather which the weather data show to occur on average less frequently than once in ten years is taken into account in assessing a compensation event.”

4–135 In other words, ECC3 attempts to make it clear that it is only weather that exceeds the high measurement used to calculate the specified long-term average that is a compensation event under this form of contract. 4–136 However, the standard is measured by gauging whether the weather within a limited period of the date of tender is worse than normally occurs once in ten years in relation to the closest meteorological weather station. Obviously, to be at all meaningful, the relevant weather conditions will have been measured and the place of measurement should be reasonably close to the site. On the other hand, Windguru448 provides the facility for customising a report to a particular location identified on a map, on Google Earth449, or by latitude and longitude. 4–137 Consistent with the trend of risk apportionment in the standard forms generally, the 2009 edition of the Irish government standard forms of contract provides for C to be awarded an extension of time, but not compensation for delay to the completion date caused by a “weather event”. Under these standard forms, a weather measurement for a month is described as one in which the specified number of days with rainfall exceeding 10mm, or with minimum air temperature less than 0°C, or with maximum mean ten minute wind speed exceeding 15m/sec and the weather event is defined as follows: “[W]hen a weather measurement is recorded at [a specified] weather station for a month between the starting date and the date for substantial completion of the works that is shown to exceed the 90th percentile of past weather measurements for the corresponding month of the year at the same weather station, as determined by Met Eireann and published most recently before the designated date.”

4–138 It is, perhaps, surprising that, in light of concerns regarding global warming and in contrast to the developments in other contracts concerning the effects of heat, as opposed to freezing conditions, the Irish government has chosen not to excuse delay caused by the effects of extended periods of hot weather. However, the forms do provide for the possibility of D adding another weather condition for which C may be entitled to an extension of time, but not to compensation. 445 446 447 448 449

Cl.14.2(b). Cl.60.1(13). Cl.60.1(13). http://www.windguru.com/int/ (accessed 13 July 2010). http://earth.google.com/ (accessed 13 July 2010).

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4–139 NEC/SF99 adopts the novel approach of focusing on the actual effect of weather conditions, rather than its severity and providing a formula for balancing the risk as between the parties. Clause 60.1(11) provides that C is to be excused delay caused by weather conditions if: “[C] is prevented by weather from carrying out all work on the site for periods of time, each at least one full working day, which are in total more than one seventh of the total number of days between the starting date and the completion date. In assessing this event, only the working days which exceed this limit and on which work is prevented by no other cause are taken into account.”

4–140 FIDIC/Build98450 refers to “unforeseeable climatic conditions”. Together with FIDIC4451, FIDIC/SF98452 and FIDIC/DB95453, FIDIC/Build98454 also excuses delay, broadly caused by: “[A]ny operation of the forces of nature which is unforeseeable and against which an experienced contractor could not reasonably have been expected to take precautions.”

4–141 The notes to Cl.6.1 of FIDIC/SF98 state that there is no provision under this form of contract for an extension of time for completion as a result of adverse weather. Whilst it might reasonably be conceded that the “forces or nature” may extend to other things besides weather, it is difficult to understand how “weather” is not anything other than “the forces of nature” and thus, despite what is said in the guidance notes, by reason of Cll.6.1(h) and 7.3, is an excusable event. The latest versions of the FIDIC contracts, FIDIC/Build99 and FIDIC/PD+B99, provide for “exceptionally adverse climatic conditions” to be a D’s time risk event455 and A201/97456 and A201/07457 provide for adverse weather that is “abnormal for the period of time, could not have been reasonably anticipated and had an adverse effect on the scheduled construction”. 4–142 Whilst FIDIC/DB99 does not expressly refer to weather as being at C’s risk and it makes no express provision for adverse weather to be a D’s time risk event, it would seem, from the way the form describes force majeure, to be at D’s risk, both as to time and cost458. Clause 19.1, whilst setting out what force majeure can be deemed to include, states that, by definition, force majeure comprises an event: 1. 2. 3. 4.

which is beyond the control of one of the parties to the contract; for which such party could not reasonably have provided before entering into the contract; which, having arisen, such party could not reasonably have avoided, or overcome; and which is not substantially attributable to the other party459.

It is suggested that this will always encompass exceptional weather conditions.

450 451 452 453 454 455 456 457 458 459

Cl.8.4(c). Cl.44.1(c). Cll.6.1(h) and 7.3. Cll.17.3(g), 17.4 and 8.3(c). Cll.17.3(h), 17.4 and 8.4(a). Cl.8.4(c). Cl.4.3.7.2. Cl.15.1.5.2. Cl.19.4. Cl.19.1.

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4–143 In contrast to the distribution of risk under other standard forms of contract, under IFC84 and IFC98460, when C is in culpable delay to the completion date, C also takes the risk as to time of the effects of exceptionally adverse weather conditions. This is also the case under the JCT intermediate forms, IFC05 and IFWCD05461.

Unforeseeable physical conditions 4–144 Generally, developers and CAs are under a duty to disclose to contractors all information in their possession regarding site conditions. In The Canadian Red Cross v WN Developments462, the CA was contributorily negligent on a contract where, in the course of excavating for an extension to a building, C ruptured the water main, flooding part of the premises. It transpired that an as-built plan, in D’s possession, showed the exact line and detail of the main. However, while the contract drawings indicated the position of the water main, they contained no information about it. Smith LJ held that the reasonable degree of care and skill required of the CA may not always include the duty to divulge all the information in its possession, but, in the general way: “if [C] should have called for the as-built plans from [D], a fortiori, the [CA] should have done so”. 4–145 It would also appear that, whereas general “soft-spots” may not be excusable under the engineering contracts (because the generality would be determinable by “information which he ought reasonably to have ascertained”), an isolated, or transitory soft-spot will provide the basis for excusable delay. In Humber Oil463, the Court of Appeal considered the meaning of Cl.12 of ICE5 in relation to the collapse of a lifting rig. C was employed for the construction of mooring and berthing dolphins at Humberside. For the purpose of carrying out the work, C selected and used a jack-up barge, equipped with a 300-tonne fixed crane. Whilst the crane was lifting a concrete soffit onto piles, the crane became unstable and collapsed, destroying the barge, causing extensive damage to plant and equipment and considerable delay and expense. 4–146 C claimed that the collapse of the crane and the ensuing consequences were due to encountering physical conditions which could not reasonably have been foreseen by an experienced contractor. The arbitrator answered the point as follows: “Is the collapse properly to be regarded as merely an unforeseeable consequence of conditions which were in themselves foreseeable? In my opinion, the answer is No. Although the soil conditions at the base of the leg, taken in isolation, were foreseeable, and the geometry and the other details of the leg were well known, I do not consider that this requires me without more to reject the claim. It simply poses a different question: what was the condition that led to the failure of Stevin 73, and was that condition unforeseeable? In my opinion taking into account particularly the unprecedented nature of this collapse, there must have been a very unusual combination of soil strength and applied stresses around the base of leg number 2 just before failure occurred. It is not possible to calculate or precisely to predict these strengths and stresses, but they must have existed for failure to have occurred, having regard to the findings that I have already made. Was this a physical condition? In my opinion it was. Clause 12 contains no limitation on the meaning of ‘physical condition’ and I can see no reason why a combination of strength and stress should not fall within the term. The ‘condition’ was thus a transient

460 Cl.2.3. 461 Cl.2.19.2. 462 The Canadian Red Cross Society v WN Developments (Ottawa) Ltd and McLean & McPhadyen, Ontario Supreme Court (1983) 1-CLD–02–09. 463 Humber Oil Terminals Trustee Ltd v Harbour and General Works (Stevin) Ltd (1991) 7 Const LJ 333.

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combination the elements of which existed at the time the contract was made but which came together only near the point of failure. I do not regard this as placing the condition outside the wording of clause 12. Was this condition such that it could not reasonably be foreseen by an experienced contractor? In my opinion, the answer must be Yes. I do not believe that any amount of analysis, of the type put forward either by (the expert for the claimant) or (the expert for the respondent), would have led an experienced contractor to foresee this condition. Put more simply, I do not believe that the condition, which led to the collapse of Stevin 73, could have been foreseen. Of a certainty, it was not foreseen by anyone.”

4–147 In the Court of Appeal, Parker LJ, rejected the appeal shortly: “[Counsel] submits that the physical condition of the soil, which was found by the arbitrator to be foreseeable, really concludes the matter and that applied stress is not and cannot be any part of the physical condition. Attractive as his argument appears to be at first sight, I cannot accept it. The arbitrator was in my view saying that the general soil conditions were foreseeable and well able to stand the applied loads and stresses. There was however here a peculiar characteristic, which could not have been reasonably foreseen, namely a liability to sheer at a much lower loading than had already been withstood. The matter may perhaps be put in this way. General soil conditions were known and were foreseeable and foreseen. Such soil conditions would not have resulted in a sheer failure. There was thus an unforeseeable condition.”464

4–148 On the other hand, where bills of quantity provide for costs to be inserted by C at the time of tender for dealing with hidden obstructions, or for working in different types of ground conditions, then, apart from the adequacy, or otherwise, of the quantities, C is required to price, there can be no question of foreseeability in regard to those measured items. Certainly, the possibility of their existence is foreseen and priced for at the time of tender. 4–149 In most of the engineering forms (but not HKGC99, or IChemE), C is also expressly excused the effects on progress and cost of unforeseeable physical conditions. However, in other engineering forms, this risk is circumscribed by such subjective expressions as: “physical conditions which an experienced contractor would have judged at the contract date to have such a small chance of occurring that it would have been unreasonable for him to have allowed for them”465; “physical obstructions or conditions which could not reasonably have been foreseen by [C].”466

4–150 Other forms take an objective approach and relieve delay caused by “physical conditions or circumstances on the site, which are exceptionally adverse and were not foreseeable by an experienced contractor”467; “ground conditions which could not reasonably be foreseen by an experienced contractor”468; “adverse physical conditions that could not reasonably have been foreseen by an experienced contractor”469; and “site conditions which are materially adverse in comparison to the site conditions which [C] should have reasonably foreseen at the date of contract”470. 464 465 466 467 468 469 470

Humber Oil Terminals Trustee Ltd (1991) 7 Const LJ 333 at 337. ECC2 and ECC3 Cl.60.1(12). FIDIC/M&E87 Cl.26.1(c). FIDIC/DB95 Cl.8.3(d). ICE/MW95 Cll.4.4(c) and 3.8(1). SGC95 Cl.14.2(p). Cl.41.2, if not scheduled to be at C’s risk by the option in the contract information.

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4–151 On the whole, the building forms do not specify unforeseeable physical conditions as an excusable event, it being largely left to determination as to whether what C is ultimately required to do is something for which it has not been required to include in its price and which, thereby, becomes a variation. However, this provision does not extend to FIDIC/DB99, which, at Cl.4.12 states: “(a) (b) (c)

[C] shall be deemed to have obtained all necessary information as to risks, contingencies and other circumstances which may influence or affect the works; By signing the contract, [C] accepts total responsibility for having seen all difficulties and cost of successfully completing the works; and the contract price shall not be adjusted to take into account any unforeseen difficulties or costs.”

4–152 In ACA82 and ACA98471, C is excused delay caused by any “adverse ground conditions or artificial obstructions”, whether or not they are foreseeable by C, or anyone else. MPF also makes provision for: “Ground conditions or man-made obstructions in the ground that necessitate an amendment to the requirements and/or proposals”472

of which C is then bound to advise D and seek D’s approval but, under this form, depending upon which clause has been stated to apply, there is the possibility of such approval not constituting a change, or constituting a change if the circumstances: “[C]ould not reasonably have been foreseen by an experienced and competent contractor having regard to any information concerning the Site that [C] had, or ought reasonably to have obtained.”473

Similar procedures occur under MP05 at Cll.14.1 and 14.2. 4–153 NZ03 provides for relief from the effects of physical conditions as a variation “which [C] considers could not reasonably have been foreseen when tendering by an experienced contractor”, but adds, unusually, that the effect of unforeseen physical conditions is only to be defined as a variation if “[it] will in the [CA’s] opinion substantially increase [C’s] costs”474. 4–154 AS2124 and AS4000 refer to this risk as “latent conditions” and describe the risk as: “(a) physical conditions on the site or its surroundings, including artificial things but excluding weather conditions, which differ materially from the physical conditions which should reasonably have been anticipated by [C] at the time of [C’s] tender if [C] had: (i)

examined all information made available in writing by [D] to [C] for the purpose of tendering; and (ii) examined all information relevant to the risks, contingencies and other circumstances having an effect on the tender and obtainable by the making of reasonable enquiries; and (iii) inspected the site and its surroundings; and (b) any other conditions which the contract specifies to be latent conditions.”

471 472 473 474

Cll.2.6 and 11.5(e). Cl.8.1. Cl.8.2. Cl.9.5.2.

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4–155 IGBW/09 provides for an extension of time for delay to the completion date caused by C encountering on the site unforeseeable ground conditions, or man-made obstructions in the ground, or unforeseeable utilities in the ground, but leaves it to D to decide, upon a job-specific basis, whether such risks are also to be compensable. In the design and build forms475, C bears entirely the time and cost risk of delay caused thereby. However, in the minor works form IGMW/09, the risks are both excusable and compensable. 4–156 GC/Works/1476 defines the risk adopted by D as: “[G]round conditions which he did not know of, and which he could not reasonably have foreseen having regard to any information which he had or ought reasonably to have ascertained.”

4–157 GC/Works/1/98, GC/Works/1DB/98477 and GC/Works/2/98478 use the same general definition, but confine it by excluding those ground conditions or obstructions “caused by weather” and expand it to include “artificial obstructions”. FIDIC/Build98 adopts an even wider definition of excusable ground conditions as including: “[N]atural physical conditions and man-made and other physical obstructions and pollutants, which the [C] encounters on the Site including hydrological conditions but excluding climatic conditions which the [C] considers to have been unforeseeable.”479

4–158 The AIA form, A201/97480 and A201/07481 define D’s time and cost risk event as: “(1) subsurface or otherwise concealed physical conditions that differ materially from those indicated in the contract documents or (2) unknown physical conditions of an unusual nature, that differ materially from those ordinarily found to exist and generally recognised as inherent in construction activities of the character provided for in the contract documents.”

4–159 FIDIC/Build99 and FIDIC/PD+B99 contain a slightly different definition, setting it down as meaning unforeseeable physical conditions which are: “[N]atural physical conditions and man-made and other physical obstructions and pollutants, which the [C] encounters at the site when executing the works, including sub-surface and hydrological conditions but excluding climatic conditions.”482

4–160 FIDIC/SF98 excuses delays caused by: “[P]hysical obstructions or physical conditions other than climatic conditions not reasonably foreseeable by an experienced [C] and which the [C] immediately notified to the [D].”483

4–161 NEC/SF99 excuses delay caused thereby if C encounters physical conditions which: 1. 2.

475 476 477 478 479 480 481 482 483

are within the site; are not weather conditions; and

IGCEDB/09 and IGDB/09. Cll.7(3) and 36(2)(e). Cll.7(3) and 36(2)(d). Cl.4(2). Cll.4.12 and 8.4(b). Cl.4.3.4. Cl.3.7.4. Cl.4.12. Cll.6.1(l) and 7.3.

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3.

an experienced contractor would have judged, at the date of its offer, to have such a small chance of occurring that it would have been unreasonable to have allowed for them.

4–162 MF/1 is perhaps unique in attempting to specify what types of ground conditions are deemed to be unforeseeable. Clause 5.7 states: “[I]n the case of work underground or involving excavation where the actual conditions of the ground are not stated in the contract or if rock, rocky soil, solid chalk, water, running sound, slag, pipes, concrete or obstructions are found, and such conditions or obstructions could not reasonably be ascertained from an inspection of the site by [C] before he prepared the tender or from information made available to [C] for the purpose of the tender.”

4–163 Clause 5.7 then makes express provision for any costs incurred to be a D’s cost risk event. However, for it to be a D’s time risk event it must be construed to be “by reason of circumstances beyond the reasonable control of the contractor” under Cl.33.1 which, of course, it obviously would.

Access, ingress and egress 4–164 Generally, relief is granted for D’s failure to give, in due time, ingress to, or egress from the site of the works, or any part thereof, through, or over, any land, buildings, way, or passage adjoining, or connected with the site and in the possession and control of D. This is not necessarily restricted to the whole of the works, or only to C. It could, for example, relate to a subcontractor that might be denied access to a part of an existing building that was being renovated in stages, and to which it was essential that it had access in order to work. 4–165 Most of the building forms, such as SIA80484, SGC95485, HKGC99486, ICE/ MW487, ICE6 and ICE7488, ICE/DC489, JCT80 and JCT98490, IFC84 and IFC98491, WCD81 and WCD98492, PCC92 and PCC98493, MC87 and MC98494, WC/87, WC/98495, C21/09496 and PPC2000497 expressly state that a failure by D to give access to the works is expressly described as a D’s time and cost risk event. ECC2498 and NEC/ SF99499 excuse delay resulting from a failure to give possession of the site by the later of the specified access date, or that shown on the accepted schedule. Similar phraseology in ECC3500 (expressly recognising that slippage in the schedule must be taken into

484 485 486 487 488 489 490 491 492 493 494 495 496 497 498 499 500

Cl.23.(1)(i). Cl.14.2(j). Cl.50(1)(b)(vi). Cl.4.4(e). Cll.42(3) and 44(1)(c). Cll.42(3) and 44(1)(b). Cl.25.4.12. Cl.2.4.12. Cl.25.4.12. Cl.2.6.14. Cl.2.13.2 and WC/98 Cl.2.10.12. Cl.2.10.12. Cl.38.1. In this form, such a contingency falls under Cl.18.3(i) and/or 18.3(xi). Cl.60.1(2). Cl.60.1(6). Cl.60.1(2).

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consideration in identifying when possession, or access, is required), excuses access to and use of the site, or any part of it. 4–166 The 2009 editions of the Irish government standard forms of contract also take a similar position in making it plain that D is only liable for the time and cost effects of a failure to give access501 where it is given later than the latest of: 1. 2. 3. 4. 5. 6. 7. 8.

the starting date; the day after C has done what Cl.9.1 requires C to do before the starting date; the date shown in the works requirements, if any; the day after C has submitted its schedule according to Cl.4.9; the date stated for work to start on the part of the site as stated in C’s current schedule; ten working days (or any other period stated in the works requirements) after C has informed the CA that it is ready to start executing the work on site; the date C actually requires the part in accordance with its actual progress; ten working days after C has obtained all the consents it needs to start executing the works on site and has provided copies to the CA.

4–167 Strangely, provisos 6 and 8 are omitted from IGBW/09 and IGCE/09, which are for use where the works are to be designed by D. 4–168 Failure to give right of access to, and possession of, the site within the time stated in the appendix to tender is also excused under FIDIC/DB95502, FIDIC/ Build98503, FIDIC/Build99504, FIDIC/DB99505 and FIDIC/PD+B99506. 4–169 Deferment of possession of the site is excused under HK05507, ICE6 and ICE7508, JCT80 and JCT98509, JCT05510, JCTsub/05511, IFC84, IFC98512, IFC05 and IFWCD/05513, WCD81, WCD98514 and DB05515, PCC92 and PCC98516, PCC06517, MC87 and MC98518, MC08519, WC/87 and WC/98520 and WC/08521. In ACA82 and ACA98, the words used are:

501 502 503 504 505 506 507 508 509 510 511 512 513 514 515 516 517 518 519 520 521

Cl.7.1. Cll.2.2 and 8.3(c). Cl.2.1. Cll.2.1 and 8.4(b). Cll.2.1 and 8.4(b). Cll.2.1 and 8.4(b). Cl.25.1(3)(j)(i). Cll.42(3) and 44(1)(c). Cl.25.4.13. Cl.2.29.3. Cl.2.19.3. Cl.2.4.14. Cl.2.20.3. Cl.25.4.14. Cl.2.26.3. Cl.2.6.15. Cl.2.21.2. Cl.2.13.2 and WC/98 Cl.2.10.13. Cl.2.19.2 and WC/08 Cl.2.19.3. Cl.2.10.13. Cl.2.19.3.

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“[T]he addition, alteration or omission of any obligation or restriction in regard to any limitations of working space or working hours, access to the Site or use of any parts of the Site.”522

4–170 MF/1 provides that a breach by D of its general obligations to provide access to the site as specified is a D’s cost risk event. As to a time risk event, it falls to be construed under Cl.33.1 as being “any act or omission on the part of [D] or [the CA],” or “by reason of circumstances reasonably beyond the control of [C]”523. Similarly, under IChemE, a failure to give possession, or access to the site as provided for in the contract would fall to be construed as a D’s risk event under Cl.14.1(d) as a “breach of the contract by [D]”. On the other hand, under MPF, a failure to provide such access as is specified would rank as a D’s time risk event under Cl.12.1.8 and a D’s cost risk event under Cl.21.2.1, which provide for relief and compensation for “any other breach or act of prevention by [D]”. A similar structure is provided for under MP05524, CE06525 and TC08526.

Postponement 4–171 Postponement of the works is often referred to as a suspension of the work, or a part of the work. Postponement usually imposes a financial and time penalty on D527 and this is generally recognised in the forms analysed. Typically, for example, A201/97 and A201/07 provides that “suspension, delay or interruption by D” of the works in whole or in part is to be both a D’s time and cost risk event528. Similarly, whilst NZ03 provides only for “suspension of the whole or part of the contract works”, it also provides that such suspension “will be treated as a variation”529 and hence an excusable and compensable event. All the forms of contract make provision for payment of costs and an extension of time in such an event, except the GC/Works suite of UK government contracts, which make no express provision for an extension of time in these circumstances530.

Illustration Facts: AMW Plumbing and Heating Ltd (R) contracted with Zoom Development Ltd (A) to carry out plumbing and heating works at a development of flats in Cumbernauld comprising of three blocks. R successfully completed the first two blocks, but could not complete the contract works because A had not yet elected to build the third block. R was paid for the completed work, save for 5%, which (under Cl.5.7 of the contract) was to be

522 Cll.11.5(e) and 8.1(d). 523 Cl.33.1. 524 Cl.18.8. 525 Cl.5.7.2. 526 Cl.2.28.5. 527 For which redress is usually by way of an extension of time, if the suspension adversely affects completion, and financial compensation for the cost of standing time and unabsorbed overheads. See Ch.21, “Damages” at paras 21–047 to 21–187. 528 Cl.14.3.2. 529 Cl.6.7.3. 530 This is because, in these forms, possession is not to be granted on a particular date and the contract period is specified without a completion date. In other words, the contract completion date is calculated by reference to the contract period once C has been granted possession.

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retained until practical completion. R sued A for this 5%. The position of the latter was that it had exercised its entitlement to suspend the work under Cl.2.3, which provided the right, at all times and with no liability for compensation, to amend the development proposals, in whole, or in part, to cease, or suspend, work. Since work on the third block had not commenced, there had been no need for the plumbing, and heating works and, applying Cl.5.7, A was entitled to withhold 5% of the payment. The sheriff held that A was not entitled to suspend the works and, as a consequence, R was entitled to payment of the retention money. A appealed with regard to the interpretation of the word “suspension” in the contract, particularly in Cll.2.3 and 3.1. Held, by Sheriff Taylor, that: (1) the issue of payment of the retention money rested entirely in A’s hands, since it had elected not to build the third block of flats for many years and thus withhold payment of the 5% retention; (2) that the mechanism for payment to R for work properly done was inadequate, because the purpose of retention in building contracts is to provide the employer with security in the event that defects arise following the employer taking possession of the site; (3) that, although there was no agreed basis as to when a claim for payment was first made by R, it was quite clear that the initial writ would constitute a claim for payment; since that initial writ was served in 2009, payment therefore fell to be made within seven days of the raising of the action, applying the provisions of Sch 1 Pt II of the Scottish Scheme: AMW Plumbing and Heating Ltd v Zoom Development Ltd531.

4–172 PPC2000 provides no express power of postponement, it being left to fall within the definition of change under App 1, or to be construed as a breach under Cl.18.3(xiv). Simple postponement, or suspension is dealt with under IGCE/09, IGBW/09, IGCEDB/09, IGDB/09 and IGMW/09532, HK86533, HKGC99534, HK05535, SIA80536, SGC95537, IChemE538, MF/1539, ICE/MW540, ICE6 and ICE7541, ICE/DC542, ACA82 and ACA98543, JCT63544, JCT80 and JCT98545, JCT05546, JCTsub/05547, IFC84, IFC98548, IFC05 and IFWCD/05549, TC08550, PCC06551, ECC2 and ECC3552, NEC/

531 532 533 534 535 536 537 538 539 540 541 542 543 544 545 546 547 548 549 550 551 552

[2011] GWD 1–13; 2010 WL 4810776. Cl.9.2.1. Cll.21(2) and 23(e). Cl.50(1)(b)(viii). Cl.25.1(3)(j)(i) and (iii). Cll.1(4)(c) and 23.(1)(f). Cl.14.2(k). Cl.41. Cl.25. Cll.4.4(a) and 2.3(c). Cll.40(1) and 44(1)(c). Cll.40(1) and 44(1)(b). Cll.11.8 and 11.5(e). Cll.21(2) and 23(e). Cll.23.2 and 25.4.5.1. Cll.2.29.2.1 and 3.15. Cll.2.19.2.1 and 3.22.2. Cll.3.15, 3.6 and 2.4.5. Cll.3.12 and 2.20.2.1. Cll.2.28.2.1 and 3.13. Cll.2.21.1.2 and 3.15. Cl.60.1(4).

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SF99553, FIDIC/SF98554, FIDIC/M&E87555, FIDIC/DB95556 and FIDIC/Build98557 and C21/09558. Delay caused by postponement of construction work and also postponement of design work is excused under WCD81, WCD98559 and DB05560. Any instructions to postpone work due to safety conditions are also excused under ICE6 and ICE7561 and ICE/DC562.

Illustration Facts: Selby Hall and Philip Shivers (the Cs) contracted with Jan Van Der Heiden (D) (under the JCT Minor Building Works form) for D to carry out internal refurbishment and remodelling of a flat in London. Work progress was slow. Despite this, the Cs made interim payments to D. When the Cs stopped further payments, the work slipped further behind, with D refusing to return to the site. It later transpired that D’s works were not only incomplete, but also defective. The Cs sued for £150,000 for general and liquidated damages and D counterclaimed for £50,000. Held, by Coulson J, that: (1) D incurred culpable delay; (2) D could only justify the suspension of the work for non-payment if he suspended the works in accordance with Cl.4.7; (3) D’s liability to pay damages did not end when the contract was terminated; (4) there was a credit of £21,063.39 due to D; (5) D’s credit should be set off against D’s own liability towards the Cs amounting to £80,191.27 and, as a consequence, D should pay the Cs £59,127.88: Hall v Van Der Heiden563.

Acts of third parties 4–173 This event comprises delay caused by the acts, or omissions of third parties, which includes such things as works to be carried out to D’s direct orders, either by means of work, or supply of materials, or equipment, by other contractors, local authorities, statutory undertakings and government acts. 4–174 In the United Kingdom, “statutory undertaker” is the expression used to describe the various “boards” that were formed to provide electricity, gas, water and such like. It also includes commercial enterprises doing works under statutory powers and transport providers acting under statutory powers. Generally, under the UK standard forms of contract, C and its subcontractors are entitled to an extension of time only if the local authority, or statutory undertaker, causes the delay when executing the obligations imposed upon them by statute564. By the time of the last revision of

553 Cl.60.1(3). 554 Cll.6.1(j) and 7.3. 555 Cl.26.1(g). 556 Cll.8.8 and 8.3(c). 557 Cll.8.9 and 8.4(b). 558 Cl.57.3. 559 Cll.25.4.5.1 and 23.2. 560 Cll.2.26.2.1 and 3.10. 561 Cll.40(1)(c) and 44(1)(c). 562 Cll.40(1)(c) and 44(1)(b). 563 [2010] EWHC 586 (TCC). 564 Boskalis Westminster Construction Ltd v Liverpool City Council (1983) 24 BLR 83; Henry Boot Construction Ltd v Central Lancashire New Town Development Corp (1980) 15 BLR 1.

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JCT63, in 1975, the performance of local authorities and statutory undertakers had delayed so many contracts that the JCT considered it necessary to change the risk in JCT80 from one borne by C to one for which D would bear the risk. However, if they are acting in a contractual capacity, for example when carrying out electrical installation works under a contract with C, the rules applicable to the subcontractor will apply, so that the risk still remains with C. 4–175 These risks are variously described in the standard forms as “delay in approval of any statutory body”565, or delay caused by a local authority, or statutory undertaking “of work in pursuance of its statutory obligations or the failure to carry out such work”566. 4–176 HK05 provides that C is entitled to relief for the effects of a statutory undertaker, or utility company acting in pursuance of its statutory obligations “failing to commence or to carry out its work in due time”567. On the other hand, MPF and MP05 appear not to provide express relief for such a contingency. 4–177 PPC2000 provides conditional relief in regard to “delay in the receipt of any of the third-party consents listed in the commencement agreement”568 and “damage or obstruction by any specialist appointed by [D]”569. “Delay in receipt of any necessary permission or approval of any statutory body which [C] has taken all practicable steps to avoid or reduce” is also excused under the JCT design and build forms570. 4–178 Apart from the usual provisions for C to receive an extension of time and compensation for the effects of the acts of third parties, A201/97 and A201/07 also provide for C to compensate D for any effect C has on the working of those for which D is responsible571. By default, under IGBW/09, IGDB/09, IGCEDB/09 and IGCE/09, C is entitled to an extension of time, but not compensation, if delay to the completion date is caused where: “[O]wners of utilities on the site do not relocate or disconnect utilities as stated in the works requirements, when [C] has complied with their procedures and the procedures in the contract, and the failure is unforeseeable.”572

C may be entitled to compensation on a job-specific basis if it is so identified but, if not so identified, compensation will not be available. However, under IGMW/09, it is both an excusable and compensable risk573. 4–179 Whilst this is not a risk referred to in NZ03, delay caused by local authorities and statutory undertakers is referred to in HKGC99574, SGC95575, HK05576, SIA80577,

565 566 567 568 569 570 571 572 573 574 575 576 577

WCD81 and WCD98 Cl.25.4.7. WCD81 and WCD98 Cl.25.4.11 and DB05 Cl.2.26.6. Cl.25.1(3)(q). Cl.18.3(iii). Cl.18.3(xv). WCD81 and WCD98 Cl.25.4.7 and DB05 Cl.2.26.12. Cl.6.2.3. See, for example, the schedule to IGBW/09 Pt 1, section K, item 21. The schedule, to IGMW/09 Pt 1, section K, item 21. Cl.50(1)(b)(ix). Cl.14.2(e). Cl.25.1(3)(q). Cll.7(1) and 23(1)(p).

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PPC2000578, ACA82 and ACA98579, JCT80 and JCT98580, JCT05581, IFC84, IFC98582 and IFC05 and IFWCD05583, WCD81, WCD98584 and DB05585, PCC92 and PCC98586, PCC06587, MC87 and MC98588, MC08589, WC/87 and WC/98590 and WC/08591. Moreover, HK05 provides that C is entitled to relief where delay to progress is caused through “time not reasonably foreseen by [C] in obtaining approval or consent from a government department”592. AS2124 provides for relief in two clauses for the effects of the directions of593 and delays by, public, and local, authorities and statutory undertakings594, provided that they have not originated as a result of default on C’s part. 4–180 Under FIDIC/DB95595, delay is excused as a result of impediment, or prevention on the part of any “relevant legally constituted public authorities in the country”, provided that C has diligently followed the authority’s procedures and the resultant delay was not foreseeable by an experienced contractor. FIDIC/Build98596 excuses an act where these authorities “delay or disrupt C’s work” where “the delay or disruption was unforeseeable”. 4–181 Government acts are excused under MPF597, MP05598, PPC2000599, JCT80, JCT98, WCD81 and WCD98600, JCT05601, JCTsub/05602, DB05603, IFC05 and IFWCD/05604, PCC92 and PCC98605, PCC06606, TC08607, MC87 and MC98608, MC08609, WC/87 and WC/98610 and WC/08611. “Delay or disruption caused by a legally constituted public authority” is excused under FIDIC/DB95612, FIDIC/Build98613. 578 579 580 581 582 583 584 585 586 587 588 589 590 591 592 593 594 595 596 597 598 599 600 601 602 603 604 605 606 607 608 609 610 611 612 613

Cl.18.3(vi). Cl.11.5(d). Cl.25.4.11. Cl.2.29.7. Cl.2.4.13. Cl.2.20.7. Cl.25.4.11. Cl.2.26.6. Cl.2.6.12. Cl.2.21.6. Cl.2.13.2. Cl.2.19.2 and WC/08 Cl.2.19.9. Cl.2.10.11. Cl.2.19.9. Cl.25.1(3)(t). Cl.35.5(b)(vii). Cl.35.5(b)(viii). Cll.8.4 and 8.3(c). Cll.8.5 and 8.4(b). Cl.12.1.3. Cl.18.1.3. Cl.18.3(x). Cl.25.4.9. Cl.2.29.12. Cl.2.19.14. Cl.2.26.11. Cl.2.20.12. Cl.2.6.12. Cl.2.21.11. Cl.2.28.11. Cl.2.13.2 and WC/98 Cl.2.10.9. Cl.2.19.2 and WC/08 Cl.2.19.14. Cl.2.10.9. Cl.2.19.14. Cll.8.4 and 8.3(c). Cll.8.5 and 8.4(b).

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FIDIC/Build99614, FIDIC/DB99615 and FIDIC/PD+B99616 provide similar relief provided that: 1. 2. 3.

the authority’s delay is not caused by C’s failure to follow the appropriate procedures; the authority’s delay delays, or disrupts C’s work; and the delay, or disruption to C’s work was unforeseeable.

4–182 Under MF/1, acts of the government are expressed to be D’s cost risk events617; the inference that they are also D’s time risk event can be drawn from C being entitled to relief for any cause beyond its control618. On the other hand, IChemE expressly defines government acts as force majeure, which is a D’s time risk event under this form, but does not express it to be a D’s cost risk event. 4–183 Delay caused by D, or persons employed by D is excused under HKGC99619, HK86620, HK05621, SIA80622, SGC95623, JCT63624, JCT80 and JCT98625, JCT05626, JCTsub/05627, CE06628, MP05629, IFC84 and IFC98630, IFC05 and IFWCD/05631,WCD81 and WCD98632, DB05633, PCC92 and PCC98634, PCC06635,TC08636, MC87 and MC98637, MC08638, WC/87 and WC/98639 and WC/08640. Apart from CE06 and MP05, which use different wording, the JCT05 forms generally phrase this as: “[A]ny impediment, prevention or default, whether by act or omission, by [D, the CA, the QS] or any of [D’s] persons, except to the extent caused or contributed to by default, whether by act or omission, of [C] or of any of [C’s] persons.”

4–184 Delay caused by supply of materials by D, or persons employed by D is excused under HK05641, JCT80 and JCT98, WCD81 and WCD98642, IFC84 and IFC98643, PCC92 614 615 616 617 618 619 620 621 622 623 624 625 626 627 628 629 630 631 632 633 634 635 636 637 638 639 640 641 642 643

Cll.8.5 and 8.4(b). Cll.8.5 and 8.4(b). Cll.8.5 and 8.4(b). Cl.6.1. Cl.33.1. Cl.50(1)(b)(vii). Cl.23(h). Cl.25.1(3)(p). Cl.23(1)(k). Cl.14.2(m). Cl.23(h). Cl.25.4.8. Cl.2.29.6. Cl.2.19.7. Cl.5.7.2. Cl.18.1.6. Cl.2.4.8. Cl.2.20.6. Cl.25.4.8. Cl.2.26.5. Cl.2.6.10. Cl.2.21.5. Cl.2.28.5. Cl.2.13.2. Cl.2.19.2 and WC/08 Cl.2.19.8. Cl.2.10.8.1. Cl.2.19.8. Cl.25.1(3)(r). Cl.25.4.8.2. Cl.2.4.9.

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and PCC98644, MC87 and MC98645 and WC/87 and WC/98646, ECC2 and ECC3647. In the JCT 2005 and later series of forms, this specific risk is omitted and replaced by the general expression referred to in the preceding paragraph648. NZ03 deals with this in a different way and provides that delay, or cost increase, caused by D’s contractors, or employees649, or the late supply of D’s materials, services, or work, is to be “treated as a variation”650. 4–185 ECC2 and ECC3 go one stage further and tie in D’s obligations to the schedule itself, and excuse D’s failure to carry out work “within the times shown on the Accepted [Schedule]”651. ECC2, ECC3652 and NEC/SF99653 excuse delay caused by D’s failure to “provide something which he is to provide by the date for providing it”. 4–186 In MPF654 and MP05655, it is expressed as “interference with [C’s] regular progress of the project by others on the site” where “others” is defined as: “[P]ersons whose presence on the site has been authorised by [D] other than [C] its subcontractors and suppliers and any other person under the control of [C].”

4–187 Under FIDIC/SF98656, any failure by D is excused. FIDIC/DB95657 uses the expression “any delay, impediment or prevention by D” and, similarly, HK05 excuses any “act of prevention, a breach of contract, or other default by [D]” and adds “or any person for whom [D] is responsible”658. FIDIC/M&E87659 excuses delay by “any other contractor engaged by [D]” and finally, FIDIC/Build99660, FIDIC/DB99661 and FIDIC/PD+B99662 provide for “any delay, impediment or prevention caused by or attributable to [D], [D’s] personnel, or [D’s] other contractors on the site”. 4–188 In contrast to the distribution of risk under other standard forms of contract, under IFC84 and IFC98663, when C is in culpable delay to the completion date, C also takes the risk of delay caused by: “the carrying out by a statutory undertaker of work in pursuance of its statutory obligations in relation to the works, or the failure to carry out such work”664; and “the exercise by the UK government of any statutory power which directly affects the execution of the works.”665

This is also the case under the JCT intermediate forms, IFC05 and IFWCD/05666. 644 645 646 647 648 649 650 651 652 653 654 655 656 657 658 659 660 661 662 663 664 665 666

Cl.2.6.11. Cl.2.13.2. Cl.2.10.8.2. Cl.60.1(16). At para.4–183. Cl.5.5.2. Cl.5.16. Cl.60.1(5). Cl.60.1(3). Cl.60.1(8). Cl.12.1.6. Cl.18.1.6. Cll.6.1(k) and 7.3. Cl.8.3(e). Cl.25.1(3)(v). Cl.26.1(f). Cl.8.4(e). Cl.8.4(c). Cl.8.4(e). Cl.2.3. Cl.2.20.7. Cl.2.20.12. Cl.2.19.2.

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Nominated subcontractors and suppliers 4–189 In Jarvis v Westminster 667, the House of Lords decided that “delay” on the part of a nominated subcontractor should be considered in the light of the provisions relating to delay on the part of D under the main contract. Irrespective of whether the delay of which complaint is made results from dilatoriness, or from bad workmanship, the provisions here relate only to the commencement of the nominated subcontractor’s contract and hence cease on practical completion of the nominated subcontractor’s work. Thus, in the event that a nominated subcontractor has to return to the site to remedy defects in its work that has previously been taken over by C, it cannot be said to be causing “delay” under these provisions. 4–190 The effects of the failure of the nominated subcontractor to complete on time are the subject of NSC/4, Cl.12, which reads: “12.1 If the nominated subcontractor fails to complete the subcontract works (or any part thereof) within the period or periods for completion or any revised period or periods as provided in clause 1.1.2.2, [C] shall so notify the [CA] and give to the nominated subcontractor a copy of such notification. 12.2 The nominated subcontractor shall pay or allow to [C] a sum equivalent to any loss or damage suffered or incurred by [C] and caused by the failure of the nominated subcontractor as aforesaid. Provided that [C] shall not be entitled so to claim unless the [CA] in accordance with clause 35.1.5 of the main contract conditions shall have issued to [C] (with a copy to the nominated subcontractor) a certificate in writing certifying any failure notified under clause 12.1.”

4–191 Clause 12.2 leads to Cl.35.13 in JCT80 and JCT98. JCT80 and JCT98 establish that C shall not grant to any nominated subcontractor any extension of the period, or periods within which the subcontract works are to be completed668 without the CA’s approval. 4–192 JCT80 and JCT98 Cl.35.15 is concerned with failure of the nominated subcontractor to complete its works. It reads: “If any nominated subcontractor fails to complete the subcontract works (or where the subcontract works are to be completed in parts any part thereof) within the period specified in the subcontract or within any extended time granted by [C] with the written consent of the [CA] and [C] so notifies the [CA] with a copy to the nominated subcontractor, then, provided that the [CA] is satisfied that clause 35.14 has been properly applied, the [CA] shall so certify in writing to [C]. Immediately upon the issue of such a certificate the [CA] shall send a duplicate thereof to the nominated subcontractor.”

4–193 The certificate of the CA under Cl.35.15.1 is to be issued not later than two months from the date of notification to the CA that the nominated subcontractor has failed to complete the subcontract works, or any part thereof669. This clause is the equivalent of the arrangement contained in Cl.27(d)(ii) of JCT63. Its importance to both C and the nominated subcontractor is that it enables C to claim against the nominated subcontractor for direct loss and/or expense that it may have suffered as a result of the failure of the nominated subcontractor. 4–194 NSC/4, JCT80 and JCT98 thus create a three-sided arrangement, where the CA considers the nominated subcontractor’s notice, particulars and estimate that the

667 J Jarvis & Sons v Westminster Corp [1970] 1 WLR 637; (1970) 7 BLR 64. 668 JCT80 and JCT98, Cl.35.14.1. 669 JCT80 and JCT98 Cl.25.15.2.

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CA has received via C. If the CA consents to the nominated subcontractor’s extension of time, then it does so via C and C then grants the extension of time. A similar arrangement is contemplated under HK05670. 4–195 The effect of nomination, or renomination, of a subcontractor, or supplier is excused under JCT80 and JCT98671, and PCC92 and PCC98672. HK05673 provides that C is entitled to relief for the effects of a renomination, but not a nomination, unless it is in the face of a valid objection674. The effect of requiring C to enter into a nominated subcontract notwithstanding a valid objection is excused under SIA80675. The effects of the nomination, or renomination, of a supplier, but not of a subcontractor, are excused under MC87 and MC98676 and WC/87 and WC/98677, and the renaming and replacing of a named subcontractor are excused under IFC84 and IFC98678. 4–196 IChemE provides for the appointment of nominated subcontractors and, conditionally, for the failure of any nominated subcontractor to perform its obligations to be a D’s cost risk event679 and a D’s time risk event680. Delay by a nominated supplier, or subcontractor is also excused under HKGC99681, HK86682, JCT63683, JCT80 and JCT98684, and PCC92 and PCC98685. Delay by a nominated supplier is excused under MC87 and MC98686, and WC/87 and WC/98687. Delay caused by the default of a nominated subcontractor, but not a nominated supplier is excused under ICE6 and ICE7688. 4–197 With regard to a nominated subcontractor’s delay, JCT80 and JCT98689 forbid C from granting an extension of time to any nominated subcontractor without the written consent of the CA who, in dealing with the notice, must apply the subcontract conditions. NSC/4690 requires that, with the consent of the CA, C should grant an extension of time if the reason for delay is a D’s time risk event and: “[A]ny of the matters which are stated by the subcontractor to be the cause of the delay is an act, omission or default of [C], his servants or agents or his subcontractors, their servants or agents other than the subcontractor, his servants or agents or the occurrence of a relevant event.”

4–198 Similar provisions appear in HK05691 where the event is described as “an event for which the nominated subcontractor or nominated supplier is entitled to an

670 671 672 673 674 675 676 677 678 679 680 681 682 683 684 685 686 687 688 689 690 691

Cl.29.9. Cll.35, 36 and 25.4.5. Cll.8A, 8B and 2.6.5.1. Cl.25.1(3)(o). Cl.25.1(3)(n). Cl.32(1)(n). Cl.2.13.2. Cl.2.10.5. Cll.3.3.3, 3.6 and 2.4.5. Cl.10.7. Cl.14.1(e). Cl.50(1)(b)(x). Cl.23(g). Cl.23(g). Cl.25.4.7. Cl.2.6.7. Cl.2.13.2. Cll.8 and 2.10.7.2. Cl.59(4)(f). Cl.35.14.1. Cl.11.2.2.1. Cl.25.1(3)(m).

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extension of time under the subcontract or supply contract”. It is normally the case that, apart from those events for which D takes the risk of time under the contract, the subcontractor is also entitled to an extension of time from C for impediments, or interference caused by C himself, but for which, vis-à-vis D, C is not so entitled. Clauses such as this must thus be read in conjunction with exclusions that provide that delay to progress on the part of a nominated subcontractor, or nominated supplier, will not be an event at D’s risk where such delay to progress is caused, or contributed to by a breach, or other default by C. In JCT98692 and in HK86693, this exclusion is delay which C “has taken all practicable steps to avoid or reduce”. In HK05, C’s entitlement in regard to any event is conditional upon breach, or default by C being taken into account694. Logically, the expression “taken into account” in this regard must mean that the delay to progress caused by the act, or omission of C is discounted entirely. 4–199 In the same way as subcontracts are dealt with under JCT80 and JCT98, an extension of time granted to a works contractor under WC/87, WC/98, or WC/08 by a management contractor under MC87, MC98, or MC08 is granted not by the CA, but by the management contractor. The management contractor has a duty to advise the CA in time for the latter to express dissent; if the CA does express dissent, it must be expressed before the time expires for the management contractor to decide the application by the works contractor. WC/87, WC/98 and WC/08 are silent as to what happens if the CA expresses dissent, but the management contractor goes ahead and grants an extension of time to a works contractor, which thereby relieves it of its liability to pay liquidated damages. The only safeguard appears to be the provision that: “[N]o project extension item shall be considered to the extent that it was caused or contributed to by any default, whether by act or omission, of the management contractor.”695

4–200 The developer’s time risk events set out in Cl.2.10 of WC87 and WC98 are virtually the same as those in Cl.25 in JCT80 and JCT98 mutatis mutandis. 4–201 The FIDIC forms treat delay on the part of subcontractors very much more simply. FIDIC/M&E87696 does not provide for nomination, but provides that C is to be excused if delay on the part of a subcontractor is due to a cause mentioned in Cl.26.1 (excusable events) and such delay prevents C from meeting the contract completion date. FIDIC/Build98697 and FIDIC/Build99698 provide for the nomination of subcontractors, but do not provide for C to obtain relief for any delay caused by them. 4–202 NZ03 also provides simple provisions for nomination and its effects699 and, whilst there appears to be no provision for relief, or compensation, arising solely from the expenditure of a prime cost, or provisional sum, by nomination, the contract provides that it “will be treated as a variation” if the nominated subcontractor:

692 Cl.25.4.7. 693 Cl.23(g). 694 Cl.25.4. 695 Cl.2.13 in MC87 and MC98, in MC08 the proviso is extended to include the managing contractor’s persons. 696 Cl.26.2. 697 Cl.5. 698 Cl.5. 699 Cl.4.2.6.

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1. 2.

fails without reasonable grounds to enter into a subcontract with [C] within ten working days of a written request to do so; or repudiates its subcontract, or makes default, such that [C] is entitled to treat the contract as at an end.

4–203 IGCE/09, IGBW09, IGCEDB/09, IGDB/09 and IGMW/09, FIDIC/DB99, FIDIC/PD+B99, PPC2000, MPF, the 2005 and later series of JCT contracts and MF/1 make no provision for nominated subcontractors.

Delay in receiving instructions 4–204 The instructions contemplated under this category of risk are those in connection with instructions for carrying out the content of works, the subject-matter of the contract and not instructions for variations to the contract. It is respectfully suggested that, in City Inn v Shepherd700, by construing the clause relating to delay in receiving instructions to apply also to variations, which C had no legitimate expectation of receiving at any time, the court was in error. 4–205 There are two aspects to the issue of whether and in what circumstances C is entitled to relief from delay caused by not receiving, in due time, further information to which it is entitled, under the contract. On the one hand, there is the question of whether any further information, instructions, drawings, details or levels should be provided in relation to an agreed calendar date701, or in relation to the date it is actually needed702, or on a date it is expected to be needed703. The second question is whether, in order to render default a D’s risk, C must make a specific request for such information and, if so, when such request must be made. 4–206 Throughout the pre-1998 versions of the JCT family of contracts and in HK86704, it was provided that subsequent information must be given to C: “[O]n a date which, having regard to the completion date, is neither unreasonably distant from nor unreasonably close to the date on which it was necessary to receive it.”

In other words, on the date it was needed, in relation to an intent to complete by the completion date. The expression “having regard to the completion date” was considered in Glenlion705. In that case, C failed in its claim for disruption damages when the CA did not provide the information when C claimed that it needed it in relation to a date for completion of the works that was earlier than the completion date. 4–207 It was determined that D had no obligation to provide such information when it was needed if that particular need arose out of C’s acceleration of its schedule. In

700 City Inn Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590, affirmed City Inn Ltd v Shepherd Construction Ltd [2010] CSIH 68, without discussion by either court on how, simply by requesting an instruction for a variation, C moved the relevant event from that described in JCT80 Cl.25.4.5 to that described in Cl.25.4.6. 701 For example by virtue of a pre-contract warranty such as that contained in an information release schedule under JCT98 Cl.5.4.1. 702 Which must necessarily be gauged by reference to the date the activity for which the information is required is actually intended to start and/or finish on the assumption that the information is made available. 703 For example, a contract completion date or a date set down in a schedule that is no longer being followed. 704 Cl.23. 705 Glenlion Construction Ltd v The Guinness Trust (1988) 39 BLR 89.

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that case, C’s “need” arose at a time that was not relative to the completion date, but in advance of the completion date because of C’s voluntary advancement of the progress of the works. 4–208 The other side of this coin is the question of what is the position if, instead of being ahead of programme, C is behind programme. If it has been agreed that information is to be provided on a date that, had the programme been followed, would have been timely but, because of a pre-existing C’s delay to progress, or an earlier D’s delay to progress, is a date for provision of information that is well in advance of when it will then actually be needed, different questions are raised. 4–209 Whilst a delivery later than identified in relation to the programme may, or may not, be a D’s risk event (depending upon the wording of the contract) in such circumstances, the late delivery in relation to the programme cannot cause delay to progress (because at the time of delivery it is not yet needed) and if it does not cause delay to progress, logically, it cannot cause delay to the completion date706. However, in City Inn v Shepherd707, whilst conceding that “[C’s programme] is clearly relevant in determining what is a reasonable time for giving any particular instruction”708, in relation to instructions issued in a period of culpable delay, Lord Drummond Young thought that C’s updated programme was irrelevant and that the need for the information had to be construed in relation to the contract completion date. Whilst that may be right in relation to whether the date on which information is provided constitutes a D’s time risk event, as to whether the timing of information release actually causes delay to progress and hence the possibility of delay to completion of the works beyond the completion date and relief from liquidated damages, it is thought that D’s progress on site should be a relevant consideration709 and, in dismissing it as irrelevant, the court was in error. 4–210 The second point for consideration is whether any specific request must be made for such information. Generally, it is C that has to carry out and complete the works and that should reasonably be able to say when it will be necessary for it to place orders for goods, materials, or equipment, or commence off-site manufacture of part of the work. For this reason, historically, C’s application has been required within a reasonable time of the information becoming necessary in order not to impede the progress of the works. 4–211 In Merton v Leach710, the dispute concerned a contract for the erection of 287 dwellings at Mitcham by Leach (C) for the Borough of Merton (D). In this case, the court considered whether and, if so, when C’s schedule became a specific application

706 See for example, Great Eastern Hotel Co Ltd v John Laing Construction Ltd [2005] EWHC 181 (TCC); Leighton Contractors (Asia) Ltd v Stelux Holdings Ltd [2004] HKCFI 822 and Mirant Asia-Pacific Construction (Hong Kong) Ltd v Ove Arup and Partners International Ltd [2007] EWHC 918 (TCC). 707 City Inn Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590 affirmed, City Inn Ltd v Shepherd Construction Ltd [2010] CSIH 68. 708 City Inn Ltd [2007] CSOH 190 at [23]. 709 A point expressly made in a number of cases. See, for example, Balfour Beatty Building Ltd v Chestermount Properties Ltd (1993) 62 BLR 1; Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 Const LR 32; (1999) CILL 1527; Royal Brompton Hospital NHS Trust v Frederick A Hammond (No 1) [2000] EWHC 39 (TCC); [2001] 76 Const LR 14; Great Eastern Hotel Co Ltd [2005] EWHC 181 (TCC) and Leighton Contractors (Asia) Ltd [2004] HKCFI 822. 710 London Borough of Merton v Stanley Hugh Leach Ltd (1985) 32 BLR 51.

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for instructions, drawings, details or levels “within the meaning of clauses 23(f)711 and 24(l)(a)712 of JCT63”. The schedule referred to was “programme 515”. This consisted of a chart, prepared by C at the outset of the contract, which indicated the dates on which drawings and information would be required for each activity throughout the whole period of the contract. Vinelott J found little difficulty in agreeing with the arbitrator that, since this chart contained enough information to enable the CA to understand what was required of it, it was sufficiently “specific” to comply with the requirements of the particular clauses of JCT63. 4–212 However, the real point at issue here was whether the application was made on a date that was “neither unreasonably distant from nor unreasonably close to” the date on which each item of information was required. In other words, was the schedule by which the information was requested capable of being construed as the schedule to which the works were in fact being carried out? 4–213 The judge considered that the purpose of this provision was: 1. 2.

to spare the CA from the requirement to furnish instructions too far in advance of the date when they were actually needed by C, as this would lead to unnecessary disruption of its work; and to ensure that the CA would not be left with insufficient time to prepare them713.

4–214 He did not consider that it was the intention of this provision to prevent C from submitting an application in respect of the whole contract at the commencement of works, provided that the date specified for delivery of each set of information met the requirements of Cll.23(f) and 24(1)(a). On the other hand, he agreed that, if the work failed to proceed according to C’s plan, the dates specified might well no longer meet those requirements, and needed adjustment accordingly in the light of the circumstances subsisting at the relevant date. 4–215 Thus, an important consideration under the majority714 of the earlier JCT standard forms of contracts considered, and one frequently overlooked by contractors and subcontractors, is that they could not rely upon delay in receiving information, entitling them to an extension of time, unless they had specifically applied in writing for the information required, at an appropriate time715. 711 Under Cl.23(f ), C is entitled to an extension of time if delay to completion is caused: “by reason of [C] not having received in due time necessary instructions, drawings, details or levels from the [CA] for which he specifically applied in writing on a date which having regard to the date for completion stated in the appendix to these conditions or to any extension of time then fixed under this clause or clause 33(1)(c) of these conditions was neither unreasonably distant from nor unreasonably close to the date on which it was necessary for him to receive the same.” 712 Under Cl.24(1)(a) C is entitled to compensation if it should suffer loss and/or expense as a result of: “[C] not having received in due time necessary instructions, drawings, details or levels from the [CA] for which he specifically applied in writing on a date which having regard to the date for completion stated in the appendix to these conditions or to any extension of time then fixed under clause 23 of clause 33(1)(c) of these conditions was neither unreasonably distant from nor unreasonably close to the date on which it was necessary for him to receive the same.” 713 London Borough of Merton (1985) 32 BLR 51 at 88. 714 For example, HKGC99 Cll.63(a) and 50(1)(b)(vii); SGC95 Cl.14.2(l); HK86 Cl.23(f); ACA82 and ACA98 Cll.2.1 and 11.5(e); WCD81 and WCD98 Cl.25.4.6; PCC92 and PCC98 Cl.2.6.6; MC87 and MC98 Cl.2.13.1.2; WC/87 and WC/98 Cl.2.10.6; JCT80 Cl.25.4.6; and IFC84 Cl.2.4.7. 715 See, for example, Great Eastern Hotel Co Ltd [2005] EWHC 181 (TCC) at [135]–[153], in which a management contractor was not entitled to an extension of time for a failure by D to provide information on the date it was scheduled to provide that information when, at the time it was originally

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4–216 This is an issue that may also arise under HK05716, which provides that the CA is to provide C with further information “when having regard to the progress of the works and [C’s] procurement, fabrication and other lead-in times, it is reasonably necessary for [C] to receive it”717 but that: “[C] shall inform the [CA] sufficiently in advance of the time he requires the supplementary documentation to enable the [CA] to fulfil his obligations.”718

4–217 Under the provisions of JCT63, JCT80 and HK86, which require that C should provide the CA with sufficient warning “neither too distant from nor too close to the time he actually needed the same”, it is implicit that any stated requirement made at the outset of the project should be updated in the light of progress actually achieved. 4–218 However, under HK05 it would appear that no such obligation is placed upon C so that a stated requirement at the outset of the contract, gauged in relation to C’s original planned schedule, would probably fulfil the requirements of this clause. Where C must achieve particular progress in order to enable the CA to have sufficient information to complete the design, this could potentially leave the CA and hence D, exposed. 4–219 The intention of restricting the timing of the applications for instructions is to assist the CA and design team to plan their design work and order their priorities. There is, in these forms, recognition that C is in the best place to know when the information is likely to be needed and that the CA is not expected to be able to provide “an instant drawing service”. 4–220 The fact that some questions take time to research, time to price and to consider with D before instructions can be given is an important consideration. The fact that C needs instructions by a particular date is itself not enough; C needs to be able to ask for those instructions in time for the CA to deal with its request. At Cl.4.11.1 of the 2009 edition of the Irish government standard forms of contract, for example, it is made plain that C is to give the CA ten days’ advance notice, in every case, of its need for any instruction that the CA is to provide. 4–221 On the other hand, the 1998719 and 2005 and later series720 of JCT forms deal with the supply of further information quite differently from the way it was dealt with in the earlier editions of the JCT forms and, in so doing, they adjust, in C’s favour, the balance of risk of failure to produce further information at the appropriate time. 4–222 Under the 1998 JCT forms, there are two options for the provision of further information, neither of which imposes any obligation on C to request it (at any time). The first possibility is that the CA provides, as part of the contract documents, an information release schedule, setting down exactly when every other piece of information, instructions, drawings, details, or levels will be provided. Any failure to provide any of the information listed at the time set down in that schedule, irrespective of C’s need, or actual progress on site, is stated to be both a time and cost risk event for D721. due, the works were in delay and not being performed in accordance with the schedule. However, see also City Inn Ltd v Shepherd Construction Ltd [2010] CSIH 68, in which the Scottish Inner House unanimously held C’s progress to be irrelevant. 716 Cl.5.6(1). 717 Cl.5.7(1). 718 Cl.5.7(2) 719 JCT98 and IFC98 (with the exception of MC98, WC98 and MWA98). 720 JCT05, IFC05, IFWCD/05, JCTsub/05, MC08, WC/08 TC08, PCC06. 721 See, for example, JCT98 Cll.25.4.6.1 and 26.2.1.1 and JCT05 Cll.2.11 and 2.29.6.

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4–223 If the CA does not provide any of the information set down in the information release schedule (presumably in its entirety) or, in the event that there is a need for other information, instructions, drawings, details, or levels, which are not referred to in the information release schedule (a contingency which, in practice, is probably inevitable), then the second limb of the new provisions cuts in. This second limb is perhaps the most pernicious change in the 1998 forms, because no guidance notes have been provided to draw it to the attention of users and it effectively emasculates the force of Vinelott J’s observations in Merton722. 4–224 Since the 1998 edition, under the JCT forms, the obligation to provide such information arises conditional upon its being asked for in writing. In fact, the obligation to provide such information is not any longer conditional upon C’s asking for it at all, unless it is “reasonably practical to do so”. Under the pre-1998 forms, because of the requirement to request information in writing at a time “not too close to nor distant from” when it was needed, the risk of leaving it too late for the CA to research, prepare and publish the further information requested was placed on C. On the other hand, under JCT98 and IFC98, the risk of delay caused because C does not have information it has not asked for, or of delay caused by asking, at the last minute, for clarification, or elaboration of information, instructions, drawings, details, or levels, or of any such information already given (as often happens in practice), now passes to D. The words “unless it is reasonably practical to do so” are weasel words. They have no effect in practice because, when in culpable delay, C is unlikely to find it “reasonably practical” to give the CA notice of its need, if, by not so doing, it might stand the chance of extracting relief and compensation for a delay that would otherwise be as a result of its own default. If delay, or disruption, is caused by the CA being unable to deduce the need, or fulfil it instantaneously, C is entitled to relief from damages for delay and compensation for loss and/or expense723. 4–225 The JCT2005 and later suite of JCT contracts expresses the same position but, perhaps, less clearly. Under these forms, there is no express excusable event concerning the failure to provide information in due time. However, C is entitled to relief for the effects of any impediment, prevention, or default, whether by act, or omission of D, or any of D’s persons (which, as defined, includes anyone employed by D), which would include the supply, or failure to supply information by the CA. However, the event only arises to the extent that such impediment, prevention, or default is not caused, or contributed to by C, or any of C’s persons (as defined). It is thus open to D to recover the 1963 form balance by either: 1.

2.

722 723 724 725 Projects

adopting the CMS724 and the recommendations of the CIOB Guide725 of (amongst other things) identifying all information required by logically linking the date of requirement to the activities for which it is required in an updated CPM programme; or requiring as part of the specification, or bills, that C is obliged to give notice in writing of its need for any information at a time not too distant from nor too close to the time it is actually needed by C.

London Borough of Merton (1985) 32 BLR 51. See, for example, JCT98 Cll.25.4.6.2 and 26.2.1.2. and JCT05 Cll.2.29.6 and 4.24.6. See App.2 to the 4th edn and Ch.10, “Project control”, throughout. Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex (Chichester: Wiley Blackwell, 2010).

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4–226 ECC2 and ECC3 provide that it is both a D’s time and cost risk event if D: 1. 2.

fails to provide something which he is to provide by the date for providing it726; or the CA does not reply to a communication from C within the period required727.

4–227 PPC2000 refers to “a delay caused by a default or failure of [D] or any consultant beyond any agreed time limit”728. SIA80729 requires C to be provided with the information it needs within a reasonable time, but does not expressly require C to give notice of that requirement. NZ03 specifies that the late supply of materials, services, or work, by D will be “treated as if it were a variation”730 and that the late issuance of instructions, drawings, or specifications731 and the failure of the CA to carry out its duties732 will be treated as a variation if “[C] suffers delay in the completion of the works or incurs additional cost by reason of [the event]”. 4–228 The pre-1999 FIDIC forms other than the “build-only” forms did not deal expressly with delay caused by a failure to provide further information in due time. The nearest any of them came to it was FIDIC/M&E95733, which excuses delay caused by D’s, or CA’s instructions “otherwise than by reason of C’s default”. However, FIDIC/ Build99734 contains express provisions to the effect that it is a D’s time and cost risk event if C is delayed, or disrupted if “any necessary drawing or instruction is not issued to [C] within a particular time, which shall be reasonable”. 4–229 The GC/Works suite of UK government contracts specifically requires C, at monthly intervals, five days before each progress meeting, to set out in detail what further information, if any, it requires735 and for the CA to report, within seven days of the meeting, on how it intends to deal with C’s request736. 4–230 But perhaps the most thorough, and reasonably well balanced, requirement for the supply of later material is to be found in the 2009 edition of the Irish government standard forms of contract. These forms do not make special mention of “further drawings, details or levels”, but use the term “instructions” and combine the requirement for the supply of instructions by the CA with the supply of any works item, or “thing” by D and attempts to clarify the issue of by when such material is to be supplied by identifying737 that C is to give the CA ten days’ notice of its need for any such requirement and that it is to be supplied no later than the latest of: 1. 2. 3. 4.

726 727 728 729 730 731 732 733 734 735 736 737 738

the the the the

date date date date

stated in the contract, if any; stated in C’s current schedule; C first notifies the CA under this sub-clause that it is required; C actually requires it, in accordance with its actual progress738.

Cl.60.1(3). Cl.60.1(6). Cl.18.3(i). Cl.23(1)(j). Cl.5.16. Cl.2.87. Cl.6.2.4. Cl.26.1(d). Cl.1.9. Cl.35(3)(b). Cl.35(4)(e). See, for example, IGBW/09 Cl.4.11. IGBW/09 Cl.4.11.2.

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4–231 Accordingly, it would seem that, provided that C updates its schedule regularly in accordance with the contract, the CA will be bound to provide instructions to suit C’s schedule. On the other hand, one good reason for rejecting a submittal of a revised schedule is that it would impose upon D an obligation that the contract does not require D to bear739 and that, presumably, would include bringing forward the date for the provision of information to suit C’s advanced schedule. Conversely, if C is delayed so that it does not need information on the dates previously indicated, then it is only entitled to receive that information when it actually needs it. Under these forms, C is only entitled to an extension of time and compensation if the CA fails to provide: “[A]n instruction under subclause 4.5.4 within the time required under subclause 4.11.2 when [C] has asked for the instruction in accordance with subclause 4.11.1”740,

or D fails to provide: “[A] works item or other thing as required by the contract when [C] has asked for the instruction in accordance with subclause 4.11.1.”741

Quality control 4–232 Under this heading, the effect of delay caused by the provision of samples is excused under ACA82 and ACA98742 and the delay in approving C’s quality system is excused under ICE/DC743. 4–233 With the exception of the GC/Works suite of UK government contracts C21/09744, ICE6745 and ICE7746, which do not expressly make provision for the time effects of an ineffective search for defective work, in general, the standard forms both excuse and make provision for compensation for the effects of opening up, or testing work which is not scheduled in the documents to be tested, or opened up and which is later found to be satisfactory. This is phrased variously as: “additional testing of work found to be satisfactory”, or “opening up of testing work found to be satisfactory” and “an ineffective search for defective work”. 4–234 The Irish government standard forms describe the event as being where: “[T]he [CA] directs [C] to search for defects or their cause and no defect is found, and the search was not required because of a failure of [C] to comply with the contract.”747

4–235 HK05748 also provides for inspections and tests, but says that they will always be the subject of a variation, unless the inspection, or test is: 1. 2.

739 740 741 742 743 744 745 746 747 748

required by the contract; shows that the work is not in accordance with a contract;

IGBW/09 Cl.4.7.10. IGBW/09 Schedule, Pt 1, section K, item 7. IGBW/09 Schedule, Pt 1, section K, item 9. Cll.3.5 and 11.5(e). Cll.8(3) and 44(1)(b). Cl.49. Cl.50. Cl.50. See, for example, the Schedule to IGBW/09 Pt 1, section K, item 2. Cl.8.2.

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3. 4.

necessary because of a similar failure elsewhere; or necessary because the work was carried out without an inspection notice required by the contract.

4–236 Clause 6.4.7 of NZ03 provides relief if “[C] suffers delay in the completion of the works, or incurs additional cost, by reason of [the event]”. HK86749, SGC95750, A201/97 and A201/07751, ECC2 and ECC3752 provide for an ineffective search for defective work to be both a D’s time and cost risk event. ICE6753, ICE7754 and ICE/ DC755 provide for compensation only for the additional testing of work found to be satisfactory. HKGC99756, ICE/MW757, IFC05 and IFWCD/05758, JCT63759, JCT80 and JCT98760, JCT05761, JCTsub/05762, WCD81, WCD98763 and DB05764, PCC92 and PCC98765, PCC06766, MC87 and MC98767, MC08768, WC/87 and WC/98769, WC/08770, TC08771, MP05772, CE06773, ECC2 and ECC3774, NEC/SF99775 and FIDIC/Build98776, FIDIC/Build99777, FIDIC/DB99778, FIDIC/PD+B99779 and PPC2000780 excuse delay caused by the opening up, or testing of work found to be satisfactory. FIDIC/SF98781 and FIDIC/Build98782 also excuse delay caused where C is prevented from carrying out tests and any additional tests on completion, boreholes, or other exploratory and testing work. 4–237 FIDIC/DB95783 provides that, for a period of up to two years in total:

749 750 751 752 753 754 755 756 757 758 759 760 761 762 763 764 765 766 767 768 769 770 771 772 773 774 775 776 777 778 779 780 781 782 783

Cll.23(i) and 24(b). Cll.14.2(g) and (o) and Cll.10.4 and 18.4. Cll.12.1.2 and 7.2.1. Cl.60.1(10). Cll.36(3) and 50. Cll.36(4) and 50. Cl.23.(1). Cll.63(c) and 50(1)(b)(vii). Cl.4.4(b). Cl.2.20.2.3. Cl.25.4.5. Cl.2.4.6. Cl.2.29.2.2. Cl.2.19.2.3. Cl.25.4.5.2. Cl.2.26.2.3. Cl.2.6.5.2. Cl.2.21.1.3. Cl.2.13.2. Cl.2.19.2 and WC/08 Cl.2.19.2.2. Cl.2.10.5.3. Cl.2.19.2.2. Cl.2.28.2.2. Cll.22.1 and 18.5. Cl.5.8. Cl.60.1(11). Cl.60.1(5). Cl.7.4. Cll.7.4 and 8.4(b). Cll.7.4 and 8.4(b). Cll.7.4 and 8.4(b). Cl.18.3(vii). Cll.9.2, 6.1(m) and 7.3. Cll.7.4 and 8.4(b). Cl.12.3.

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“The contract period shall be extended by a period equal to the sum of any periods, after the works are taken-over, during which the works or any section or item of plant cannot be used, for the purposes for which they are intended, by reason of a defect or damage.”

What at first may seem rather odd can be explained by the distinction, in this form, between the “contract period” and the “time for completion”. The contract period is the time for completion plus the defects liability period of 365 days. The time for completion is defined as the period for the carrying out and commissioning of the works, calculated from the commencement date. The effect of this clause in FIDIC/ DB95 is thus not to extend the time for completion, but to extend the defects liability period. 4–238 There is also a strange provision in IFC98784 (but not in any of the other JCT forms) that purports to give to an adjudicator, arbitrator, or the court (but not the CA) power to extend the time for completion of the works, solely by reason of the CA not withdrawing its instruction to open up and test work where a fault has already been found. The clause seems to bite if C objects to compliance with the CA’s instruction to open up, stating its reasons in writing within ten days of receipt of the instruction, and if, within seven days, the CA does not in writing withdraw the instruction, or modify the instruction to remove C’s objection785. By way of contrast, Cl.3.13.1 provides that, if C complies with the CA’s instruction and finds no defect, then, by virtue of Cl.2.4.6, if the instruction causes delay to the completion date, C is entitled to an extension of time. However, under Cl.13.3.2, not only is the question of delay to the completion date not a matter on which the CA can decide but, irrespective of whether, when carrying out the earlier investigation, faults were found, or any further investigation is carried out, it seems that, if C objects and in any subsequent adjudication, arbitration, or court hearing it is found that the CA behaved unreasonably in not withdrawing its instruction, then C may be awarded more time in which to complete. 4–239 It seems odd that, if the work is found to be satisfactory, and the opening up caused delay to the completion date when opened up under Cl.3.13.1, the CA should be required to determine an appropriate extension of time, but not in the event that C objects to the instruction. It appears that, in the latter case, where C objects to the instruction for further opening up, only the adjudicator, arbitrator, or judge can determine an appropriate extension of time and then the decision is based on whether the instruction is found to be fair and reasonable. 4–240 Rationally, whether or not an extension of time is granted should not depend upon whether an instruction was reasonable but, primarily, upon whether the opening up, the subject-matter of the instruction, was actually carried out and, if so, whether it caused delay to the completion date. Entitlement to an extension of time should then depend on whether the opening up showed it to be an unnecessary measure and, if so, caused delay to the completion date or, on the other hand, proved the work to be defective, or did not cause delay to the completion date.

784 Cl.3.13.2. 785 Although it seems that, only by complying with an instruction found to be unreasonably oppressive and thereby causing delay to completion, could C have suffered any adverse reaction to the instruction, nowhere does the clause require that C should have complied with the instruction or, by compliance, have caused delay to completion.

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Strikes and civil commotion 4–241 As between C and his subcontractor, and notwithstanding the rights of C and the subcontractor under the relevant main form of contract, JCTsub/05 provides that: “If the main contract works are affected by a strike, lock-out or local combination of workmen affecting any of the trades employed upon them or any of the trades engaged in the preparation, manufacture or transportation of any of the goods or materials required for the main contract works: 1. 2. 3.

neither [C] nor the subcontractor shall be entitled to make any claim upon the other for any loss and/or expense resulting from such action; [C] shall take all reasonably practicable steps to keep the site open and available for the use of the subcontractor; and the subcontractor shall take all reasonably practical steps to continue with the subcontract works.”

4–242 In so far as it is not also expressly described as being included in the definition of force majeure, the effect of strikes and lockouts is expressed as D’s time risk event generally, but not under NEC/SF99. HK86786, for example, provides that D takes the risk as to time of delay to the completion date caused: “[B]y reason of civil commotion, local combination of workmen, strike or lockout affecting any of the trades employed upon the works or any of the trades engaged in the preparation, manufacture or transportation of any of the goods or materials required for the works.”

4–243 Similar phraseology appeared in JCT63787. However, because of abuse of that provision experienced from time to time, the wording of later forms was amended to exclude the acts of those under C’s control. So, for example, the 2009 edition of the Irish government standard forms of contract provides for C to receive an extension of time and compensation where delay to the completion date is caused by: “Strike or lockout affecting the construction industry generally or a significant part of it, and not confined to employees of [C] or any of [C’s] personnel.”788

4–244 Similarly, under GC/Works/1, GC/Works/1/98, GC/Works/1DB and GC/ Works/1DB98789, D only takes the risk of delay caused thereby provided the strike and/ or lockout is outside the control of C or its subcontractors. Similar provisions are made in SIA80790, SGC95791, PPC2000792, ECC2 and ECC3793, JCT80 and JCT98794, IFC84 and IFC98795, WCD81 and WCD98796, PCC92 and PCC98797, MC87 and MC98798, WC/87 and WC98799 and the FIDIC forms that provide that D takes the risk of delay

786 787 788 789 790 791 792 793 794 795 796 797 798 799

Cl.23(d). Cl.23(d). See, for example, the schedule to IGBW/09 Pt 1, section K, item 14. Cl.36(2)(c). Cl.23(1)(e). Cl.14.2(c). Cl.18.3(ix). Cll.80.1 and 60.1(14). Cl.25.4.4. Cl.2.4.4. Cl.25.4.4. Cl.2.6.4. Cl.2.13.2. Cl.2.10.4.

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unless the riot or civil commotion is restricted to C, or its subcontractors800. IFC84, IFC98, IFC05 and IFWCD/05, AS2124 and AS4000 provide for relief from the effects of industrial conditions, provided that they occur before the completion date, after which the risk is to be borne by the contractor. 4–245 It is perhaps unfortunate that, in the JCT 2005 and later forms, the phraseology reverts to that of the JCT63 format, omitting to exclude the effect of disturbance by C and C’s subcontractors that caused so many difficulties in the past. In these forms, the excusable event is expressed as: “[S]trike, lockout or local combination of workmen affecting any of the trades employed upon the works or any of the trades engaged in the preparation, manufacture or transportation of any of the goods or materials required for the works, or any persons engaged in the preparation of the design for [C’s] design portion.”801

and, other than in IFC05 and IFWCD05802, the risk of delay caused thereby is not identified as being transferred to C when C is in culpable delay to the completion date. 4–246 In so far as it is not expressly described as being included in the definition of force majeure, almost all major standard forms except the ICE forms, GC/Works/2 and GC/Works/2/98, and NEC/SF99 expressly provide that D takes the risk of delay caused by riot, civil rebellion, or insurrection. Contracts which allocate risk for such events in this way are SIA80803, GC/Works/1, GC/Works/1/98, GC/Works/1DB, and GC/Works/1DB98804, GC/Works/2805, JCT63806, JCT80 and JCT98807, IFC84, IFC98808 and IFC05809, MWA80, MWA98810 and MWA05811, WCD81, WCD98812 and DB05813, PCC92 and PCC98814, MC87 and MC98815, WC/87 and WC/98816, MPF817, PPC2000818, ECC2 and ECC3819, FIDIC4820, FIDIC/SF98821, FIDIC/Build99822, FIDIC/DB/99823, FIDIC/PD+B99824 and HK05825.

800 FIDIC/M&E87 Cll.37.2(c) and 26.1(1); FIDIC/DB95 Cll.17.3(e), 17.4 and 8.3(c); FIDIC/ Build98 Cll.17.3(c), 17.4 and 8.4(b). 801 See, for example, JCT05 Cl.2.29.11 and DB05 Cl.2.26.10 which also includes disturbance to (or by) “any person engaged in the preparation of the design”. 802 Cl.2.19.2. 803 Cl.23(1)(d). 804 Cll.1(1)(d) and 36(2)(d). 805 Cl.14(2). 806 Cl.23(d). 807 Cl.25.4.4. 808 Cl.2.4.4. 809 Cl.2.20.10. 810 Cll.6.3B, 3.6 and 2.2. 811 Cll.5.4 and 2.7. 812 Cl.25.4.4. 813 Cl.2.26.10. 814 Cl.2.6.4. 815 Cl.2.13.2. 816 Cl.2.10.4. 817 Cl.12.1.2. 818 Cll.19.1 and 18.3(viii). 819 Cl.80.1. 820 Cll.20.4(e), 20.3 and 44.1(a). 821 Cll.6.1(c) and 7.3. 822 Cl.17.3(c). 823 Cl.17.3(c). 824 Cl.17.3(c). 825 Cll.1 and 25.1(3)(d).

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4–247 In many forms, these risks are scheduled as insurable risks, but that is not the case with ECC contracts. ICE6, ICE7 and ICE/DC826, and GC/Works/2 and GC/ Works/2/98, provide for financial compensation instead of insurance. 4–248 Again, in so far as it is not expressly described as being included in the definition of force majeure, the use, or threat of terrorism is expressed as a D’s time risk event under PPC2000827, MPF828, JCT80 and JCT98829, IFC84 and IFC98830, WCD81 and WCD98831, PCC92 and PCC98832, MC98833, WC/98834, FIDIC/SF98835 and FIDIC/Build98836. Delay caused by the effects of war, or hostilities, is expressly excused in all the standard forms except the ICE forms, the GC/Works series of UK government contracts, the minor works forms and MTC89, the JCT Intermediate forms, MC87 and MC98, WC87 and WC98 and JCT63. JCT63 provides for the abandonment of the contract in such circumstances. 4–249 Excusable delay for the effects of war is provided for in ACA82, ACA98837, GC/Works/1 and GC/Works/1/98, and GC/Works/1DB and GC/Works/1DB98838 and JCT80839, FIDIC/SF98840, FIDIC4841, FIDIC/M&E87842, FIDIC/DB95843 and FIDIC/ Build98844. 4–250 Delay caused by “any unlawful, wanton or malicious act by a person or persons acting on behalf of or in connection with an unlawful association” is expressly at D’s risk only under JCT80 and JCT98845, although it is referred to in other forms in connection with work which is likely to be carried out in Northern Ireland, namely under WCD81 and WCD98846, IFC84847, MTC89848, PCC92 and PCC98849 and MC87850. 4–251 The 2005 and later series of JCT contracts groups terrorism with civil commotion, excusing delay caused by “civil commotion or the use or threat of terrorism and/ or the activities of the relevant authorities in dealing with such event or threat”851. The 2009 edition of the Irish government standard forms of contract goes one stage further

826 Cl.20(2). 827 Cl.18.3(xiii). 828 Cl.12.1.4. 829 Cl.25.4.16. 830 Cl.2.4.16. 831 Cl.25.4.15. 832 Cl.2.6.16. 833 Cl.2.13.2. 834 Cl.2.10.15. 835 Cll.6.1(b) and 7.3. 836 Cll.17.3(b), 17.4 and 8.4(b). 837 Cl.11.5(c). 838 Cll.1(1)(d) and 36(2)(d). 839 Cl.22.2. 840 Cll.6.1(b) and 7.3. 841 Cll.20.4(b), 20.3 and 44(1)(a). 842 Cll.37.2(a) and 26.1(1). 843 Cll.17.3(a), 17.4 and 8.3(c). 844 Cll.17.3(a), 17.4 and 8.3(b). 845 Cl.22.2.3.5. 846 Cl.22.2.3.5. 847 Cl.6.3.2. 848 Cl.6.8. 849 Cl.6.3.2.3.5. 850 Cl.6.2. 851 JCT05 Cl.2.29.10; JCTsub/05 Cl.2.19.12; IFC05 and IFWCD05 Cl.2.20.6.10; PCC06 Cl.2.21.9; DB05 Cl.2.26.9; MP05 Cl.18.4; MC08 Cl.2.19.2 and WC/08 Cl.2.19.12; CMTC/08 Cl.2.28.9.

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and groups all such risks with war and rebellion, excusing and compensating delay to the completion date caused by instructions to rectify loss, or damage caused by: “war, invasion, act of foreign enemies, hostilities (whether war is declared, or not), civil war, rebellion, revolution, insurrection, or military, or usurped power, or martial law and terrorism, in so far as they are permitted exclusions from insured risks.”852

4–252 GC/Works/1, GC/Works/1/98, GC/Works/1DB and GC/Works/1DB98853 also provide that D takes the risk of delay caused by military and usurped power and an act of a foreign enemy, whether, or not war has been declared. 4–253 In contrast to the distribution of risk under the other JCT forms, under IFC05 and IFWCD/05854, when C is in culpable delay to the completion date, C also takes the risk of delay caused by: “civil commotion, or the use, or threat of terrorism and/or the activities of the relevant authorities in dealing with such event or threat”855; “strike, lock-out, or local combination of workmen affecting any of the trades employed upon the works, or any of the trades engaged in the preparation, manufacture, or transportation of any goods, or materials required for the works (and, in the case of IFWCD/05, any persons engaged in the preparation of the design for C’s design portion).”856

This is also the case, subject to slightly different phraseology, under IFC84 and IFC98857.

Health and safety 4–254 Safety provisions, or the lack of them, can give rise to excusable delay and this is expressly referred to in relation to the relevant edition of the Construction (Design and Management) Regulations (CDM Regulations) under ICE6 and ICE7858, JCT80 and JCT98859, JCT05860, JCTsub/05861, IFC84 and IFC98862. IFC05 and IFWCD/05863, WCD98864, DB05865, PCC92 and PCC98866, PCC06867, MC98868 and WC/98869, MC08870, WC/08871 and TC08872. In ICE6 and ICE7873 and ICE/DC874, delay caused by instructions to postpone work due to safety conditions is also an excusable event. 852 853 854 855 856 857 858 859 860 861 862 863 864 865 866 867 868 869 870 871 872 873 874

See, for example, the schedule to IGBW/09 Pt 1, section K, item 11. Cll.1(1)(d) and 36(2)(d). Cl.2.19.2. Cl.2.20.10. Cl.2.20.11. Cl.2.3. Cll.71(3)(a), 13(3) and 44(1)(c). Cl.25.4.17. Cll.3.23.1 and 2.29.6. Cll.3.20.1 and 2.19.7. Cl.2.4.17. Cll.3.23.1 and 2.20.6. Cl.25.4.16. Cll.3.16.1 and 2.26.5. Cl.2.6.17. Cll.3.23.1 and 2.21.5. Cl.2.13.2. Cl.2.10.17. Cl.2.19.2 and WC/08 Cl.2.19.8. Cl.2.19.8. Cll.3.22.1 and 2.28.5. Cll.40(1)(c) and 44(1)(c). Cll.40(1)(c) and 44(1)(c).

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Damage caused by carrying out the works 4–255 Not unreasonably, the standard forms of contract usually provide that C is responsible for financial loss arising out of damage caused by the carrying out of the works where it is due to its own negligence, or breach of statutory duty875. It may be required to insure against any such loss arising therefrom, since otherwise there is no provision for relief from the effects of any delay caused thereby. However, action carried out in an emergency “to prevent threatened damage, injury or loss” is both a D’s time and cost risk event under A201/97876 and A201/07877 and delay caused by the “use or occupation of the site by the works” is a time risk event under ECC2 and ECC3878 and FIDIC/M&E87879, but not under A201/97 and A201/07 under which it must be by collateral agreement880. FIDIC/M&E87 also excuses delay caused by the execution of the works by D on, over, under, in, or through any land881 and interference with any right of way, light, air, or water, or with any easement, wayleaves, or other right882. Delay resulting from “damage necessarily caused by the carrying out of the Works” is excused under ECC2 and ECC3883 and FIDIC/M&E87884. 4–256 The 2009 edition of the Irish government standard forms of contract also provides for both an extension of time and compensation for delay to the completion date caused by D instructing C to rectify loss of, or damage to, risk items for which C is not responsible. Somewhat strangely, under these forms of contract, C is also entitled to an extension of time, but not compensation, where delay to the completion date is caused by loss of, or damage to, the works, which is at C’s own risk885. 4–257 The risk of accidental physical damage to the contract works, or the contractor’s plant and equipment, during construction has traditionally been managed by means of insurance. Most insurance policies covering construction projects are written on an “all risks” basis, but are always subject to important exclusions, such as defects in design, materials, or workmanship. The insurance policy in question can be purchased by the client, or by the contractor, as the construction contract may dictate; such policies usually cover most of the parties involved, such as the client, the contractor, subcontractors and even suppliers and lenders. 4–258 “Marine” (transit) insurance policies are usually purchased in order to cover the separate risk of equipment and components (which are destined to be incorporated in the works) for the risk of loss, or damage, during the journey from the supplier to site. In addition, delay insurance may be purchased for delays arising from incidents of indemnifiable damage under either the “Contractors All Risks” property damage policy, or the “Marine Transit” policy. Typically, the loss insured by delay policies is the financial loss that would be suffered by the client (and their lenders) arising from the late commencement, or completion, of the project.

875 876 877 878 879 880 881 882 883 884 885

See, for example, JCT80 and JCT98 Cl.20.2 and JCT05 Cl.6.8(b). Cl.10.6.1. Cl.10.4. Cll.80.1 and 60.1(14). Cll.37.2(h) and 26.1(i). Cl.9.9.1. Cll.37.2(i) and 26.1(i). Cll.37.2(h) and 26.1(i). Cll.80.1 and 60.1(14). Cll.37.2(i) and 26.1(i). See, for example, the Schedule, Pt 1, section K, item 12.

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Illustrations (1)

(2)

(3)

(4)

Facts: Proceedings were commenced against the airlines and providers of security screening services, the related disputes arising out of various reinsurance provisions for aggregation and the difference between a “cause” and an “event”. The claimant reinsurers submitted before the arbitral tribunal that the outward reinsurances were subject to the occurrences relating to a single event arising out of the 9/11 attack on the Twin Towers of the World Trade Center (the WTC), but the tribunal disagreed. The claimant reinsurers appealed the award. Held, by Field J, that, whilst the underlying conspiracy unified the two incidents to some extent, it was confirmed that neither attack was reliant upon the other with, for instance, distinctions being made between the timing of the whole enterprise (passing through security, point of hijack, timing of collision with the WTC and the collapse of the buildings) and the fact that the buildings, whilst being part of the same complex, were actually entirely separate structures: Aioi Nissay Dowa Insurance Co Ltd v Heraldglen886. Facts: AstraZeneca Insurance Co (C) sought an indemnity from XL Insurance Ltd and Ace Bermuda Insurance Ltd (D) (the reinsurers) for settlements and associated defence costs arising out of litigation in the United States with regard to allegations that a drug sold by its insured AstraZeneca (AZ) had caused personal injuries. D denied that an indemnity was appropriate on the basis that an indemnity was only required if indemnity had been owed under the original policy. Article I of C’s policy provided that it would indemnify AZ for “damages” paid “by reason of liability…imposed by law”. D argued that, since C had settled the original claims without “actual legal liability”, the policy did not apply and so C had no entitlement to an indemnity under the reinsurance contracts. Held, by Flaux J, that C had to establish that AZ was under an actual liability; there was no entitlement to an indemnity against defence costs where the insured acted to defend the claim and liability was successfully avoided, without some express provision to the contrary: AstraZeneca Insurance Co Ltd v XL Insurance (Bermuda) Ltd 887. Facts: In 2004, Mr Bate took out a property insurance policy with Aviva. In 2006, an accidental fire occurred at his property. Aviva initially reserved its rights, but then wrote to Mr Bate, seeking to avoid the policy. Mr Bate brought a claim for indemnity and damages. Held, by Mackie J, that: (a) Mr Bate had misrepresented, or failed to disclose, that he had been running businesses from the property; he had claimed for previous fire damage against his previous insurers, which they had repudiated; the ownership of the property was complex and unusual and that it was being further developed and (b) Mr Bate had no valid claims under the Insurance Conduct of Business, since Aviva could reasonably avoid the policy on the grounds of misrepresentation, or non-disclosure. In the alternative, Aviva could repudiate the claim for breach of a contractual condition precedent to inform it of the development of the property: Bate v Aviva Insurance UK Ltd 888. Facts: On 3 October 2005, Kuwait Oil Co (KOC) entered into a contract with M/S Hyundai Heavy Industries Co Ltd (HHI) to build certain new crude oil storage tanks. After construction, one such tank was found to be defective. The claim in respect of this damage and loss was made against the original insurers, AIC. AIC

886 [2013] EWHC 154 (Comm). 887 [2013] EWHC 349 (Comm). 888 [2014] EWCA Civ 334.

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(5)

(6)

(in turn) notified their reinsurers Beazley Underwriting Ltd (the claimant) under the reinsurance contract. At first, all the reinsurers denied liability on the basis of the London Engineering Group (LEG) 2 exclusion. The reinsurance contract incorporated a claims control clause (CCC) as a condition precedent to recovery. The claimant alleged that the defendants had breached the above provisions and denied liability for the loss. Held, by Eder J, that, on the facts, there had been no breach of the CCC; the defendants were therefore not barred from claiming against the claimant: Beazley Underwriting Ltd v Al Ahleia Insurance Co889. Facts: C was unsuccessful at trial, with D being awarded a comparatively small counterclaim, as well as all the costs of the proceedings. D’s original costs budget of £264,708 was approved in the costs management order. Following the conclusion of the trial, D sought an upwards revision of its costs to the sum of £531,946.18, which was objected to by C. Held, by Coulson J, that indemnity costs was not the applicable order; that, were they to apply, the budget would provide the starting point for any assessment; and that, in accordance with paragraph 8 of the Pilot Scheme, D was entitled to argue before the costs judge that there were “good reasons” for departing from the approved costs budget: Elvanite Full Circle Ltd v AMEC Earth and Environmental Ltd890. Facts: Oakapple Homes (OH) appointed DTR as the project architect for the conversion of a former cotton mill into 72 residential units, together with some commercial units. Under the terms of DTR’s appointment, it was obliged to provide collateral warranties in favour of any person, or institution, providing finance in connection with the development of any part of it and the first purchaser and the first tenant of any leasehold interest and occupier of each and every part of the development and to anyone providing finance to them. DTR’s contract was novated to the contractor, Oakapple Construction. The development was completed and the units occupied. The development was then largely destroyed by fire. DTR went into creditor’s voluntary liquidation, but the building insurers for the development brought a subrogated claim against DTR for breaches of its design and inspection duties and sought to maximise their recovery by requiring DTR to execute collateral warranties in favour of the 72 residential leaseholders. DTR’s liquidator was concerned to know whether, if such warranties were issued, DTR’s professional indemnity (PI) insurance would meet any liabilities thereunder. DTR’s PI insurers were therefore joined as a party. They argued that there was contributory negligence by Oakapple Construction and that there would not be coverage under the policy since such liability would fall foul of the proviso to cover. Held, by Ramsey J that DTR would not be entitled to defend claims by beneficiaries to the warranties (if executed) on the basis of Oakapple Construction’s “contributory negligence” as contractor; that the “benefit” of the warranty referred to in the policy was not a reference to the amount of damages claimable under the warranty, but, rather, to the scope, extent and duration of DTR’s liability. The damages that might have been recoverable by the original party to the appointment could not have been intended to define the benefit of the warranty so as to limit the damages recoverable by the beneficiaries, since that would clearly defy commercial business common sense: Oakapple Homes (Glossop) Ltd v DTR (2009) Ltd (in liquidation)891.

889 [2013] EWHC 677 (Comm). 890 [2013] EWHC 1643 (TCC). 891 [2013] EWHC 2394 (TCC).

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4–259 Finally, delay caused by a fault in the design of the works is expressly excused under ECC2 and ECC3892, FIDIC4893, FIDIC/SF98894, FIDIC/M&E87895 and FIDIC/Build98896, FIDIC/Build99897 and FIDIC/PD+B99.

Catastrophes 4–260 In essence, a catastrophe of any variety is a force majeure and, in some of the contracts, the usual catastrophes are listed as being comprised in the definition of force majeure. Catastrophes are generally those circumstances that often are required under the contract to be insured either by C, by D, or by the parties jointly. However, certain of the risks which might be encompassed in the description of a catastrophe will be uninsurable. Intrinsically, so far as C is concerned, D takes the risk of their occurrence, although, for those uninsurable risks, should they occur, it is likely that the risk will be reimbursable under statutory provisions granting the licence to operate. Such risks generally include the likes of nuclear radiation, or explosive nuclear assemblies and sonic, or supersonic, pressure waves. 4–261 In the 2009 edition of the Irish government standard forms of contract, delay to the completion date caused by instructions to rectify loss, or damage caused by contamination from radioactive, toxic, explosive, or other hazardous properties of any nuclear assembly, or its components (in so far as they are permitted exclusions from insured risks) are events giving rise to an extension of time and compensation898. For extended discussion of the law relating to nuclear installations and damage caused thereby, see the judgment in Blue Circle v MoD899, in which it was accepted that the reduction in value of property due to plutonium contamination of a nearby marsh was “damage to property” for the purposes of liability under the Nuclear Installations Act 1965. 4–262 Catastrophes, which are normally insurable, are such things as fire, or explosion, storm, lightning, tempest, flood, or earthquake, aircraft, or other aerial devices, or objects dropped therefrom, and bursting, or overflowing of water tanks or pipes. They may also include such things as civil commotion, strike, or lockout, acts of terrorism and so on. In some contracts, they will be referred to as the “specified perils”, in others, as “insured risks”, in others, as “accepted risks”, or “excepted risks”900, and, in the new FIDIC and NEC forms, as “employer’s risks”. This can create a little confusion and it is prudent to read the relevant clause carefully. Generally, delay caused by these risks is at C’s risk under the GC/Works series of UK government contracts; under the ICE forms and the earlier FIDIC forms, it is not expressly referred to, but it is expressed to be at D’s risk under NZ03, provided that “[C] suffers delay in the completion of the works or incurs additional cost by reason of [the event]”901, HK86902, 892 Cll.80.1 and 60.1(14). 893 Cll.20.4(g), 20.3 and 44(1)(a). 894 Cll.6.1(g) and 7.3. 895 Cll.37.2(g) and 26.1(i). 896 Cll.17.3(g), 17.4 and 8.4(b). 897 Cll.17.3(g), 17.4 and 8.4(b). 898 See, for example, IGBW/09 Cll.3.1(3) and 3.2.3 and the Schedule, Pt 1, section K, item 11. 899 Blue Circle Industries v Ministry of Defence [1998] 3 All ER 385 CA. 900 In C21/09 and HK05, the “Excepted Risks” include many risks which are normally insurable, as well as some which normally are not and they are different from the “Specified Perils” for which insurance is to be taken out. 901 Cl.5.6.6. 902 Cl.23(c).

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SIA80903, SGC95904, the current FIDIC forms, the ACA, JCT and NEC forms. Unusually, NEC/SF99 provides that C is to be excused delay caused by: “A loss of plant and materials or damage to the works, plant and materials which is not the fault or responsibility of [C] or could not have been prevented by any reasonable action of [C]”

but which are insured risks in the joint names of C and D under Cl.82.1, irrespective of whether the loss, or damage is not the fault or responsibility of C, or could not have been prevented by any reasonable action of C. 4–263 In contrast to the distribution of risk under other standard forms, under IFC05 and IFWCD/05905, when C is in culpable delay to the completion date, C also takes the risk of delay caused by loss, or damage as a result of the specified perils906. This is also the case in relation to the like event under IFC84 and IFC98907.

Antiquities 4–264 A further category of relief that is reasonably discrete is the finding of antiquities, or fossils. The effect of such finds is generally to suspend the carrying out of the works so as not to damage the discovery, during the time it takes for the CA to give instructions as to what should be done in regard to the exposure, restoration, or preservation of such antiquities, or fossils. Whilst it can reasonably be construed that the discovery of unknown fossils, or antiquities may well fall under “unforeseeable physical conditions”, there is separate express provision for financial compensation under the ICE and the GC/Works series of UK government contracts; relief for delay, but not compensation for loss caused thereby is provided for expressly in HK86908, HK05909, PPC2000910, JCT63911, JCT80, JCT98, JCT05912, JCTsub/05913, WCD81, WCD98914 and DB05915, PCC92 and PCC98916, PCC06917, MC87 and MC98918, MC08919, WC/87 and WC/98920, WC/08921, TC08922, ECC2 and ECC3923, FIDIC4924 and FIDIC/DB95925.

903 904 905 906 907 908 909 910 911 912 913 914 915 916 917 918 919 920 921 922 923 924 925

Cl.23.(1)(c). Cl.14.2(f). Cl.2.19.2. Cl.2.20.9. Cl.2.3. Cl.23(k). Cl.25.1(3)(k). Cl.18.3(ii). Cll.34 and 23(k). Cll.3.22.1.2 and 2.29.2.1. Cll.3.22.1.2 and 2.19.2.1. Cll.34.2 and 25.4.5.1. Cll.3.22.2 and 2.29.2.1. Cll.3.16.2 and 2.6.5.1. Cll.3.22.1, 3.22.2 and 2.21.3. Cl.2.13.2, WC/98 Cl.2.10.5.1 and MC/98. Cl.2.19.2 and WC/98 Cl.4.21.2.6. Cl.2.10.5.1 and MC08 Cl.3.27. Cl.4.21.2.6. Cll.3.21.2 and 2.28.2.1. Cl.60.1(7). Cll.27.1(a) and 44.1(b). Cll.4.24 and 8.3(c).

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FIDIC/Build98926, FIDIC/Build99927, FIDIC/DB99928 and FIDIC/PD+B99929 furthermore provide that such occurrences are both D’s time and cost risk events. 4–265 By default (except in relation to the minor works form), under the 2009 edition of the Irish government standard forms of contract, delay to the completion date caused by “An item of archaeological, or geological interest, or human remains is found on the site, and it was unforeseeable” entitles C to an extension of time. D is entitled to identify, on a job-specific basis, whether C is to be compensated for prolongation caused thereby and, if not so positively identified, the risk is not compensable. However, under IGMW/09, it is both an excusable and compensable risk. 4–266 Unusually amongst the 2005 and later JCT forms, PCC06 is the only form of contract which provides relief to be granted for the effects of C using his: “[B]est endeavours not to disturb the object and cease work if and insofar as its continuance would endanger the object or prevent or impede its excavation or removal”,

compliance with which is expressly referred to as an excusable event930. Otherwise, under those JCT forms which make any provision at all for this event931, relief is only provided for the effect of instructions on what to do with the antiquities, once they are found, notwithstanding that, paradoxically, compensation for loss and expense is to be paid not only for instructions on what to do about them, but also for taking the action to avoid damage to the discovery that is not subject to relief.

Standard provisions for recovery of loss or expense Introduction “For [C] to recover its costs it is not sufficient merely to show that some delay has been caused in the construction process.What must be shown is not only that [C] has been delayed or disrupted through no fault of his own but also that the party from whom he wishes to recover his loss has assumed responsibility for that particular risk, either by his conduct, by virtue of his contract or by some representation or undertaking.”932

4–267 The words “direct loss and/or expense” should not afford any real difficulty. The distinction between direct and indirect would appear to be largely the distinction that is always to be made in regard to damages in tort, or contract. It must be shown that the act, or acts, complained of were, in the understanding of an ordinary person, the cause of the loss, or expense: not merely a contributory, or “but for”, cause, but the predominant, or “direct”, cause, unaffected by any intervening cause933.

926 Cll.4.24 and 8.4(b). 927 Cll.4.24 and 8.4(b). 928 Cll.4.24 and 8.4(b). 929 Cll.4.24 and 8.4(b). 930 For example, as referred to in JCT05, Cl.3.22.1.1. 931 IFC05, IFWCD/05 DB05, MP05 and CE06 make no mention of the finding of antiquities as an excusable event. 932 The National Economic Development Office, Faster Building for Industry (London: HMSO, 1983). The Report of the Building and Civil Engineering Economic Development Committees’ Joint Working Party. 933 That is to say, the causa causans rather than the causa sine qua non. See Ch.14, “Cause and effect”, throughout.

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4–268 In principle, loss and expense may be recoverable under four different provisions of most standard forms of contract: 1. 2. 3. 4.

those referable to the retrospective valuation of variations934; those referable to the prospective valuation of variations935; those providing for recovery of loss and expense not reimbursable under the valuation provisions936; and those referable to recovery at common law937.

4–269 However, recovery of damages at common law may not always be available as it is becoming increasingly fashionable impliedly to exclude common law rights of recovery of damages by contract. So, for example, NEC3 provides that “This contract is the entire agreement between the parties”938 and the 2009 series of Irish government forms provides that: “[C’s] sole remedies for a compensation event shall be those stated in the contract”939. 4–270 On the whole, the standard forms adopt one of two approaches to provide for reimbursement under the contract for the financial effects of delay and disruption: 1. 2.

reimbursement is made by reference to the cost incurred by C, which may, or may not include profit; or for the effect of variations, reimbursement is by reference to the rates and prices in the contract.

4–271 In Hsin Chong v Henble940, in relation to a contract in which the expression “direct loss and expense” was undefined, the court held that direct loss and expense included liability for overheads and profit, so long as these were not too remote in the sense of being unforeseeable. Overheads and profit are sometimes specifically included as a head of loss, or expense, by the terms of some of the standard forms of contract. 4–272 For example, NZ03 adopts the approach of defining a number of compensable events as “variations”, where payment for variations is to include costs, overheads and profit. Similarly, under SGC95, the definition of “cost” expressly includes profit and, whilst IChemE has no particular rules for the valuation of variations and their effects, other than that it “shall be such amount as shall in all the circumstances be reasonable”941, reimbursement for other matters under this form is generally on the basis of cost plus profit. 4–273 On the other hand, some forms expressly exclude profit, but include overheads within the definition of claimable compensation. Under ICE6942 and ICE7943, for example, delay resulting from variations is to be valued at, or based on, rates in the

934 For example, JCT80 and JCT98 Cl.13 and JCT05 Cl.4.16. 935 For example, JCT80 and JCT98 Cl.13A and JCT05 Cl.5.1 and Sch.2. 936 For example, JCT80 and JCT98 Cl.26 and JCT05 Cl.4.23. 937 For example, JCT80 and JCT98 Cl.26.6 and JCT05 Cl.4.26. 938 Cl.12.4. 939 Cl.10.1.2. 940 Hsin Chong Construction (Asia) Ltd v Henble Ltd [2006] HKCFI 940; (2005) HCCT 000023A/2005, 18 August 2006. 941 Cl.19.1. 942 Cl.52(4)(b). 943 Cl.53(2).

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contract, unless rate-based valuation is not feasible944, whereas claims for the cost of delay arising out of other than variations see “cost” defined as: “[A]ll expenditure incurred on or off site including finance, overheads and other charges but does not include any allowance for profit.”945

4–274 Under AS4000, the provisions for reimbursement of the financial effects of prolongation and disruption are similar to those in ICE7, with prolongation and disruption arising out of variations being treated differently from those other events that are subject to cost reimbursement. Valuation of variations is to be based upon hierarchical rules946, the application of which is rendered more complex than it need be by the provision that “deductions shall include a reasonable amount for profit but not overheads”. 4–275 Compensation under the 1999 series of FIDIC forms of contract is on the basis of cost plus profit, for loss arising from those matters for which D has active responsibility, whilst other matters attract cost reimbursement only, with cost having the same meaning as in the ICE forms. 4–276 ECC2 and ECC3 valuation is on the basis of actual cost, plus an addition for all other costs, profit and risk, which is termed “the fee”, in which C is to provide an estimate for the full consequential costs of all variations, including the effect on the schedule947. 4–277 In some other forms948, the risk of adequate compensation for subsequent variations, where the contract prices were referable, lay where it fell, in that, if C had over-priced a particular item, or priced it inadequately, then the difference would be multiplied if the work was expanded949. The rationale underlying this is that: 1.

2.

if valuation is on the basis of tendered bill rates, C and D are both obliged to accept the same level of overhead, risk and profit as on the work for which they entered into contract; and any inaccuracy in the original price will be compounded.

4–278 This method of valuation is vulnerable to two criticisms: 1.

2.

it can lead to inequitable reimbursement of the value of the variation where it relies on a cost model that may not have been priced realistically and thus does not reflect the cost of the change effectively; and C must pursue claims for loss and expense arising out of prolongation and disruption through routes other than the valuation of the change itself 950.

4–279 The optional move away from the use of the bill of quantities in the NEC forms of contract to a priced activity schedule can be viewed as a symptom of perception of failure of existing models to provide a satisfactory method of valuing change951

944 ICE6 Cl.52(1); ICE7 Cl.52(3) and dictum of Lloyd LJ in Henry Boot Construction Ltd v GEC Alstom Combined Cycles Ltd [2000] BLR 247. 945 ICE6 and ICE7 Cl.1(5). 946 Cl.36.4. 947 Cl.62. 948 Excluding the JCT family of contracts, for example. 949 See, for example, Henry Boot Construction Ltd [1999] BLR 123. 950 See, for example, HK05, which expressly excludes claims for disbursement. 951 PH McGowan, R Malcolm, W Horner, D Jones and PA Thompson, Allocation and Evaluation of Risk in Construction Contracts (Ascot: Chartered Institute of Building, 1992). Occasional Paper No 52 of the Chartered Institute of Building.

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but, in view of the fact that contractors continue to produce bills of quantity to generate bids and value change, it is perhaps more likely to be related to risk transfer and the value it brings to change management.

Compensable events 4–280 The events that provide financial compensation under the contract for prolongation of the contract period are matters which, of their nature, tend to be within the control of D, or its CA, or other persons employed by D. They are matters which, but for a power to extend the completion date, would amount to acts of prevention and put time at large952. 4–281 For example, Cl.24 of JCT63 provides that: “If upon written application being made to it by [C] the [CA] is of the opinion that [C] has been involved in direct loss and/or expense for which he would not be reimbursed by a payment made under any other provision in this Contract by reason of the regular progress of the works or of any part thereof having been materially affected by.”

4–282 There then comes the list of D’s cost risk events. In so far as they are at D’s risk and reimbursable, the words are identical with those D’s time risk events in JCT63 Cl.23. In principle, D’s cost risk events are: 1. 2. 3. 4. 5.

delay in receiving instructions, drawings, details, or levels; the opening up for inspection of any work covered up, or the testing of any of the work; any discrepancy in, or divergence between the contract documents; delay on the part of artists, tradesmen, or others engaged by D; and postponement of any work to be executed.

4–283 Under JCT80953, D’s cost risk events are: 1.

2.

3. 4. 5. 6.

delay in receiving instructions (including those for, or in regard to the expenditure of provisional sums), drawings, details, or levels, for which C specifically applied in writing, provided that such application was made on a date which, having regard to the completion date, was neither unreasonably distant from nor unreasonably close to the date on which it was necessary to receive the same; the opening up for inspection of any work covered up, or the testing of any of the work, materials or goods in accordance with Cl.8.3 (including making good in consequence of such opening up or testing), unless the inspection, or test showed that the work, materials, or goods were not in accordance with the contract; any discrepancy in, or divergence between the contract documents; the execution of work (not forming part of the contract) by D himself, or by persons employed, or otherwise engaged by it, or failure to execute such work; the supply by D of materials and goods that D has agreed to provide for the works, or the failure so to supply; instructions under Cl.23.2 issued in regard to the postponement of any work to be executed;

952 See Ch.6, “Extensions of time and time at large”, at paras 6–106 to 6–173. 953 Cl.26.2.

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7. the failure of D to give in due time ingress to, or egress from, the site of the works, or any part thereof through, or over any land, buildings, way, or passage adjoining, or connected with the site and in the possession and control of D; 8. the issuing of instructions for variations; 9. the issuing of instructions for the expenditure of undefined provisional sums; and 10. the requirement of work for which approximate quantities are unreasonably inaccurate. 4–284 JCT98 has changed D’s cost risk event regarding the supply of further information drawings, or levels, to: 1.

2.

Where an information release schedule has been provided, failure of the CA to comply with the supply (presumably, in full) of the drawings, schedules, levels, or information by the date set down in the information release schedule954. In other words, this is now a matter of strict liability. If the information is not provided on, or before the calendar date set down in the information release schedule, the failure to meet that date is a D’s cost risk event. The supply of any other drawings, schedules, levels, or information (in so far as it is not provided in accordance with the information release schedule)955 and any instructions, unless it is given:

“[A]t a time when, having regard to the progress of the works, or, where in the opinion of the [CA] Practical Completion of the works is likely to be achieved before the completion date, having regard to such completion date, it was reasonably necessary for [C] to receive such further drawings or details or instructions.”956

4–285 The only proviso to this, in regard to the timing of any request for such information is: “Where [C] is aware and has reasonable grounds for believing that the [CA] is not so aware of the time when it is necessary to receive such further drawings or details or instructions [C] shall, if and to the extent that it is reasonably practicable to do so, advise the [CA] of the time sufficiently in advance of when [C] needs such further drawings or details or instructions to enable the [CA] to fulfil his obligations (under this clause).”957

4–286 JCT98 has also added, as compensation events: 1. 2.

D ensuring that the planning supervisor carries out its duties, or any failure by D to so ensure958; the rightful suspension of the works by C for non-payment by D, provided that such suspension is not frivolous, or vexatious959.

Added to the clause regarding instructions for the expenditure of provisional sums is an exclusion in regard to compensation for loss arising out of instructions for the expenditure of a provisional sum for performance designed work960.

954 955 956 957 958 959 960

Cl.26.2.1.1. Cl.26.2.1.2. Cl.5.4.2. Cl.5.4.2. Cl.26.2.9. Cl.26.2.10. Cl.26.2.7.

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4–287 Other forms are less precise, but generally provide for financial compensation for anything that might amount to an act of prevention by D, or the CA, or others on D’s behalf. The JCT 2005 and later build-only forms961, for example, which refer to D’s cost risk events as “relevant matters”, provide that C is to be compensated for any loss and/or expense suffered as a result of: 1.

2.

3. 4. 5. 6.

variations (excluding those where loss and/or expense is included in a confirmed acceptance of a variation quotation, but including any other matters or instructions which under these conditions are to be treated as, or requiring, a variation); CA’s instructions in regard to: a. postponement, or the expenditure of undefined provisional sums; b. opening up of work found to be satisfactory; c. errors, omissions and inconsistencies in the contract documents, or between them and other documents; Taking avoiding action in the event of finding antiquities and compliance with any instructions in connection therewith; suspension by C following D’s default in payment; execution of work the subject of approximate quantities that are not reasonably accurate; any impediment, prevention, or default, whether by act, or omission, by D, the CA, or the QS, or any of D’s employed persons (as defined) except to the extent caused, or contributed to by any default, whether by act, or omission, of C or of any of C’s persons (as defined).

4–288 The JCT design and build form, DB05, omits the items referable to approximate quantities, but includes provision for C to be compensated for the effects of any delayed permission, or approval under the development control requirements, which C has taken all practical steps to avoid, or reduce. 4–289 AS4000 provides for compensation for the effects of legislative changes962, the effect of finding minerals, fossils, etc963 instructed acceleration, or re-scheduling964, suspension of work965 and variations966 which include latent conditions967. 4–290 FIDIC/PD+B99 and FIDIC/DB99 do not deal with compensation for delay caused by variation, but FIDIC/Build99 adopts a similar approach to that contained in the ICE forms968. In the ICE engineering forms and FIDIC/Build99, FIDIC/DB99 and FIDIC/PD+B99, C’s entitlement to compensation is primarily set out in regard to individual clauses of the contract. So, for example, ICE7 provides that, unless the event could reasonably have been foreseen by an experienced contractor at the time of tender, or the event has been caused by any omission, or default of the contractor, D’s cost risk events are instructions given by CA in relation to:

961 962 963 964 965 966 967 968

See, for example, JCT05 Cl.4.24. Cl.11.2. Cl.24.3. Cl.32. Cl.33.4. Cl.36.1. Cl.25.3. Cl.12.3.

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1. correction of any ambiguities, or discrepancies in the contract documents969; 2. requiring C to investigate and report upon the practicality, cost and timing of alternative measures that may be available in relation to unforeseeable physical conditions970; 3. consenting to measures notified under Cl.12(2) to overcome unforeseeable physical conditions, with, or without modification971; 4. the manner in which the physical conditions, or artificial obstructions notified under Cl.12(2) are to be dealt with972; 5. to correct any impossibility, or illegality973; 6. to rectify any error in setting out caused by incorrect data supplied by the CA974; 7. to make boreholes, or to carry out exploratory excavation, other than pursuant to an instruction to expend a provisional sum, or prime cost item975; 8. to ensure conformity with any Act of Parliament, regulation, or by-law976; 9. to conform to any condition, or limitation in any licence obtained after the award of the contract977; 10. to dispose of fossils, coins, articles of value, or antiquity and structures, or other remains, or things of geological, or archaeological interest978; 11. to make any tests not described in the contract in sufficient detail for the contractor to have allowed for it in his tender979; 12. to suspend the progress of the works, or any part thereof, except as provided for in sub-cll.40(1)(a), (b) and (c)980; 13. to order any variation in accordance with sub-cll.51(1)(a), (b) or (c)981; 14. to expend a provisional sum982; 15. to expend a prime cost item983; 16. to make good the failure of a nomination of a subcontractor984; and 17. to amend, or alter the health and safety plan985. 4–291 The provisions for reimbursement consequent upon delay, or disruption, in MPF and MP05 are confusing and potentially misleading. Cl.21.2 of MPF states that, subject to Cl.21.1, D’s cost risks events are only D’s, or a third party’s acts of interference and D’s right to suspend performance for non-payment and, at Cl.21.1, it states that: “[N]o change or matter that is required by the contract to be treated as giving rise to a change shall give rise to an entitlement to be reimbursed loss and or expense.” 969 970 971 972 973 974 975 976 977 978 979 980 981 982 983 984 985

Cl.5. Cl.12(4)(a). Cl.12(4)(b). Cl.12(4)(c). Cl.13(1). Cl.17(2). Cl.18. Cl.26(3)(b). Cl.27(2)(a). Cl.32. Cl.36(4). Cl.40(1). Cl.51(1). Cl.58(1). Cl.58(2). Cl.59(2). Cl.71(3)(a).

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At Cl.20.6.4 in regard to the valuation of changes, it also says that: “any loss and/or expense that will be incurred as a consequence of the change” is to be part of the valuation of the change. 4–292 Similarly, at Cl.27.2, MP05 states that, subject to Cl.27.1, the only matters for which D will be liable to C in respect of loss and/or expense are: “a breach or act of prevention on the part of [D] or his representative or advisers appointed pursuant to clause 21 other than any matters or actions that are expressly permitted by this contract and that are stated not to give rise to a change; interference with [C]’s regular progress of the project by others on the site; the valid exercise by [C] of his rights under section 112 of HGCRA 1996”.

4–293 Clause 27.1 provides that: “No change or matter that is required by this contract to be treated as giving rise to a change shall, either individually or in conjunction with other changes, give rise to an entitlement to be reimbursed for loss and/or expense under clause 27”,

whilst providing, at Cl.27.8, that valuation of loss and expense for change is to be valued under Cl.26. 4–294 In contrast to the other standard forms, NZ03 adopts the novel approach of defining a number of events as “variations”. Under this form, the following events are compensable as variations: discrepancies in contract documents986;

omissions from schedules of prices987; discrepancies in quantities988; changes in legal requirements989; locating utilities990; late supply of D’s goods and materials991; instructed postponement992; omission of postponed section of work993; expenditure of contingency sums994; instructions to explain ambiguities995; late issuance of instructions, documents, drawings, or specifications996; failure of a nominated subcontractor to enter into a subcontract, or repudiation by a nominated subcontractor997; the activity of D’s contractors998; loss, or damage caused by “excepted risks”999; 986 987 988 989 990 991 992 993 994 995 996 997 998 999

Cl.2.2.5. Cl.2.3.2. Cl.2.3.4. Cl.5.11.6. Cl.5.13.4. Cl.5.16. Cl.6.7.3. Cl.6.7.4. Cl.12.11.2. Cl.2.8.4. Cl.2.87. Cl.4.2.6. Cl.5.5.2. Cl.5.6.6.

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defective instructions regarding setting out1000; antiquities1001; failure of the CA to carry out its duties1002; failure to carry out testing1003; investigating work found not to be defective1004; failure to promptly issue a completion certificate1005; partial possession1006. 4–295 Under the 2009 edition of the Irish government standard forms of contract build-only forms, IGBW/09 and IGCE/09, the compensable risks are stated to be: 1. the CA gives C a change order1007; 2. the CA directs C to search for defects, or their cause and no defect is found and the search was not required because of a failure of C to comply with the contract. Schedule, Pt 1, section K, item 2; 3. the CA directs C to suspend work Schedule, Pt 1, section K, item 3; 4. C suspends work in response to D’s failure to make due payment. Schedule, Pt 1, section K, item 4; 5. there is a factual error in information about the site, or setting out information in the works requirements. Schedule, Pt 1, section K, item 5; 6. D takes over part of the works before substantial completion of the works, or any section. Schedule, Pt 1, section K, item 6; 7. the CA does not give C a duly requested instruction within the time permitted. Schedule, Pt 1, section K, item 7; 8. D does not allow C to occupy and use of a part of the site. Schedule, Pt 1, section K, item 8; 9. D does not give C a works item, or other thing as required by the contract after it being duly requested. Schedule, Pt 1, section K, item 9; 10. D’s personnel interference with the execution of the works where the interference is unforeseeable and not in accordance with the contract. Schedule, Pt 1, section K, item 10; 11. D instructs C to rectify loss, or damage to the works, or anything connected therewith. Schedule, Pt 1, section K, item 11; and 12. a breach by D of the contract delaying the works that is not listed elsewhere in this table. Schedule, Pt 1, section K, item 16. 4–296 Under these forms, D also has the option, on a job-specific basis, of also identifying the following events as compensable: 1. A difference between the contract value of the works according to the quantities and descriptions in the bill of quantities (taking into account the method of measurement identified in Part 1B when it applies) and the contract value

1000 1001 1002 1003 1004 1005 1006 1007

Cl.5.8.5. Cl.5.14.2. Cl.6.2.4. Cl.6.4.4. Cl.6.4.7. Cl.6.6.4. Cl.10.7.4. The Schedule, Pt 1, section K, item 1.

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of the works described in the works requirements, because the bill of quantities, when compared with the works requirements:

includes an incorrect quantity, or includes an item that should not have been included, or excludes an item that should have been included, or gives an incorrect item description 2. 3. 4. 5. 6.

and the difference for an item in (or that should have been in) the bill of quantities is more than 500. Schedule, Pt 1, section K, item 17; An item of archaeological, or geological interest, or human remains is found on the site and it was unforeseeable. Schedule, Pt 1, section K, item 18; Unforeseeable ground conditions, or man-made obstructions other than utilities. Schedule, Pt 1, section K, item 19; Unforeseeable utilities in the ground on the site. Schedule, Pt 1, section K, item 20; and Owners of utilities on the site do not relocate, or disconnect utilities as stated in the works requirements when C has complied with their procedures and the procedures in the contract, and the failure is unforeseeable. Schedule, Pt 1, section K, item 21.

4–297 However, under the Schedule, Pt 1, section K to the forms in which building, or engineering works are to be designed by C, IGDB/09 and IGCEDB/09, items 5, 7, 17, 19, 20 are not compensable and D has the option of determining on a job-specific basis whether items 18 and 21 should be compensable. 4–298 On the other hand, in the Schedule, Pt 1, section K to IGMW/09, items, 18, 19, 20 and 21 are compensable and D has the option of determining, on a jobspecific basis, whether item 17 should be compensable. Under this form, oddly enough, loss caused by D taking over a part of the works, or any section before substantial completion.1008 is neither excusable nor compensable. 4–299 The right to compensation under these forms, however, is circumscribed by a number of preconditions. Some of these conditions would probably fall foul of the Unfair Contract Terms Act 1977 Pt 3, under English law, and also the State laws in many parts of the US as being contrary to the public interest: 1.

2.

3.

The compensable delay must be a delay to the completion date of the whole of the works and not any sectional completion date, or other period: Cl.10.7.1. This has the effect of precluding compensation for delay to the completion of any section, or to any subcontract work that does not extend past the completion date, notwithstanding that it may cause such prolongation. There cannot be any compensation by way of loss, or expense incurred by reason of delay, disruption, loss of productivity, or the knock-on effect of any event that is otherwise compensable: Cl.10.7.4. There is to be a contingency period for which compensation is to be paid, or not, as the case may be: Cl.9.4. This is defined in the Schedule to the contracts, at Pt 1, section K by two “threshold” periods to be defined by D on a projectspecific basis.

1008 See the schedule to IGMW/09 Pt 1, section K, item 6.

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4.

5.

6.

The rate of compensation is liquidated and ascertained in the Schedule, Pt 1, section K as a rate per site working day (excluding VAT) to be tendered for by C (and, if left blank, or a negative value, is to be taken to be zero). C is entitled to be paid for the effects of a delay to the completion date which extends the period by more than seven consecutive days into a holiday period, but not otherwise: Cl.10.7.3. This necessarily precludes payment for delay that lasts through a weekend. Notice, within 20 working days of the date C “became aware or should have become aware of something that could result in such entitlement”, together with all supporting information, within a further 20 days, is a condition precedent to entitlement: Cl.10.3.2. In the absence of such notice and supporting details, C is deemed to have waived any entitlement. Because the forms declare each to be an entire agreement (Cl.1.9.1) and make specific reference to these provisions being the only provisions entitling C to compensation (Cl.10.1) it is considered unlikely that C would be able to secure at common law anything in excess of that provided under the contract.

Claims procedure 4–300 Clause 24 of JCT63, JCT80 and JCT98 states that: “[C’s] application shall be made as soon as it has become, or should reasonably have become apparent to him that the regular progress of the works or of any part thereof has been or was likely to be affected”.

Provided that C has submitted a written application for compensation, the JCT98 forms further state (at Cl.26.1) that: “[H]e has incurred or is likely to incur direct loss/or expense in the execution of this contract for which he would not be reimbursed by a payment under any other provision of this contract due to (the listed D’s cost risk events) then the [CA] from time to time thereafter shall ascertain, or shall instruct the quantity surveyor to ascertain, the amount of such loss and/or expense which has been or is being incurred by [C].”

The forms then state (at Cl.26.5): “Any amount from time to time ascertained under clause 26 shall be added to the contract sum.”

HK05, Cl.27.1(1), which to some extent is based upon the JCT forms, but borrows also from engineering contracts, contains similar provisions. 4–301 JCT05 adopts a slightly different procedure and makes it plain that, although an application for reimbursement is required if C “incurs or is likely to incur” direct loss and/expense, it is only such loss and/or expense that “has been or is being incurred” to which C is entitled to reimbursement. 4–302 It should be noted that the wording of the 1998 and 2005 and later JCT forms concerning continuing losses and/or expenses caters for one aspect of the decision in Minter F G Minter Ltd v Welsh Health Technical Services1009 in so far as they contemplate future and/or continuing loss and/or expense, thereby removing the need to submit regular notices regarding continuing financing charges, as appeared to be necessary under JCT63. 1009 (1980) 13 BLR 1 CA, reversing (1979) 11 BLR 1.

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4–303 As to the separation of delays for the purposes of compensation, there is nothing in JCT80 or JCT98 requiring the CA to apportion the various causes of delay to specific extensions of time. Clause 25.3.1.3 provides only that the CA should state “which of the relevant events he has taken into account”. However, JCT05 corrects this omission and requires the CA to identify “the extension of time that he has attributed to each relevant event”1010 and also adds the requirement to identify “the reduction in time that [the CA] has attributed to each relevant omission”. The provision in JCT80 and JCT98 that, in providing notice and details of delay, C is to ignore any concurrency1011, but which in the sense used is really parallelism (see Ch.18 – Concurrency, parallelism and pacing, at paras 18–018 to 18–022 (which fortunately has been omitted from the 2005 and later series of forms)) does nothing to help to give the CA any guidance as to what is the true effect on C’s costs of the individual delay to progress for which D is liable. Clause 26.3 of JCT80 and JCT98 requires the CA: “If and to the extent that it is necessary for ascertainment under clause 26.1 of loss and/or expense the [CA] shall state in writing to [C] what extension of time, if any, has been made under clause 25 in respect of the [D’s time risk event] or events referred to in clause 25.4.5.1 (so far as that clause refers to clauses 2.3, 13.2, 13.3 and 23.2) and in clauses 25.4.5.2, 25.4.6, 25.4.8 and 25.4.12.”

4–304 Thus, the position is that, so far as concerns extensions of time, with JCT80 and JCT1998, the CA can give a single award, without the need to separate the degree of delay caused by the various events, but, for the purposes of compensation, the CA must state individually how much delay to progress and to completion has been caused by each of D’s cost risk events in Cl.26.2. Whether or not an activity is in float is irrelevant in this regard as Cl.26 provides for compensation for the effects of disruption and thus is to be paid, if incurred, irrespective of any delay to completion. The forms generally place an obligation on C to provide such information as is necessary, first to enable the CA to form an opinion as to whether delay to progress, or disruption of the work has occurred, or is likely to occur as a result of a D’s cost risk event and, secondly, upon request1012, to enable the CA, or the quantity surveyor to ascertain the resulting loss and/or expense (if any). 4–305 Compensation under these clauses is limited in its scope and by the requirement that C must make a written application within a reasonable time, generally a very limited period following the occurrence of the event. Unlike the provisions for an extension of time, which are designed to enable D to recover liquidated damages notwithstanding its own interference, neither the CA nor D could reasonably have constructive notice of C’s loss, or expense, as a result of a D’s cost risk event. In this case, a specific claim is required and, where notice is specified to be a condition precedent to entitlement1013, failure to conform to the notice periods specified will usually result in the claim being time barred under the contract. The effect of that is not necessarily entirely to bar C’s claim, which may still be pursued at common law for damages for breach, unless the form of contract also excludes common law remedies, as it does in MF/1 and ECC3, for example1014. However, there is no clause in HK05 similar to that 1010 Cl.2.28.3.1. 1011 Cl.25.2.2.2. 1012 Cl.26.1.2, for example.. 1013 See HK05 Cl.28.3. 1014 See Strachan & Henshaw Ltd v Stein Industrie (UK) Ltd (1997) CILL 1349; (1998) 87 BLR 52; (1997) 63 Con LR 132.

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in JCT to the effect that entitlement is without prejudice to any other rights, or remedies that C may possess, which would include common law rights to damages. Nor is there any expression such as that contained in MF/1, Cl.44.4. or ECC3, Cl.63.4. or the Irish government forms1015, which excludes C’s common law rights. What C might do to recoup financial loss it suffers as a result of events not listed in Cl.27.1(1), if anything, is thus left open. 4–306 Under GC/Works/1 and GC/Works/1/98, if the prolongation, or disruption is caused by variations, the CA may request an estimate from C: Cll.40(5) and 42(2). In any case, prolongation and disruptive effects are to be taken into account in the valuation of the work1016 whether estimated by C, or the QS. In this form, reimbursement is on the basis of compensation for expense actually suffered by C1017. Finance charges are covered by their own special provisions and are payable only where the CA, QS, or D has failed to comply with a time-limit, or the QS varies a previous decision1018. 4–307 ICE6 and ICE7 impose an obligation on C to keep such records “as may be reasonably necessary to support any claim” and “any contemporary records or further contemporary records” as the CA may direct1019 and to submit interim accounts to the CA. Both ICE6 Cl.52(4)(c) and ICE7 Cl.53(3) provide that C may inspect and is to be provided with copies of the records kept pursuant to any such claim, or instructions. HK05 Cl.28.2(1) similarly requires C to keep the records necessary to support its claim and requires it to present those to the CA within 60 days of the date of notice of the claim. Bearing in mind that in this form the notice of the claim is not required to have been given until 28 days have elapsed after it has become apparent to C that the event has occurred, the records could potentially be presented some three months after the event has ceased to have any effect. This, it might be argued, is much too long for any meaningful investigation to be made, except by reference to historical records. 4–308 On the other hand, the 2009 edition of the Irish government standard forms of contract requires, at Cl.10.3.4, not that the records should be kept to support a claim but: “[T]o substantiate any aspect of an event or circumstance in relation to which it has, or is entitled to give notice and its resulting costs.”

This is a more stringent, but also far more sensible requirement as to proof entitlement than is normally encountered in standard forms of contract. 4–309 However, these forms are no different in this regard from the standard forms of contract generally, which contain no obligation for C to keep any other records, or to make available to the CA any records that do not support a claim. This is a serious omission from the standard forms of contract from D’s point of view as, in the absence of the records demonstrating the facts building up to the circumstances giving rise to the claim, it is not always possible to separate those losses flowing from one event from the losses entirely flowing from an occasion for which D is not at risk. See, for example, the recommendations of the SCL Protocol at para.1.14.2 and Guidance s 2. It is also the case that, in the event that C presents a global claim, D’s defence can only be mounted on the basis of the documentary evidence of what 1015 Cl.10.1.2. 1016 Cl.42. 1017 Cl.46. 1018 Cl.47. 1019 ICE6, Cl.52(4)(c) and ICE7, Cl.53(3).

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actually happened1020. Apart from those records required to substantiate a claim, the 2009 edition of the Irish government standard forms of contract also requires C to keep those records that identify what payments have been made to labour resources1021. However, they do not require those records to identify what those resources were doing, when they were doing it, or why they were doing it and are thus unlikely to be of any help in this regard. 4–310 FIDIC/Build99, FIDIC/PD+B99 and FIDIC/DB99 have common delay and compensation clauses1022 relative to finding fossils, etc, testing, interference with tests on completion, changes in legislation, suspension, D’s specific risks and, unusually, force majeure. FIDIC/Build99 and FIDIC/PD+B99 have further similar provisions relating to D’s requirements, or drawings, access to site, setting out information and unforeseeable physical conditions1023. 4–311 Apart from references in the corresponding clauses, the new FIDIC forms also contain the expression in Cl.20.1 “any additional payment, under any clause of these conditions or otherwise in connection with the contract”. 4–312 Under ICE/MW1024, referring to “any delay or impediment”; it does not mention prevention. Amongst other things, C is to be compensated arising out of D causing “any delay, impediment or prevention”1025. FIDIC/Build98 Cl.8.4(e) and FIDIC/ SF98 Cll.6.1(k) and 7.3, by comparison, refer to compensation arising out of “any failure of [D]” and FIDIC/M&E87 refers to “the failure of [D] to fulfil any of his obligations under the Contract”1026. IChemE provides for any claim for compensation for any event in regard to which a submission of claim for reimbursement as a variation cannot be made1027. 4–313 On the other hand, PPC2000 closely follows the structure of the JCT forms and provides for reimbursement of additional costs in regard to all D’s time risk events, except delay to progress caused by third parties1028, weather1029, statutory undertakings and utilities1030, the insured risks1031, strikes and industrial action1032, and changes in the law affecting the availability of resources. 4–314 Except for provision for reimbursement at cost for the effect of suspensions1033, C21/03 does not provide any rules for the quantification of loss in the event of disruption; it merely states that, for certain tests1034 and achieved acceleration1035 D shall pay C. In respect of delay, under Cl.44.1, prolongation is to be paid at pre-agreed rates if arising out of a variation, or breach of contract by D. Under Cl.41, if D and C fail to agree on the amount to be included for disruption in valuation of a variation, valuation 1020 See Ch.19, “Total time, total loss and global claims”, throughout. See also K Pickavance, “A case for the defence” (September 2006) RICS Construction Journal, at 18. 1021 Cl.5.3.3. 1022 Cll.4.24, 7.4, 8.9, 10.3, 13.7, 16.1, 17.4 and 19.4. 1023 Cll.1.9, 2.1, 4.7 and 4.12. 1024 Cl.4.4(h). 1025 FIDIC/DB95, Cl.8.3(e). 1026 Cl.26.1(e). 1027 Cl.18.1. 1028 Cl.18.3(iii). 1029 Cl.18.3(v). 1030 Cl.18.3(vi). 1031 Cl.18.3(viii). 1032 Cl.18.3(ix). 1033 Cl.46.3. 1034 Cl.38.1. 1035 Cl.45.4.

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is to be referred to an independent valuer, but without any valuation rules for guidance. Consequently, recovery for disruption is likely to be difficult under this form of contract. Similarly, C21/09 provides1036 that C is entitled to compensation only for prolongation costs and not compensation for disruption to progress which does not affect completion. The compensable events are stated to be: “a variation, other than one for which, under clauses 41.6 [site conditions], 42.4 [ambiguities and inconsistencies] and 44.3 [defects in D’s documents], there is no payment for delays; or a breach of the contract by [D] which causes delay, disruption or interference to [C] carrying out the Works.”

4–315 SIA80 makes no provision for loss and expense to be paid under the contract, other than in connection with the valuation of a variation. Any other costs must be pursued out of a collateral agreement, or through the disputes-resolution process. On the other hand, SGC95 Cl.23 provides for the payment of loss and expense, for similar matters as give rise to entitlement to compensation under ICE6 and ICE7. 4–316 ECC2 and ECC3 adopt a radical approach to the pricing of compensation events, incorporating a term to denote any incidence of a risk for which D accepts liability under the contract for both time and cost. 4–317 A schedule of actual costs provides a comprehensive list of the cost components that are to be included in any assessment of a compensation event. Any costs not covered in the schedule are deemed to be covered by “the fee”, which is added to the actual cost. The difficulty with allocating costs to activities is in determining an appropriate apportionment for parallel activities using the same resources. 4–318 HK86 is similar in form and content to JCT63, with the compensation clauses being Cll.11(6), relating to variations, and 24, loss and expense. The compensation clauses in HKGC99 Cll.61, 63 and 64 are also similar in content to JCT63, except that loss and expense recovery is limited to cost incurred. In HK051037 D takes the time risk of 12 separately described “qualifying events”. 4–319 In the event that C suffers loss, or expense as a result of an act, or omission of one of D’s consultants, or other persons employed by it, other than a specialist contractor, C may have no redress against D under this contract for compensation and may not be entitled to relief from liquidated damages for a delay to the completion date caused by the CA because of the distinction made between persons for whom D is responsible and the CA in the definition of excepted risk1038. 4–320 In regard to compensation for delay and disruption under the contract, the AIA forms of contract are materially different from the other standard forms considered. Whereas specific provision is made for reimbursement of costs arising out of CA’s instructions1039, concealed, or unknown conditions1040, human remains antiquities and wetlands1041, and instructed suspensions delay or interruption1042, reimbursement for delay due to other causes is not expressly provided for under the contract. On the other hand, changes in quantities causing “inequity” to either D, or C does provide 1036 1037 1038 1039 1040 1041 1042

Cl.55. Under Cl.25.1(3). Cl.1.6, Excepted Risk (c). A201/97 Cl.3.2.3 and A201/07 Cl.3.2.4. A201/97 Cl.4.3.4 and A201/07 Cl.3.7.4. A201/07 Cl.3.7.5. A201/07 Cl.14.3.2.

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for the prices in the contract to be changed1043 thereby overcoming the effects of unreasonably enhanced rates, as was the case in Henry Boot Construction Ltd v Alstom1044. In these forms, there appears to be no standard provision for recovery of liquidated and ascertained damages, but D is entitled to recover its losses arising out of C’s actions causing delay to D’s other contractors1045, where both D and C waive entitlement to recovery of consequential losses1046, such as rental expenses on D’s part and head office overheads on C’s part. 4–321 The standard forms of contract generally place an obligation on C to provide such information as is necessary, first to enable the CA to form an opinion as to whether delay to progress, or disruption of the work, has occurred, or is likely to occur as a result of a D’s cost risk event and, secondly, upon request1047 to enable the CA or the QS to ascertain the resulting loss and/or expense (if any).

Compensation for disruption to progress 4–322 Although in all the other standard forms discussed, delay-related compensation is payable for delay to progress and disruption caused other than to activities affecting the completion date, that is not the case with the 2009 edition of the Irish government standard forms of contract. Under C21/09 and also in the Irish government standard forms1048 it is expressly stated that the compensable delay must be a delay to the completion date of the whole of the works and not any sectional completion date, which precludes compensation for delay to the completion of any subcontract works that does not extend past the completion date. At Cl.10.7.4, the Irish government standard forms further specifically exclude any payment by way of compensation for loss, or expense incurred by reason of delay to progress, disruption, loss of productivity, or the knock-on effect of any event that is otherwise compensable. 4–323 It is more normally the case under other standard forms of contract that, once a D’s cost risk event has occurred, it is not essential that there should also be an extension of time prior to ascertainment of the loss and expense; the two provisions operate quite independently. Although, in Ascon Contracting Ltd v Alfred McAlpine Construction Isle of Man Ltd1049, HH Judge Hicks QC thought (obiter) that “six subcontractors each responsible for a week’s delay will have caused no loss if there is six weeks’ float”, it is thought that this is not correct. It is evident that financial loss may flow from the delay to progress, without causing a delay to completion. Similarly, it does not always follow that loss and/or expense will be forthcoming, even if an extension of time has been granted for D’s cost risk events. There are obviously circumstances that may justify C being reimbursed its loss and/or expense arising out of a delay to progress which, whilst it affects only an activity in float and does not cause a delay to the completion date, will not produce an entitlement to an extension of time. However, where and to the extent that there has been such a delay to the completion date entitling C to an extension of time under JCT80 and JCT98, the CA is required to state the

1043 1044 1045 1046 1047 1048 1049

A201/07 Cl.7.3.4. [1999] BLR 123. A201/97 and A201/07 Cl.6.2.3. A201/97 Cl.4.3.10 and A201/07 Cl.15.1.6. See for example JCT98 Cl.26.1.2 and JCT05 Cl.4.23.2. See, for example, IGBW/09 at Cl.9.7. (1999) 66 Con LR 119.

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extension of time attributable to those D’s time risk events that also constitute matters justifying reimbursement for loss and/or expense1050. 4–324 When delays occur and the regular progress of the works is materially affected, there are frequently several concurrent causes. It is important for C to obtain an extension of time, but, whilst this may relieve it of the possibility of a claim against it for liquidated and ascertained damages by D, it will not reimburse it for loss and/or expense it may have incurred. If, then, C is faced with giving written notice to D of more than one D’s time risk event, it might think it prudent to “concentrate” on D’s time risk events that are likely to give it reimbursement, as well as an extension of time. However, this practice should be avoided, because it is only as a result of disclosure of all the effects on progress that C becomes entitled to full relief and compensation under most of the standard forms of contract.

Cost and time management in the JCT Major Projects Contract and the CIOB Complex Projects Contract – a comparative analysis 4–325 This section considers the key differences between the JCT Major Projects Contract (MPC)1051 and the recently published CIOB Complex Projects Contract (CPC) in terms of the manner in which the cost and time risks of building projects are managed. Major projects (or complex projects, as the CIOB form calls them) are inevitably subject to greater risks than simple ones and the parties are therefore more risk sensitive. They tend to be conceived, designed and constructed over long periods of time and the longer the period between conception and completion, the more changes are likely to occur1052. Change management is therefore a crucial determining factor in how such projects are procured and the relevant contracts let. It is instructive to compare MPC and CPC because the latter form is new to the market and its approach may be of interest to those contemplating carrying out such projects.

MPC 4–326 There is an optional clause for collaborative working in Schedule 3 to MPC, which applies by default if nothing is done about it in the contract particulars. In practice, it is often struck out, with the result that, when it comes to managing cost and time risks, the parties are not expressly required to act in good faith. Even if the collaborative working clause is not struck out, there is nothing in MPC requiring the sharing of information on time, cost and change and it is difficult to conceive of effective collaboration without such transparency between the parties.

COST 4–327 Under MPC, cost overall must be considered by reference to (i) the Contract Sum, (ii) Changes, and (iii) loss and/or expense. Combined these will make up the eventual cost of the project. However, unless provided by C during the course of the contract (which is not a requirement of MPC), there is no mechanism by which such a calculation of out-turn cost can be made.

1050 Under Cl.26.3. 1051 The JCT Major Project Construction Contract 2011, MP 2011. 1052 By way of simple illustration, it stands to reason that there is likely to be more bad weather over a three-year than over a 12-month construction period.

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THE CONTRACT SUM 4–328 The initial price of work under MPC is the “contract sum”, as identified in the contract particulars. That price is subject to adjustment for change(s) in accordance with Cl.26 of MPC. The pricing document is contained in Schedule 2 and it must include the contract sum analysis, together with agreement as to how the C is to be paid (eg by stage, or interim payments)1053. Under para. 7 of Schedule 2, the contract sum analysis and the pricing of the information must be annexed to the contract1054. The contract sum analysis should set out “the manner of which the Contractor has calculated the Contract Sum”1055. The contract sum analysis must also contain “such information as is specified by the Requirements”1056. The contract sum is therefore “fixed”, based upon the contract sum analysis when the contract is agreed. It is therefore in effect, an agreed estimated, or target price for the work. However, as the project proceeds, the price is subject to adjustment for change(s) and therefore the price actually becomes unfixed as soon as such change occurs.

CHANGE(S) 4–329 The value of a change is either agreed prior to an instruction1057, or a “fair valuation” is made by the employer based upon the contractor’s proposed valuation1058, supported by “such information as is reasonably necessary to permit a fair valuation to be made”1059. The contractor’s proposed valuation must be submitted within 14 days of a change being notified. Agreement in advance is possible, but inherently unlikely because contractors are generally reluctant to be bound by pre-agreed costs and timings. Thus, in the normal course of events, changes fall to be valued and/or disputed. 4–330 Where a change is to be valued, the employer has 14 days from receipt of the contractor’s information to prepare and notify the contractor of its valuation and that valuation is “calculated by reference to the information provided by the Contractor”1060. In the absence of detailed cost-recording requirements, the employer and the quantity surveyor must do the best that they can where the contractor provides inadequate information. It is possible (and sensible) for the requirements document to set out in detail the types of information which the contractor must submit to the employer and the quantity surveyor. 4–331 In essence, MPC regulates cost changes by providing for changes to be agreed, or for a fair valuation to be made of them. MPC also provides some limited guidance as to how cost changes are to be valued1061. Thus, under MPC, the contract sum can

1053 There are four payment “Rules” from which to choose (interim valuation [A], stage payment [B], progress payment [C] and “Some other procedure” (which allows the parties to identify a bespoke payment process [D])), and one of these needs to be identified in the contract particulars. 1054 Sub-para.1. 1055 Sub-para.2. 1056 Sub-para.5. 1057 Cl.26.2.1. 1058 Cl.26.2.2. 1059 Cl.26.7. The way this provision is worded favours the Contractor, because all it has to do is provide reasonably sufficient information to “permit” a valuation to be made. 1060 Cl.26.8. 1061 The standard JCT contract includes quite detailed Valuation Rules. All MPC does is to provide (Cl.26.6) that a fair valuation shall have regard to the nature and timing of the Change (Cl.26.6.1), the effect of the change elsewhere on the project (Cl.26.6.2), the prices and principles in the pricing document “so far as applicable” (Cl.26.6.3), and loss and/or expense so far as not covered by Cl.27 (Cl.26.6.4).

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be described as planned target cost, which is subject to change based upon a fair valuation. Clause 25 of MPC deals with “Cost savings and value improvements”. Under Cl.25.1 thereof, “the Contractor is encouraged to suggest amendments to the Requirements and/or the proposals which, if instructed as a Change, should result in a financial benefit to the Employer”. The clauses which follow define “financial benefit”, which embraces reduction in the cost of the project, reduction in its life cycle costs, earlier practical completion and any other financial benefit to the employer1062. Under Cl.25.3 thereof, the parties can negotiate “with a view to agreeing the Contractor’s quotation and the financial benefit to the Employer”1063, where the employer wishes to implement a proposed amendment. Any such agreement is then confirmed in an instruction. 4–332 Irrespective of whether there is any actual financial benefit to the employer, at practical completion, the employer becomes liable to pay the proportion of any agreed financial benefit stated in the contract particulars1064. The effect of this may be to negate any attraction of using the cost saving provision from the Employer’s perspective. But the most obvious drawbacks are that (i) agreeing the effects of change in advance under a contract which makes no programming provision (at all) and no adequate cost, or time recording requirements is difficult (to say the least) and (ii) the contractor is only “encouraged”1065 to make proposals. This raises significant questions, such as: • •

Why should a contractor pre-agree the effects of change for which it is not obliged to record, programme, or budget? How can a contractor be expected to suggest useful amendments if the cost and programming information required for sensible suggestions is not required to be kept?

4–333 A considerable amount is therefore left to “trust”. However, just as contractors might suspect employers of requiring valuations and extensions of time in their own favour, so employers may frequently expect contractors to overstate their claims.

LOSS AND/OR EXPENSE 4–334 Loss and/or expense are addressed in Cl.27 of MPC. The contractor is not entitled to loss and/or expense generally in connection with change(s)1066. The basis of the contractor’s contractual entitlement to an ascertainment of loss and expense is that “the regular progress of the Project is or is likely to be materially affected as a consequence of any matters set out in clause 27.2 so as to cause loss and/or expense to be incurred”1067. The matters defined (so-called relevant matters in the standard JCT parlance) are limited to breaches, or acts of prevention by the employer1068 and interference with the regular progress of the project by others on the site1069. 4–335 The contractor is required to notify the employer as soon as he becomes aware that the regular progress is, or is likely to be affected and must “take all practicable 1062 Cll.25.1 to 25.4. 1063 As an agreement to agree, the employer cannot require the contractor to agree what the financial benefit is. The provision is at best vague. 1064 Cl.25.4. The proportion is 50% where not stated otherwise. 1065 Whatever that means legally. 1066 Cl.27.1. 1067 Cl.27.3. 1068 Cl.27.2.1. 1069 Cl.27.2.2.

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steps to reduce the loss and/or expense to be incurred”1070. In other words, MPC seems to anticipate that the contractor should mitigate loss and/or expense in advance of it being incurred, but it does not require the contractor to programme the work properly in order to enable that mitigation to happen (expect perhaps through educated guesswork), or to keep proper records showing the likely impact of matters on the progress of the work or their cost. 4–336 The onus is placed upon the contractor to supply information regarding loss and/or expense. The contractor must therefore provide an “assessment” of the loss and/ or expense (it not being stated precisely when its assessment must be provided), including “such information as is reasonably necessary to enable the Employer to ascertain the loss and/or expense incurred”1071. It is not stated what form as such information should take. It will also be obvious to the informed reader that there is a potential mismatch as between the contractor’s obligation to “assess” the loss and/or expense and the employer’s duty to “ascertain” it. The absence of any requirement to provide the information within a defined time might also lead to difficulties if the contractor does not provide its assessment in a timely manner, because the employer may be left having to try to ascertain loss and/or expense based upon information which cannot be verified retrospectively, if the contractor has not kept, or provided the necessary records. There is, however, a loose requirement that the assessment and information is to be updated by the contractor on a monthly basis “until such time as the Contractor has provided all of the information that is reasonably necessary to allow the whole of the loss and/or expense that has been incurred to be ascertained”. There is clear scope for debate about what information is “reasonably necessary” in order to allow loss and/or expense to be ascertained, which is a potential cause of dispute. The contract implies, however, that, if the contractor has not provided all the information reasonably necessary so as to allow an ascertainment to be made, no ascertainment requires to be made. 4–337 The employer is required within 14 days of receipt of the contractor’s information to carry out the ascertainment and to notify the contractor1072. There is also a requirement for he ascertainment to be made “by reference to the information provided by the Contractor”. This should not be read as somehow restricting the information which the employer may take into account, since the contractor is unlikely to provide any information that suggests that its entitlement is less than the amount of its assessment1073. There is also a requirement that the ascertainment should be “in sufficient detail to permit the Contractor to identify any differences between [the ascertainment] and the Contractor’s assessment of the loss and/or expense incurred”. The ascertainment must not include any element of loss and/or expense “to the extent that that element was contributed to by any cause which is neither a Change nor a matter set out in clause 27.2” and it is made clear that loss and/or expense incurred as a result of a change must be included in the relevant Cl.26 valuation1074. 1070 Cl.27.3. 1071 Cl.27.4. 1072 Cl.27.5. 1073 However, in regard to extensions of time it is expressly provided that the employer “may take account of other information available to him” (Cl.18.4). As a matter of strict interpretation, the absence of equivalent provision in the loss and/or expense clause suggests, perversely, that the employer is not entitled to take account of other information in ascertaining loss and/expense. 1074 It is odd (albeit consistent with the JCT family of contracts generally) that loss and/or expense arising from variation is only required to be valued, whereas loss and/or expense arising from disruption

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4–338 Clause 27.6 thereof requires the contractor to provide any “documentation”1075 in support of further ascertainment within 42 days of practical completion and the employer to review and notify any further ascertainment within 42 days of receiving the same. This is an advance on the standard JCT form, in that it provides an equivalent loss and/or expense review process to that for extensions of time. 4–339 A major (and surprising) difference between MPC and the standard JCT contract when it comes to loss and/or expense that employers should be aware is the complete absence from Cl.27.3 of any proviso of the sort found in the standard JCT contract, which only entitles the contractor to loss and/or expense “provided always that” its application is made “as soon as it has become, or should reasonably have become, apparent to him that the regular progress has been or is likely to be affected”1076. This proviso is an important reinforcement of the contractor’s contractual duty to mitigate loss and/or expense. Under MPC, the absence of such a proviso permits the contractor to “ambush” the employer with loss and/or expense claims, without the employer being provided with the information at the correct time to enable the employer to play its part in mitigating any loss and/or expense which it must ultimately pay.

TIME 4–340 There are just over two pages devoted to time in MPC, involving six separate clauses. The last two clauses deal with acceleration1077 and the bonus for early completion1078. The four principal time provisions deal respectively with commencement and completion, liquidated damages, early takeover and extensions of time1079. 4–341 Somewhat surprisingly, MPC contains: • •

No programming requirements, nor any means by which a bespoke programming specification might be contractually enforced1080; No requirements for the preservation of any records of resources used, the cost expended and productivity achieved, nor any means by which a bespoke record-keeping specification might be contractually enforced1081; and

is required to be ascertained. This is an obvious loophole for contractors to seek to exploit by claiming that loss and/expense is change-related so that they can bypass the more rigorous process of ascertainment. 1075 Cl.27.8. It is worth noting that the requirement here has changed from providing “information” (which may, or may not include documents) in clauses 27.4 and 27.5 to “documentation” in Cl.27.6. The employer may therefore use the final loss and/or expense review process under Cl.27.6 to insist that the contractor provides supporting documentation (which is not unreasonable if the contractor has actually incurred loss and/or expense). 1076 Cl.4.23.1 of the JCT Standard Building Contract SBC/Q2011. A similar, albeit amended, provision in the JCT Trade Contract TC/C 2002 was the subject of judicial comment by Akenhead J in W W Gear Construction v McGee Group Ltd [2010] EWHC 1460 (TCC). The learned judge noted that the words “provided always that” were a strong sign that the parties intended there to be a condition precedent, Akenhead J’s comment might be obiter, but it is nonetheless persuasive. 1077 Cl.19. 1078 Cl.20. The bonus for early completion is nil unless otherwise stated in the contract particulars. 1079 Cll.15 to 18. 1080 There is no equivalent of Cl.2.9 in the standard JCT form, although that clause merely requires the contractor to provide its master programme to the employer and the master programme has no further contractual function. 1081 Without a programme, or records of progress achieved, it is difficult, if not impossible to identify a delay to progress, other than intuitively.

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•

No risk management provisions other than a facility for a collateral agreement to be entered into for the agreed effects of any value engineering, or acceleration1082.

4–342 Clause 15.2 of MPC provides that, once it has access to site, “the Contractor shall commence the execution of the Project and shall proceed regularly and diligently with the Project so as to achieve Practical Completion on or before the Completion Date”1083. The obligation placed upon the contractor is to proceed “regularly and diligently” (standard JCT parlance again) and practical completion is defined. This latter is entirely sensible, because the common law is somewhat vague about what the phrase means and, where it is not defined, it is easier for parties to exploit this ambiguity1084. Under Cl.15.3 thereof, “the Contractor shall at all times use his reasonable endeavours to prevent or reduce delay to the progress of the Project or to completion of the Project”. In other words, the contractor is not obliged to use all endeavours, or incur cost in doing so, or to make any attempt to manage the employer’s risks1085. 4–343 Under Cl.15.4 thereof, the contractor is required to notify the employer when, in its opinion, practical completion “has occurred”1086. Then if the employer agrees, it issues a statement recording the date of practical completion. If the employer does not so agree, it notifies the contractor what work it requires to be completed before practical completion will occur. There is obvious scope here for dispute about whether practical completion has in fact occurred. If the contractor fails to achieve practical completion by the completion date, “he shall be liable to pay the Employer liquidated damages … for the period from the Completion Date to the date of Practical Completion”1087. Under Cl.16.2 thereof, there is an obligation placed upon the employer to repay liquidated damages, to the extent that the employer’s entitlement to the same subsequently becomes extinguished by extensions of time. 4–344 Under Cl.17 thereof, the employer may take partial possession (called “take over”) prior to practical completion with consent, but the contractor is not allowed unreasonably to withhold consent1088. A statement of take over must be issued by the employer1089, which has the usual implications for practical completion, liquidated damages, insurance and so on. However, in common with other JCT contracts, it is 1082 In effect, this means that the employer depends upon the contractor for the information necessary to manage its risks under a contract which provides the contractor with an entitlement to more time and more money where the employer’s risks are not managed. 1083 There is a definition of practical completion in Cl.1 of MPC, which provides that it takes place when the project is “complete for practical purposes” and, in particular, (i) relevant statutory requirements have been complied with and any necessary consents, or approvals have been obtained, (ii) neither the existence nor the execution of any minor outstanding works would affect its use, (iii) any stipulations identified by the Requirements as being essential for practical completion to take place have been satisfied, and (iv) the health and safety file and all as-built information and O&M information required by the contract to be delivered at practical completion have been delivered to the employer. 1084 Practical completion is not defined in every JCT contract. 1085 See Ascon Contracting Ltd v Alfred McAlpine Construction Isle of Man Ltd (1999) 66 Con LR 119 at para.56, per HH Judge Hicks QC: “It is difficult to see how there can be any room for the doctrine of mitigation in relation to damage suffered by reason of the employer’s culpable delay in the face of express contractual machinery for dealing with the situation by extension of time and reimbursement of loss and expense.” 1086 This is not ideal from the employer’s perspective because the employer will want to have some notice from the contractor as to when the contractor thinks that practical completion will occur. 1087 Cl.16.1. 1088 Cl.17.1. 1089 Cl.17.2.

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not made clear what the contractor’s continuing obligations are in terms of completing the work to parts taken over1090. 4–345 Clause 18 of MPC is the all-important (perhaps, all, or nothing?) extension of time provision. Clause 18.1 thereof entitles the contractor to an adjustment of the completion date for delay, or likely delay to the project caused by the events defined in Cll.18.1.1–8 thereof, unless the event is a matter which the contract specifically states “will not give rise to a Change”1091. The events are fairly broadly defined and it is not particularly helpful that parties are required to go “digging around” the rest of the contract to find events which do not give rise to a change. 4–346 Any adjustment of the completion date is subject to the principles set out in Cl.18.7 thereof, which require the employer to: “• • •

Implement any agreements regarding the completion date under Cll.19, 25 and 26 thereof (acceleration, cost savings and changes)1092; Have regard to any breaches by the contractor of Cl.15.3 thereof (the obligation to use reasonable endeavours to prevent, or reduce delay)1093; and Make “a fair and reasonable adjustment”, notwithstanding any concurrent contractor delay1094.”

4–347 The “fair and reasonable adjustment” which has been required is an inevitably impressionistic and subjective estimate of the additional time based upon the information which has been provided by the contractor and is not required to contain any programming information, or progress records. The types of event giving grounds for an extension of time are force majeure (this is not defined whilst some other forms do define it eg FIDIC)1095, specified perils1096, exercise after the base date by the United Kingdom government of a statutory power affecting the project’s1097 use, or threat of terrorism1098, any change1099, interference by others on site with the progress

1090 In CPC, it is made clearer that any work remaining to, or insurance required to be maintained in respect of, an area partially possessed is to be treated as a variation (Cl.51.3). 1091 Matters expressly stated not to give rise to a change in the MPC are as follows: instructions choosing between discrepant provisions within the proposals (Cl.10.3), choosing between discrepant provisions between the requirements, proposals and/or statutory requirements (Cl.10.4), reflecting a change in statutory requirements announced on, or before the base date (Cl.10.5), the acceptance of alternative materials, or goods proposed by the contractor of an equivalent, to better standard where those specified are not procurable (Cl.11.4), compliance with a comment on a design document by the employer where the contractor fails to notify the employer that he considers that compliance with the comment would give rise to a change (Cl.12.9), amendments to the requirements and/or proposals necessitated by encountering ground conditions, or manmade obstruction, unless Cl.14.2 applies (clause 14.1), instructions to open up, or test work, materials or goods found not to be in accordance with the contract (Cl.22.1), instructions relating to work, materials, or goods found not to be in accordance with the contract upon opening up, or testing (Cl.22.3), and the implementation of remedial measures considered necessary by an insurer as a result of non-compliance with the Joint Fire Code (Cl.33.1). 1092 Cl.18.7.1. 1093 Cl.18.7.2. 1094 Cl.18.7.3. 1095 Cl.18.1.1. 1096 Cl.18.1.2. 1097 Cl.18.1.3. “UK Government” is not defined and so it appears to be unclear whether the Welsh Assembly’s exercise of a statutory power affecting the project would count. 1098 Cl.18.1.4. 1099 Cl.18.1.5.

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of the work1100, valid suspension by the contractor for non-payment1101 and any other breach, or act of prevention by the employer, or his agents1102.

CPC 4–348 Unlike MPC, CPC does not permit the parties to opt out of the express obligation to “co-operate in a spirit of mutual trust and fairness”1103. Thus, in the way in which the parties approach questions of cost and time under CPC, they are placed under an overriding contractual obligation to act co-operatively. If they fail so to do, a breach will potentially result in the wronged party becoming entitled to recover damages. CPC requires all information concerning time, cost, quality and change to be transmitted electronically, or to be made available in a common data environment1104, to all those having a continuing role in administration, quality and project control. Collaboration and transparency are absolutely central to cost and time control under this standard form.

TIME 4–349 CPC is unique amongst standard form construction contracts in requiring the employer to appoint a project time manager in order to advise the contract administrator on the time management aspects of the contract. Despite being employed and paid for by the employer as a consultant, the project time manager is nonetheless required to act in an independent and fair manner1105. The project time manager manages time collaboratively and contemporaneously by reference to a quality controlled, dynamic critical path network (or “Working Schedule”, as it is called in CPC), supported by a planning method statement describing the precise assumptions and calculations contained in the working schedule1106. The working schedule is required to conform to the recommendations of the CIOB’s “Guide to Good Practice in the Management of Time in Complex Projects (‘the Guide”). It is to be prepared in accordance with a detailed specification1107, published for acceptance1108, and independently audited from time to time so as to ensure that the time management requirements of the contract are fully met1109. The working schedule must also be priced against the contractor’s pricing document. It therefore functions not only as a predictive time control tool, but also as a predictive cost control tool. 4–350 require to be performed in the future to the same degree of detail. The contract addresses this by requiring the working schedule to be in three densities1110. Low density is for work not expected to be between four and nine months in the future, and high density is for work to be executed within the next three months, the whole being rolled forward as the project progresses.

1100 1101 1102 1103 1104 1105 1106 1107 1108 1109 1110

Cl.18.1.6. Cl.18.1.7. Cl.18.1.8. Cl.5.1. Cll.2.4.7 and 25. Cl.5.2. Cl.26. A default specification is included at App. D. Cll.26.4 and 26.5. Cl.35. App. D, paras D5 and D6.

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4–351 The other key issue in time management (not addressed by MPC) is the keeping of satisfactory progress records. Competently kept progress records are an invaluable resource, not only in the maintenance of the working schedule by way of update and the quality control of future planning of the project, but also, as a reliable data source regarding achievable productivity, they can be a valuable tool in planning future projects1111. As with the working schedule, CPC is prescriptive regarding the progress records that are required to be kept. Progress records must conform to the recommendations of the Guide and detailed specification1112. They are to be regularly published for acceptance and, again, are to be independently audited from time to time, so that those records can be fully relied upon by all parties1113. 4–352 Under CPC, the working schedule is to be updated at regular intervals from the progress records, so as to demonstrate the effect of progress achieved, both on time and on cost1114. The default first date for publication of the draft update of the working schedule and planning method statement is contemporaneous with the submittal of the progress records database for acceptance and assumes that the submittal will be accepted within the business days. This ensures that there is an accepted working schedule, updated with progress achieved, for consideration at the date of the first and every subsequent progress meeting1115. 4–353 If the contractor’s update demonstrates that, as a result of slow progress, any due date is unlikely to be met, the contractor must revise its intentions for the future conduct of the works in order to overcome anticipated delay1116. CPC requires that, at regular intervals1117 and whenever the contractor changes its intentions for the future conduct of the works (as a result, for example, of any change in working methods1118, mitigation of a risk1119, or improvement of progress against the schedule)1120, the contractor is to revise the working schedule and to republish it for acceptance1121.

COST 4–354 Under CPC, cost management is the responsibility of the valuer. The valuer may be a cost engineer, or quantity surveyor (appointed by the employer for that purpose), or, if neither is appointed, it is the contract administrator. Whichever it is, under the CPC, the contractor is entitled to expect the employer to ensure that the valuer, in exercising any discretion in the performance of its duties, does so in an independent and fair manner1122. 4–355 Effective cost management requires several connected issues to be considered. First, whether the contract price can be relied upon as a prediction of the out-turn

1111 To this end, Cl.21.4 specifically provides that the progress records can be used by the employer, contractor, contract administrator and project time manager, for any purpose, without restriction. See also the Guide, at Section 5.4, “Feedback and Benchmarking”. 1112 Cl.32 and App. E. 1113 Cl.35. 1114 Cl.33.1. 1115 Cl.20; see also “Risk Management” below. 1116 Cl.33.3 and, if recovery is not instituted voluntarily, it may be instructed under Cl.44. 1117 To take on board the shift from activity based logic to resource and location based logic: see Cl.34.1. 1118 Cl.13.4. 1119 Cl.37.3. 1120 Cll.42 and 43.2. 1121 Cl.34.2. 1122 Cl.5.2.

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cost is a fundamental issue, which is not addressed in MPC. Secondly, for both parties, there is the question of how and when change and the effects of any disruption and prolongation are valued. Thirdly, there is mutual interest in the accuracy of interim valuations and, ultimately, the risk of whether the stated value will be paid in full, on time, or at all. 4–356 Through the incorporation of the contractor’s pricing document in the working schedule, the update of the working schedule is also the basis of valuation of the predicted cost of the works and the current value of work done1123. These calculations stimulate the issue of the contract administrator’s notice of payment due1124. When the work is actually carried out, the schedule automatically calculates the predicted outturn cost of the works1125. This cost is calculated as the total cost indicated against all the activities and levels of effort in the latest accepted working schedule, adjusted to take account of anything for which the employer is not liable. Once the valuer has issued its statement of current value, the contract administrator must then issue a notice of payment due1126, stating what precise sum, if any, is to be paid by whom and by when, taking into account those matters considered by the valuer and also any adjustment to be made to the statement in respect of anything for which the employer is not liable to pay.

RISK MANAGEMENT 4–357 CPC provides for risk management in three ways. First, before the work starts, risk must be planned for; secondly, there must be a strategy for dealing with risk when it matures during the course of the project to cause a delay to progress; and, thirdly, provision is made for extensions of time and compensation when the consequences cannot be avoided. 4–358 Under CPC, the contract administrator is required to maintain a risk register1127. If anyone (not just the contractor) becomes aware of anything likely to interfere with progress of the works, or its cost, they are to issue an early warning1128, following which the contract administrator is to arrange for a risk management meeting to identify how the risk should be dealt with, to update the risk register and to issue appropriate instruction for avoidance, or mitigation of its effects. Once a risk has been notified, the contractor is to produce a risk description and impacted working schedule, so that its likely consequences can be identified and dealt with1129. Uniquely, CPC distinguishes as between different types of float (which neither party owns) and requires both parties to allow time contingencies in the working schedule for their own risks1130. Where contractor’s time contingency periods are on the critical path to a completion date (and hence included in the contract duration) the effect of those time contingencies in the priced working schedule is to require the contractor to pre-price the prolongation costs it is likely to suffer as a result of those contingency periods later being absorbed by contractor’s risks.

1123 1124 1125 1126 1127 1128 1129 1130

Cl.28. Cl.57. Cl.53.2. Cl.57. Cl.37.1. Cl.36. Cll.36, 37, 44 and 45. Cl.27.

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4–359 If the contractor does not use its critical contingencies then, all other things being equal, there will be a reduction in the duration of the work, a reduction in the contractor’s costs for the work and an earlier substantial completion date, to the contractor’s benefit1131. If, by improving its progress, either party is able to reduce the time needed for future work, instead of leaving that additional time as float, it may, if it wishes, secure that additional time as its own time contingency to be used in managing future risks1132. 4–360 Where the employer’s time contingency periods are on the critical path to a completion date, and hence included in the contract duration, the effect of those time contingencies in the priced working schedule is to require the contractor to pre-price the prolongation costs it is likely to suffer as a result of those contingency periods later being absorbed by the employer’s time-related cost risks. If the employer does not use its critical time contingencies then, all other things being equal, there will be a reduction in the duration of the works, an earlier substantial completion date and hence a reduction in the contract price, to the employer’s benefit. 4–361 If the contractor fails competently to manage its own risks1133, and also whenever an employer’s risk is predicted to be likely to cause delay to completion, the project time manager is to consult with the contractor and advise the contract administrator as to what instructions may reasonably be given to the contractor to: • • •

reschedule one or more specific activities, or sequence of activities, or parts of the working schedule to be carried out in different order, or sequence, change the resources to be applied to one or more specific activities; and/or take any other action necessary so as to illustrate on the working schedule how the contractor’s obligation to achieve any completion date is intended to be achieved1134.

4–362 The cost of recovery is always at the contractor’s risk, but apart from adjustment of time contingencies, early completion and mitigation of the employer’s risk can only be achieved by means of paid acceleration. In effect, under, CPC, this gives the employer the choice of having delayed completion, or paying the price of acceleration to bring the project back on time, or to advance the completion date. 4–363 Under the CPC, both extensions of time and compensation are calculated from available facts1135, using what is known as “time impact”1136, or “modelled/addictive/multiple base”1137 analysis. In this method of analysis, a fragment1138 added to the latest updated working schedule and the critical path is recalculated1139. The contractor’s entitlement to time is then calculated by reference to the completion date before the addition of the event and after the addition of the event, the effect of 1131 There is no provision in CPC by which the employer can refuse to accept the completed Works, merely because they are completed earlier than the substantial completion date. 1132 Cll.42 and 43. 1133 Cll.27.3 and 27.4. 1134 Cll.44 and 45. 1135 Cll.38 and 39. 1136 Society of Construction Law, Delay and Disruption Protocol (2002) and Keith Pickavance, Delay and Disruption in Construction Contracts, 4th edn (2010), paras 15–144 to 15–158. 1137 American Association of Cost Engineers, International, Recommended Practice No 29 R-03 (2009). 1138 Defined in App. A as “A small sub-network of fragment of a network diagram, used to illustrate a short sequence of Activities”. 1139 Cll.38.3 and 38.4.

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the even being the difference between the two. If the effects are calculated from estimated facts arising out of an early warning, the CPC makes provision for any extension of time granted later to be adjusted in the light of what actually transpires once the facts are known. Otherwise, extensions of time and disruption are to be calculated from the facts of what actually occurred to disrupt progress1140. 4–364 Because the high density part of the working schedule is calculated by reference to the resources and productivity to be expected and each activity is priced, where disruption occurs to interfere with productivity, the effect is also calculated from the impacted working schedule and, where the completion of a sequence, or critical path, is linked to levels of effort, the effect of any change in the working schedule caused by an event will also show the difference in site-related costs (preliminaries), or overheads and profit for the purposes of compensation. CPC therefore avoids the likelihood in the MPC (which is also faced in many other types of standard forms) of claims for additional time and/or money being left to the end, resulting in confusion of responsibility during the course of the project and costs wasted in retrospective dispute resolution, arbitration and adjudication to determine liability for the unmanaged loss.

Differences between MPC and CPC 4–365 The above consideration of the relevant contractual provisions shows that MPC and CPC are conceptually very different. MPC, which was intended for use by sophisticated users1141, leaves a lot of scope for dispute in the absence of amendment and careful drafting and assembly of the contract documents. CPC, on the other hand, is very much more modern and prescriptive in its approach. The MPC follows (and in some areas is actually less advanced than) the traditional JCT approach, which allows risk to go unmanaged until the Contractor is ready to make claims. By contrast, CPC elevates good modern working practice (nothing more than one should expect?) in things like scheduling, record-keeping and open communication, to the status of express contractual requirements. 4–366 Key differences between MPC and CPC include the following: •

•

•

Under MPC, the employer is kept effectively in the dark about what the contractor plans to do and how it plans to achieve it. There is thus little, or no, opportunity of collaboration, or control of the employer’s risks. In contrast, CPC requires complete transparency in the contractor’s intentions, contains the provisions necessary to enable the employer to manage its risks, expressly requires collaboration in risk management and contains substantive redress in the event of a default. In MPC, cost and time risk are artificially separated. In CPC, the information in the contractor’s pricing document is required to be incorporated in the working schedule so that the effects of change on both cost and time can be managed together (as they should be)1142. Under MPC, cost and time changes are subject to agreement, or subjective assessment. Under CPC, they are calculated objectively by reference to the

1140 Cl.40.3. 1141 On the assumption that (i) the parties would be habitual constructions who know what they are doing and (ii) detailed requirements documents would be put together containing much of the detail. 1142 Cl.28.

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•

•

•

•

working documents. This is supported by express requirements that the information to facilitate such calculation must be properly recorded, updated and shared. Under MPC, the employer is required to make a subjective assessment based upon information provided by the contractor in determining the contractor’s extension of time entitlement1143. That the assessment is done by the employer, in whose interests it will always be to keep the entitlement to the minimum, creates a conflict of interest. Scrupulous employers will make appropriate assessments (if they can, based on what contractors provide in support of their applications). However, in the absence of a good faith obligation, the employer may think the contractor is concealing relevant information and the contractor may suspect that the employer has under-assessed its entitlement and this can lead to disputes. Under CPC, there is a dedicated project time manager, who is expressly required to exercise any discretion “independently and fairly”1144. Any conflict of interest is thus avoided. Under MPC, cost is measured by reference to a static document produced at the outset of the project, namely the pricing document illustrating the contract price. There is no requirement for the contractor to submit any programme for the work, or predict the out-turn cost. CPC makes the contractor’s pricing document and the working schedule and planning method statement dynamic documents which are required to be updated and submitted for approval on a regular basis1145. They are also required to include the necessary information to make them valuable and dynamic. The requirements for the contents of documents like the pricing document and application for extensions of time and loss and/or expense are not clearly spelled out in contracts like MPC (it is not unique in this regard). CPC takes the approach that the contents of documents are important enough to merit express provisions1146. A key feature of CPC is that scheduling is required to be done at different densities depending upon whether activities are to be carried out in the short, medium, or longer term. The working schedule must also be resourced1147 and cost loaded1148. One area of dispute under JCT and other contracts arises because most programmes are (despite the facility being available) not properly logic-linked and resourced, which makes it difficult to know what a contractor’s real intentions are, or to compare planned and actual resources when a dispute arises. Under MPC, the obligations on the contractor to programme and keep records are non-existent and any entitlement to more money and time is determined by reference to the information and documents which the contractor chooses

1143 Under other JCT forms, where the designer is also the contract administrator, this can create serious conflicts of interest, where delay is caused by late design and the designer in question seeks to decide extension of time entitlements in a way that shifts responsibility for delay away from the design team. 1144 Cl.5.2. 1145 Cll.26 (submittal) and 33 (updating). 1146 See, for example, Cl.26.6, which requires the draft working schedule and draft planning method statement to include the planned resources, the expected productivity, the quantity of work, the calculated (not guessed, or disguised!) duration and the planned value. 1147 Cl.26.6. 1148 Cl.28.

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•

•

•

1149 1150 1151 1152 1153 1154 1155 1156

to keep and submit. Under CPC, the contractor is obliged properly to programme the work1149, and keep records of resources used, productivity achieved and cost expended1150, and the programmes and progress records must be published for acceptance at stated intervals1151. If the contractor fails to do so, CPC provides express remedies for the records or schedules it requires and to recover from the contractor the cost of doing so1152. The progress records are maintained on a database by the project time manager and, unless rejected, they are deemed to be conclusive as to the progress of works (subject to any condition(s) of acceptance)1153. While MPC envisages that much detail will be addressed in the requirements document, such documents are not always put together in a way that is consistent with the terms of contract and can even include provisions that conflict with them. Such mismatches can create difficulties of interpretation and disputes. Also, there is a tendency for contractors to seek to exploit inconsistencies, or even to ignore the small print of requirements documents in part, or in whole, because tribunals do not always insist on strict compliance with them. By elevating important matters concerning the obligations of the parties in terms of time and cost management to the status of express contractual requirements, CPC aims to avoid the temptation for contractors and tribunals to treat such requirements as being of secondary, or no importance. MPC contains rather vague provision as to how changes are to be valued. These provisions are actually more open to interpretation than the valuation rules in the standard JCT contract. CPC contains clear and detailed rules for the valuation of variations1154. As with progress records, the cost records which the contractor is required to keep and present in respect of variations are also more prescriptive under CPC. Thus, when a variation is instructed, the contractor is required to provide its calculation, (or estimate) of the time and cost effects of the variation (Cll.23.2 and 23.3). The calculation, or estimate of cost, is also required to be prepared in accordance with Cl.39, which enables the contract administrator, valuer, or listed persons to request “any further information, documents or statements [they] may require to verify the occurrence of the Event, or its consequences” (Cl.39.2.6). MPC contains no provisions regarding ownership of float, or concurrency, or how contingencies are to be identified in the pricing document. CPC makes express provision regarding how float and time contingencies are to be identified in the specification and used1155. CPC also defines concurrency for the purposes of the contract and gives clear guidance on the circumstances in which concurrency will give rise to an entitlement to financial compensation and/or an extension of time1156.

Cl.26. Cl.32. Cl.32.2. Cl.25.2. Cll.32.3 and 32.5. Cl.24. Cl.27. Cl.41.

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•

•

1157 1158 1159 1160 1161 1162 1163 1164 1165

MPC contains a rudimentary provision for a collateral agreement for acceleration1157 and one for a bonus on early practical completion1158. It also requires the contractor to mitigate delay1159 and loss and/or expense1160, but it does not contain any detailed provisions that will assist where delay to progress, or completion, arises and which, most importantly, will enable the employer to play a meaningful role in the mitigation process. There are provisions dealing with the contractor’s and employer’s improvement of progress1161, instructed recovery1162 and instructed acceleration1163, as well as a provision dealing with the consequences of the contractor failing to comply with such instruction1164. Under MPC, disputes can be brought at any time, including years after the facts giving rise to them have arisen. It is possible for the contractor to surprise the employer with claims brought long after the employer can do anything about them. CPC requires issues to be resolved quickly at the time they arise and before they become disputes by means of a fast-track procedure called issue resolution and1165, if the contractor does not refer a matter at the right time, CPC deems the issue agreed and the contractor loses its right to escalate the matter into a dispute.

Cl.19. Cl.20. Cl.15.3. Cl.27.3. Cll.42 and 43. Cl.44. Cl.45. Cl.46. Cl.65.

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CHAPTER 5

Notices, claims and early warnings

Introduction Early warnings Notices Nature of the notice Form of notice Constructive notice Contents of notice Period of notice Second notices Waiver of notice Service of notice Notice as a condition precedent Extension of time conditional upon notice Compensation conditional upon notice

5–001 5–003 5–008 5–012 5–024 5–030 5–033 5–055 5–081 5–090 5–097 5–110 5–110 5–151

Introduction “Thus in the beginning the world was so made that certain signs come before certain events.”1

5–001 If the project is not properly scheduled, recorded and controlled2, notices and warnings are important, but, if the project is not properly scheduled, recorded and controlled, it is difficult to know when the work is being delayed. Paradoxically, that is just the condition in which notice of whether delay to progress is likely to occur, or has occurred, will be of great assistance to D and may also be of significant importance to C. 5–002 Research carried out by the CIOB3 has revealed that when asked upon what occasion is a delay to progress notified, 50% of respondents admitted that they were generally unaware of delay to progress until some time after it had occurred, 38% declared that, in their experience, a delay to progress was only notified if it was perceived

1 Cicero, De divinatione, 1.118. 2 The argument is that if the work is properly scheduled, recorded and controlled, there is no benefit to be achieved by writing down in another document what is already patently obvious from the working schedule. See Chs 7–10. 3 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008).

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to be likely to delay completion and only 5% said that, in their experience, a delay to progress would be declared irrespective of the predictive consequences. Only 20% said that they were familiar with a delay to progress being notified either to D, or the CA, when the contract required it4.

Early warnings 5–003 Some contracts contain provisions that require not only that C is to advise D of delay to progress that has occurred, or is likely to occur, but also that D, or the CA on its behalf should advise C of any circumstances of which it becomes aware, or should reasonably have become aware, which might adversely affect the cost, or timing of the project. The guidance notes to ICE7, for example, advise that: “The contract is drafted bearing in mind the benefits of team working and current procurement initiatives. If its procedures are followed the parties to the contract will be provided with an ‘early warning’ of circumstances that may give rise to additional costs, or delay in a stage, or completion of the contract”,

but it is not apparent how, within the terms of that contract, that provision is supposed to operate, other than by C advising the CA of delay to progress within 28 days of its occurrence under Cl.44(1). 5–004 Although it comes under the heading of “early warning”, more in the nature of a notice of delay, FIDIC/SF985 contains the requirement that: “[C] shall notify [D] in writing as soon as he is aware of any circumstance which may delay, or disrupt the works, or which may give rise to a claim for additional payment. To the extent that [C’s] failure to notify results in [D] not being unable to keep all relevant records, or not taking steps to minimise any delay, disruption, or cost, or the value of any Variation, [C’s] entitlement to extension to the time for completion, or additional payment shall be reduced.”

5–005 More extensive provisions appear in ECC26, which states that: “[C] and the [CA] give an early warning by notifying the other as soon as either becomes aware of any matter which could increase the total of the prices, delay completion, or impair the performance of the works in use. Either the [CA], or [C] may instruct the other to attend an early warning meeting. Each may instruct other people to attend if the other agrees. At an early warning meeting those who attend co-operate in making and considering proposals for how the effect of each matter which has been notified as an early warning can be avoided, or reduced, seeking solutions that will bring advantage to all those who will be affected and deciding upon actions which they will take and who, in accordance with this contract, will take them. The [CA] records the proposals considered and the decisions taken at an early warning meeting and gives a copy of his record to [C].”

Consistent with the recommendations of the CMS 7, ECC38 adds to this by requiring C also to identify effects on key dates in addition to identifying effects on dates to which liquidated damages are applied.

4 5 6 7 8

See, for example, JCT05 Cl.2.27.1. Cl.10.3. Cl.16. See App.2 to the 4th edn. Cl.16.1.

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5–006 ECC2 and ECC3 require each party to warn the other of potential problems; whilst, if D fails to warn C there is no penalty in default of an early warning imposed upon D, other than that it will have to face the time and cost consequences of whatever follows, ECC29 and ECC310 provide that: “If the [CA] has notified [C] of his decision that [C] did not give an early warning of a compensation event which an experienced contractor could have given, the event is assessed as if [C] had given an early warning.”

5–007 Similar, but not identical, provisions appear in PPC2000, which states at Cl.3.1: “The partnering team members shall work together and individually, in accordance with the partnering documents, to achieve transparent and cooperative exchange of information in all matters relating to the project and to organise and integrate their activities as a collaborative team.”

The contract goes on, in Cl.3.7, to require that: “The partnering team members shall operate an early warning system, whereby each partnering team member shall notify the others as soon as it is aware of any matter adversely affecting, or threatening the project, or that partnering team member’s performance under the partnering contract, and (within the scope of its agreed role, expertise and responsibilities) shall include in such notification proposals for avoiding, or remedying such matter. The [CA] shall convene a meeting of the core group within five working days from the date of any such notification to agree an appropriate course of action unless all core group members agree such course of action without a meeting.”

For some risks under this form, C’s entitlement to an extension of time is conditional on the basis that such an early warning is given by C11.

Notices 5–008 The benefit of notices under the current standard forms of contract is often not fully appreciated: “[N]otices are not provided simply for the benefit of [D]. Such provisions, properly and fairly applied, enable [C] to claim in an orderly, timely and disciplined manner. [C] can be confident that the claims process has begun, which in the event of a failure to agree, may lead to invoking the dispute provisions of the contract. Much of the uncertainty and confusion which can arise when claims are postponed to the end of the works can be reduced.”12

5–009 Bearing in mind that under the current standard forms of contract, D has no enforceable right of access to C’s working schedule (electronically, or otherwise), nor to progress records, other than in connection with a claim, it should be recognised that without such notice, D cannot be certain that the works are not proceeding according to schedule. As a result, without such notice, D will be unable effectively to manage its risks and the CA will be unable to manage its interface with C and effectively to execute its duties regarding certification of an appropriate extension of time. 9 Cl.63.4. 10 Cl.63.5. 11 See for example, PPC2000 Cl.18.3(i) and (xiv) and see below at paras 5–110 to 5–151. 12 Prof Jones, “Can prevention be cured by time bars?” (October 2009) Society of Construction Law.

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5–010 Without notice, D may have no knowledge of the event which has affected, or is likely to affect, C’s performance. Even if D has knowledge of the circumstances giving rise to an entitlement to an extension of time, without C’s advice, it may be ignorant of its impact on C’s progress. One of the principal effects of a notice of delay to progress can be expected to be that both the CA and D may give some thought as to how instructions could be given so as to reduce the effects of the event of which complaint is made. For example, on receiving notice of a delay, or likely delay, to progress, the CA may be in a position to mitigate the effects by giving instructions for the omission of work. By redistributing, or increasing their own resources, they may also be able to speed up the supply of drawings in order to provide an alternative source of work for C. Alternatively, the CA may also be able to persuade D to release possession of other parts of the site earlier than was intended; and, in the event of anticipated delay due to protracted delivery of materials, it may be able to give instructions for the substitution of materials on shorter deliveries. 5–011 In the end, however, it should be recognised that, other than by modifying the content of the works to manage the knock-on effects of a delay to progress, because of the absence of any power to control C’s resources, or timing, or duration of activities, under the current standard forms of contract, there is little that D can achieve that C does not positively wish D to achieve.

Nature of the notice 5–012 Standard forms of contract generally require C to serve notice upon D, or the CA for one or more of the following occurrences: a discovery requiring inspection13;

a delay to progress; an event at D’s risk as to time; an event at D’s risk as to loss and/or expense; and a likely delay to completion of the works beyond the completion date. 5–013 Whilst many standard forms of contract refer to “claims” for extensions of time14 and thereby invite confrontational sensitivity15, the nature of the communication required under the JCT family of contracts is a “notice”. Although commonly referred to by all parties in the construction industry as a “claim”, this is a misnomer and the notice should not be thought of as confrontational, nor anything other than helpful16. In the same vein, PPC2000 requires C to notify the CA as soon as it becomes aware of the occurrence of a D’s risk event together with its proposals for mitigation17.

13 For example, adverse ground conditions, or antiquities. 14 See, for example, MF/1 Cl.33.1, A201/97 Cl.4.3.1 and A201/07 Cl.15.1.5.1. 15 However, Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008), shows that 32% of those responding failed to notify the delay because they did not want to upset D and 5% said that it was because they did not want to upset the CA. 16 The JCT 1998 and 2005 and later series of forms require notice to be given of each and every delay to progress, irrespective of whether it is caused by a D’s time risk event and whether, or not it is likely to affect the completion date. 17 Cl.18.4(i).

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5–014 The engineering forms generally have different notice requirements, depending upon the nature of the event and the consequences that follow. For example, ICE7 requires notice to be given: “If during the carrying out of the works [C] encounters physical conditions and artificial conditions (other than weather conditions, or conditions due to weather obstructions conditions), or artificial obstructions which conditions, or obstructions could not in his opinion reasonably have been foreseen by an experienced contractor [C] shall as early as practicable give written notice thereof to the [CA].”

Similarly, FIDIC4 requires notice to be given to the CA as soon as unforeseeable ground conditions are discovered, whether or not they have caused any delay, or disruption, at that time18. 5–015 GC/Works/1, GC/Works/1/98 and GC/Works/1DB, also require that C should notify the CA as soon as unforeseeable ground conditions are discovered, whether, or not they have caused any delay to progress, or disruption at that time19. On the other hand, whenever C believes it will become entitled to financial compensation as a result of any other delay to progress, or disruption, C is required to notify the CA. The forms also require that C is to give notice: “[I]mmediately upon becoming aware that the regular progress of the works, or any part of it has been, or is likely to be disrupted, or prolonged.”20

As a general rule under these forms, C is also required to report at monthly intervals, five days before each progress meeting, on: “[A]ny new circumstances arising since the previous meeting which in its opinion have delayed, or may delay, completion of the works, or a section of them.”21

5–016 The contractual duty imposed upon C to give notice of delay to progress, to provide the information upon which the CA can carry out a meaningful analysis of the effect of any of D’s delay-risk events, and the time for performance of those obligations, tend to vary with the form of contract employed. Under IFC84, IFC9822 and IFC05, IFWCD/0523, and JCT0524, C is obliged to provide only the information required, when it is requested by the CA. On the other hand, under JCT9825 the CA’s duty to form an opinion materialises when C has, of its own volition, provided all the information to the CA that it could reasonably need26. 5–017 The JCT contracts make it plain that C’s notice is not a claim but is an advice to the CA that something has happened, which is likely to affect, or has already affected progress, irrespective of whether it affects C’s right to an extension of time, or to reimbursement of loss and expense. For example, MPF27 and MP0528 state: 18 Cl.12. 19 Cl.7(2). 20 Cl.46(3)(a). 21 GC/Works/1 and GC/Works/1/98 Cl.35(3)(c) and GC/Works/1DB Cl.35(3)(b). 22 Under Cl.26.3. 23 Cl.2.19.4.2. 24 Cl.2.27.3 25 Cl.25.2. 26 For a listing of the information reasonably necessary to deal with an extension of time see “Contents of notice”, below at paras 5–033 to 5–054. 27 Cl.12.2. 28 Cl.18.2.

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“Whenever [C] becomes aware that the progress of the project is being, or is likely to be delayed due to any cause, he shall forthwith notify [D] of the cause of the delay and its anticipated effect upon the progress and completion of the project, or any section (if applicable).”29

JCT98 states: “If and whenever it becomes reasonably apparent that the progress of the works is being, or is likely to be delayed, [C] shall forthwith give written notice to the [CA] of the material circumstances including the cause, or causes of the delay and identify and give such notice of any event which in his opinion is a [D’s time risk event].”30

JCT05 requires that: “If and whenever it becomes reasonably apparent that the progress of the works, or any section is being, or is likely to be delayed [C] shall forthwith give written notice to the [CA] of the material circumstances, including the cause, or causes of the delay, and shall identify in the notice any event which in his opinion is a [D’s time risk event].”31

5–018 Some contract forms do not require notice of all delays to progress, but only those that are caused by D’s time and/or cost risk events which adversely affect completion of the works beyond the completion date. Typically, for example, the New South Wales government form C21/0332 requires that, in order to become entitled to an extension of time for completion, C must give D: “(i) (ii)

a notice of the delay, and its cause, relevant facts, and its expected impact, as soon as practicable after the delay began; and notice of the extension of time claimed, together with information sufficient for [D] to assess the claim, either in the notice under (the preceding paragraph), or in a separate notice given within seven days after the delay ended.”

5–019 NZ0333 contains a similar formula, which also restricts notice to D’s time risk events that will have an effect on completion and FIDIC434 also requires notice of the occurrence of D’s time risk events giving rise to an extension of time. 5–020 HK05 follows a similar pattern, requiring that C is to notify D if a delay to completion of the works beyond the completion date is likely to occur as a result of one of D’s risk events35. The information to be provided is only that sufficient for the CA to be able to grant an extension of time. 5–021 FIDIC/Build9836 and FIDIC/DB9537 only require notice of any D’s time risks that are likely to cause a delay to completion of the works, within 28 days of the occurrence of the delaying event. FIDIC/M&E8738 similarly only requires notice of D’s time risks that are likely to cause a delay to completion of the works, but within

29 On this clause generally, see N. Lane, “Time and loss and expense in the Major Project Form: a commentary” (2006) 22 Const L.J. 3 at 8–11. 30 JCT98 Cl.25.2.1.1. 31 JCT05 Cl.2.27.1. 32 Cl.43.2. 33 Cl.10.3.2(b). 34 Cl.44.2. 35 See, for example, HK05 Cl.25.1(1). 36 Cl.20.1. 37 Cl.8.3. 38 Cl.26.1.

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14 days of the occurrence of the event. FIDIC4 requires notice to be given to the CA where delay is caused to the planning, or progress of the works by any delay in receiving information39, or delay caused by suspension of the works, whether, or not it causes delay to the completion of the works40. 5–022 FIDIC/SF9841 has a single clause requiring notice of any delay, including a delay to progress to be given as soon as C is aware of any circumstances that may delay, or disrupt the works. FIDIC/Build99, FIDIC/DB99 and FIDIC/PD+B99 contain the notice requirements in the claim disputes and arbitration Cl.20.1. This states that notice is only required in regard to an event that entitles C to an extension of time, saying: “If [C] considers himself to be entitled to an extension of the time for completion and/or any additional payment, under any clause of the conditions, or otherwise in connection with the contract, [C] shall give notice to the [CA], describing the event, or circumstance giving rise to the claim.”

5–023 Under FIDIC4, delay caused by inconsistencies in the contract documents42, delays caused by errors in the information provided43, and delays caused by uncovering work in search of further defective work44 do not require any notice to be given at all. This is so notwithstanding that, if they result in any extra, or additional, work, they rank for an extension of time under Cl.44.1(a).

Form of notice 5–024 Most standard forms require “written notice”. However, the same criteria of enforceability must surely apply to its form as to the period in which it is given: if C does not defeat its entitlement to an extension of time by not giving any notice at all, then it follows that it does not defeat its entitlement by not giving a notice that is otherwise than in writing. 5–025 The content of the notice and details required in regard to a claim for reimbursement of loss and/or expense was one of the matters brought before the court in Merton v Leach45. This was a case concerning JCT63 (July 1971 revision), where practical completion was some 101 weeks late and the CA had granted extensions of time for only 26 weeks. 5–026 C appealed to the High Court against the arbitrator’s preliminary ruling on a number of issues of law, one of which was the degree of particularity needed in an application for the recovery of “direct loss and/or expense”. In particular, D argued that the application must contain sufficiently detailed information to enable the CA to form an opinion, on the basis of that information alone, on the merits of the application. Vinelott J said that, whilst the contract could easily have required C to furnish full details in its application, it did not do so. Moreover, the CA will often, as a result of

39 40 41 42 43 44 45

Cl.6(4). Cl.6(3). Cl.10.3. Cl.5.2. Cl.17. Cl.38(2). London Borough of Merton v Stanley Hugh Leach Ltd (1985) 32 BLR 51.

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its involvement in the contract, be very well aware of the basis of C’s claim; and, if the application is not sufficiently detailed to enable the CA to form an opinion on the claim, it is always open to the CA to seek further details from C. If C then failed to provide the further information sought, C would be jeopardising its own claim. Therefore, while it might often be desirable for C’s application to be as detailed as possible, the judge did not consider that the mere fact that such detail was lacking could of itself invalidate the application, unless in the circumstances it was so vague that it did not enable the CA to know upon which question it was required to form an opinion. 5–027 While taking the view that the question of whether any particular document was, or was not a “written notice” was clearly a question of fact, his Lordship accepted the arbitrator’s opinion that: a notice must be in writing;

it must specify a cause of delay; the progress of the works must already have been affected (ie, the notice must not relate solely to an anticipated future delay); it need not take any special form of words provided it is sufficiently precise to put the CA on notice of the delay; and it need not relate the delay to one of the grounds for an extension of time set out in Cl.23. 5–028 Thus, subject always to proof that it was given and effectively received46, and except in the absence of express words to the contrary, such as those contained in Cl.10.3.1 of the 2009 edition of the Irish government standard forms of contract, it would seem that notice might reasonably take any form. It could be given in a telephone conversation, or be the result of the effects of a management meeting investigating progress47. The important point is that C should not attempt to cover up delay to progress, or likely delay to the completion of the works, by whatever reason it is caused, but, as a matter of policy, it should draw it to the attention of the CA so that it can, if it wishes, do something about it. 5–029 On the other hand, it seems that where notice is a condition precedent to entitlement, the courts may adopt a strict approach to entitlement, rather than a business common sense approach. In Education 4 Ayrshire48, Cl.72.1 of the contract provided that all notices were to be sent to D by first class post, facsimile or by hand, addressed to the chief executive. Where the letter which was claimed to give notice contained references to an email to one of D’s employees and attached a letter from the subcontractor to C, from which it was possible to deduce all the necessary information, Lord Glennie declined to accept it as a notice under the contract saying: “[I]t [does not] help [C] to say that the letter of 2 May 2007, when read with the letter of 30 April 2007 from the [subcontractor], would have enabled [D] to infer that the claim by the [subcontractor] against [C] was going to be passed up the line to them. That may be so, but the purpose of the clause is to avoid such uncertainty. [C] were required to tell [D] what claim they were making. It does not do for them to say: ‘here is what the [subcontractor] has written to us, you work it out for yourself’. That is not a valid notice under the clause. The failure to give a valid notice in accordance with clause 17.6.2 is fatal to [C’s] claim for relief.”49 46 J Uff, S Furst, A Ahearn, F O’Farrell and A Nissen, Construction Law Year Book 1998–1999 (London: Sweet & Maxwell, 1999) Vol.4 at p.31. 47 See, for example, GC/Works/1 and GC/Works/1/98 Cl.35(3)(c). 48 Education 4 Ayrshire Ltd v South Ayrshire Council [2009] CSOH 146; (2010) 26 Const LJ 327. 49 Education 4 Ayrshire Ltd [2009] CSOH 146; (2010) 26 Const LJ 327 per Lord Glennie at [19].

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Constructive notice 5–030 Notwithstanding that the contract requires notice to be given in writing, within a fixed period of the occurrence of an event, in some circumstances, notwithstanding that it was not given in writing, or not given formally within the fixed period, D may be deemed to have received notice. For example, in Lee Masonry50, which concerned a construction management form of procurement51 in which D was responsible for scheduling the works, delay had been caused early in the contract by groundworks contractors encountering wet lands and bad ground for which they had received an extension of time. However, D did not re-schedule the works effectively and did not re-issue the working schedule in accordance with the contract so that when the appellant two trades contractors carried out their works it was unco-ordinated and other trades contractors interfered with their work. 5–031 The contract required that for the purposes of compensation for delay and disruption, C was to give notice of a claim no later than 30 days “after the start of the occurrence or event giving rise to the claim” (emphasis added). D said that there had been no notice from C during the period when delays on the project were “most apparent”, that is between April and July 2003 and accordingly had disallowed their claims. In upholding the lower court’s decision, the Tennessee Court of Appeal said: “[D] had ample notice of the events giving rise to [C’s] claims and had even more information about the claims than the ‘general nature’ required. Additionally, [C] were not required to provide notice of a claim until the events were sufficient to generate a claim. As the trial court noted, ‘It was only when these delays and disruptions (of June, July, and August 2003) were not addressed and additional delays and disruptions occurred that [C] were able to make a claim.’ [The contract clause requires] a written statement from [C] that the amount claimed ‘covers all known amounts to which [C] is entitled as a result of said occurrence or event.’ It was impossible to know the extent of the damage on a project that started behind schedule and only became increasingly behind schedule. The trial court correctly concluded that it was not possible for [C] to assert, thirty days after the start of the occurrence, that the amount claimed was all the money they believed they were due. Further, even if [C] did not fully comply with all of the notice provisions, such noncompliance would not be a material deviation from the contract requirements. We agree with the trial court’s assessment that, based on meeting minutes, daily reports, revised schedules, and default letters to other contractors, [D] had actual knowledge of the delays and disruptions on the project and how they were impacting [C]. As the trial court noted, ‘[a]ny further written notice would not have served any practical purpose’.”

5–032 Further, in relation to D’s attempt to overturn the lower court’s award of damages, the Court of Appeal said: “[D] claims that because the contract placed the risk of poor site conditions on [trades contractors, C] should not be able to recover damages that resulted from poor site conditions. This argument also fails for the same reasons it did when [D] attempted to rely on the ‘no damages for delays’ clause. The provisions of the contract [D] relies upon in its argument require the contractors to notify [D] of any ‘disturbing conditions.’ From the beginning of the project until its completion, [D] was well informed of the delays and disruptions that were occurring on the project and their cause. Written notification as required under the clauses that [D] now insists ‘place the risk of poor site conditions upon [C]’ was unnecessary.” 50 Lee Masonry, Inc v City of Franklin, Tennessee, No M2008–02844-COA-R3-CV (2010) Tenn Ct App. 51 See Ch.3, “Project procurement” at paras 3–036 to 3–046.

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Contents of notice 5–033 Having established that circumstances have arisen that require a notice to be given, the question that must then be faced is: what information should C be obliged to give to enable the CA to calculate, or ascertain to what extent D’s time risk event is likely adversely to affect the completion date and so entitle C to relief? In other words, what is the notice supposed to say? Depending upon the form of contract, notice may be required not only for the occurrence of D’s time, or cost risk event, a potential D’s cost, or a time risk event that is likely to cause delay to the completion of the works, or to delay to the completion of the works beyond the completion date, but also for any delay to the progress of the works, howsoever that is caused and irrespective of whether it is connected with an excusable, or reimbursable event52. 5–034 The JCT standard forms are unhelpful. The contracts do not require, for example, that C should logically demonstrate the basis for its opinion, or that the underlying assumptions should be factually supported by evidence. The JCT minor works forms say nothing at all. The JCT intermediate forms say that C should provide that which is reasonably necessary53. That expression was construed by HH Judge LLoyd QC in Sindall v Solland54, in which he expressed the view that: “Under clause 2.3 of IFC 84, [C] is not obliged (unless and perhaps until required under the last paragraph of clause 2.3) to quantify the effect of any notified event, although it is usually done to anticipate a request under that paragraph and to assist in the formation of an opinion favourable to [C] as it is information to which the [CA] is entitled.”

5–035 Whilst the notice that is to be given under the JCT forms is relative to the progress of the works, JCT80 and JCT98 provide that C must estimate the extent, if any, of the expected delay in the completion of the works beyond the completion date resulting from any delay to progress “whether, or not concurrently with delay resulting from any other relevant event”55. The implication of this is that C may not “roll up” a number of delays to progress in different D’s time risk events, but must individually identify each delay to progress and the anticipated effect of each event on the completion date assuming that there is no other operative cause of delay. 5–036 A different regime is required by the 2005 and later series of JCT contracts, whereby C is required only to notify the CA of the expected effects of each event and no reference is made to concurrency56. 5–037 Under normal circumstances, the notice need not be particularly complicated. The 2009 edition of the Irish government standard forms of contract, for example, requires that the first notice need only “state prominently that it is being given under sub-clause 10.3 of the contract”, all relevant factual information being given in a second notice, within 20 days. 5–038 JCT80 and JCT98 require that the notice should include the material circumstances, including the cause, or causes of the delay and identify any event that in C’s opinion is a D’s time risk event. 5–039 The notice is required to advise the CA of the cause of any current, or likely future, delay to progress. C is also required to express an opinion as to whether the 52 53 54 55 56

JCT80 and JCT98 (Cl.25.2.1.1), IFC84 and IFC98 (Cl.2.3). See, for example, IFC05 Cl.2.19.4.2. Sindall Ltd v Solland [2001] 3 TCLR 30. See, for example, JCT98 Cl.25.2.2.2. See for example, JCT05 Cl.2.27.

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stated cause of delay to progress is a D’s time risk event. This does not require it at this stage to identify the period by which the duration of the contract period is likely to be extended. It requires that C should identify: the cause of any anticipated, or actual delay to progress;

whether it is likely to delay completion; and whether the cause is a D’s time risk event. 5–040 JCT80 and JCT98, the most detailed forms, require only that, in relation to any likely, or current delay to progress, C should state, in writing: the material circumstances giving rise to the delay to progress;

the cause of the delay to progress; and C’s opinion as to whether the cause of the delay to progress is defined as a D’s time risk event;

and, as soon as it is able after the notice if not with it:

the expected effects of the delay to progress; and the likely effect of the event on the completion date, when taken in isolation from other causes of delay. 5–041 None of this assertiveness is much use in logically calculating the extent to which a D’s time risk event is likely to cause the contract period to be prolonged57. At the very least, in support of any notice of delay to progress given during the course of the works, which C believes has been caused by a D’s time risk event, C should be required to produce the factual evidence underpinning its opinion of the expected effects, together with: a network schedule accurately illustrating how it intended to complete the works if the event had not occurred (ie a workable master schedule);

an updated network schedule showing what had actually been achieved in relation to the proposed schedule before the event occurred; and an impacted network schedule demonstrating, with supporting descriptions, the duration of new, or delayed, activities and their logical interface with the remaining works. 5–042 Broadly speaking, this is no doubt what is intended by C21/09 in requiring notice of delay to be accompanied by a CPM schedule that shows how C has been, or will be, delayed in reaching completion, by specific reference to an activity or activities on the then current updated and impacted critical path or paths of the schedule58. 5–043 At the time of notification, C may have no idea of the magnitude of the time, or, indeed, whether the delay-causing event is also a D’s cost risk event and whether it has suffered, or is likely to suffer resulting loss. Nevertheless, pending the production of the above information, in regard to any disrupting event, it would seem prudent for C to reserve its rights for a commensurate extension of time and/or the direct and indirect costs incurred thereby. 5–044 In Merton59, Vinelott J was asked to decide whether, under a JCT form of contract, it was an implied term that the giving of written notice by C: “forthwith upon

57 See Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 64 Con LR 32. 58 Cll.54.3 and 25.8. 59 London Borough of Merton (1985) 32 BLR 51.

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it becoming reasonably apparent that the progress of the works is delayed”60 was a precondition to the CA’s power to grant an extension of time. The argument was rejected for three reasons: it was possible for a delay to progress to cause delay to the completion of the works, without that delay being immediately apparent to C;

the extension of time provision was designed not only to protect C against the possibility of liability for liquidated damages for D’s delay, but also to preserve D’s right to liquidated damages in respect of delay caused by C; and if the CA failed to grant an extension of time, although it was aware that an extension was appropriate, there was a danger that Cl.23 might be rendered inoperable. In this case, the time for completion would be “at large” and the only obligation C would have would be to complete the work in a reasonable time, failing which D would have to prove any “actual loss” it might have suffered. That might leave C in a better position if it did not give notice than if it did61. 5–045 In Steria62, a subcontract requiring the subcontractor to give written notice to C of the circumstances giving rise to the delay did not include a requirement that the notice must make it clear that it is a request for an extension of time, or a requirement that it gives an assessment of the delay, but it did require more than a bald statement that particular relevant circumstances had occurred. HH Judge Davies said: “In my judgment it is necessary for the subcontractor to notify [C] first that identified relevant circumstances have occurred and second that those circumstances have caused a delay to the execution of the subcontract works. In my judgment the latter is required, either by a process of purposive construction, or by a process of necessary implication, because otherwise it seems to me that the notice would not achieve its objective. I also consider that the written notice must emanate from the subcontractor. The essence of the notification requirement in my judgment is that [C] must know that the subcontractor is contending that relevant circumstances have occurred and that they have led to delay in the subcontract works.”63

5–046 On the other hand, in Education 4 Ayrshire64, in the Scottish Outer House of Session, Lord Glennie declined to follow Steria and Merton and rejected a business common sense approach to contract interpretation in favour of strict compliance, saying: “[These cases] lay down no governing principles. I do not propose to consider them in detail. Suffice it to say that the reasoning in Steria was to the effect that the court should be slow to write into a clause requirements for the content of the notice which were not spelt out in the clause. That is a very different position from the present case. In the London Borough of Merton case there was reference to the [CA], to whom notice had to be given, not being a ‘stranger to the work’. But that comment was made in support of an argument that it was unnecessary to imply a requirement for certain matters to be stated in the notice to be given to him. That again is a very different situation from that with which I am concerned.”65

60 JCT63 Cl.23. 61 The result achieved in Gaymark Investments Pty Ltd v Walter Construction Group (1999) NTSC 143; (1999) 16 BCL 449. 62 Steria Ltd v Sigma Wireless Communications Ltd [2008] BLR 79. 63 Steria Ltd [2008] BLR 79 at [81] and [82]. 64 Education 4 Ayrshire Ltd [2009] CSOH 146; (2010) 26 Const LJ 327. 65 Education 4 Ayrshire Ltd [2009] CSOH 146; (2010) 26 Const LJ 327 at [20].

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5–047 In Education 4 Ayrshire, C was a PFI provider under a PFI scheme, to carry out work to six schools in Ayrshire, Scotland, for D, the South Ayrshire Council. The construction work was let by C to a subcontractor. Amongst other things, C was entitled to an extension of time and compensation if it discovered “type 3 asbestos”, defined as any asbestos that exceeded in nature, extent and/or location the asbestos described in the contract. Clause 72.1 of the contract provided that all notices were to be sent to D by first class post, facsimile or by hand, addressed to the chief executive. Clause 17.1 provided that C was to give notice of any delay to progress and, further, at Cl.17.6, in regard to any delay to progress caused by D’s risk events, the contract provided, that: “Subject to clause 17.8, to obtain relief or claim compensation under this clause 17 [C] must: 1.

2.

as soon as practicable, and in any event within 20 business days after it becomes aware that the [D’s risk] event has caused or is likely to cause delay, breach of an obligation under this agreement or [C] to incur costs or lose revenue, give to [D] a notice of its claim for an extension of time to the relevant [completion] date, payment of compensation and/or relief from its obligations under this agreement; within 15 business days of receipt by [D] of the notice referred to in clause 17.6.1 (or such longer period as [D] acting reasonably may agree) give full details of the [D’s risk] event and the extension of time and any estimated change in project costs claimed (including evidence, on an open book basis, of the calculation of any estimated change in project Costs).”66

5–048 Clause 17.8 stated that: “In the event that information is provided after the specified number of business days contained in clause 17.6, then [C] will not be entitled to any extension of time, compensation, or relief from its obligations under this agreement in respect of the period of time during which the information is delayed.”67

5–049 As a result of finding type 3 asbestos, C claimed that there had been delay to completion of the Prestwick Academy, one of the schools under the contract, and that it gave notice to D by letter to D’s chief executive dated 2 May 2007 (within 20 business days of 6 April 2007) saying: “In accordance with Clause 17.1 of the [contract], we hereby inform you that we anticipate a delay in achieving the [completion] date in relation to Prestwick Academy. Taking into account the measures we are proposing to adopt to mitigate the delay we estimate that delay will be 19 weeks and is due to the discovery of asbestos in Building 7. To this end please refer to our previous correspondence of 18 April to Mr Roddy Macdonald and the attached correspondence from [the subcontractor] dated the 30/4/07 which provides further details and includes the proposed [schedule] for removal of asbestos. We will submit our full claim in accordance with clause 17.6 of the [contract].”68

5–050 In regard to the documents referred to in that letter, Lord Glennie observed69 that the email of 18 April was from C, to one of D’s employees, copied to a number of others, saying that [C] had “been provided with further information on the implications of the asbestos found during the type 3 survey” and suggesting a contingency planning meeting. The letter of 30 April was from the subcontractor to C updating C on the delay resulting from the discovery of type 3 asbestos and concluding: 66 67 68 69

Education Education Education Education

4 4 4 4

Ayrshire Ayrshire Ayrshire Ayrshire

Ltd Ltd Ltd Ltd

[2009] [2009] [2009] [2009]

CSOH CSOH CSOH CSOH

146; 146; 146; 146;

(2010) (2010) (2010) (2010)

208

26 26 26 26

Const Const Const Const

LJ LJ LJ LJ

327 327 327 327

at at at at

[30]. [30]. [8]. [9].

NOTICES, CLAIMS AND EARLY WARNINGS

“The 17 week delay in the asbestos removal and demolition will delay [completion]. The [completion] of Phase 2 and Phase 3 will also be delayed to 7 August 2009 and 8 January 2010. Please note that due to Christmas 2009, the delay to the [completion] of Phase 3 will be 19 weeks. We would therefore request a 19 week extension of time.”

5–051 Whilst it was common ground that notice under the contract was a condition precedent to relief and compensation, D denied that it had received the notice as required by the contract. In accepting D’s defence to the claim for an extension of time and compensation, Lord Glennie said70: “The wording seems to me to point to a requirement of strict compliance with the terms of the clause. The notice has to be sent within a limited time, as soon as practicable ‘and in any event within 20 business days’. Clause 17.6.1 does not contain the wording found in clause 17.6.2, ‘or such longer period as [D] acting reasonably may agree’. The time requirement is strict. The requirement for strict compliance is illustrated further by the fact that certain formalities are insisted upon. Clause 72.1 requires the notice to be sent, not to anyone, but to the Chief Executive of [D]. Furthermore, it must be in writing and sent by first class post, facsimile or by hand (e-mail will not suffice) All this implies a level of formality which would, to my mind, be negated if the notice which had to be sent in a particular way, to a particular person and by a particular time, did not have to say what the clause appears to require it to say. There is no ambiguity in the requirements for a notice under the clause. Nor does compliance cause any difficulty. [Counsel for C] suggested that one should make allowance for the fact that notices would be drafted by businessmen, not lawyers. I do not accept this. It is within judicial knowledge that parties to contracts containing formal notice provisions turn immediately to their lawyers whenever there is a requirement to give notice in accordance with those provisions. But even if that were not the case, there is nothing in clause 17.6.1 that would not readily be understood by a businessman unversed in the law. Where parties have laid down in clear terms what has to be done by one of them if he is to claim certain relief, the court should be slow to seek to relieve that party from the consequence of failure. [C] seek[s] to advance a construction of the clause which would, if successful, only introduce uncertainty. The points advanced in argument by [counsel for C] appear to me to demonstrate that, at least on the ground, [D] knew about the delay likely to be caused by the discovery of Type 3 Asbestos. But clause 17.6.2 is not directed towards ensuring that [D] have knowledge at that level. Those arguments do not assist [C] on the question of construction. The clause required that a notice be sent within a particular time to the Chief Executive of [D] giving notice of what claim [C was] making. The letter of 2 May 2007 did not do that. It matters not that, at certain levels, employees of [D] may have been aware of what was going on. Nor, to my mind, does it help [C] to say that the letter of 2 May 2007, when read with the letter of 30 April 2007 from the [subcontractor], would have enabled [D] to infer that the claim by the [subcontractor] against [C] was going to be passed up the line to them. That may be so, but the purpose of the clause is to avoid such uncertainty. [C] were required to tell [D] what claim they were making. It does not do for them to say: ‘here is what the [subcontractor] has written to us, you work it out for yourself’. That is not a valid notice under the clause. The failure to give a valid notice in accordance with clause 17.6.2 is fatal to [C]’ claim for relief.”

5–052 Under normal circumstances, and in the absence of such contractual formulae, the CIOB Guide71 advises that the supplementary information should contain all that is necessary to identify: the nature of the event and its unique identifier;

the contractual clauses under which the notice is required; 70 Education 4 Ayrshire Ltd [2009] CSOH 146; (2010) 26 Const LJ 327 at [17]–[19]. 71 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) at paras 5.2.5.4 to 5.2.5.7.

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a synopsis of the event and the timing of the constituent activities; the planned activity, or activities affected and the manner of the effect; the likely consequential effect on the key dates and completion date, if any; the likely consequential effect on any other contractors and subcontractors, if any; and the file reference of the impacted working schedule. 5–053 The Guide advises: “The textual information in the above items is supplemented most effectively and usefully by a picture of the fragnet used to impact the event, if relevant, together with a trace of the critical paths from the event to the relevant completion dates on the impacted schedule. For clarity, the direct effect should be clearly differentiated from the causative event giving rise to it and, if relevant, the consequential effect on any contractors, subcontractors, key dates, sectional completion dates, or the completion date flowing from the direct effect.”

5–054 In the example of a notice of delay, at Figure 5.172, the event description is: “Instructions to resolve a discrepancy between design information”. It is expressed that way because that is the phraseology used in the example contract to describe the event which entitles C to an extension of time and compensation. The effect: “delay to the MOF Jetty” is not the event, it is the effect of the delay to progress caused by the event73.

Period of notice 5–055 Whilst, for the obvious reason that, unless C knows precisely what is required of it, it cannot precisely comply with a requirement, precision in expression of the notice requirement is important. There are at least two and sometimes three issues for consideration. Always, there will be the issues of: From what occurrence does the period begin? How long is the period to run? In addition, where no specific period is specified, the issue also arises of what is a reasonable period within which to give notice. 5–056 The occurrence, from which the period of notice is to run, differs from form to form. In some, it is a delay to progress, irrespective of its consequences; in others, it is a delay to progress only if it is caused by an excusable event; others require only the occurrence of the excusable event itself and some ask only for the likelihood of a delay to the completion of the works. 5–057 JCT8074, JCT9875, and JCT0576 require C to give notice forthwith, so as soon as it becomes reasonably apparent that the progress of the works is being, or is likely to be delayed. 72 This is an example of a notice of delay, which in a fuller form was first used by the author in connection with the resolution of a delay-related dispute. In this form it has since been adopted for use in the CIOB/Hill International Masterclass series and is now reproduced in Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects, 2010, at App.4. 73 See also Ch.14, “Cause and effect” at paras 14–021 to 14–129. 74 Cl.25.3.1. 75 Cl.25.3.1. 76 Cl.2.28.

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5–058 Whilst, under the JCT forms, C is not obliged to update its schedule with progress and is only obliged to revise its schedule in the event that an extension of time is granted77, a delay to progress can properly only be gauged by reference to a workable and contemporaneous updated as-planned schedule. It follows from this that, if the schedule is not constantly updated, whether, or not there is a contractual obligation to do so, the obligation to give prompt notice of a likely delay to progress cannot be fulfilled. This is simply because, without a schedule that represents C’s intent, there is no baseline from which a delay to its intent can even be identified, let alone notified to the CA. 5–059 In the Supreme Court of Queensland in the case of Queensland v Multiplex78, which concerned a provision of AS2124 stating: “If [C] desires an extension of time for practical completion, [C] shall within 28 days after a delay occurs give the [CA] a written claim setting out the facts on which the claim is based,”

the court had little difficulty in concluding that the “delay” that “occurs” in this sense was not the causative occurrence, but the delay to progress flowing from it and, although the court at first instance thought that the operative delay occurred when it had ceased, on appeal, the delay was construed as occurring when it first started. 5–060 Some construction contracts require C to provide notice within a specified period after the occurrence of the event giving rise to delay. ICE6 and ICE7, for example, require notice within 28 days of the cause of delay arising and FIDIC479 only requires notice of the occurrence of an excusable event and requires it to be given “within 28 days after such event has first arisen”. 5–061 On the other hand, FIDIC/Build99, FIDIC/DB99 and FIDIC/PD+B99 require notice in regard to an excusable event only if it entitles C to an extension of time, saying: “If [C] considers himself to be entitled to an extension of the time for completion and/or any additional payment, under any clause of the conditions, or otherwise in connection with the contract, [C] shall give notice to the [CA], describing the event, or circumstance giving rise to the claim. The notice shall be given as soon as possible, and not later than 28 days after [C] became aware, or should have become aware, of the event, or circumstance.” (emphasis added)

5–062 The 2009 edition of the Irish government standard forms of contract also takes a similar line, providing that: “[I]f [C] considers that under the contract there should be an extension of time, or adjustment of the contract sum, or that it has any other entitlement under, or in connection with the contract, [C] shall, so far as practicable and in any event within 20 working days after it became aware, or should have become aware of something that could result in such an entitlement, give notice of this to the [CA].” (emphasis added)

5–063 Bearing in mind that both these forms render such notice a condition precedent to entitlement, this is an extraordinary provision. It is one thing for a period of time to run from a date upon which it can be shown that C was aware of the salient facts. It is another thing entirely to apply an objective test as to when he should reasonably have 77 See JCT05 Cl.2.9.2. 78 State of Queensland v Multiplex Constructions Pty Ltd (1998) 14 BCL 329. 79 Cl.44.2.

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become aware, so as to bring into operation an exclusion clause which will defeat entitlement. This is fraught with potentially difficulties. 5–064 NZ0380 also restricts the notice requirements only to excusable events which will have an effect on completion, saying that notice is to be provided “within 20 working days after the circumstances arise which are relied upon as the grounds for an extension [of time]”. 5–065 On the other hand, HK05 requires notice first to be given within 28 days of commencement of an excusable event. Although for some purposes, such as a complete stoppage of work, the date will be obvious, that is not so in all cases81 and nothing is provided by which, for these purposes, the “commencement” of the events can be identified82. 5–066 Establishing that an event has occurred and calculating a delay period therefrom may not always be as straightforward in practice as might in theory be supposed. Wallace v US83 concerned a small contract for repairs to an historic building in the naval dockyard in New Orleans involving, amongst other things, the replacement of the Georgian windows. In this case, C was to be entitled to an extension of time, provided that it gave notice “within 10 days from the beginning of any excusable delay”. 5–067 In fact, the work got off to a slow start and, by January 1994, the CA was moved to complain that it had not received any submittals and no work had been carried out on site. The first window submittal was made on 28 February 1994 and rejected. It was then discovered that the specification for the window replacement was impossible to perform because the glazing bars were required to be the same style as the existing, but also to be capable of withstanding 160mph winds. 5–068 Having advised the CA of the impossibility on 24 March, C agreed a suitable compromise and, on 31 March 2004, submitted an acceptable sample with a request for a change order. Shortly before receipt of approval of the submittal, C claimed an extension of time and loss and expense arising out of the effects of the defective specification. On the basis that entitlement did not arise unless notice was given within 10 days of the beginning of the event and thus taking no account of any delay prior to the notice of impossibility given on 24 March, the CA subsequently determined the extension of time to be 36 days from the submittal date of 16 March to the final approval date of 26 April. 5–069 On appeal, the court interpreted the “beginning” here to mean D’s risk event, not the delay to progress caused by the event, but the excusable event itself. It said that, in order to trigger this provision, that is for the condition precedent to become operative: “[C] must know the cause of the delay sufficiently to be able to assert that it is unforeseeable, beyond [its] control, and without [its] fault, or negligence within the meaning of the regulation. To require notice sooner would be to put [C] in the untenable position of seeking an extension before it could demonstrate, or document its entitlement thereto. Such an interpretation of the regulations makes no sense.”

Thus, in this case, the fact that the delay to progress had occurred many weeks before notice was given, C could not be required to give notice before it had discovered the 80 Cl.10.3.2(b). 81 See Ch.14, “Cause and effect”, at paras 14–025 to 14–069. 82 Consider, for example, event 25.2(3)(m) when a “delay caused by a delay on the part of a nominated sub-contractor” commences. 83 RP Wallace Inc v The United States, COFC No 96–222C (2004); (2005) 21 Const LJ 378.

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specification to be impossible to perform and know the cause of the delay it had already suffered. 5–070 In Lee Masonry84, in which the contract required that C was to give notice no later than 30 days “after the occurrence of the event giving rise to the claim”, the Tennessee Court of Appeal upheld the opinion of the lower court that for an extension of time, the trade contractors had 30 days after the occurrence ended, not started, within which to state the general nature of their claims. On this basis, the lower court had concluded that because of the cumulative nature of the delays and disruptions that had occurred over the course of the project, “the occurrence was on-going and did not end until [the trade contractors’] work ended.” 5–071 Whilst, in this author’s opinion, in the absence of precision in the drafting, this is the preferred view of when the notice period should begin to run for the occurrence of delay caused by excusable events, the practical effect of these two cases is to render the time bar on notice of delay of little practical effect in some contracts. Take, for example, NZ03, which provides85 that the CA is not bound to grant an extension of time unless notice is given within 20 working days after the circumstances arise which are relied upon as the grounds for an extension of time. One of those grounds is that C is fairly entitled to an extension of time for “the net effect of any variation”86 where, in several clauses of the contract, entitlement is also set out whereby if “[C] suffers delay in the completion of the works [the occurrence] will be treated as if it were a variation”. Thus, under this type of clause, C has actually to suffer delayed completion as a result of the occurrence prior to the event becoming a variation and, only within 20 working days of the occurrence becoming a variation, is C required to give notice. Whilst it is doubtful that that is what the draftsman intended, this is the effect of the words. 5–072 Where no specific period is stated within which notice is to be given, what will constitute a reasonable period will not only depend upon the nature of the event, but also the purpose of the notice, that is whether it is for relief from liquidated damages, or for recovering loss and expense. In Steria v Sigma87, the clause in the subcontract required that: “If by reason of any circumstance which entitles [C] to an extension of time for the completion of the works under the main contract, or by reason of a variation to the subcontract works, or by reason of any breach by [C] the subcontractor shall be delayed in the execution of the subcontract works, then in any case provided the subcontractor shall have given within a reasonable period written notice to [C] of the circumstances giving rise to the delay, the time for completion hereunder shall be extended by such period as may in all the circumstances be justified.” (emphasis added)

HH Judge Davies interpreted this as follows: “What the subcontractor is required to do is give written notice within a reasonable period from when he is delayed, and the fact that there may be scope for argument in an individual case as to whether, or not a notice was given within a reasonable period is not in itself any reason for arguing that it is unclear in its meaning and intent.”88

84 85 86 87 88

Lee Masonry, Inc, No M2008–02844-COA-R3-CV (2010) Tenn Ct App. Cl.10.3. Cl.10.3.1(a). Steria Ltd [2008] BLR 79. Steria Ltd [2008] BLR 79 at [90].

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5–073 However, in practice, “a reasonable time” depends upon many things, not all of which are always contemporaneously recognisable. The point came before the High Court of Hong Kong on appeal against the decision of an arbitrator in Hsin Chong v Henble89. In this case, for the purposes of a notice for a compensation event, the court concluded that a reasonable time must be taken to be 28 days from the occurrence of the delaying event giving rise to the loss. 5–074 In this case, the condition of the contract relating to extensions of time said that notice was to be given within 28 days of the occurrence of an event and another clause, in relation to loss and expense, required an application for reimbursement to be made “within a reasonable time” of the loss having been incurred. The Hon Reyes J held that: “The 28 day notice restriction in GCC 22 must be indicative of the reasonable time-frame by which a claim under GCC 11(6) for loss and expense in relation to a particular variation is to be raised. Given that EOT Claim 5 is too late for the purposes of GCC 22, I am unable to accept that it was brought within a reasonable time for the purposes of GCC 11(6). I accordingly do not think that the loss and expense sought in connection with EOT Claim 5 can be allowed.”90

5–075 The text of Cl.22 of the GCC referred to is not set out in the judgment; however, an interim application for an extension of time is bound to be based upon a view as to whether a delay to completion of the works beyond the completion date is “likely to occur” and it is not unreasonable that, given effective time management, an opinion to that effect could be formed within 28 days of the occurrence of the event giving rise to the delayed progress. On the other hand, it does not follow, simply because a view can be taken within 28 days of the occurrence of an event that a delay to completion of the works beyond the completion date is likely to occur (at a point in time in the future, emphasis added) that it can equally be established in the same 28-day period that loss and expense “has involved [C] in direct loss and/or expense” (past tense, emphasis added). Because of the necessary administrative processes, particularly those involving subcontractors, such costs may not be quantifiable until some time after the period when the delays arose. 5–076 Accordingly, it is respectfully suggested that considering the 28-day limit from the occurrence of an event for which notice of an extension of time claim may be submitted as the equivalent of a reasonable time for service of a loss and expense claim for the same event, was in error. 5–077 Other than the JCT forms, many contracts specify an exact period within which C must give notice following it suffering loss and/or expense. For example, HK0591, ICE692, ICE793, FIDIC494, FIDIC/M&E8795, FIDIC/DB95, FIDIC/Build98, FIDIC/Build99, FIDIC/PD+B99 and FIDIC/DB9996 require notice to be given within 28 days of the occurrence of an event for which C intends to claim compensation. 5–078 The 2005 and later editions of the JCT forms require C to give notice within a reasonable time of it becoming apparent to C that it is incurring, or is likely to incur 89 Hsin Chong Construction (Asia) Ltd v Henble Ltd [2006] HKCFI 940; (2005) HCCT 000023A/2005, 18 August 2006. 90 Hsin Chong Construction (Asia) Ltd [2006] HKCFI 940 at [104]. 91 Cl.28.1(1)(a). 92 Cl.52(4)(b). 93 Cl.53(2). 94 Cl.53.1. 95 Cl.34.1(a). 96 Cl.20.1.

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loss and expense for which it would not be reimbursed under other provisions of the contract. The effect of this is to provide C with a great deal more freedom in regard to the timing of notice on the basis that it is open to C to argue that it always thought it would be reimbursed under some other provision of the contract. ICE6 and ICE797 require the notice to be served “within 28 days after the cause of any delay has arisen, or as soon thereafter as is reasonable”. A201/97 and A201/07 require that: “[C]laims by either party must be initiated within 21 days after the occurrence of the event giving rise to such claim, or within 21 days after [C] first recognises the condition giving rise to the claim, whichever is the later.”98

5–079 NEC/SF99 requires that either party is to advise the other of the occurrence of a compensation event as soon as either becomes aware of it99. Under ECC2100, C is required to notify the CA within two weeks of a compensation event occurring, or being expected to occur. This is expanded to eight weeks under ECC3101. It should be noted that, under the NEC forms of contract, no distinction is made between events which excuse C from liquidated damages and those which entitle C to compensation for loss; they are the same “compensation events”. Thus, under these forms, C may receive financial compensation for delay caused by weather, or force majeure, for example, which, under other forms, might not entitle C to such compensation. 5–080 The essence of the requirement for notice is to require C to assert its rights in a timely manner during the life of the project and to allow D the opportunity to resolve, or mitigate the effects of the problem. However, unless, through C’s failure to give notice in good time, D has been prejudiced, it would seem that, if C does not disentitle himself to an extension of time by not giving any notice at all, it should not be penalised for not giving notice within a set period of time.

Second notices “Because the requirements of the initial notice are often fulfilled by a notice containing very little useful information, most forms of contract also call for later, supplementary, information to be provided, concerning the extent of delay to progress and the extent of delay to completion likely to be caused. This is usually to be provided within a limited period after the initial notice has been served.”102

5–081 In order to give effective notice for the purposes of an extension of time, at the very least, C must be aware that: an excusable event has occurred;

as a result, a delay to progress has occurred; and the delay to progress has affected an activity on the critical path to completion. 5–082 Depending upon the type of event, one or more of those three criteria may not be immediately apparent. Accordingly, many contracts require that C is to submit 97 Cl.44(1). 98 Cl.15.1.2. 99 Cl.15.1. 100 Cl.61. 101 Cl.61.3. 102 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (2010), at para.5.2.5.3.

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a second notice containing detailed particulars, and some require that second notice within a limited period of the date of the first notice. 5–083 Typically of the forms which specify a limited period for the submission of further particulars, FIDIC4103 says that the CA is not bound to make any determination during the course of the works unless C has: “(a) (b)

within 28 days after such event has first arisen notified the [CA] with a copy to [D], and within 28 days, or such other reasonable time as may be agreed by the [CA], after such notification submitted to the [CA] detailed particulars of any extension of time to which it may consider himself entitled in, order that such submission may be investigated at the time.”

5–084 Similarly, JCT80, JCT98104 and HK05105 require that, within 28 days of a first notice, the second notice is to provide substantiation that the D’s risk event is the cause of the delay, and particulars of the: cause;

effect; and length of the delay to the completion of the works in sufficient detail to enable the CA to determine C’s entitlement to an extension of time. 5–085 The word “substantiation” in the 1980 and 1998 JCT forms and HK05 is not defined, nor otherwise described, but it would appear to be similar to “reasonable proof ”. The clause does not give any guidance as to what might be an adequate discharge of the burden of proof, but it should clearly be better than the assertion that is required under JCT98. Nothing is provided in JCT98 to give any indication of how cause and effect are to be proved, or how the length of likely delay to completion of the works beyond the completion date is to be calculated. 5–086 When an event has a continuing effect, such as a delay to the provision of information, HK05 requires not only that C is to provide the interim particulars described above, but also, by sub-sub-sub-Cl.(b), further interim particulars are to be provided at 28-day intervals, and by sub-sub-sub-Cl.(c), final particulars within 14 days of cessation of the delay to progress. 5–087 Under C21/09106, if the delay continues for more than 14 days and C wishes to apply for a further extension of time, it must give a notice every 14 days until after the delay ends. Under this form, each notice must be accompanied by a CPM schedule which shows how C has been, or will be, delayed in reaching completion, by specific reference to an activity or activities on the then current updated and impacted critical path or paths of the schedule. 5–088 The 2009 edition of the Irish government standard forms of contract is also specific as regards supplementary information, requiring, in relation to both excusable and compensable events that the following are to be supplied: “(1) All relevant facts concerning the claim; (2) A detailed calculation and, so far as is practicable, a proposal, based on that calculation, of any adjustment to be made to the contract sum and of the amount of any other entitlement claimed by [C]; 103 104 105 106

Cl.44.2. Cl.25.2.1. Cl.25.2(1). Cll.54.3 and 25.8.

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(3)

If [C] considers that the [schedule] contingency referred to in sub-clause 9.4 should be used, or that there should be an extension of time, the information required under sub-clause 9.3, and, so far as is practicable, a proposal, based on that information for any use of the [schedule] contingency, or any extension to the date for substantial completion of the works and any affected section.”107

In contrast, JCT05 only requires that details are to be provided “if practicable in such notice, or otherwise as soon as possible thereafter”. 5–089 The GC/Works series of forms also require that, whenever C believes it will become entitled to financial compensation as a result of any other delay to progress, or disruption, C is required to notify the CA: “[I]mmediately upon becoming aware that the regular progress of the works, or any part of it has been, or is likely to be disrupted, or prolonged”108

and to follow that, within 56 days, with full details of and evidence of the loss incurred109.

Waiver of notice “In some cases there is scope for the application of the principles of waiver or personal bar to operate so as to prevent a party, who has proceeded on the basis of a defective notice without taking the point, from subsequently raising it as a technical defence to the claim.”110

5–090 It seems that in so far as concerns neutral events, if C does not give notice of a delay, when required by contract so to do, it has only itself to blame. However, even under those circumstances, C may still be entitled to relief where D, or the CA on its behalf has proceeded as though such notice was not required. In the US Board of Contract Appeals case of J W Mertz111, D asserted that consideration of C’s claim was barred because it had failed to comply with the requirements of the contract that, within ten days of the beginning of any delay, it should have notified the CA in writing of the causes of delay. The Board said: “Although the record does not affirmatively indicate that written notice was given within 10 days from the beginning of each of the alleged delays, it is also true that in the decision appealed from the [CA] considered the claim for weather delays on its merits, and proceeded to allow the part which it deemed meritorious, without invoking the failure to give notice as a reason for its denial of the remainder and, indeed, without so much as mentioning that failure. In these circumstances it is clear that [D] must be deemed to have waived any lack of timely notice it is well settled that the action of a [CA] in considering a claim upon its merits without invoking the failure to give timely notice as a reason for its denial, constitutes a waiver of such failure.”

5–091 Similarly, with reference to Vakili v Hawksmith112, in Lee Masonry113, the Tennessee Court of Appeal held that: “The waiver of a written change order requirement by [D] is not always required to be in writing but may be the result of the parties’ conduct on the job. Thus, it is not uncommon 107 108 109 110 111 112 113

Cl.10.3.1. Cl.46(3)(a). Cl.46(3)(b). Education 4 Ayrshire Ltd [2009] CSOH 146; (2010) 26 Const LJ 327 per Lord Glennie at [19]. JW Mertz (1959) IBCA 64, 59–1 BCA (CCH) at 2,086. Vakili v Hawksmith, No M2000–01402-COA-R3-CV, WL 1173285 (2001) Tenn Ct App. Lee Masonry, Inc, No M2008–02844-COA-R3-CV (2010) Tenn Ct App.

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for courts to find that [D] has waived a written notice requirement in cases where extra work has been ordered verbally by [D] or the extra work has been performed with [D]’s knowledge and without its objection. The course of dealing between the parties can also amount to a waiver where the conduct of the parties makes it clear that they did not intend to rely strictly upon a contract’s written notice requirement and that adherence to such a requirement would serve no useful purpose.”

5–092 On the other hand, in Garofalo v NYU114, it was held that the CA did not have authority to waive the notice requirements for extra work, because the contract itself limited the CA’s authority to approve changes. 5–093 Similarly, the 2009 edition of the Irish government standard forms of contract expressly provides that there can be no waiver of its provisions, stating: “[T]he rights of a party will not be prejudiced, or restricted by any indulgence, or forbearance extended to the other party, and no waiver by a party of any breach will waive any other breach. No failure, or delay by a party in exercising a right, or remedy will waiver the right, or remedy, nor will any single, or partial exercise, or waiver of any right, or remedy prejudice any other exercise of that, or any other right, or remedy.”115

5–094 Waiver was also rejected as a defence in City Inn116. In that case, it was argued that D had, by its conduct, or the CA as its agent, acquiesced in waiving compliance with the precondition to entitlement to an extension of time. It was admitted that, in relation to every instruction given, it was evident that C had been carrying out the instructed work without the estimates, or method statement referred to in the precondition, and the work had been valued and paid for without objection. In some cases, C had even given a notice of delay in regard to the instruction and response based on the precondition that had been made. The CA had dealt with notices of delay and granted extensions of time without reference to the precondition. 5–095 In rejecting the waiver argument, Lord Macfadyen accepted D’s position that the precondition was designed to secure that D was informed if and when C thought that the issue of a CA’s instruction would prevent completion by the completion date. If so informed, D might in some circumstances choose to avoid the delay by having the instruction cancelled. Even if that were not done, D would be put in a position in which it could make advance arrangements to cover the financial consequences of the delay. If D was deprived of that information through the failure of C to comply with its obligation to warn of the likely consequences of the instruction, the precondition secured that the risk of loss would remain with C by depriving him of entitlement to an extension of time. The precondition did not remove C’s entitlement to payment for instructed work, but deprived it of the option to transfer the risk of loss through delay by depriving it of its entitlement to an extension of time. In short, Cl.13.8 as a whole was concerned with the allocation of the burden of risk of the cost of delay to completion. Lord Macfadyen said: “Faced with a [CA’s] instruction [C] was placed under an obligation to consider what its effect would be on the completion of the works. If he was of opinion that it would delay completion he was obliged, if he was to preserve his entitlement to an extension of time,

114 F Garofalo Elec. Co, Inc v New York University, 705 NYS 2d 327 (App Div, 2000). 115 See, for example, IGBW/09 Cl.1.9.4. 116 City Inn Ltd v Shepherd Construction Ltd [2001] Scot CS 187; 2002 SLT 781. Affirmed by the Scottish appeal court [2003] BLR 468; 2003 SLT 885.

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to give notice to the [CA]. That did not impose an intolerable burden on [C] since he would already have identified the critical path of the works and the resources required for their completion. [C] might, however, take the view that he would not give notice to the [CA] either because he foresaw no delay resulting from the instruction, or because the cost implications were acceptable to him. It was not correct to represent clause 13.8 as making liability for liquidated damages turn on matters of mere procedure.”117

5–096 However, in a subsequent trial in this matter, it was held that D’s rights under the terms of this contract could be waived. Lord Drummond Young said118: “There is thus an express power to dispense with the requirements of clause 13.8.1, and the question arises as to whether this impliedly excludes waiver of the clause. In some cases an express power to dispense with a provision might well exclude a right of waiver. Nevertheless, I think that such cases are exceptional, and that the norm is that waiver should be available even when there is an express right of dispensation. My reason for this conclusion is twofold. First, waiver, like other forms of personal bar, is based on elementary considerations of justice; these are well expressed by Dixon J. in a passage cited in paragraph [154] below in relation to the right of estoppel in the law of Australia. If one party speaks or acts in such a way as clearly to suggest waiver, it may be obviously unfair to ignore what he has said or done. Secondly, in practice those involved in commercial relationships frequently act in an informal manner in their dealings with each other, no doubt because this enables their business to proceed quickly and efficiently. If effect is to be given to the parties’ true intentions, objectively construed, these informal dealings must be recognized, and waiver and other forms of personal bar achieve this. I accordingly conclude that the [CA] had power to waive the requirements of clause 13.8 and to bind [D] by so doing.”

The reference to Dixon J. is set out at para.154 of the judgment, as follows119: “The rationale of the doctrine of personal bar is set out by LP Rodger in William Grant & Sons Ltd v Glen Catrine Ltd, 2001 SC 901; citing Dixon J. in Grundt v Great Boulder Pty Gold Mines Ltd, (39) 59 CLR 641, at 674–675, Lord Rodger said (at 921): ‘[T]he basal purpose of the doctrine of estoppel is to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting. This means that the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were deserted that led to it. So long as the assumption is adhered to, the party who altered his situation upon the face of it cannot complain. His complaint is that when afterwards the other party makes a different state of affairs the basis of an assertion of right against him then, if it is allowed, his own original change of position will operate as a detriment. His action or inaction must be such that, if the assumption upon which he proceeded were shown to be wrong and an inconsistent state of affairs were accepted as the foundation of the rights and duties of himself and the opposite party, the consequence would be to make his original act or failure to act a source of prejudice’.”

Service of notice 5–097 If notice is required to be given, it must of course be served in accordance with the contract provisions, by and to the parties stipulated in the contract upon the other party, in the form required, at the correct address and in due time. A failure to comply with the requirements as to service set down in the contract will usually 117 City Inn Ltd [2001] Scot CS 187; 2002 SLT 781 at [9]. 118 City Inn Ltd v Shepherd Construction Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590 per Lord Drummond Young at [150], affirmed City Inn Ltd v Shepherd Construction Ltd [2010] CSIH 68. 119 City Inn Ltd [2007] CSOH 190; [2008] BLR 269, (2008) 24 Const LJ 590 at [154].

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invalidate an otherwise effective notice. The provisions as to service of notices may be intended merely to be directory, or, depending upon the context in which they are required to be given may be mandatory. Notices that are stated to be a condition precedent to entitlement, or upon which the appointment of a decision maker depends, for example, are likely to be construed to be mandatory and a failure to comply with the contract requirements will render the act dependent upon the notice a nullity. 5–098 For instance, in an arbitration concerning the termination of C’s employment under a construction contract, it was claimed that the notice of termination had been served not by D but by another company entirely120. D conducted its business under a number of different company names, each one registered as a separate legal entity but all with the same directors. D claimed that, inadvertently, it had served notice on the wrong letterhead, but because the directors were the same, it did not matter. This view was not shared by C, which successfully claimed that, because the companies had been registered so as to maintain an independent relationship, one from the other, it was not open to D to maintain that, for purposes that were convenient to it, the companies were one and the same. 5–099 A201/07 specifically requires that a claim must be copied to the initial decision maker and, if they are not the initial decision maker, also to the CA121. Where notice provisions specify that notices are to be copied to a third party, a failure to copy the notice to the correct party may invalidate the notice. In Von Essen v Vaughan122, in a contract for the disposal of shares in a hotel, notice of a claim for breach of warranty was to be made by 30 September 2005 and served on both D and the solicitors acting for D. Because of a potential conflict of interest involving that firm, D subsequently instructed another firm as its solicitors and thereafter, by agreement, C’s solicitors corresponded with the second firm about the transaction, the completion of accounts and the exercise of an option, but no express agreement was made that notice of claim for breach of warranty should be served other than on the first solicitors. 5–100 On 14 September 2005, C’s solicitors sent formal notice of a claim for breach of warranty to D and to D’s second solicitors. No copies of the letter or the enclosures were sent to the first solicitors until 26 October 2005, after the contractual deadline of 30 September 2005 had passed. 5–101 In confirming the decision of the court at first instance, the Court of Appeal held that service of a copy of the notice on D’s first solicitors was required for deemed service. As this was not done before 30 September 2005, C had failed to comply with the requirements for deemed service and was thus not entitled to pursue its claims for breach of warranty. 5–102 Where a named person is to be served with notice, the notice must be addressed to that person. In Education 4 Ayrshire123, the contract provided that notices, the service of which was a condition precedent to a claim for compensation, were to be sent to D addressed to the chief executive, but the letter alleged to be a notice of a claim was not addressed to the chief executive and only contained references to an email to one of D’s employees. Lord Glennie declined to accept it as a notice under the contract saying:

120 Uff, Furst, Ahearn, O’Farrell and Nissen, Construction Law Year Book 1998–1999 (1999), Vol.4 at p.31. 121 Cl.15.1.2. 122 Von Essen Hotels 5 Ltd v Vaughan and Vaughan [2007] EWCA Civ 1349. 123 Education 4 Ayrshire Ltd [2009] CSOH 146; (2010) 26 Const LJ 327.

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“The clause required that a notice be sent within a particular time to the Chief Executive of [D] giving notice of what claim [C was] making. The letter of 2 May 2007 did not do that. It matters not that, at certain levels, employees of [D] may have been aware of what was going on. Nor, to my mind, does it help [C] to say that the letter of 2 May 2007, when read with the letter of 30 April 2007 from the [subcontractor], would have enabled [D] to infer that the claim by the [subcontractor] against [C] was going to be passed up the line to them. That may be so, but the purpose of the clause is to avoid such uncertainty.”124

5–103 In Primus v Pompey125, Cl.26.1 of the contract provided that: “Any notice to be given hereunder shall either be delivered personally or sent by fax. The addresses or numbers for service of [D] and [C] shall be those stated in Schedule 1 or such other address or number for service as the party to be served may have previously notified in writing to the other party. A notice shall be deemed to have been served as follows: 1. 2.

if personally delivered at the time of delivery, or if sent by fax at the time of transmission.

In proving such service, it shall be sufficient to prove that personal delivery was made or that the fax was properly addressed and despatched as the case may be.”

5–104 A notice of intention to refer a dispute to adjudication under the HGCRA was posted by C on 5 March 2009. Notwithstanding that it was received by D and D’s solicitor the following day, D claimed that under the contract, the notice should have been provided either by way of personal delivery (which they equated with personal service) or by fax and, because it was not served in either way, it was invalid and the adjudicator was thus without jurisdiction. In construing the contract provisions, Coulson J held: “[B]y using the unusual expression ‘personal delivery’ (or, more accurately, ‘shall be delivered personally’), the parties must be taken to have meant something different from ‘personal service’, which is a well known concept requiring the handing over of the document in question in a personal exchange between two individuals. ‘Delivery’ seems to me to mean actual delivery, whether by post or by some other mechanism. ‘Personal’, as defined in the Oxford English Dictionary, means ‘of, affecting or belonging to a particular person rather than anyone else, done or made by a particular person; involving the actual presence or action of a particular individual.’ It seems to me, therefore, that ‘delivered personally’ means the actual delivery by an appropriate individual within [C] to a similarly appropriate individual within [D]. The document in question must actually be delivered. The method of delivery does not matter, provided that the document is actually delivered to the named address in Schedule 1. Because clause 26.1 refers expressly to ‘the address for service’, that seems to me to be another reason to distinguish this procedure from personal service, which can happen anywhere. On the facts of the present case, actual delivery to the named address and to an appropriate person at that address is exactly what happened. Since, therefore, there was actual personal delivery to [D’s] solicitor (arguably the most appropriate person to receive it), I do not find that there was any breach of clause 26126. I should say at once that my finding that, on these facts, [C] complied with clause 26 is based on the combination of the unusual wording of clause 26 (‘delivered personally’), and the uncontroversial evidence that the notice of adjudication was in fact received by an – perhaps the – appropriate individual the day after it was posted. If the contract had required, say, personal service, or the documents had sat on a reception desk for a week or been lost

124 Education 4 Ayrshire Ltd [2009] CSOH 146; (2010) 26 Const LJ 327 per Lord Glennie at [19]. 125 Primus Build Ltd v Pompey Centre Ltd [2009] EWHC 1487 (TCC). 126 Primus Build Ltd [2009] EWHC 1487 (TCC) at [18]–[20].

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or even delayed in the post, then I would have had no hesitation in coming to the conclusion that the notice had not been properly served in accordance with the contract. On one view, therefore, [C] have been rather fortunate that their enforcement claim has survived this first hurdle.”127

5–105 The JCT family of contracts state that, where it is not otherwise written into the contract, notice is to be given or served by any effective means to any agreed address. If nothing has been agreed, then effective service can be achieved by sending it to a company’s principal, or registered office, or, in the case of non-companies, to the last-known principal business address, by ordinary prepaid post128. The forms do not require such notices to be copied to any other party. On the other hand, the forms do provide that: “Where sent by post, it shall, subject to proof to the contrary, be deemed to have been received on the second business day after the date of posting”129

where “business day” is defined at Cl.1.1 as any day which is not a Saturday, Sunday or public holiday. 5–106 What is meant by business (working) days and by the expression “deemed” was considered in Lafarge v Newham130 under a form of contract that was said to have evolved out of the ICE standard form. In this case the court declared an arbitrator’s award to be a nullity because the effect of the deeming provision and what was meant by working days meant that notice to refer the dispute to arbitration was found to have been served outside the permitted timescale. In this case, during the course of a contract for minor civil engineering works C had referred a dispute to adjudication. Under the contract, notice to refer the dispute to arbitration had to be served by letter or delivered by hand within three months of the adjudicator’s decision, that is by 13 November 2004. Clause G44(3) of the contract stated: “Any notice shall be deemed to be served two working days following service in accordance with this clause.”

5–107 On Thursday 11 November 2004, D’s claims consultants sent a notice to refer the dispute to arbitration, which it was common ground had been received at C’s registered office on Friday 12 November 2004. In relation to the validity of the notice there were thus two issues to consider: whether the deeming provision only took effect in the event that the contrary could be proved (as is expressly stated to be the case in the JCT forms); and in the event that it did not, whether Saturday was a “working day” so as to fall within the two days necessary for the notice to be effective before it was out of time. 5–108 In construing the meaning of “deemed”, Cooke J held that: “The word ‘deemed’ can mean ‘presumed until the contrary is proved’, but it can also be used as a word of definition, stating how matters are to be regarded definitively for the purposes of the contract or document in question131.

127 128 129 130 131

Primus Build Ltd [2009] EWHC 1487 (TCC) at [22]. See, for example, MWA98 Cl.1.5 and JCT05 Cl.1.7. See, for example, JCT05 Cl.1.7.4. Lafarge (Aggregates) Ltd v London Borough of Newham [2005] EWHC 1337 (Comm). Lafarge (Aggregates) Ltd [2005] EWHC 1337 (Comm) at [31].

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What is plain, as a matter of construction, is that, whichever method of service is adopted, ‘notice shall be deemed to be served two working days following service’. Whether or not the notice is sent by post or left at the registered office, the terms of Clause G44 (3) apply, even though the effect may be to deem service to be effected after actual receipt in the course of post or delivery by hand, either of which could easily occur. The reason for this provision for a lapse of time before service is treated as effective is reasonably apparent. i.

ii. iii.

If a letter is sent by post, there will inevitably be some delay before the notice comes to the attention of those dealing with the matter at the contractor’s office, whether as a consequence of delay in the post or circulation of post at the office. The notice may not arrive at all because of the vagaries of the postal system. Equally, if the notice is left at [C’s] principal place of business or registered office, it is highly likely that there will be some delay in the matter coming to the notice of the persons concerned in the business in question. Delay is particularly to be expected with delivery by post or by hand to the registered office if that office is, as is commonly the case, the offices of solicitors or accountants of the address of the company secretary. The counting of time is nonetheless from the point when the server of the notice takes action, either by posting the notice or leaving at the relevant office. The clause is thus intended to bring clarity to the time at which service is effective, benefiting the server because he can calculate when he needs to take the relevant action and benefiting the recipient by allowing time for the matter to which the notice relates to come to the notice of those concerned with it132.

The sub-clause does not exist in order to resolve disputes where the parties do not agree on the date of actual receipt. The words ‘deemed to be served’ are not included in the clause in order to provide a fallback position if it cannot be shown when the notice was received: nor do they give rise to the possibility of rebuttal by evidence as to the time of actual receipt.”

5–109 Having determined that under this contract, irrespective of when it was actually received, the date on which service was then made was always two days after notice was posted, or delivered by hand, the judge had to consider whether Saturday was a “working day” where under the contract “working day” was not defined, but there were provisions in the contract for C to work on Saturdays. The judge held that: “In ordinary parlance in the UK, ‘working days’ are Mondays to Fridays, excluding Christmas, Easter and Bank Holidays. The point is illustrated by the parties’ own office hours. These are the days when the parties’ offices were and would ordinarily be open and it is this concept that the parties must have had in mind. The Arbitrator said that ‘working day’ was not a term of universal use, but its general meaning outside use in contracts is sufficiently clear for it to be used in contracts, whether construction contracts or other contracts, and to be given that meaning where the contract itself does not provide a definition. There is no suggestion here that there is any customary meaning in the construction industry or any usage which would change the position, whether or not contractors often work at weekends133. It is therefore much more likely to be the ordinary office working day which the contract has in mind, as opposed to the ordinary builders’ site day and the expression is clear in its effect if it is taken to refer to this. I conclude that the expression ‘working day’ means an ordinary office working day134. As Saturday 13th November 2004 was not a working day, two working days could not expire on that day, following the sending of the notice by recorded delivery on 11th November 2004 (at whatever time), and the earliest time at which service could be treated as 132 Lafarge (Aggregates) Ltd [2005] EWHC 1337 (Comm) at [35]–[36]. 133 Lafarge (Aggregates) Ltd [2005] EWHC 1337 (Comm) at [57]. 134 Lafarge (Aggregates) Ltd [2005] EWHC 1337 (Comm) at [58].

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effective would be sometime on Monday 15th November 2004, which was more than three months from the date when the adjudicator gave his decision. The consequence is that the Arbitrator has no jurisdiction in this dispute since the reference to him was not made in time in accordance with the provisions of the contract.”135

Notice as a condition precedent Extension of time conditional upon notice 5–110 The requirement simply for C to provide the CA with notice of the expected effects of a delaying event upon which the CA can then form its own opinion has been construed by some commentators as amounting to a condition precedent to the CA’s obligation to grant an extension of time. Walker-Smith and Close stated, in their commentary on JCT63: “[I]t is difficult to conclude from the wording of the clause whether [C’s] obligation to give written notice of the cause of a delay is a condition precedent to the [CA’s] duty to grant an extension of time; that is to say whether the [CA’s] duty only arises if he receives such notice, or whether the notice is merely an obligation of [C], but one necessary for the exercise of the power. A determination of this question would depend upon a consideration of the whole clause, and in that, for the reason given in the general notes above, [D] might be heavily prejudiced by a failure to grant an extension. It is unlikely, that it would be held that [C’s] notice was a condition precedent. In practice, [C] should be astute to give such a notice. If it does not it might not receive an extension for a cause for which neither party could be blamed; in which case it would be prejudiced, not [D]. Further it could well be liable in damages, because on receiving such a notice the [CA] might, order a variation which would overcome the cause of delay, and, if it was deprived of that opportunity through ignorance, [D] would suffer damage. Similarly, in practice the [CA] should grant that which is found reasonable and not wait for notice.”136

5–111 However, in the commentary on the 1980 edition of JCT80, apparently because of the wording of Cl.25.3.3.1, Povey takes a slightly different view. Clause 25.3.3.1 states: “If in the opinion of the [CA], upon receipt of any notice, particulars and estimate under clause 25.2.1.1 and 25.2.2 in any event is D’s time risk event and the completion of the works is likely to be delayed thereby beyond the completion date the [CA] shall in writing to [C] give an extension of time.” (emphasis added)

In Walker-Smith and Close, Povey comments on this as follows: “It is possible to conclude from the wording of clause 25.2.1.1, particularly when related to clause 25.3.3.1, that the [C’s] written notice is a condition precedent to the [CA’s] duty to grant an extension of time under clause 25.3.1 within 12 weeks of receiving a sufficient estimate of particulars. However, if no written notice is given, it is submitted that the [CA] cannot give an extension under clause 25.3.1, but he may be able to do so when he carries out its review after practical completion under clause 25.3.3.1.”137

5–112 JCT05 also uses the expression “on receiving a notice”138. However, with respect to the learned authors, it is one thing to impose a duty on the CA to consider the award 135 Lafarge (Aggregates) Ltd [2005] EWHC 1337 (Comm) at [59]–[60]. 136 Rt Hon Sir D Walker-Smith, and H. A. Close, The Standard Forms of Building Contract (London: Charles Knight & Co Ltd, 1979) at pp.92–93. 137 PJ Povey (ed), Walker-Smith on The Standard Forms of Building Contract (London: Charles Knight & Co Ltd, 2001) at p.160. 138 Cl.2.28.1.

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of an extension of time during the course of the works after particular information has been furnished and it is another thing entirely to say that, unless that information is furnished (presumably in its entirety), the CA has no power to award an extension of time until after practical completion; that does not follow from the phraseology employed in JCT80, JCT98, or the 2005 and later series of JCT contracts. 5–113 The principal difference between JCT63 and the 1998 forms is that, in the 1998 forms, C has a duty imposed upon it to provide the particulars of the expected effects of a D’s time risk event and an estimate of the extent, if any, of the expected delay in the completion of the works. Under JCT63, C was not required to provide any further information, or furnish the CA with its opinions. On the other hand, under the 2005 and later series of JCT forms, in the event that the information initially provided by C is inadequate, the CA may call for whatever further information it needs, a provision that was absent from earlier forms139. 5–114 In Multiplex v Honeywell140, the contract provided that: “It shall be a condition precedent to the subcontractor’s entitlement to any extension of time that he shall have served all necessary notices on [C] by the dates specified and provided all necessary supporting information including but not limited to causation and effect [schedules], labour, plant and materials resource schedules and critical path analysis [schedules] and the like.”

In this case C failed in its claim that the subcontractor had disentitled itself to an extension of time by failing to provide the cause and effect schedules and critical path analysis where it was claimed by the subcontractor that C had inhibited its power to produce such information by C’s failure to properly plan and schedule the works. Jackson J (as he then was) held that the words “not limited to causation and effect [schedules], labour, plant and materials resource schedules and critical path analysis [schedules] and the like” were for guidance as to what is meant by “necessary supporting information” and did not require the subcontractor to provide the impossible. 5–115 However, because contracting parties can agree anything they like (provided that it is not illegal, or otherwise contrary to public policy), it is quite possible to enter into a contract that expressly renders the giving of notice a condition precedent to the grant of an extension of time, or the award of compensation for D’s cost risk event. Such an effect might possibly be achieved, for instance, with a contract clause along the following lines: “[F]ailure to give notice in writing within 21 days of the occurrence of an event for which C is otherwise entitled either to an extension of time, or to compensation for loss and/or expense will constitute a waiver of any entitlement, howsoever arising, to an extension of time and/or to compensation for loss and/expense incurred thereby.”

5–116 In Education 4 Ayrshire141, notices were to be addressed to D’s chief executive in writing or by fax (but not email) within a limited period after C became aware of a D’s risk event that had caused, or was likely to cause, a delay or suffer loss and/or expense. The barring clause stated that: “In the event that information is provided after the specified number of business days contained in clause 17.6, then [C] will not be entitled to any extension of time, compensation, or relief

139 See, for example, JCT05 Cl.2.27.3. 140 Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd (No 2) [2007] EWHC 447 (TCC). 141 Education 4 Ayrshire Ltd [2009] CSOH 146; (2010) 26 Const LJ 327.

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from its obligations under this agreement in respect of the period of time during which the information is delayed.”142

In this case, it was common ground between the parties that if the information required was not delivered in accordance with the contract, this clause acted as a complete bar to C’s claim. 5–117 FIDIC/Build98143 attempts to achieve the same purpose by the concluding sentence of the clause governing the procedure for submitting claims for both extensions of time and compensation as follows: “If [C] fails to comply with this, or another sub-clause in relation to any claim, the time for completion shall not be extended and [C] shall not be entitled to additional payment.”

5–118 FIDIC/Build99, FIDIC/DB99 and FIDIC/PD+B99 also have a similar provision at Cl.20.1 that: “[I]f [C] fails to give notice of a claim within such period of 28 days, the time for completion shall not be extended, [C] shall not be entitled to additional payment, and [D] shall be discharged from all liability in connection with the claim”.

5–119 SIA80 also requires notice to be given as a condition precedent to entitlement unless the CA has already indicated its willingness to grant an extension of time. The phraseology adopted in this form is: “It shall be a condition precedent to an extension of time by the [CA] under any provision of this contract including the present clause (unless the [CA] has already informed [C] of his willingness to grant an extension of time) that [C] shall within 28 days notify [C] in writing of any event, or direction, or instruction which he considers entitles him to an extension of time, together with a sufficient explanation of the reasons why delay to completion will result.”

5–120 ECC3144 attempts to render notice of any event not ostensibly within D’s control a condition precedent, stating that: “If [C] does not notify [D’s time risk event145] within eight weeks of becoming aware of the event, he is not entitled to a change in the completion date, or a key date unless the [CA] should have notified the event to [C] but did not.”

5–121 The 2009 edition of the Irish Government standard forms of contract also states that notice for both extensions of time and compensation, to be given within 20 working days of the date C “became aware, or should have become aware of something that could result in such entitlement”146 (together with all supporting information within a further 20 days), is a condition precedent to entitlement. 5–122 In these forms, in the absence of such notice and supporting details147, C is expressly deemed to have waived entitlement to both an extension of time and compensation.

142 Education 4 Ayrshire Ltd [2009] CSOH 146; (2010) 26 Const LJ 327 at [10]. 143 Cl.20.1. 144 Cl.61.3. 145 Although ECC3 does not distinguish between D’s risk as to time separately from D’s risk as to cost, all risks being “compensation events”, for this purpose it is a time risk event. 146 Cl.10.3.2. 147 Unless accepted by quotation under Cl.10.4.

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5–123 As a condition precedent to C being entitled to relief from liquidated damages and compensation for its effects, it is not uncommon in the United States for a variations clause to require C to submit prompt notice to D with respect to work which C regards as changed and such notice provisions are routinely enforced148. In Garofalo v NYU 149, for example, the court held that C’s failure to comply with the notice provisions resulted in waiver of its claims for additional work. 5–124 IChemE expressly provides that notice of the potential effects of a variation is a condition precedent to the variation instruction taking effect and hence, in the event of delay to completion being caused thereby, to entitlement to relief and compensation. It states150: “If [C] is of the opinion that compliance with any variation, order would prevent him from, or hinder him in fulfilling any obligation under the contract, he shall so notify the [CA] within seven days giving reasons why he considers he would be so prevented, or hindered. No variation, order in respect of which such a notification is given by [C] shall become binding unless it is thereafter confirmed by the [CA]. If the variation, order is so confirmed then the obligations of the [C] shall thereupon be modified to such extent as [C] and the [CA] may agree.”

5–125 A similar clause was held to be enforceable in the Scottish case of City Inn v Shepherd151. In this case, D had amended a JCT standard form of contract to provide that: “Where in the opinion of [C] the instruction, or other item which in the opinion of [C] constitutes an instruction issued by the [CA] will require an adjustment to the contract sum and/or delay the completion date [C] shall not execute such instruction (subject of clause 13.8.4152) unless he shall have first submitted to the [CA] in writing within 10 working days (or within such other period as may be agreed between [C] and the [CA]) of receipt of instruction, details of: 1. 2. 3. 4.

initial estimate of the adjustment (together with all necessary supporting calculations by reference to the contract documents); initial estimate of the additional resources (if any) required and his method statement for compliance; initial estimate of the length of any extension of time to which he considers his entitlement to clause 25 and the new completion date (together with all necessary supporting documentation by reference to the master [schedule]); initial estimate of the amount of a direct loss and/or expense to which he may be entitled under clause 26; and any such other information as the CA may reasonably require.”

5–126 Clause 13.8.3 provided the CA with the power, on receipt of C’s estimates, either to confirm the instruction, or to withdraw it. Clause 13.8.5 then provided that: “If [C] fails to comply with any one or more of the provisions of clause 13.8.1, where the [CA] has not dispensed with such compliance under clause 13.8.4, [C] shall not be entitled to an extension of time under clause 25.3.”

148 Construction Briefings, No 2001–01, January 2001, West Group. 149 F Garofalo Elec. Co, Inc, 705 NYS 2d 327 (App Div, 2000). 150 Cl.16.6. 151 City Inn Ltd, 2002 SLT 781. Affirmed by the Scottish appeal court [2003] BLR 468; 2003 SLT 885. 152 Which provides for the CA, by notice, to dispense with C’s obligation under Cl.13.8.1 to provide notice of the effect of the variation.

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5–127 In this case, it was common ground that C had not complied with Cl.13.8.1 and the CA had not dispensed with that obligation under Cl.13.8.4. Notwithstanding this, the CA had purported to grant an extension of time of four weeks and an adjudicator had granted another five weeks making nine weeks’ extension of time in all. D appealed, claiming that, because of its non-compliance with the precondition in Cl.13.8.1, by the terms of Cl.13.8.5, C had no entitlement to an extension of time and, amongst other things, D was entitled to £270,000 in unpaid liquidated damages. In response, C claimed that it was entitled to both of the extensions of time granted to it and that Cl.13 did not operate to disqualify them because, it said, Cl.13.8.5: 1. 2.

was a penalty clause and therefore unenforceable; and only applied if C, on receipt of an instruction, actually formed the relevant opinion to which the clause refers.

5–128 Lord Macfadyen rejected both arguments. On the first point he said that, if C failed to take steps under Cl.13.8.1 to secure an extension of time, C’s failure preserved for D its entitlement to the pre-estimated weekly sum that D might have lost by reason of the delay to completion, thus the liquidated damages remained payable by C as a result of delaying completion and not as a penalty for failing to operate Cl.13153. 5–129 Whilst the imposition of notice as a condition precedent to entitlement is one of the techniques currently used to give some teeth to the notice requirements under many bespoke and some standard forms of contract, such a technique is not without its pitfalls and, in the drafting of such exclusion clauses, there are two potential problems to be faced, namely the contra proferentem rule and the “prevention principle”. 5–130 Because of the draconian results of such a clause coming into effect, it is generally thought to be likely that, to be enforceable as a condition precedent, the clause must state expressly the precise time within which the notice is to be served and must make plain by express language that, unless the notice is served within the stipulated time, C will lose its right to an extension of time. In the event of subsequent dispute, so the theory goes, such provisions are likely to be examined closely and, in the case of any ambiguity, or inconsistency with other provisions, are likely to be construed contra proferentem154. 5–131 In Multiplex v Honeywell155, Jackson J explained that the premise that in so far as the extension of time clause is ambiguous, it should be construed in favour of C, must be treated with care:

153 This matter again came before the Scottish Outer House of the Court of Session, in City Inn Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590 in which Lord Drummond Young rejected the application to deny C its extension of time and compensation for like-time prolongation costs. In this later rehearsal of the facts, it was successfully argued that, whilst C was bound by the terms of the contract to apply its corporate mind as to whether the content of a variation instruction would cause additional expense, or delay completion, that provision did not apply to late instructions which, by virtue of their lateness, gave rise to the need to adjust the contract sum, or to grant an extension of time. (The decision was upheld on appeal, see City Inn Ltd v Shepherd Construction Ltd [2010] CSIH 68. It has been criticised by this author: see Ch.4, “Standard form provisions for time and cost”, at paras 4–104 to 4–105.) 154 Bremer Handelsgesellschaft MBH v Vanden Avenne-Izegem PVBA [1978] 2 Lloyd’s Rep 109 HL. 155 Multiplex Constructions (UK) Ltd [2007] EWHC 447 (TCC) at [57].

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“It seems to me that, in so far as an extension of time clause is ambiguous, the court should lean in favour of a construction which permits [C] to recover appropriate extensions of time in respect of events causing delay. This approach also accords with the principle of construction set out by Lewison in ‘The Interpretation of Contracts’ (3rd edition, 2004). That principle reads as follows: ‘Where two constructions of an instrument are equally plausible, upon one of which the instrument is valid and upon the other of which it is invalid, the court should lean towards that construction which validates the instrument.’”

5–132 In Steria v Sigma156 HH Judge Davies took relaxed view of what is necessary in order to impose that obligation on a subcontractor. The clause in that subcontract required that: “If by reason of any circumstance which entitles [C] to an extension of time for the completion of the works under the main contract, or by reason of a variation to the subcontract works, or by reason of any breach by [C] the subcontractor shall be delayed in the execution of the subcontract works, then in any case provided the subcontractor shall have given within a reasonable period written notice to [C] of the circumstances giving rise to the delay, the time for completion hereunder shall be extended by such period as may in all the circumstances be justified.” (emphasis added)

5–133 In this case, the judge thought it unnecessary also to warn of the consequences of non-compliance saying: “In my opinion the real issue which is raised on the wording of this clause is whether those clear words by themselves suffice, or whether the clause also needs to include some express statement to the effect that unless written notice is given within a reasonable time the subcontractor will not be entitled to an extension of time. In my judgment a further express statement of that kind is not necessary. I consider that a notification requirement may, and in this case does, operate as a condition precedent even though it does not contain an express warning as to the consequence of non-compliance. It is true that in many cases careful drafters will include such an express statement, in, order to put the matter beyond doubt. It does not however follow, in my opinion, that a clause – such as the one used here – which makes it clear in ordinary language that the right to an extension of time is conditional on notification being given should not be treated as a condition precedent. This is an individually negotiated subcontract between two substantial and experienced companies, and I would be loathe to hold that a clearly worded requirement fails due to the absence of legal ‘boilerplate’.”157

5–134 Apart from the problem of expressing the condition so that it has effect, once that is achieved, then consideration may have to be given to whether the “prevention principle”158 applies. This goes along the lines of: if D is not permitted to extend the time for completion for the effects of the event for which it is responsible, it cannot have its liquidated damages as that would give it a benefit from its own wrong;

C is then entitled to a reasonable time to complete; and if C does not complete within a reasonable time, D must prove the losses it has actually suffered before C will be liable in compensation. 5–135 Applying this principle to the context of entitlement to an extension of time on the one hand and, on the other, the contractual stipulation that a failure of C to

156 Steria Ltd [2008] BLR 79. 157 Steria Ltd [2008] BLR 79 at [90] and [91]. 158 For a deeper explanation of the prevention principle, see Ch.6, “Extensions of time and time at large”, at para.6–114.

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give notice in due time will invalidate an entitlement to an extension of time, has created some difficult questions that courts and tribunals have occasionally had to resolve159. In such circumstances, the question arises as to whether, because of the prevention principle, and notwithstanding a failure to issue due notice, C will nevertheless be entitled to an extension of time for the effect of what, in the absence of an extension of time, would be an act of prevention by D. 5–136 The apparent conflict was considered in the Australian case of Gaymark160. In that case, C was required to construct a hotel, retail and office complex in Darwin, in the Northern Territory of Australia. The contract was a standard form of contract which, in its unamended form, provided, amongst other things, that an extension of time was to be granted “notwithstanding that [C] has not given notice of a claim”. 5–137 In the dispute that followed, the arbitrator found that, notwithstanding that no notice of delay had been given, had the unamended form been adopted, C would have been entitled to an extension of time for a part of the total delay to completion (as a result of adverse weather and other causes of delay to completion, for which D was responsible). However, in this case, the power to extend the time for performance notwithstanding the absence of notice of delay had been replaced by Cll.19.1 and 19.2, which in effect removed the CA’s power to grant an extension of time at any time, regardless of notice, and replaced it with C’s conditional entitlement. Clause 19.1 required amongst other things that “in any event not later than 14 days after the cause of delay first arose [C must] give notice in writing to the CA”. Clause 19.2(b)(i) stated that it was a condition precedent to entitlement to an extension of time that C “has complied strictly with the provisions of sub-clause 19.1”. 5–138 The Supreme Court of the Northern Territory refused to upset the arbitrator’s award to the effect that, in the absence of compliance by C, D was not permitted to extend the time for completion. Accordingly, because at least some of the delay to completion was caused by D, it was thereby prevented from taking liquidated damages and C was required to complete within a reasonable time, which it had done. Moreover, because C had failed to comply with the notice provisions, D had no power to grant the extension of time, which it had impliedly purported to grant, and was deprived of AUS$565,000 in liquidated damages to which the arbitrator had found it would otherwise have been entitled. 5–139 The correctness of this case has been doubted161. It is apparent that, on its facts, it was not D’s breach of which D wrongly attempted to take advantage so much as C’s breach (in not giving notice) which, according to the arbitrator’s decision, left it in a better position than it would have been had such notice been given, thereby entitling C to benefit from C’s own breach162. In general terms, the effect of Gaymark is that the prevention principle overrides the requirement for notice as a condition precedent. The Australian courts, however, have tended to avoid the severe results implied by that decision by giving a wide interpretation to the CA’s discretion to override any time-barred extension of time claim that many Australian standard forms

159 Prof. D. Jones, “Can prevention be cured by time bars?” (2009) Society of Construction Law. 160 Gaymark Investments Pty Ltd (1999) NTSC 143; (1999) 16 BCL 449. 161 See, for example, I Duncan Wallace QC, “Prevention and liquidated damages: a theory too far?” (2002) 18 BCL 82; and Dr H Lal, “Extensions of time: the conflict between the prevention principle and notice requirements as a condition precedent” (2002) Society of Construction Law. 162 The evil that Vinelott J sought to avoid by rejecting an implied term in JCT63 to the same effect in London Borough of Merton (1985) 32 BLR 51, see above at para.5–044.

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provide163.In this regard, the CA’s rejection of a prima facie time-barred extension of time application for an act of prevention has been upheld on the grounds that the CA’s discretion overrides the prevention principle, notwithstanding that the prevention principle overrides the underlying contractual notice provisions164. 5–140 In the Australian case of Turner v Austotel165, in which C had failed to give notice which was claimed to be condition precedent to D’s power to extend the contract period, Cole J rejected the contention that, by virtue of the prevention principle, by failing to give notice, C had thereby prevented D from taking liquidated damages saying: “If [C], having a right to claim an extension of time fails to do so, it cannot claim that an act of prevention which would have entitled it to an extension of time for practical completion resulted in its inability to complete by that time. A party to a contract cannot rely upon preventing conduct of the party where it failed to exercise a contractual right which would have negated the effect of that preventing conduct.”166

5–141 Turner v Austotel was relied upon obiter by the court in the case of Abigroup v Peninsula167, in which compliance with the notice provisions was expressed to be a condition precedent to entitlement to an extension of time, but the CA also had a unilateral power to grant an extension of time at any time before the issue of the final certificate. In this case, the New South Wales Court of Appeal held that: “[I]n the absence of the [CA’s] power to extend time even if a claim had not been made within time, [C] would be precluded from the benefit of an extension of time and liable for liquidated damages, even if delay had been caused by variations required by [D] and thus within the so called ‘prevention principle’.”

5–142 It thus appears that, had it been required to do so, the court would not have permitted C to avoid its obligation to give notice and would not have permitted it to receive an extension of time, notwithstanding D’s acts in inhibiting C from completing on time. 5–143 Although the logic of Turner v Austotel seems unimpeachable, it is a case that has been criticised and it was not referred to in City Inn v Shepherd168, a case in which an amended JCT form of contract was used and in which the issue was dealt with not on the application of the “prevention principle”, but on the unsuccessful application of the doctrine of penalties. 5–144 Whilst it is thought that there should be nothing in D’s control that could permit D to require C to take more time to complete, whilst at the same time taking liquidated damages for C’s failure to complete on time, there is something intuitively disturbing about the concept of C’s failure to comply with a condition precedent to an extension of time interfering with D’s entitlement to liquidated damages so as to render C better off by not complying with the contract than it would have been if it 163 See, for example, AS2124 Cl.35.5 and AS4000 Cl.34.5, which say: “notwithstanding that [C] is not entitled to an extension of time the [CA] may at any time before the issue of the final certificate direct an extension of time”. The extension of time issue in Gaymark arose because similar and equivalent provisions had been removed from the contract. 164 See, for instance, the decision in Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd [2002] NSWCA 211, discussed at para.5–141, below. 165 Turner Corp Ltd v Austotel Pty Ltd (1997) 13 BCL 378. 166 Turner Corp Ltd (1997) 13 BCL 378 at 384–385. 167 Abigroup Contractors Pty Ltd [2002] NSWCA 211. 168 City Inn Ltd [2001] Scot CS 187; 2002 SLT 781. Affirmed [2003] BLR 468; 2003 SLT 885.

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had. Take, for example, PPC2000169, which states that D may only grant an extension of time for a breach of contract by D, or any consultant “of which [C] has given early warning”. The effect of the precondition is that, if C has not given an early warning of such a breach, D is thereby unable to extend time for performance arising out of that breach, with all the difficulties that then ensue which were the subject of Gaymark170 and City Inn171. 5–145 However, City Inn was concerned with a pre-warning of the likely effects of D’s voluntary variations. It was not concerned with implied variations, or with acts, or omissions which, but for the terms of the contract, would be a breach172. For acts of prevention by D that, but for the provisions in the contract to extend time therefore, would be a breach and, where there is a power to extend time (that is, where the action constituting the act of prevention is stated in the contract to be an event for which C is entitled to relief), to require C to take administrative action before it is entitled to that relief, for D’s act of prevention, cannot, it is suggested, be right. 5–146 This is a subject that has not yet come before the courts although it can be expected to occur sooner or later under a number of UK and international standard forms of contact. For example: PPC2000 states that D may only grant an extension of time if there is a breach of contract by D, or any consultant “of which [C] has given early warning”173. ECC3 states: “if [C] does not notify a compensation event within eight weeks of becoming aware of an event, he is not entitled to a change in the prices, the completion date, or a key date unless the [CA] should have notified the event to [C] but did not.”174

The 1999 editions of the FIDIC forms also provide, perhaps less enigmatically, that: “if [C] fails to give notice of a claim within 28 days, the time for completion shall not be extended, [C] shall not be entitled to additional payment, and [D] shall be discharged from all liability in connection with the claim.”175

5–147 However, it is suggested that, should it do so, the approach adopted in Turner v Austotel is to be preferred to that in Gaymark. This view would appear to be supported by the remarks of Jackson J (as he then was), who subsequently expressed a similar concern in Multiplex v Honeywell176. In adopting Jackson J’s opinion, in Steria v Sigma177 (in which it had been claimed that the failure of the subcontractor to give C notice, in a contract in which the condition requiring notice had been held to be a condition precedent to entitlement, had the effect of putting time at large), HH Judge Davies also observed:

169 At Cl.18.3(xiv). 170 Gaymark Investments Pty Ltd (1999) NTSC 143; (1999) 16 BCL 449. 171 City Inn Ltd, 2002 SLT 781. 172 At para.32 of his judgment in City Inn, Lord Macfadyen expressly excluded the effects of a delay in receiving instructions from the precondition, distinguishing the failure to provide the instruction in due time from the effects of the instruction once given. 173 PPC 2000 at Cl.18.3(xiv). 174 ECC3 Cl.61.3. 175 See, for example, FIDIC/Build99 Cl.20.1. 176 Multiplex Constructions (UK) Ltd [2007] EWHC 447 (TCC) at [103]. 177 Steria Ltd [2008] BLR 79.

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“Although on the facts of that case Jackson J. did not, due to the particular wording of the extension of time and liquidated damages clauses employed, need to express a final decision on the point, nonetheless I gratefully adopt his analysis and agree with his preliminary conclusion. Generally, one can see the commercial absurdity of an argument which would result in [C] being better off by deliberately failing to comply with the notice condition than by complying with it.”178

5–148 This was also the position adopted by Hon Reyes J in the Hong Kong case of Hsin Chong v Henble179 in which the court declined to accept that the prevention principle should operate to keep D out of its liquidated damages simply because, in a contract in which notice of an excusable event was a condition precedent to entitlement to an extension of time, C had failed to give such notice180. 5–149 The inclusion of an administrative condition precedent to entitlement in the forms of contract has been described as an attempt to transfer the risk of delay caused by D’s time risk events from D to C, thereby rendering the benefit of an extension of time C’s instead of D’s. Rae takes the view that, provided the exclusion of the prevention principle is clearly embodied in the contract, such provisions could have that effect181. 5–150 Thus, on balance it seems that, in the absence of contractual terms to the contrary, the failure to give notice should not defeat C’s entitlement to an extension of time, nor should it result in an enhanced entitlement, but it does not follow that C’s right to an extension of time will necessarily be unaffected by its failure to give a contractually compliant notice to the CA, once it becomes aware of a delaying event of which the contract requires it to give notice as a precondition to entitlement to relief from liquidated damages during the course of the works. The better view would seem to be that: in the event that the absence of compliance with a precondition requiring notice of the effects of a voluntary change prevented D, or the CA from taking action which it could reasonably have taken to reduce, or avoid the loss arising out of the event, C’s failure to give such notice will render it liable for the costs which could have been saved and defeat its entitlement to relief from liquidated damages;

absence of strict compliance with notice as a precondition to entitlement to an extension of time arising out of acts, or omissions by D, other than voluntary changes, should not defeat C’s entitlement to an appropriate extension of time, or compensation; in principle, the CA should grant a fair and reasonable extension of time as soon as it is able to and not wait for formal notice of that of which it is already aware; the extension of time not only protects D’s interest in liquidated damages but demonstrates when the works should have been completed for the purposes of demonstrating whether C has accelerated progress to overcome, in whole, or in part, what would otherwise have been the natural consequences of the event;

178 Steria Ltd [2008] BLR 79 at [95]. 179 Hsin Chong Construction (Asia) Ltd [2006] HKCFI 940; (2005) HCCT000023A/2005, 18 August 2006. 180 See also, Dr H Lal, “The rise and rise of time-bar clauses for contractors’ claims: issues for construction arbitrators” (September 2007) Society of Construction Law. 181 SW Rae, “Prevention and damages: who takes the risk for employer delays?” (2006) 22 Const LJ 307.

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in the absence of contractually compliant notice of a delaying event, C cannot recover any acceleration costs it incurs in, order to overcome the effect of an event of which it has not notified D, or the CA on D’s behalf; in the event that C fails to give notice, it should not be entitled to benefit from its breach by receiving a greater extension of time, or greater compensation than that which it would have received had it given a contractually compliant notice; and in the event that C fails to give notice, and D or the CA is put to additional expense, which would not have occurred if such notice had been given, that expense should be recoverable from C.

Compensation conditional upon notice 5–151 Under JCT63, notice of loss and/or expense, pursuant to recovery of compensation is limited to that which C has already incurred182. Under JCT80 and JCT98, on the other hand, notice can be given for loss, or expense C has incurred “or is likely to incur”183. The difference between the two is that, in connection with recurring costs, such as interest payments, under JCT63, C must make regular applications for the interest that it has paid184, whereas under JCT80, JCT98 and the 2005 and later series of JCT contracts, a single application will suffice to cover all finance costs, provided C indicates, in its notice, that the charges are likely to continue185. 5–152 In the 2005 and later editions of the JCT forms, C’s responsibility is to give notice not within a reasonable time of the delay to progress causing the loss, or expense having arisen, but within a reasonable time of it becoming apparent to C that it is incurring, or is likely to incur loss and expense for which it would not be reimbursed under other provisions of the contract. However, irrespective of prospective notice, ultimately C can recover only the loss, or expense, that it can be shown to have actually incurred. 5–153 JCT63, JCT80, JCT98 and the 2005 and later forms alike require C to make a written application for reimbursement of loss and/or expense. The preconditions to be fulfilled are similar in all these forms, which are: the regular progress of the works has been materially affected, or possession of the site has been deferred186;

the cause of the effect on progress is an event for which D is at risk as to cost187; as a result of the effect on progress, C has incurred, or is likely to incur loss, or expense188; that loss, or expense is not recoverable, or has not been recovered under any other provision in the contract189; and

182 183 184 185 186 187 188 189

Cll.11(6) and 24(1). Cl.26(1). F G Minter Ltd v Welsh Health Technical Services Organisation (1980) 13 BLR 1. Rees and Kirby Ltd v Swansea City Council (1985) 30 BLR 1. Cl.26.1. Cll.26.2.1–26.2.8. Cl.26(1). Cl.26(1).

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the application is made as soon as it is reasonably apparent that loss has been, or is likely to be, suffered190. 5–154 ECC3191 similarly states that notice within eight weeks of the occurrence of an event (other than an event in D’s control) is a condition precedent to recovery of compensation, saying that: “If [C] does not notify [D’s cost risk event192] within eight weeks of becoming aware of the event, he is not entitled to a change in the prices unless the [CA] should have notified the event to [C] but did not.”

Unless the event causing the loss expense is a CA’s instruction, which is subject to valuation as a variation, under HK05, notice of the event “within 28 days of it becoming apparent to C that an event has occurred which gives rise to claim” is a condition precedent to entitlement193. 5–155 The requirement for prompt notice of financial loss, or expense was dealt with in the case of Rees v Swansea194. At first instance, C had been awarded damages including financing charges on the principles established in Minter v WHTSO195, that is, the interest was not interest on a debt196, but a debt that had (as one of its constituent parts) interest charges which D had incurred. It was unsuccessfully argued in the Court of Appeal that C had failed to make the requisite written application within a reasonable time as required by the contract. 5–156 The court determined, amongst other things, that the notice seeking the payment of financing charges need not be in any particular form, but must refer to the fact that C has suffered loss, or expense, by reason of being out of pocket, ie that C was seeking to recover financing charges. As to the form of the claim, Goff LJ said that he did not: “[C]onsider that more than the most general reference is required sufficient to give notice that [C’s] application does include loss, or expense incurred by him by reason of his being out of pocket in respect of the relevant variation, or delayed instruction, or whatever may be the [D’s cost risk event] giving rise to a claim under the clause.”

5–157 It is reasonably clear from the wording of this type of clause that C’s written application, within a reasonable time, or defined period, is intended to be a condition precedent to the CA’s duty to form an opinion on whether any loss, or expense has been suffered by C, for which it is entitled to reimbursement. The severity of this condition is, of course, mitigated by the provision in the JCT forms to the effect that the contractual rights do not exclude other common law remedies197. This also seems to be implied into the contracts in the United States, where a contract provision to the effect that prompt notice is a condition precedent to loss and expense has been

190 Cl.26.1.1, but see, for example, IFC05 which adds, at Cl.4.17, “which he would not be reimbursed under any other provision of the contract”. 191 Cl.61.3. 192 Although ECC3 does not distinguish between D’s risk as to time separately from D’s risk as to cost, for this purpose it is a cost risk event. 193 Cl.27.1(1) and Cl.28.1(1)(a). 194 Rees and Kirby Ltd (1985) 30 BLR 1. 195 F G Minter (1980) 13 BLR 1. 196 Interest on a debt is not normally recoverable as general damages under English law. 197 Cl.26.6.

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held not to prejudice a claim by reference to a common law right to damages, for example where time is at large by virtue of D’s breach. 5–158 In the US case of Hoel-Steffen, concerning a government contract for construction of a project in St Louis, Missouri, where notices of disruption in regard to losses suffered by changes were not given within the 30-day period imposed by the contract, the US Court of Claims, on appeal against the decision of a Board of Contract Appeals, said that the question to be answered was: “[W]hether [C] put [D] on notice of [D’s] conduct complained about, so that the procurement officials could begin to collect data on the asserted increase in costs, and could also consider desirability of continuing the delay causing act.”

5–159 In reversing the decision of the Board, that C’s claim for compensation was barred by the absence of a written demand for financial compensation, the Court of Claims held that: “To adopt [a] severe and narrow application of the notice requirements would be out of tune with the language and purpose of the notice provisions, as well as with this court’s wholesome concern that notice provisions in contract-adjustment clauses not be applied too technically and illiberally where [D] is quite aware of the operative facts.”198

5–160 In Crosby v Portland UDC, in regard to the requirement to give notice of loss and/or expense being incurred, the court said that: “[T]he proviso is to bring the [CA’s] attention to the fact that the continuation of the suspension may be costly to [D]. This object is worthy of achievement and can be achieved by the giving of a general notice whatever the actual, or anticipated circumstances of the suspension.”199

5–161 Similarly, in the United States, failure by C to comply with the contract provisions for notice of financial loss has been found not to be fatal to its claim where the CA advised D of the potential consequences of a variation before D directed C to comply therewith200; where D’s employee instructed the performance of additional work201; where the CA observed the additional work being carried out and did not object202; and where, in a claim against C by one of its subcontractors, C was advised that, if the subcontractor were to be instructed to carry out additional work, “it would in all probability result in additional cost”203. 5–162 In the US case of Harrison v Gulf States204, the US Federal Appeals Court held that, irrespective of the administrative requirements under the contract, D would be liable for C’s losses arising out of extra work caused by D’s acts, or omissions if: the extra work was foreseen by D; or

the extra work was so substantial that it could not have been without D’s actual knowledge; or D did have actual knowledge of the extra work; or D authorised the work ex post facto.

198 199 200 201 202 203 204

Hoel-Steffen Construction Co v United States, 456 F 2d 760 (Ct Cl, 1972) at 767–768. J Crosby & Sons Ltd v Portland Urban District Council (1967) 5 BLR 121 at 132, per Donaldson J. National Bonding and Accident Insurance Co (1983) ENGBCA 4586, 83–2 BCA at 16863. Corbell Construction Co (1977) AGBCA 77–129, 74–1 BCA at 1380. United Beaton International (1976) VABCA 1209, 76–2 BCA at 12133. Baston-Cook Co v Loden, 199 SE 2d 591 (Ga App, 1973). Nat Harrison Associates, Inc v Gulf States Utilities Co, 491 F 2d 578 (5th Cir, 1964) at [20].

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5–163 In summary, it appears that the US courts have been slow to find that C cannot recover its actual damages in an action for D’s acts and/or omissions, whether or not the administrative procedures under the contract have been followed. Thus, it seems that, irrespective of whether notice is expressed to be a condition precedent to entitlement in the event that no specific notice is given, in practice it is unlikely to affect adversely C’s entitlement to compensation arising from D’s act of prevention in contracts that preserve C’s common law rights. 5–164 Conversely, in the United Kingdom, in Strachan & Henshaw205, the Court of Appeal determined that Cl.44.4 of MF/1 did not entitle the subcontractor to pursue a claim at common law for damages, because such redress was forbidden by the express terms of the contract. Clause 44.4 of that form states: “[D] and [C] intend that their respective rights, obligations and liabilities as provided for in the conditions shall be exhaustive of the rights, obligations and liabilities of each of them to the other arising out of, or in connection with the contract works, whether such rights, obligations and liabilities arise in respect of, or in consequence of a breach of contract, or of statutory duty, or a tortious, or negligent act, or omission which gives rise to a remedy at common law. Accordingly, except as is expressly provided for in the conditions, neither party shall be obligated, or liable to the other in respect of any damages, or losses suffered by the other which arise out of, under, or in connection with the contract, or the works, whether by reason, or in consequence of any breach of contract, or of statutory duty, or tortious, or negligent act, or omission.”

Phraseology to the same effect is contained in C21/09206, ECC3207 and in the 2009 series of Irish government contracts208. 5–165 Thus, it would appear that, where the parties’ rights to recover money are exhaustively set out in the contract in such a way as to exclude any common law rights, as they are in C21/09, the 2009 edition of the Irish government standard forms of contract and ECC3, for example209, or where the law of the contract precludes any residual common law rights, failure to comply with the relevant notice and/or other requirements may extinguish entitlement entirely.

205 Strachan & Henshaw Ltd v Stein Industrie (UK) Ltd (No 1) (1998) 87 BLR 52; (1997) 63 Con LR 132. 206 Cl.55.3. 207 Cl.12.4. 208 See, for example, IGBW/09 Cl.10.1.2. 209 See also, for example, the implied exclusion of common law rights in ECC3 Cl.63.4.

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CHAPTER 6

Extensions of time and time at large

Extensions of time Introduction The role of the contract administrator Likely and actual delay to the completion date Forming an opinion Negotiating an award The timing of an award Reviewing an award Developer’s time risk event occurring in period of culpable delay to the completion date Time at large Where there is no contract Where there is no contract completion date under the contract When completion is prevented Where there is no power to extend time Where the power to extend time is inoperable Assessing a reasonable time to complete Where there is no contract Where there is no completion date under the contract Where there is a stipulated contract period

6–001 6–001 6–014 6–031 6–044 6–069 6–075 6–088 6–100 6–106 6–108 6–112 6–114 6–130 6–134 6–143 6–159 6–165 6–169

Extensions of time Introduction “Time for you and time for me, And time yet for a hundred indecisions, And for a hundred visions and revisions, Before the taking of a toast and tea.”1

6–001 The purpose of an extension of time to complete is to excuse C from what would otherwise be its liability for liquidated damages during that extended period. A delay, or a likelihood of delay to progress is not the same as a delay, or a likelihood of 1 TS Eliot, “The Love Song of J Alfred Prufrock”, The Norton Anthology of Poetry, 3rd edn (New York: WW Norton & Company, 1983) (l. 31–34).

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delay, to completion. It is unfortunate that the words are easily connected and, in using them in the same clauses of contracts, the draftsmen have caused much confusion2. A delay to progress is an adverse shift in the intended timing of the start and/or finish of a discrete activity; it can occur at any time. Any question as to whether the activity concerned is part of a CPM network, or is on a critical path, is irrelevant as to whether the start and/or finish of the activity has been caused to occur on a date different from that upon which it was intended to occur. On the other hand, a delay to the completion date occurs only when the completion date has passed and can only be caused by a delay to the progress of an activity that is on the critical path to completion. 6–002 It is obvious that a delay to progress can occur only upon days upon which progress was intended to be made (and not non-working days). A delay to progress is rarely co-extensive with a delay to the completion date, which is calculated in relation to the achievement of completion by a calendar date (as opposed to the working calendar). For example: if an event that causes 50 days’ delay to progress in an activity impacts upon an activity that has 15 days’ total float, it will demonstrate that the event will absorb the 15 days of float and, after the float has been taken up, the event will be likely to cause only 35 days’ delay to the completion date (notwithstanding that it caused 50 days’ delay to progress). 6–003 If an event impacts upon activities on the critical path that are planned to finish on a date before a holiday period (such as Christmas, at which typically in the United Kingdom construction industry, there is a two-week shut down) the impact on completion will be greater than the delay to progress because the delay to the completion date will also span the holiday period. For example, if an activity is planned to be completed, say, on 23 December 2005, the last working day before Christmas, a delay to progress of one day will result in an earliest date for completion of 5 January 2006, one day after the date the works are due to recommence. 6–004 The 2009 edition of the Irish government standard forms of contract makes a novel, but impractical, attempt to deal with this by specifying that an extension of time is to be “equal to the amount of the delay, taking into account only site working days”3 where site working days are defined as those days on which C intends to work according to its current schedule4. In effect, this is a day’s extension of time for a day’s delay to progress and takes no account of weekends, restrictive resource calendars, or holiday periods. On the other hand, the liquidated damages provisions say that: “If the works do not achieve substantial completion by the date for substantial completion of the works [C] shall pay [D] liquidated damages for the period from the date for substantial completion of the works until the date of substantial completion of the works as certified by the [CA].”5

It is thus apparent that the extension of time provisions are calculated according to working days, but the liquidated damages provisions operate on calendar days. 6–005 Except in the most unusual circumstances (in which C intends to work a seven-day week on 52 weeks per year), there will then be an inconsistency between the period for which D is entitled to levy liquidated damages and the period in respect of 2 See, for example, the various uses of the word “delay” in Ch.1, “Introduction and terminology”, at para.1–031 and the reference to the word “delay” in ICE7 referred to in Ch.2, “The risk of development” at para.2–027. 3 See, for example, IGBW/09 Cl.9.3.2. 4 IGBW/09 Cl.1.1. 5 IGBW/09 Cl.9.8.

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which C is entitled to an extension of time. By way of example, take the circumstances in which C does not intend to work at weekends and intends to complete on a Friday and where Monday is a national holiday. One day delay to progress caused by an excusable event will entitle C to one day extension of time. However, because the work will not now be completed until the following Tuesday, three days later, D is theoretically entitled to deduct two days liquidated damages for the effect of an event for which D is liable. Where this concerns an event that otherwise might be construed as an act of prevention, the liquidated damages provisions will become unenforceable6. 6–006 Where resources or activities have restricted working calendars, for example in groundworks when the activity is prohibited during the wet season (which, in the United Kingdom, tends to be from the end of October to the end of March the following year), a delay to progress in that activity preventing completion of it within the dry season, in so far as it is on the critical path, will have a greater effect on completion than the quantified delay to progress (to the extent of five months). 6–007 It is thus a serious omission from the 2009 edition of the Irish government standard forms of contract that it makes no allowance for extensions of time, or compensation as a result of the knock-on effect of a delay to progress of work restricted by resource, or activity-related calendars. 6–008 If the planned critical path on which an event is predicted to have an effect is re-sequenced, or otherwise changed by shifts in durations of other activities after the event has caused a delay to progress, the effect upon the completion date will also change proportionately to the degree of re-sequencing of the critical path actually accomplished. 6–009 In Balfour Beatty v Chestermount, Colman J appeared to think that a delay to progress was co-extensive with a delay to the completion date where he said: “His yardstick is what is fair and reasonable. For this purpose he will take into account amongst other factors the effect that [D’s time risk event] had on the progress of the works. Did it bring the progress of the works to a standstill?, or did it merely slow down the progress of the works? In both cases his objective must be the same; to assess whether any of [D’s time risk events] has caused delay to the progress of the works and, if so, how much. He must then apply the result of this assessment of the amount of delay caused by [D’s time risk event] by extending the contract period for completion of the works by a like amount and this he does by means of postponing the completion date.”7

6–010 Whilst, in this case, it appears that the court felt that the delay to progress would be co-extensive with the delay to the completion date, and it can be, it is apparent that, in practice, in most cases it is not. In Ascon8, HH Judge Hicks QC observed that, whilst that was an inference that might reasonably be drawn in some circumstances, it would not always follow. HH Judge Hicks’s view is to be preferred since a delay to progress cannot always be taken to be co-extensive with a delay to the completion date, even if C intends to work seven days per week. 6–011 It seems that the majority of contractors restrict their notices of delay only to those factors which, in their opinion, have affected, or are likely to have an effect on completion and, in some contracts, that is all they are required to do9. On the other hand, in the presentation of “claims”, it is sometimes argued by contractors that,

6 See paras 6–114 to 6–130, below. 7 Balfour Beatty Building Ltd v Chestermount Properties Ltd (1993) 62 BLR 1, per Colman J at 29. 8 Ascon Contracting Ltd v Alfred McAlpine Construction Isle of Man Ltd (1999) 66 Con LR 119; [2000] CILL 1583. 9 See, Ch.5, “Notices, claims and early warnings” at para.5–012.

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if a planned activity fails to start, or fails to finish on the date shown on their schedule (often not even updated), they are entitled to an extension of time. This argument is sometimes pursued irrespective of whether the phenomenon about which complaint is made is no more than a delay to progress. Sometimes, the argument is run even when the “delay” of which complaint is made is not even a delay to progress but can be shown to be a fault in the drafting of the schedule itself. 6–012 Generally, under the standard forms of contract, apart from the Australian form C21, it is only delay to a completion date carrying liquidated damages that ranks for an extension of time and is thus a D’s time risk event10. A delay to progress, which does not affect completion, does not need to be excused in order to avoid liquidated damages being levied. Hence, where the provisions require that a delay, or a likely delay, to the completion date is a condition precedent to the granting of an extension of time, no extension of time can be granted for a delay to progress notwithstanding that it may nevertheless be caused by a D’s cost risk event. 6–013 Although it is possible, in a bespoke form, to declare, for example, that on the occurrence of any change, C should be entitled to more time to complete the contract, irrespective of whether such change can be shown to have caused a delay to the completion date11, that is not the way the standard forms are generally written. Apart from C21/03 and the rather odd phraseology of IFC98 Cl.13.2, under most standard forms, it is only one of D’s time risk events that causes (or, at its lowest, is likely to cause) a delay to the completion date by a fixed date, the failure of which to achieve entitles D to liquidated damages, which entitles C to more time to complete.

The role of the contract administrator 6–014 Most standard forms say that, upon receipt of competent notice of one of D’s time risk events that causes, or, is likely to cause delay to the completion date, the CA must grant C an appropriate extension of time for completion of the works. Under the standard forms, it is generally not C’s duty to ascertain the reason for an extension of time. On the contrary, the standard forms tend to provide that the question of whether, and if so on what ground, an extension of time should be granted is a matter for the opinion of the CA, based upon its own knowledge and upon any additional information given to it by C. 6–015 Many of the standard forms contain no express provisions and give no guidance at all upon what basis the CA should award the extension of time. For example, A201/97 and A201/07 require that: “[T]he contract time shall be extended by change order for such reasonable time as the [CA] may determine.”12

Similarly, MF/1 refers to such extension of time “as may be reasonable”13. On the other hand, the ICE engineering forms say that the CA is to grant an extension of time if it is satisfied that “the delay suffered fairly entitles [C] to an extension

10 11 paras 12 13

See paras 6–031 to 6–043, below. See, for example, C21/03 referred to in Ch.4, “Standard form provisions for time and cost” at 4–006 to 4–010. Cl.8.3.1. Cl.33.1.

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of time”14. IChemE simply says that the CA should grant “the appropriate” extension of time15. 6–016 The FIDIC forms, FIDIC/Build99, FIDIC/DB99 and FIDIC/PD+B99 approach the point by dealing with C’s entitlement as opposed to the CA’s duty measured by an objective standard. They all contain the same provision, stating that “[C] shall be entitled to an extension of time if and to the extent that the completion date is, or will be delayed”. Similar phraseology is also used in MP05, which uses the expression “is, or is likely to be delayed”16. 6–017 ECC2 and ECC3, however, are much more prescriptive and state that a delay to the completion date for which C is entitled to relief from liquidated damages and reimbursement of its costs: “[I]s assessed as the length of time that, due to the compensation event, planned completion is later than planned completion as shown on the accepted schedule.”17

6–018 The NEC contracts define the “accepted [schedule]” as either the original schedule, or an accepted later schedule18. The forms anticipate that later schedules will include updates and reviews incorporating progress actually achieved, the effects of any preceding events and any re-sequencing19. Although this may appear to encourage proof of causation by reference to the schedule C was following at the time the event occurred, there appears to be no redress available to D if C fails to update its schedule at all. In those circumstances, it would appear that C must use its original planned schedule as the baseline20 from which to calculate the effects of events21. 6–019 A similar formula is adopted by C21/09, which stipulates22 that C is to supply a contractually compliant schedule, and that C must update and resubmit the schedule when directed by D, taking into account actual progress, any changed circumstances and the effects of delays and approved extensions of time. However, C21/09 also provides23 that until C provides a contractually compliant schedule, the tender schedule may be designated as the “contract program” by reference to which extensions of time are determined24. 6–020 Under the 1980 and 1998 versions of the JCT forms of contract, the CA is to determine “a fair and reasonable” extension of time. During the course of the works, the JCT forms generally provide that: “[I]f the completion of the works is likely to be delayed [as a result of D’s risk event] beyond the completion date the [CA] shall in writing to [C] give an extension of time as he then estimates to be fair and reasonable.”25

14 Cl.44(3). 15 Cl.14.1. 16 Cl.18.1. 17 Cl.63.3. 18 Cl.11.2(1). 19 Cl.32.1. 20 Cl.63.3. 21 For the effect of this, see Ch.14, “Cause and effect”, throughout and Ch.15, “Forensic programme analysis”, throughout. 22 Cl.25.8. 23 Cl.25.6. 24 See fn 21. 25 For example, JCT98 Cl.25.3.1.2.

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6–021 After the completion date has passed, the CA may also grant an extension of time “if in his opinion the fixing of such later completion date is fair and reasonable”26. Similar provisions, although with different phraseology, appear in the 2005 and later series of JCT forms. JCT05, for example, requires27 that: “If, in the [CA’s] opinion, on receiving a notice and particulars under clause 2.2728: 1. 2.

any of the events which are stated to be a cause of delay is a [D’s time risk event]; and completion of the works, or of any section is likely to be delayed thereby beyond the relevant completion date,

then, save where these conditions expressly provide otherwise, the [CA] shall give an extension of time by fixing such later date as the completion date for the works, or section as he then estimates to be fair and reasonable.”

6–022 Clause 2.28.5 continues: “After the completion date for the works, or for a section, if this occurs before the date of practical completion, the [CA] may, and not later than the expiry of 12 weeks after the date of practical completion shall, by notice to [C]: 1.

2.

3.

fix a completion date for the works, or for the section later than that previously fixed if in his opinion that is fair and reasonable having regard to any [D’s time risk events], whether on reviewing a previous decision, or otherwise and whether, or not the [D’s time risk event] has been specifically notified by [C] under clause 2.27.1, or subject to clauses 2.28.6.3 and 2.28.6.429, fix a completion date earlier than that previously fixed if in his opinion that is fair and reasonable having regard to any instructions for relevant omissions issued after the last occasion on which a new completion date was fixed for the works, or section, or confirm the completion date previously fixed.”

6–023 Contrary to what is thought by some commentators, the clauses do not require that the CA should be fair and reasonable in forming its opinion, but that the extension of time awarded should be fair and reasonable30. It is neither the conduct of the CA, nor anyone else, that has to be fair and reasonable; it is the extension of time which has to be fair and reasonable within the bounds of the contract. This was not, however, the view of the Inner House in City Inn, which thought that it was the conduct of the decision maker which had to be fair and reasonable, saying31: “it will be open to the decision-maker, whether the architect, or other tribunal, approaching the issue in a fair and reasonable way, to apportion the delay in the completion of the works occasioned thereby as between the relevant event and the other event”.

26 For example, JCT98 Cl.25.3.3.1. 27 Cl.2.28.1. 28 To the effect that the progress of the works or any section is being or is likely to be delayed. 29 Which prohibit the setting of a completion date earlier than the contract completion date and the reduction of an extension of time which is the subject of a collateral agreement. 30 In relation to identical phraseology in JCT80. See P J Povey (ed), Walker-Smith on The Standard Forms of Building Contract (London: Charles Knight & Co Ltd, 2001), where it is noted that such a requirement for the CA’s opinion to be reasonable would be subjective from the CA’s and D’s points of view and might be quite unreasonable from C’s. 31 City Inn Ltd v Shepherd Construction Ltd [2010] CSIH 68 at [42].

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It is respectfully suggested that this is incorrect. As is made plain in Cl.25 of JCT80, the contract in that case, it is the extension of time which must be fair and reasonable. 6–024 Similarly, ICE/MW232 requires that the CA shall: “Upon a written request by [C] promptly by notice in writing grant an extension of time for the period of completion of the whole, or part of the works that may in its opinion be reasonable.”

6–025 Before the CA may grant an extension of time under ACA82 and ACA9833, the contract requires that C shall “prove to the satisfaction of the [CA] that the taking over of the works, or any section is prevented” by any of D’s time risk events. ICE6, ICE7, ICE/DC and ICE/DC0134 provide that the CA shall: “[C]onsider all the circumstances known to it at that time and make an assessment of the delay (if any) that has been suffered by [C] as a result of the alleged cause.”

6–026 GC/Works/1/9835 provides that C should be granted an extension of time “if the [CA] is satisfied that the delay, or likely delay to the completion date is, or will be due to” a D’s time risk event. WCD81 and WCD9836 state that “if the works are delayed beyond the completion date by a [D’s time risk event] [D] shall make an extension of time for completion of the works as is then fair and reasonable”. The phraseology employed by DB05 is slightly different (acknowledging perhaps that, under that form, unless it provides the information itself, D is unlikely to have the facts upon which causation could be calculated), saying “[D] shall give an extension of time as he then estimates to be fair and reasonable”37. IFC84, IFC9838 and IFC05 and IFWCD/0539, as with JCT80, JCT98 and JCT05, require the CA to “make in writing a fair and reasonable extension of time for completion of the work”. 6–027 A rather novel but potentially troublesome attempt at a new formula has been made in CE06. In this form, Cl.5.7 identifies that D’s time and cost risk events are an instructed variation, an act, or omission of D, or anyone for whom D is responsible and, if it is not deleted by the option in the agreement, any other event that is identified in a risk allocation schedule. 6–028 In the contract particulars, in relation to Cl.5.7, it states: “an event (namely the occurrence of any risk which is not referred to in the risk allocation schedule and which is not reasonably foreseeable and is beyond the control of [C], excluding any act, omission, or insolvency of [C], any member of the supply chain, or any subsupplier of [C]) shall constitute [D’s risk event] to the following extent: To the extent of [x]% of the financial consequences of the relevant risk To the extent of [y]% of the time consequences of the relevant risk (If no insertion is made the financial and time consequences will be shared equally between the parties).”

32 33 34 35 36 37 38 39

Cl.4.4. Cl.11.5 alternative 2. Cl.44(2)(a). Cl.36(2). Cl.25.3.1. Cl.2.25.1. Cl.2.3. Cl.2.19.1

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6–029 Here, D is invited to specify the proportions “x” and “y” at the time of tender. There are three foreseeable difficulties in putting this into effect: How such “consequences” are to be calculated in order for them to be apportioned in accordance with the stated formula, is left open.

There is nothing to indicate what “consequences” are to be shared equally where the consequences to C may well be quite different from the consequences to D in both time and cost. Where the cost and time effect of an instructed variation, or an act, or omission by D, or anyone for whom D is responsible, is not excused entirely by D, the prevention principle may be found to come into play to render time at large40. 6–030 In FIDIC/SF9841, the basis upon which C should be entitled to an extension of time is not set out. However, in the guidance notes, FIDIC say, rather unhelpfully, that the test of whether C is entitled to an extension of time “is whether it is appropriate”, going on to say: “[T]his means that if an event under sub-clause 6.1 causes critical delay to the work and it is fair and reasonable to grant an extension of time, [D] should do so.” (emphasis added)

“Critical delay to the work” is not defined nor is there any guidance as to when it would be “fair and reasonable”. The use of such vague expressions in preference to the otherwise almost universal expression “delay to completion” or, more precisely, “delay to the completion of the works beyond the completion date” and a “fair and reasonable extension of time” is also almost certain to cause dispute. Bearing in mind that it is intended that this form should be used without the benefit of a professional third party to decide claims, such loose phraseology is regrettable42.

Likely and actual delay to the completion date 6–031 So far as concerns relief for the effect of delay by the grant of an extension of time, there is generally a three-part chain of causation to be proved: a D’s time risk event must occur;

the event must cause a delay to progress; and the delay to progress must have a knock-on effect on the completion date. 6–032 In the absence of express terms to the contrary, the occurrence of one of D’s time risk events alone is insufficient to provide entitlement to an extension of time: that event must also have an effect. The second part of the causation equation, then, is that the event must have an adverse effect on progress. If it does not in fact cause a delay to progress, then the occurrence of the event alone is generally of no consequence because it must follow logically that, if it does not delay the progress of the works in any way, it cannot delay the completion of the works in any way. The third part of the equation is thus that the delay to progress must cause, or, at its

40 See paras 6–114 to 6–129, below. 41 Cl.7.3. 42 See also Patrick M M Lane, (SC) “Disruption and Delay: Fair Entitlement and the Regulation of Risk” (2006) 22 Const LJ 92.

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lowest, be likely to cause, a delay to the completion date of the works, or a defined section of the works43. 6–033 The reason why the delay to progress must cause a delay to the completion date is that, generally, under the standard forms of contract, C is not obliged to maintain any particular planned duration, start, or finish dates for discrete activities and liquidated damages are not deductible for a simple departure from the scheduled sequence of individual activities. Liquidated damages are generally deductible only if a delay to progress caused by C has a knock-on effect and causes a delay to the completion date of a defined part of the work by a contractually binding date, the failure to perform to which will entitle D to levy liquidated damages. It is thus only a delay to progress caused by an event at D’s risk as to time that causes, or, at its lowest, is likely to cause a delay to the completion date for which C may be awarded an extension of time. Certain forms of contract are not at all clear as to the precise basis of entitlement. Others are unarguably prescriptive in addressing time-related relief. The standard forms of contract tend to fall into four categories. These are those providing relief in the event that completion of the works: is likely to be delayed;

is likely to, or has been, delayed; has been delayed; or whenever it is fair and reasonable. 6–034 For example, JCT9844, and some of the JCT 2005 and later series of main forms, expressly restrict the power to award an extension of time if completion of the works “is likely to be delayed”45. However, anticipating that an award may be made while a delaying event is continuing, HK05 provides for an extension of time if completion is likely to be, or is being, delayed46. However, by implication, this class of form may also include C21/03, which requires that an extension of time may be awarded if either: “(a) (b)

a clear majority of work in progress, or planned to be started during the period of the delay could not be proceeded with, or a clear majority of work will not be able to be proceeded with in the future, as a result of the delay that has occurred.”47

6–035 Common amongst the prescriptive forms, including the remainder of the JCT forms, GC/Works/1, IChemE, the older versions of FIDIC contracts, AS2124, AS4000, SGC99 and HK86 is the possibility, in the alternative, of likely, or actual delay to the completion date determining the right to an extension of time. So, for example, SGC99 requires that delay to the completion date “will be, might be, or has been caused”48. Many of the JCT forms use the expression “is being, or is likely to be delayed”49; the

43 But consider one of the alternative interpretations of Cll.44(1) and 44(3) of ICE7 in which, forgetting the purpose of an extension of time, (para.6–001), both references to delay can also be construed to be referable to a “delay to progress”. See also fn 2 and C21/03, referred to at fn 11, above. 44 Cl.25.3.1.2. 45 See, for example, JCT05 Cl.2.28.1.2; DB05 Cl.2.25.1.2; and PCC06 Cl.2.20.1.2. 46 Cl.25.3(1). 47 Cl.43. 48 Cl.14.2. 49 Generally, Cl.25.3.1.2.

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older FIDIC forms and C21/0950 use the expression “is, or will be delayed”; and HK86 uses the expression “is likely to be, or has been delayed”51, and the JCT intermediate forms, IFC05 and IFWCD/05, cover all possibilities by using the expression “has been, is being, or is likely to be delayed”52. Similarly, the 2009 edition of the Irish government standard forms of contract provides for an extension of time if completion “has been, is being, or will be delayed”.

Illustration Facts: Sarcon (No 177) Ltd (A) appealed a first instance judgment upholding Fitzpatrick’s (R) claim validly to rescind a building contract and lease agreement made between A and R. A appealed, asserting that it was entitled to an extension of time under Cl.8 of the building agreement. Held, by Girvan LJ in the Northern Ireland Court of Appeal, that the trial judge had erred in his interpretation of Cl.8, which led to his conclusion that R was entitled to treat the contract as repudiated and thus the appeal must be allowed; that this might not have been an appropriate case for the determination of a preliminary point and that the use of the preliminary point procedure should be restricted to cases in which the outcome will be determinative of the case between the parties: Fitzpatrick v Sarcon (No 177) Ltd53.

6–036 The third category is that in which analysis for the purposes of entitlement to an extension of time is restricted to the effect of delay to the completion date which has actually occurred. This class includes SIA80, which requires that delay to the completion date “has been caused”54, and MF/1, which requires that C “shall have been delayed in the completion of the works”55. 6–037 Where they provide for analysis based on the likely effect on the completion date, the forms generally also provide for a retrospective assessment on the basis of a “fair and reasonable” extension of time56 and, where one is restricted to relief for an actual delay to the completion date, they usually also provide for an interim assessment on a similar basis (although this does not appear to be the case with MF/1, which makes no reference to interim assessments prior to the completion date). 6–038 In regard to most of the forms that provide only for relief on the basis of what actually delayed completion, the idea is presumably that, during the course of the work, the CA may make a fair and reasonable assessment on the basis of the best information available to him at that time and, after completion, entitlement can then be calculated on the basis of the delay to the completion date that actually occurred. If entitlement was previously underestimated because of an error in the calculation of the duration of the delay to progress, or its effect, the CA must increase its allowance and, if entitlement had been overestimated during the interim period, 50 Cl.51.1. 51 Cl.23. 52 Cl.2.19.1. 53 [2012] NICA 58. 54 At Cl.23(1). 55 Cl.33.1. 56 Although there is no basis upon which such a fair and reasonable extension of time can be calculated, except what was likely to cause delay to completion.

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either because of an overestimate of the duration of the delay to progress, or because C later re-sequenced, or otherwise accelerated progress to overcome the effects of the delay to progress in whole, or in part, C is entitled to the benefit of the error57. 6–039 A number of standard forms give no express indication at all upon what basis the assessment of C’s entitlement is to be made. The AIA forms A201/97 and A201/07 contain the rather obscure provision that: “If [C] is delayed at any time in the commencement, or progress of the works by causes beyond [C’s] control , or by other causes that the [CA] determines may justify delay, then the contract period shall be extended by such reasonable period as the CA may determine.”58

6–040 NZ03 also provides for the CA’s discretion as to entitlement, stating as follows: “The [CA] shall grant an extension of time for completion of the contract works, or any separable portion if [C] is fairly entitled to an extension”59,

but without going on to state upon what basis such fair entitlement is to be ascertained. Others, whilst inviting the inference in one clause that entitlement is to be on the basis of what has actually caused the completion date to be affected, in another imply that entitlement should be on the basis of what is likely to affect the completion date. The partnering contract PPC2000, for example, states simply that: “[C] shall be entitled to be granted an appropriate extension of time if and to the extent that, despite [C’s] best endeavours any of the following adversely affect the date for completion.”60

6–041 It might reasonably be assumed from this that the CA is to ascertain what the actual effect on completion is before granting C an extension of time. However, that interpretation sits uneasily with Cl.18.4, which states that, by way of notice, C is to provide its calculations of the likely effect of an event and its proposals for overcoming them as soon as it becomes aware of the occurrence of a D’s time risk event, and that, within 20 working days of such notice, the CA is to “ascertain any fair and reasonable extension of time in accordance with clause 18.3”. In practical terms, this must mean that the CA is to ascertain the likely effect of the event, but if the tone of Cl.18.3 is taken literally that cannot be done until after the completion date has passed. 6–042 Similarly, in another contract61, after a “delay, or impediment” had occurred, C was required to give notice specifying “the relevant delay” and, provided the CA was satisfied that “such delay” had arisen (past tense), it was then to allow C an extension of time “equal to the delay”. Bearing in mind that the precondition to the CA’s duty was that at any time the works “will not be, or are unlikely to be completed” (future tense), it seems that the “delay, or impediment” was probably a delay to progress and that the “relevant” delay to progress was that which was likely to cause delay to the completion date. The effect interpreted was that the extension of time to be granted was an interim entitlement on the basis of an extension of time (to completion) equal

57 None of the standard forms of contract makes provision for the CA to reduce, after the completion date has passed, an extension of time given during the course of the works. 58 A201/07 Cl.8.3.1. 59 Cl.10.3.1. 60 Cl.18.3. 61 In an unreported case of the previous author’s experience.

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to the delay to progress caused by the “delay event”. In effect, this equates to a day’s extension of time for each day’s delay to progress. 6–043 The SCL Protocol recommends that assessment of entitlement to an extension of time should always be made contemporaneously upon the basis of the likely effect upon the completion date at the time D’s time risk event occurred, a position also adopted by the CMS62 and the CIOB Guide63.

Forming an opinion 6–044 Whilst it will be a rare occasion when no mention of C’s schedule is made in a notice of delay, request for an extension of time, or the CA’s award of an extension of time, the standard forms of contract, generally, draw no connection between the contractual requirements for planning and scheduling and those for ascertaining a reasonable extension of time.

Illustration Facts: Menolly Investment 3 Sarl (C) bought the issued shareholding of Serep Sarl (D) in a building on Cheapside, with Menolly Homes acting as a guarantor for C. Completion of the sale purchase agreement (SPA) depended mainly upon the practical completion of certain works in the building. Because a number of certificates of practical completion (CPCs) were issued, several actions were brought, the first, seeking declaratory relief against D regarding the CPCs for the works. The second action brought by D against C and its subsidiary Menolly Homes sought declarations regarding the same CPCs. Held, by Warren J, that the SPA was due for completion at the latest by ten business days after the issue of certificates 10 and 11 and it was not within the authority of the employer’s representative to certify practical completion on the basis of his personal view of the contract: Menolly Investments 3 Sarl v Cerep Sarl64.

6–045 The only current exceptions to this appear to be C21/09 ECC2, ECC3 and the 2009 edition of the Irish government standard forms of contract. C21/09 requires, as a precondition to entitlement to an extension of time, that the delay to progress that is likely to cause delay to completion is on a critical path of the then current contractually compliant, updated and impacted schedule and submitted in support of the notice of delay. ECC2 and ECC3 also require that entitlement is to be gauged by reference to the impact of a compensable event on the accepted schedule65. The 2009 edition of the Irish government standard forms of contract goes one stage further and provides for the proof of causation and calculation of entitlement. At Cl.10.3.1, C is required to provide: “A detailed calculation and, so far as is practicable, a proposal, based on that calculation, of any adjustment to be made to the contract sum and of the amount of any other entitlement claimed by [C]”; and

62 See App.2 to the 4th edn. 63 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) at Pt 4, “Managing the Time Model”. 64 [2009] EWHC 516 (Ch). 65 Cl.63.3.

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“If [C] considers that the schedule contingency referred to in sub-clause 9.4 should be used, or that there should be an extension of time, the information required under subclause 9.3, and, so far as is practicable, a proposal, based on that information for any use of the schedule contingency, or any extension to the date for substantial completion of the works and any affected section.”

6–046 Except in connection with these forms, the question of how the CA goes about forming his opinion is left open and, provided that it goes about the process in a reasoned manner66, there is nothing contractually to inhibit the CA from determining entitlement entirely intuitively if it so wishes. In City Inn v Shepherd67 Lord Drummond Young made the point saying, in regard to the CA’s determination under JCT80: “The [CA] is not expected to use a coldly logical approach in assessing the relative significance of [C’s] risk events and [D’s] risk events; instead, as the wording of both clause 25.3.1 and clause 25.3.3.1 makes clear, the [CA] is to fix such new completion date as he considers to be ‘fair and reasonable’. That wording indicates that the [CA] must look at the various events that have contributed to the delay and determine the relative significance of [C’s] and [D’s] risk events, using a fairly broad approach. Judgment is involved. It is probably fair to state that the [CA] exercises discretion, provided that it is recognized that the [CA’s] decision must be based on the evidence that is available and must be reasonable in all the circumstances of the case.”

In the appeal against this decision, Lord Osborne, said68: “The decision as to whether the [D’s time risk] event possesses such causative effect is an issue of fact which is to be resolved, not by the application of philosophical principles of causation, but rather by the application of principles of common-sense. The decision-maker is at liberty to decide an issue of causation on the basis of any factual evidence acceptable to him. In that connection, while a critical path analysis, if shown to be soundly based, may be of assistance, the absence of such an analysis does not mean that a claim for extension of time must necessarily fail.”

On the other hand, if C has provided a CPM schedule and based its notices and claims upon it, it is submitted that it would be irrational for the CA to fail to take its schedule into account in forming his opinion. In City Inn, Lord Carloway in the Inner House expressed the position thus69: “it is always a question of fact whether the [D’s time risk event] is likely to cause, or has caused, delay. In that context, although a formal critical path analysis is not essential, it is that type of exercise that has to be carried out to see what effect a [D’s time risk event] will have on the completion date as originally provided for in the contract, or as subsequently altered by earlier [D’s time risk events].”

In regard to the need for a critical path network, the CIOB Guide perceives there to be a disparity between the manner of C’s approach to time management during the course of the works and what is required in relation to the calculation of C’s entitlement once delay to the completion date is evident, saying: “At the time of writing this Guide, it is apparent that the construction industry uses [computing] resources intensively in design, in manufacture, in procurement, in assembly, in finance and in virtually every field other than the management of time. It is apparent, from

66 67 68 69

John Barker Construction Ltd v London Portman Hotel Ltd (1996) 83 BLR 31. City Inn Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590 at [13]. City Inn Ltd v Shepherd Construction Ltd [2010] CSIH 68, per Lord Osborne at [42]. City Inn Ltd [2010] CSIH 68, per Lord Carloway at [109].

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the CIOB’s research, that time management is generally pursued intuitively and schedules, if used at all, are used only as a target against which failure to succeed can be reported.”70

6–047 This may go some way to explain the extraordinary inconsistency between the requirements of most of the current standard forms of contract, the manner of management of the works and the way delay claims are generally dealt with. The effect of the SCL Protocol71, the CMS72 and the CIOB Guide73 is to require C to manage the works more scientifically than the standard forms generally require and, in the event of delay occurring, to require a strict proof of causation. C is then to be entitled not to the benefit of an inspired guess, but to the calculated effect of an excusable event upon its planned intention at the time that the event occurs. However, it is apparent that, in this regard, most of the standard forms of contract lag a long way behind current good practice in relation to their requirements for the management of time and the manner of determining C’s entitlement when affected by an excusable event. Under JCT80, JCT98 and the JCT2005 and later series of forms, for example, as soon as the CA has received a competent notice of a delay to progress, without having any enforceable right to C’s schedule, updated with progress, or otherwise, it must form an opinion as to whether: 1. 2.

any of the events which are stated by C to be the cause of the delay is a D’s time risk event; and whether the completion of the works is being or is likely to be delayed as a result of that D’s time risk event.

6–048 The contract does not expressly require the CA to ascertain whether the progress of the work is being, or is likely to be, delayed, or the cause of the delay to progress; those are matters for C to assert. The CA is only required to determine whether the cause stated by C, in its notice, is a D’s time risk event, and whether, as a result of that event, the completion of the works is being or is likely to be delayed. Unless the CA forms the opinion upon the basis of the information put to it that it is not fair and reasonable to fix a later date as a new completion date, the CA’s task in all this is to fix (in so far as it is practical to do so) a new completion date. 6–049 The clause does not indicate the grounds on which the CA could come to the conclusion, at the date of notice, that it was not fair and reasonable to fix a later date, save in the case of insufficiency of C’s “notice, particulars and estimate”. Extraordinarily, on the face of it, since the contract does not require the CA to determine the cause, or causes of delay to progress so much as whether a D’s time risk event is likely to cause a delay to the completion date, it is difficult to see how, in determining whether it is fair and reasonable to fix a later date for completion, the CA could not fairly consider the factual matrix giving rise to any delay, or likelihood of delay to progress but, in the first place, it would appear that that is solely for C to assert. Indeed in City Inn, Lord Carloway thought any delay to progress for which C was responsible was irrelevant to its entitlement74: 70 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (2010), at para.1.4.7. 71 Society of Construction Law, Delay and Disruption Protocol (2002). 72 See App.2 to the 4th edn hereof. 73 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (2010). 74 City Inn Ltd [2010] CSIH 68 at [110].

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“But the exercise remains one of looking at [D’s time risk event] and the effect it would have had on the original (or already altered) completion date. If [D’s time risk event] occurs (no matter when), the fact that the works would have been delayed, in any event, because of [C’s] default remains irrelevant.”

6–050 On the other hand, under JCT8075, JCT98 and HK0576, it is generally not for the CA to carry out a delay analysis in the first instance, but for C to provide: “[T]he particulars of the expected effects of a [D’s time risk event] and an estimate of the extent, if any, of the expected delay in the completion of the works.”

However, because C is not required to take into account its own sequential delays, parallelism or concurrency, this seems inadequate77. These forms do not require that C should provide to the CA all the information it needs in order to make its decision and there is no provision requiring C to supply further and better information, if it is requested. On the other hand, under the JCT intermediate forms, C is not obliged to produce anything unless the CA calls for it and then, more sensibly, it must produce “such further information as required by the [CA] as is reasonably necessary”78. A similar obligation has been added to JCT05, using the expression “such further information as the [CA] may at any time reasonably require”79. 6–051 It thus seems extraordinary that, under JCT80, JCT98 and HK05, the extent of an extension of time is to be gauged by C on the basis of what it alleges to be critical, but without reference to a critical path network. That may be satisfactory in relation to whether C is entitled to an extension of time for the effects of a D’s time risk event on an activity which is actually on the critical path to completion at the time and there is judicial authority from the Court of Appeal to this effect in the case of Wells v Army and Navy80. In that case, it was said by Vaughan Williams LJ that: “[I]n the contract one finds the time limited within which [C] is to do his work. This means, not only that he is to do it within that time, but it means also that he is to have that time within which to do it. [Counsel] having admitted really that, if you take the findings in fact by the learned judge, [D] had so delayed the works as to prevent their execution within the time limited, and to deprive [C] of the benefit of that time, meets the case by saying, ‘Oh yes, that may be so; but [C] did not get on as fast as it might have got on, and I say, therefore, on behalf of [D], that you cannot say that the conduct of [D]and the delay caused by them prevented the execution of this work within the time, because another contributory cause was the fact that [C] did not get on as fast as he might have done’. It seems to me that there are one, or two answers to that, one an answer in fact and the other an answer in law. The answer in fact is, that although there may have been some delay on the part of [C], and I am including in the consideration of this the assumption that he was responsible under the contract for the delay in the delivery of the ironwork by [a sub-contractor] – even assuming

75 Cl.25.2(1). 76 Cl.25.3(1). 77 Whilst in City Inn, the court thought that C’s progress, or lack of it, was irrelevant; that is not the way entitlement has been considered in relation to this type of contract in other cases. See, for example, Balfour Beatty Building Ltd v Chestermount Properties Ltd (1993) 62 BLR 1; Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 Const LR 32; (1999) CILL 1527; Royal Brompton Hospital NHS Trust v Frederick A Hammond (No 1) [2000] EWHC 39 (TCC); [2001] 76 Const LR 14. 78 IFC84 and IFC98 Cl.2.3 and IFC2005 Cl.2.19.4.2. 79 Cl.2.27.3 80 Wells v Army & Navy Co-operative Society (1902) 86 LT 764; Construction Law Year Book, Vol.4, p.65 at pp.69–70 CA.

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that it was not in fact the delay of [C], or any delay by those for whom he was responsible which prevented the execution of this work within the contract time, in my judgement, whatever [C] might have done, the delay of [D] and of [the CA] was such as to render the performance of the work within the contract time impossible. In law I wholly deny the proposition counsel put forward, which was this really in effect: ‘Never mind how much delay there may be caused by the conduct of [D, C] will not be relieved from penalties if he too has been guilty of delay in the execution of the works’. I do not accept that proposition in law.”

6–052 However, in relation to the question whether the activity affected is on the critical path at all (a concept that was patently not within the knowledge of the court in 1903), whether C provides a critical path network (which may well have changed the critical path) must be a relevant consideration. Under the JCT forms (but not HK05), C is obliged to give the CA notice of any delay to progress so that, if a CPM network is provided, it may assess any change to the critical path as a result of C’s lack of progress. 6–053 The importance of consideration of change in the critical path was recognised by Dyson J (as he then was) in the case of Henry Boot v Malmaison81. In this case, D’s defence to the claim for an extension of time under JCT80 Cl.25 for the effects of D’s time risk events was that the works were not in fact delayed by D’s time risk events but, instead, by C’s culpable delays to progress. C applied to have the defence struck out as being outside the arbitrator’s jurisdiction on the basis that C’s culpable delays to progress were: “irrelevant to [C’s] entitlement to extensions of time since they relate to alleged progress of the works and not to the effect of relevant events upon the completion date, or the [CA’s] obligation to determine that”.

Dyson J dealt with this shortly, saying: “It seems to me that it is a question of fact in any given case whether a [D’s time risk event] has caused, or is likely to cause delay to the works beyond the completion date. In the present case, [D] has both a negative and a positive defence to the extension of time claim. The negative defence amounts to saying that the variations and late information etc relied on by [C] did not cause any delay because the activities were not on the critical path, and on that account did not cause delay. The positive defence is that the true cause of the delay was other matters, which were not [D’s time risk events], and for which [C] was responsible. In my view, [D] is entitled to advance these other matters by way of defence to the extension of time claim. In my judgment, it is incorrect to say that, as a matter of construction of clause 25, when deciding whether a [D’s time risk event] is likely to cause, or has caused delay, the [CA] may not consider the impact on progress and completion of other events.”

6–054 In the event that C has been affected by a multiplicity of events, some of which may not be D’s time risk events and others that may be events causing concurrent, or parallel delays to completion, or where these have caused consequential delays to progress to other tasks, or activities, or where progress has been affected by acceleration, or unproductive working methods, a competent critical path network analysis is essential. In those circumstances, the difference between the effects of a D’s time risk event and culpable delay cannot be calculated without one. Nor can it be safely assumed that simply any CA, in all circumstances, can achieve the production of the required CPM analysis (or, it seems, understand the nuances of one produced by C). 81 Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 Con LR 32.

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Whilst it is now more commonplace in the United States82 for the appointed CA to be, amongst other things, capable of reading, reviewing and analysing CPM schedules, retrospective analysis of critical path schedules and the proof of causation are not yet part of the training of an ordinary CA, or generally within the experience of D. 6–055 At the moment, it is also apparent that the ordinary project manager, construction planner, architect, engineer, or quantity surveyor might also find this task beyond the capabilities normally to be expected of members of their professions. It is for this reason that, in the CMS, the tasks associated with the review, acceptance and modification of the CPM and the calculation of the effects of events and mitigation are allotted to a risk manager experienced in those techniques83. The CIOB Guide also calls for quality assurance procedures to be put in place, including third party review of C’s schedule, progress records, schedule review, updates and event impacts during the course of the works. 6–056 What constitutes the basis of a fair and reasonable extension of time was considered by Mr Recorder Toulson QC (as he then was) in Barker84. In that case, the Recorder listed four criteria85 by which he felt the CA’s conduct had fallen short of the standard required. He said that, in order to calculate a fair and reasonable extension of time, the CA must: apply the rules of the contract;

recognise the effects of constructive change; make a logical analysis, in a methodical way, of the effect of D’s time risk events on C’s schedule; and calculate, rather than make an impressionistic assessment of, the time taken up by events. 6–057 On the other hand, in City Inn86, Lord Drummond Young rejected what he referred to as a “coldly logical approach”. This was affirmed in the Inner House87, in which Lord Osborne set out the process which the court held to be required under JCT80, as follows: “1. 2. 3.

4.

before any claim for an extension of time can succeed, it must plainly be shown that a relevant event is a cause of delay and that the completion of the works is likely to be delayed thereby or has in fact been delayed thereby. the decision as to whether the relevant event possesses such causative effect is an issue of fact which is to be resolved, not by the application of philosophical principles of causation, but rather by the application of principles of common-sense. the decision-maker is at liberty to decide an issue of causation on the basis of any factual evidence acceptable to him. In that connection, while a critical path analysis, if shown to be soundly based, may be of assistance, the absence of such an analysis does not mean that a claim for extension of time must necessarily fail. if a dominant cause can be identified as the cause of some particular delay in the completion of the works, effect will be given to that by leaving out of account any

82 See, for example, “Construction Considerations” in Accelerated Construction Strategies Guideline (Texas Department of Transportation, 2003), in which it is expressly required that “Projects must be staffed by personnel who can review, monitor and analyse CPM schedules”. 83 See App.2 to the 4th edn. 84 John Barker Construction Ltd (1996) 83 BLR 31. 85 John Barker Construction Ltd (1996) 83 BLR 31 at 62. 86 City Inn Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590 at [13]. 87 City Inn Ltd [2010] CSIH 68 at [42].

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5.

cause or causes which are not material. Depending on whether or not the dominant cause is a relevant event, the claim for extension of time will or will not succeed. where a situation exists in which two causes are operative, one being a relevant event and the other some event for which the contractor is to be taken to be responsible, and neither of which could be described as the dominant cause, the claim for extension of time will not necessarily fail. In such a situation, which could, as a matter of language, be described as one of concurrent causes, in a broad sense (see para. [48] infra), it will be open to the decision-maker, whether the architect, or other tribunal, approaching the issue in a fair and reasonable way, to apportion the delay in the completion of the works occasioned thereby as between the relevant event and the other event. In that connection, it must be recognised that the background to the decision making, in particular, the possibility of a claim for liquidated damages, as opposed to one for extension of time, must be borne in mind and approached in a fair and reasonable manner”.

6–058 In Barker, Mr Recorder Toulson (as he then was) found that the CA had not applied the rules of the contract and had made little, or no attempt to come to grips with what had caused the delay to progress and the extent of the delay to the completion date it had caused. The Recorder said that: “[w]here he allowed time for [the effect of D’s risk events], the allowance which [the CA] made bore no logical, or reasonable relation to the delay caused”88. Under JCT80, C must receive an extension of time for any D’s time risk event that is likely to cause delay to the completion date. It was thus not fair, nor reasonable to moderate that by consideration of delay caused by events which were not D’s time risk events, eg concurrent delay caused to progress by C’s poor performance. 6–059 The CA must recognise constructive change. In deciding whether an event was a D’s time risk event, or the time to be allowed, the CA in Barker had not considered whether what had been measured and priced for in the bills of quantity was what C was in fact required to build, irrespective of whether any instruction had been given for change. In this case, in considering whether a D’s time risk event had occurred, or the time allowed, the CA had not given effect to the provisions for constructive change arising out of errors in description, or errors in, or omissions from the bills of quantity. The Recorder said: “Indeed he admitted frankly that he had never seen SMM7 before he came to give evidence89. He misapplied the contractual provisions [and] did not pay sufficient attention to the content of the bills, which was vital in the case of a JCT contract with quantities.”90

6–060 Thus, in determining whether a variation has occurred, reference must be made to the rules of measurement under which the works were priced. Under the JCT80 With Quantities form (the form in Barker), SMM7 determined the quantity and quality of the work included in the contract. Any departure from SMM7 in the bills description, unless expressly detailed, was deemed to be a variation. Thus, a requirement that existing plaster was to be filled and rubbed down until smooth before wallpapering was held not to include patch repairing a coat of plaster, 3 mm thick, that had become “live”, or fallen away from the wall as a result of the removal of the old wallpaper finish. 88 John Barker Construction Ltd (1996) 83 BLR 31 at 62. 89 John Barker Construction Ltd (1996) 83 BLR 31 at 57. 90 John Barker Construction Ltd (1996) 83 BLR 31 at 62.

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6–061 Where a CPM schedule has been used during the course of the works, then the CA must make a logical analysis of the effect of D’s time risk events on C’s schedule and calculate rather than make an impressionistic assessment of the time taken up by those events91. Mr Recorder Toulson QC said in Barker that, in this case, the CA had failed to carry out an analysis, in a methodical way, of the impact which the relevant matters had, or were likely to have had, on C’s planned schedule92. Thus, if the calculation is to be based on the impact of D’s time risk events on the planned schedule of work, each of D’s time risk events must be looked at in isolation to assess, in light of the contract conditions, what resources would reasonably be required and how long C should reasonably take to execute the task which has added work and time to the critical path. 6–062 Some concern has been expressed93 about Mr Recorder Toulson’s ruling on the method of quantifying the extent of the delay caused by D’s time risk events. In Barker, C’s as-planned acceleration schedule was prepared by the critical path method and, for the purpose of the cause and effect analysis, a critical path method presentation of an impacted as-planned schedule was used. The ruling has been interpreted to mean that the CA must carry out a full retrospective delay analysis to demonstrate the effects of any delay before the CA can properly certify an extension of time. This seems to flow from a misinterpretation of what the judgment actually said. It has been reported94 that the judgment said that: “the failure of [a CA] to perform a proper retrospective delay analysis was a fundamental flaw”. In fact, the judgment referred to four “fundamental” flaws, the only one of which referred to as “vital” was the failure of the CA to consider the variation in standards between what C was required to achieve and the standards it had priced for (by reference to the description of the work set down in the contract bills). 6–063 In delay analysis, what will constitute a “logical analysis” will depend upon: the contract form;

the nature of the work to be dissected; the nature of the evidence available; and the nature of the delaying events that have occurred and their causes. 6–064 It is often the case that, unless there is a specific request for something better, the most common form of proof offered by contractors seeking to prove entitlement to more time or money is a bar chart. Generally, this compares the chronological timing of what C says it planned to do with the chronological timing of what it says it actually managed to achieve and claims that the difference between the two is caused by matters at D’s risk for which it requires an extension of time and compensation. 6–065 Take, for example, the circumstances where C has been delayed by a single suspension of the whole of the works, say, whilst a particular piece of plant which D was to supply had failed to arrive. In such an analysis as that would require, it would be absurd to demand that the CA conduct a “detailed retrospective delay analysis” of the period during which C was awaiting delivery of the plant as was done in the Barker case. It is not necessary. In such a case, C will probably produce a bar chart to

91 On the other hand, where there was no CPM schedule available because it had been mislaid during the dispute process, in City Inn it was not considered essential to the decision-making process. 92 John Barker Construction Ltd (1996) 83 BLR 31 at 62. 93 John Barker Construction v London Portman Hotel (1996) CILL 1152 (editorial note). 94 John Barker Construction Ltd (1996) 83 BLR 31.

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demonstrate what it planned to do and what it has actually achieved and all the CA has to do is to ascertain as facts: the date at which the works were suspended;

the date at which the works recommenced; that the works were suspended between the two dates because D’s plant did not arrive; and that the suspension caused completion to be delayed. 6–066 He has then completed the exercise required of him, ie that he has made a “logical analysis”. Except in unusual circumstances95, stopping the whole of the works will affect the critical path and cause delay to the completion date. Such a simple factual analysis then speaks for itself and the matter is unlikely to be one that results in a dispute coming to trial. 6–067 On the other hand, in Kato96, where C had used a bar chart to manage its work, the Board declined to accept that any of the activities on its bar chart were critical to completion, saying: “While [C] presented testimony from its general manager that ‘all’ items on its schedule were on the ‘critical path’ such testimony cannot be credited. For example, when it discovered there was an obstruction for sewer manhole A-1, [C] notified [D] of the problem and proceeded to perform work on sewer manholes A-2 and A-3 pending its receipt of response.”

6–068 Whilst, in most cases, a simple comparison between the planned schedule and the as-built schedule, even if both accurately represent the facts, deserves to be dismissed as a “global”, or “total time” claim, it is felt that the method can be used to demonstrate D’s time risk delay, provided that: 1.

2.

3.

the 1.1 1.2 1.3

planned schedule: does not contain any float; has activity durations which have been accurately calculated; and shows the completion of each activity being a prerequisite for the commencement of its successor; all the events giving rise to the delay: 2.1 can be clearly identified; and 2.2 are D’s time risk events; and there is no need to take account of: 3.1 consequential delays; 3.2 concurrent, or parallel delays, or 3.3 accelerated, or inefficient working.

Negotiating an award 6–069 In Barker, Mr Recorder Toulson QC also seemed to think that the CA must give an equal opportunity to both parties to make representations. The Recorder did not say that the CA must always discuss its findings with both parties before making 95 That is, where there is a contingency period in the critical path (for example, as a result of the non-expenditure of a defined provisional sum for which critical time had been allowed). 96 Kato Corp (2006) ASBCA 51462, 06–2 BCA p.33293.

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an extension of time, but he implied that, if the CA gives the opportunity to one to make representations, then it must also give it to the other. In Barker, it transpired that the CA had produced an extension of time report for discussion with D and other members of the design team, but not C. The Recorder said: “[The CA] discussed with the [D] his proposed award and gave them the opportunity to comment upon it before it made it. It was unfortunate that he did not give the same opportunity to [C].”97

6–070 Clearly, if D is the certifying officer, it does not need to air its intended ruling with C before making it98. On the other hand, if there is an independent CA then, under the JCT contracts, although it is not required that the CA should hear D’s reflections on its assessment of delay before making its award, if it does so, it seems that it would be prudent also to give C an equal opportunity to comment. On the other hand, in the absence of conduct that impugns the CA’s independence99, Megarry J in Hounslow100 rejected the notion that a CA must respect the rules of natural justice before issuing a certificate. He said: “He must throughout retain his independence in exercising that judgement; but provided he does this, I do not think that unless the contract so provides, he need go further and observe the rules of natural justice, giving due notice of all complaints and affording both parties a hearing. For the rules of natural justice to apply, there must, in the phrase of [counsel], be something in the nature of a judicial situation; and this is not the case.”101

6–071 The JCT family of contracts makes no mention of discussion with D regarding extensions of time, leaving the whole matter entirely within the hands of the CA. FIDIC/DB95102 requires the CA to consult with C (but not D) in order to reach an agreement on any increase in cost, or time. On the other hand, FIDIC4103 and FIDIC/M&E87104 actually require the CA to discuss its findings with both parties before making an award. 6–072 The UK government contracts require applications for extension of time to be raised in writing before regular progress meetings and determined in writing within seven days thereafter. Clearly, although not specifically stated, it is anticipated by this that C’s claims and its entitlement will be hammered out in meetings with D and the CA on a regular basis105. 6–073 However, it is one thing for the CA to discuss his intended award with others and another thing entirely for the CA to be forbidden from making an award without D’s, or any other party’s, approval. The effect of such an inhibition on the CA’s discretion is to render his decision a nullity under those forms which require the CA to act impartially in determining what is fair and reasonable.

97 John Barker Construction Ltd (1996) 83 BLR 31 at 51. 98 Balfour Beatty Civil Engineering Ltd v Docklands Light Railway Ltd (1996) 12 Const LJ 259. 99 See Hickman and Co v Roberts [1913] AC 229. 100 The Mayor, Aldermen and Burgesses of Hounslow v Twickenham Garden Developments Ltd (1970) 7 BLR 81. 101 The Mayor, Aldermen and Burgesses of Hounslow (1970) 7 BLR 81 at 109. 102 Cl.3.5. 103 Cl.44.1. 104 Cl.26.1. 105 Cl.35.

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6–074 Collusion, or the interference by D with the CA’s independence, will also render the CA’s decision a nullity. In a recent Peruvian arbitration under common law concerning a modified version of FIDIC4, in which it was expressly stated that the CA had to obtain D’s approval before any extension of time could be granted and that any necessary approvals were “not to be unreasonably withheld, or delayed”, the CA was effectively prevented from granting any extensions of time, because D never gave any approval. The effect of this proviso was to emasculate the CA’s ability to carry out its function, which, amongst other things required it to discharge its duties fairly and impartially106. As a result, it was successfully argued that C was not bound by the contractual completion date, but entitled to a reasonable time in which to complete107. A similar result followed from similar inhibitions upon the freedom of the construction manager to function in the case of Bernhard’s Rugby Landscapes108. In this case, the contract between the CM and trade contractor also required the CM to exercise its discretion fairly but, amongst other things, the contract between CM and D restricted the CM’s freedom to decide, amongst other things, an appropriate extension of time.

The timing of an award 6–075 In the absence of express conditions to the contrary, the CA cannot merely take a passive role in the extension of time process. Even if it has not received notice, the CA must consider whether a D’s time risk event has occurred. In Holland v WHTSO, design defects in windows supplied by a nominated subcontractor under a JCT form of contract led to delays, but the CA, in the mistaken belief that the problem lay between C and the nominated subcontractor, declined to issue a variation order, or an extension of time. In the action that followed, HH Judge Newey QC said: “I find it impossible to believe that [the CA] in charge of a great building project, which has been brought to a stop by an unexpected difficulty, [is] entitled to adopt a passive attitude [the CA’s] failures were ones of omission rather than of commission, but I think that they nonetheless amounted to a breach of contract. The same conclusion as I have reached in regard to the issue of a variation instruction applies, I think, to the grant to [C] of an extension of time.”109

6–076 More recently, in Sindall v Solland110, in relation to an action under IFC84, HH Judge LLoyd QC remarked: “[N]ot just as a matter of law111 but as a matter of established good practice, a person in the position of a [CA] has always to consider whether there are any factors known to him which might justify an extension of time, even though [C] may not have given written notice of them in accordance with a provision such as clause 2.3.”

6–077 The CA should act as soon as it practicably can in dealing with the award of an extension of time: it must give C an adequate opportunity to plan its resources for

106 Cl.2.6. 107 See P Cowan and J Bellhouse, “Common law ‘time at large’ arguments in a civil law context” (2007) 23 Const LJ 592. 108 Bernhard’s Rugby Landscapes Ltd v Stockley Park Consortium Ltd [1998] All ER 249. 109 Holland Hannen and Cubitts (Northern) Ltd v Welsh Health Technical Services Organisation (1981) 18 BLR 89 per HH Judge Newey at 127–128. 110 Sindall Ltd v Solland [2001] 3 TCLR 712. 111 See London Borough of Merton v Leach (1985) 32 BLR 51 per Vinelott J at 89–90.

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completion in the light of the events that have occurred112. Unreasonable delay in dealing with the extension of time could result not only in C incurring acceleration costs that, as a result of the later grant of an extension of time, might prove to have been either unnecessary, or unwanted, but it may also affect D’s entitlement to liquidated damages where a part of the delay to the completion date is at C’s risk. In Peak v McKinney113, Salmon LJ said: “The liquidated damages clause contemplates a failure to complete on time due to the fault of [C]. It is inserted by [D] for his own protection; for it enables him to recover a fixed sum as compensation for delay instead of facing the difficulty and expense of proving the actual damage which the delay may have caused him. If the failure to complete on time is due to the fault of both [D] and [C], in my view, the clause does not bite. I cannot see how, in the ordinary course, [D] can insist on compliance with a condition if it is partly its own fault that it cannot be fulfilled.”114

6–078 However, it is entirely foreseeable that the effects of a D’s time risk event may not be finite in time until completion115. In such circumstances, the actual extension of time cannot be ascertained until the contract has been completed so that the CA is in some difficulty in regard to quantification of the extension of time before completion. On the other hand, it is equally entirely possible that, if the CA acts too quickly, it might award an extension of time on the basis of assumptions that later prove to be unfounded and that result in C getting an irrevocable extension of time for a delay to the completion of the works beyond the completion date that did not in fact occur.

Illustration Facts: Elmbid Ltd (C) sought damages from Linda Burgess (D) for failure to complete on the purchase of land and buildings known as “Botton End Barns” (the property). C claimed that it had delivered a valid certificate of practical completion (CPC) on 8 October 2008 and that D was bound to complete the purchase of the property by 22 September 2008. D replied, saying that C was unable to complete the contract and that she was entitled to rescind. C claimed that she was in breach. Held, by HH Judge Trower QC, that D had not discharged the burden that rested on her to show that practical completion had not been achieved and that the CPC ought not to have been issued; that D’s reply dated 9 October 2008 amounted to repudiation and, as a consequence, C was entitled to damages; that C was entitled to forfeit and to keep the deposit: Elmbid Ltd v Burgess116.

6–079 In Hawl Mac117, the contract provided no opportunity to review a decision after the completion date and required that, upon receipt of an application for an extension of time, which was to be made within seven days of an occurrence, the CA 112 Bernhard’s Rugby Landscapes Ltd [1998] All ER 249. 113 Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd (1970) 1 BLR 111 at 121. 114 See also Wells v Army & Navy Co-operative Society (1903) Construction Law Year Book, Vol.4, p.65 CA; Amalgamated Building Contractors v Waltham Holy Cross Urban DC [1952] 2 All ER. 452 at 455; Holme v Guppy (1838) 3 M & W 387. 115 For example, in the case of unforeseeable shortage of labour, or materials as defined in JCT80 and JCT98 Cl.25.4.10. 116 [2013] EWHC 1489 (Ch). 117 Hawl Mac Construction Ltd v Campbell River (1985) 60 BCLR 57; 1 Const LJ 370, Supreme Court of British Columbia.

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was fully and fairly to consider it. The work should have been finished by 4 December 1981. Two months before the completion date, C applied to the CA for an extension of time, but the CA failed to reply until over a year later. The court found that, due to the delay in responding to the application, there was no longer any power under the contract to determine the application and thus no fixed time to complete. A similar result followed from similar facts in Anderson v Tuapeka118, in which Wallace J said: “The extension clause in the present contract provides that the time for completion shall be extended for the time lost due to [D]-caused delays and that the [CA], upon receipt of an application for an extension of time, shall fully and fairly consider it and fix the time of the extension. Having failed to perform this obligation before the original time for the completion of the contract expired, it is my opinion there was no longer a specified date within which the contract was to be completed, or from which penalties could be imposed.”

6–080 In Miller v LCC119, on the occurrence of a D’s time risk event, the CA was required “to assign such other time, or times for completion as may appear reasonable”. It was held that these words, taken in the context of the contract as a whole, meant that the CA must deal with the duration of the extension of time within a reasonable time of the cause of delay ceasing to subsist. In this case, it was held that it was too late for the CA to extend the time for completion four months after the completion of the work. Miller was distinguished in Amalgamated v Waltham120 on the difference in wording between the two contracts. In the latter case, where the conditions of contract were those of the previous edition of what was then known as the RIBA standard form121, the operative words were “the [CA] shall make a fair and reasonable extension of time for completion”, but no indication was given in the contract as to the time in which the CA was required to act. By way of contrast, in that case, it was held that the CA could grant an extension of time after completion of the works for delays caused by shortage of labour and materials. 6–081 JCT63 required the CA to decide on a fair and reasonable extension of time “so soon as he is able to estimate the length of the delay”. JCT80, JCT98 and the 2005 and later series of JCT forms require that a decision should be conveyed to C, in writing, within a time limit of 12 weeks from the date of notification of the delay, or by the original completion date, whichever is the sooner122. HK05 requires the CA’s interim decision within 60 days of the particulars contained in C’s second notice123 and within 90 days of completion124. FIDIC4125 requires the CA to determine the amount of such extension “without undue delay”. GC/Works/1 and GC/Works/1/98126 require the CA to deal with the notice “as soon as possible and in any event within 42 days from the date any such notice is received”. FIDIC/Build98127 also provides that the CA must deal with extensions of time, or claims for additional payment within

118 119 120 121 122 123 124 125 126 127

Anderson v Tuapeka County Council (1900) 19 NZLR 1. Miller v London County Council (1934) 50 TLR 479; [1934] All ER 657. Amalgamated Building Contractors [1952] 2 All ER 452. Its successor was JCT63. Cl.25.3.1.4. Cl.25.3(2). Cl.25.3(8). Cl.44.1. Cl.36. Cl.20.1.

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42 days of receiving a “claim”128, or any further details supporting a “claim”. FIDIC/ DB95, FIDIC/SF98 and FIDIC/M&E87, conversely, make no mention at all of any limitation on the time allowed for reaching a decision. FIDIC/Build99, FIDIC/DB99 and FIDIC/PD+B99 state: “Within 42 days after receiving a claim, or any further particulars supporting a previous claim, or within such other period as may be proposed by the [CA] and approved by [C], the [CA] shall respond with approval, or with disapproval and detailed comments. He may also request any necessary further particulars, but shall nevertheless give his response on the principles of the claim within such time.”129

6–082 In Perini130, C had, on many occasions, made application to the CA for an extension of time which had been either refused, or only partially granted because of departmental policy. The relevant contract term stated that: “the [CA] shall, if it thinks the cause sufficient by writing extend the time for completion of works for such period as it shall think adequate”. 6–083 HH Judge Macfarlan in that case described the CA’s discretion as limited and felt that it was necessary in the interest of business efficacy to imply terms to the effect that: 1. 2.

D should not interfere with the proper performance by the CA of the duties imposed upon it by the contract; and D was bound to ensure that the CA performed the various duties imposed upon it by the contract.

6–084 Judge Macfarlan further stated that the CA was required to decide upon an application for an extension of time within a reasonable time: “The measurement of a reasonable time is always a matter of fact. Plainly, the [CA] must not delay, nor may he procrastinate, and in my opinion he is not simply entitled to defer a decision. On the other hand he is, in my opinion, necessarily obliged to have available for that consideration such time as is necessary to enable him to investigate the facts which are relevant to making it. When that investigation is complete I am of the opinion that the decision should then be made.”131 (emphasis added)

6–085 JCT98132 and JCT05133 clearly contemplate that the CA is to deal with delays and extensions of time on an interim basis during the course of the works before the completion date and that it will also make its decision as to whether such delays entitle C to an extension of time before that date. Thus, if the CA has less than 12 weeks between receipt of sufficient particulars from C and the completion date, the CA will still have to make its decision by that date. 6–086 As to continuing causes, the ultimate quantification of which cannot be dealt with until after completion, it seems that three possibilities might be contemplated by the CA:

128 In this sense FIDIC/Build98 does not distinguish between a claim for financial compensation and a claim for relief from liquidated damages by the award of more time to complete. 129 Cl.20.1. 130 Perini Corp v Commonwealth of Australia (1969) 2 NSWR 530; (1969) 12 BLR 82. 131 Perini Corp (1969) 2 NSWR 530; (1969) 12 BLR 82 at 102. 132 Cl.25.3.1. 133 Cl.2.28.1.

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1. 2.

3.

the grant of an unquantified extension of time for the cause, on the basis that it will be quantified after completion; the grant of a quantified extension of time for the likely effects up to the date of the extension of time and update that assessment at regular intervals throughout the subsistence of the contract and up to completion; or the grant of an estimated extension of time on the basis of the best information available at the time of the assessment with omissions from the contract to permit the reduction of awards at a later date in the light of further and better information.

6–087 The first of these, it seems, is highly unsatisfactory from everybody’s point of view and should be avoided: an extension of time that does not tell C the date by which it must complete is useless and, in any event, would not comply with any of the standard form provisions.

Reviewing an award 6–088 Except in the case of bespoke contracts, or amended standard forms, it is unusual to find that the CA has no power to review its previous decisions on entitlement, after completion. On completion of the contract, most of the forms not only require the CA to review the progress of the works generally, whether, or not any notice of delay has been given, but also require that the CA should review any awards for extension of time that may have been made. In relation to this, the ICE forms134 state “no such final review of the circumstances shall result in a decrease in an extension of time already granted by the [CA]”. The GC/Works series of UK government contracts135 state that the CA: “[S]hall not in any final decision withdraw, or reduce any interim extension of time already awarded, except to take account of any authorised omission that he has not already allowed for in an interim decision.”

6–089 IFC84 and IFC98136 provide that, in regard to any later review, “such an extension of time shall not reduce any previously made”. Similar phraseology is employed in IFC05 and IFWCD/05137, WCD81138, WCD98139 and DB05140 provide that D may: “[F]ix a completion date earlier than that previously fixed if that is fair and reasonable having regard to instructions for relevant omissions issued after the last occasion on which a new completion date was fixed.”

6–090 FIDIC/Build99, FIDIC/DB99 and FIDIC/PD+B99 all contain the same provision at the same Cl.8.4, which states that the determining party “shall review previous determinations and may increase but shall not decrease, the total extension

134 135 136 137 138 139 140

ICE/MW Cl.4.4; ICE6, ICE7 and ICE/DC Cl.44(5). See, for example, GC/Works/1/98 Cl.36(4). Cl.2.3. Cl.2.19.3. Cl.25.3. Cl.25.3. Cl.2.25.5.2.

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of time”. HK05, on the other hand, entitles the CA to reduce a previous extension of time during a period of culpable delay141 but not after substantial completion142. 6–091 From C’s point of view, there is thus good sense in giving prompt notice of delay and making sure that the CA has all the information available to it to deal competently with it. On the other hand, from D’s point of view, the problem of dealing with the effects of delay too quickly is that, save for omissions made from the works in particular circumstances, in most standard forms of contract, the CA is forbidden from reducing the extension of time in any subsequent review of an award. 6–092 Once an extension of time has been granted, then, in regard to any subsequent award, JCT80, JCT98143 and HK05144 make provision for the CA to take account of the time consequences of any omission of work, or obligations imposed by the contract documents by reducing, in whole, or in part, the previous extension of time. Although it has been argued that, under JCT80, the CA can take account of omissions when adjudicating upon the very first notice of a D’s time risk event145, generally the CA may not set a date for completion earlier than the original completion date146. In other words, the CA cannot use a review of omissions under the extension of time provisions to change the contract period to less than that which was agreed between the parties at the commencement of the contract. The CA can only use this provision to reduce the extent of extensions of time already granted. 6–093 Under JCT80, JCT98 and the 2005 and later series of JCT forms, the CA can only take account of instructions omitting work where those instructions were issued since the CA’s last decision on an extension of time. In other words, the CA cannot use this provision to “second guess” its previous awards, it can only take into account the effect on time of the later instructions to omit work, or obligations. 6–094 While the provisions of the JCT forms mean that the CA must make a decision on all C’s applications for extensions of time not later than the completion date, Cl.25.3.3 of the JCT80 and JCT98 forms, for example, allows the CA a further opportunity, in the 12 weeks immediately following practical completion, to review its previous decisions on the extension of time, but not to reduce them. These forms provide that the CA may fix a date earlier than that previously fixed: by acceptance of a quotation under Cl.13A including a reduction of time;

having regard to the omission of any work after the last occasion when the CA fixed a completion date; but in any event, the CA may not fix a time for completion earlier than that stated in an accepted quotation under Cl.13A.

141 Cl.25.3(7). 142 Cl.25.3(8). 143 Cl.25.3.2. 144 Cl.25.3(5). 145 The argument is that, under Cl.25.3.1 of JCT80, the CA is required to state the extent to which he has had regard to any instruction omitting work and issued since the fixing of the previous completion date. Since the completion date is defined in Cl.1.3 as the date for completion “fixed and stated in the Appendix”, it follows that even on the first application for an extension there is a previously “fixed” completion date for the purposes of Cl.25.3.1.4. This argument is inapplicable to the 2005 and later series of forms which make it clear that it is only instructions for omissions issued after the last occasion on which a new completion date was fixed which are relevant. See, for example, JCT05 Cl.2.28.5.2. 146 See, for example, JCT80 Cl.25.3.14.

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6–095 Similar, but not identical provisions appear in JCT05, where the exclusions on the power to fix an earlier date are contained in Cll.2.28.6.3 and 2.28.6.4. 6–096 The potential difficulty for the CA in making a decision too early can be illustrated by the example of a contract for construction of road works. At the time that D’s time risk event occurs, the possibility of re-sequencing adjacent rips of roadway to reduce the lag between them is not foreseeable. So, if C then produces its updated as-planned schedule with the impact of D’s time risk event illustrated on it by way of notice of D’s time risk delay, and the CA deals with it promptly, C should be awarded the anticipated effect of D’s time risk event by way of an extension of time. However, if C delays its request for an extension of time until after the re-sequencing and reduced lag between adjacent rips has taken effect, the predicted effect of D’s time risk event on the completion date will have changed radically. 6–097 A prompt notice, followed by an equally prompt decision, as is required by the standard forms of contract, would have resulted in an extension of time based on the assumption that all subsequent work would proceed as planned. Once that award has been made, the CA may not reduce it on the basis of a later analysis of entitlement unless, before doing so, it gives formal instructions to vary the sequencing of the works (if the contract permits it, which most do not) by omitting the lag time, which had already been saved by C. 6–098 A retrospective delay analysis, made after the contract was completed on the basis of as-built records, would only demonstrate entitlement in relation to what had actually occurred, rather than what might have occurred if the work subsequently is not re-sequenced147. 6–099 Under the current standard forms of contract, which do not give D an enforceable right of access to C’s CPM schedule, there is thus a considerable advantage to be gained by C’s giving notice with supporting proof to the CA promptly on the occurrence of a delaying event in contracts that permit an extension of time for the likely effect of an event, as opposed to the actual effect of an event on completion. In such a situation, the CA is constrained to award an extension of time on the basis of a projection of the then planned schedule impacted by the effect of D’s time risk event on the works at the time the event occurs. Unless the CA subsequently unreasonably delays an award, it must determine C’s entitlement without knowing whether future re-sequencing will subsequently render D’s time risk event either less critical, or not critical at all.

Developer’s time risk event occurring in period of culpable delay to the completion date 6–100 Where C is in culpable delay because the completion date has passed and practical completion has not yet been achieved, the CA must still grant an extension of time if a D’s time risk event occurs in the period of culpable delay. Generally, under most standard forms of contract, there is no restriction on the type of D’s time risk events that entitle C to an extension of time in a period of culpable delay. They may therefore include those D’s time risk events which are deemed to be at D’s risk and “neutral” D’s time risk events, such as adverse weather conditions. In Balfour Beatty v Chestermount148, notwithstanding that the form of contract in question in that case was 147 A possibility which, in regard to JCT80, was expressly rejected by the court in City Inn Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590, affirmed [2010] CSIH 68. 148 Balfour Beatty Building Ltd (1993) 62 BLR 12.

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silent on the matter, Colman J (obiter) felt that C should not be entitled to an extension of time for neutral events occurring in a period of culpable delay, but his reasons for forming this view were not extensively reported149. 6–101 HK05150 expressly permits a review of C’s extension of time entitlement, allowing for increases and, in periods of culpable delay, decreases, in any previous award “if it is fair and reasonable to do so”. Otherwise, most of the contract forms considered here appear to make no express provision in regard to risk during a period of culpable delay. However, there are three notable exceptions. The extension of time clause in FIDIC/M&E87151 specifically provides that D takes the specified risks, whether or not C is in culpable delay by the concluding expression: “[C] shall be entitled to such extension of time whether the delay occurs before, or after the time for completion”. The other exceptions are the JCT intermediate forms. By exclusion, IFC84 and IFC98 declare152 that, whilst during the contract period D takes the risk, once C is in culpable delay, D is excused and the risk of the following passes to C: force majeure153;

exceptionally adverse weather conditions154; loss, or damage caused by any one or more of the specified perils (the insured risks)155; civil commotion, local combination of workmen, strike, or lock-out affecting any of the trades employed upon the works, or any trade engaged in the preparation, manufacture, or transportation of any of the goods, or materials required for the works156; C’s inability for reasons beyond his control and that he could not reasonably have foreseen at the base date to secure such labour as is essential to the proper carrying out of the works157; C’s inability for reasons beyond his control and which he could not reasonably have foreseen at the base date to secure such goods, or materials as are essential to the proper carrying out of the works158; the carrying out by a local authority, or statutory undertaker, of work in pursuance of its statutory obligations in relation to the works, or the failure to carry out such work159; the use, or threat of terrorism and/or the activity of the relevant authorities in dealing with such use, or threat160; and the deferment by D in giving possession of the site under Cl.2.2161 (which common sense dictates in any case could not be a relevant consideration at that stage).

149 150 151 152 153 154 155 156 157 158 159 160 161

Balfour Beatty Building Ltd (1993) 62 BLR 12 at 34–35. Cl.25.3(7). Cl.26.1. Cl.2.3. Cl.2.4.1. Cl.2.4.2. Cl.2.4.3. Cl.2.4.4. Cl.2.4.10. Cl.2.4.11. Cl.2.4.13. Cl.2.4.16. Cl.2.4.14.

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6–102 A similar structure appears in IFC05 and IFWCD/05 but in that form the risks that are transferred to C during a period of culpable delay are: the carrying out by a statutory undertaker of work in pursuance of its statutory obligations in relation to the works, or the failure to carry out such work162;

exceptionally adverse weather conditions163; loss, or damage caused by any one or more of the specified perils (the insured risks)164; civil commotion, or the use, or threat, of terrorism and/or the activities of the relevant authorities in dealing with such use or threat165; strike, lockout, or local combination of workmen, affecting any of the trades employed upon the works, or any of the trades engaged in the preparation, manufacture, or transportation of any of the goods, or materials required for the works (or, in the case of IFWCD/05, any persons engaged in the preparation of the design for C’s designed potion)166; the exercise after the base date by the UK government of any statutory power which directly affects the execution of the works167; force majeure168. 6–103 In regard to acts of prevention, the court in Chestermount saw no difficulty that would prevent an extension of time producing a new completion date, which was prior to that on which the variations were actually instructed. The precise nature of the evidence offered in that case to prove the effect of a D’s time risk event does not appear from the report. But the court’s exposition of the basis of C’s entitlement when calculated retrospectively is, with respect, unarguably correct: “[T]he function of the completion date is to identify the end of the period of time commencing with the date of possession within which [C] must complete its works, including variations. The completion date is thus not the date by which [C] ought to have achieved, or ought in the future to achieve, practical completion, but the date which marks the end of the total number of working days starting from the date of possession within which [C] ought fairly and reasonably to have completed the works.”169

6–104 There appears to be nothing in the standard forms of contract that would indicate on what basis it would be possible to calculate the likely effect of a D’s time risk event occurring during a period of culpable delay, after the completion date had passed. If the approach taken is dependent upon the primacy of the critical path (as it is submitted it should be before the completion date), then C would not be entitled to an extension of time for such an event occurring that did not impact upon the critical path to the ultimate date for completion. 6–105 The drafters of the SCL Protocol considered this to be unfair and recommended that, after the completion date has passed, C’s entitlement to more time should be calculated not by reference to its effect upon the critical path to the then date for

162 163 164 165 166 167 168 169

Cl.2.20.7. Cl.2.20.8 Cl.2.20.9. Cl.2.20.10. Cl.2.20.11. Cl.2.20.12. Cl.2.20.13. Balfour Beatty Building Ltd (1993) 62 BLR 1 at 30–31.

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completion. but by reference to the period of time taken up on site by the work, or suspension caused by D’s risk event. This is also the way the CMS address the issue170.

Time at large 6–106 Provided that there is a date by which the works are to be completed, and, if events at D’s risk occur, there is an effective power under the contract to extend time for the effects thereof, a revised date for completion can be enforced under the contract. However, if there is no contractual date for completion, or, in the face of D’s risks causing delay, properly the time for completion cannot be extended, time is said to be “at large”. The effect of time being at large is that C is not then bound by a fixed completion date, but must complete within a reasonable time and D is unable to take liquidated damages, but may recover damages at common law for delay after the reasonable date for completion. 6–107 There are four circumstances in which the time to complete a construction contract may be said to be at large. These are when: there is no contract;

although there is a contract, there is no completion date under the contract; although there is a contract completion date, delay has been caused by D and there is no power under the contract by which the time to complete may be extended; and although there is a power to extend time, it has not properly been put into effect.

Where there is no contract 6–108 Whilst, in most cases, construction work will be carried out under a contract of some sort, that is not always the case and the time to complete will be at large if it is impossible to find a fixed date by which C is bound to perform. This may be as the result of, on the one hand, an otherwise effective contract being abandoned, or, on the other, if, whilst the parties continue to perform as though there were still a contract in existence, there is nothing by which the effective terms of such a contract can be construed. 6–109 Notwithstanding that the parties have agreed a completion date, either by formulation, or calculation, circumstances may arise during the execution of the contract that render that completion date unenforceable. This may occur where D waives the obligation to complete by the specified time, or date, or, where D, faced with a breach of contract by C which would entitle D to terminate the employment of C and/or to bring to an end the primary obligations of the parties to perform, instead elects to continue with the performance of the contract. Shawton v DGP171 concerned a series of contracts whereby Shawton were subcontractors to a third party for the design and manufacture of parts for the nuclear waste processing plant at Sellafield. Shawton sublet the production of drawings for the parts to DGP. In the mistaken belief that they could produce their drawings directly from the information provided by the third party and that they had no obligation to carry out any design development at all, DGP

170 See App.2 to the 4th edn thereof. 171 Shawton Engineering Ltd v DGP International Ltd [2005] EWCA Civ 1359.

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failed to allow sufficient time in its schedule for the preparation of drawings. The subcontract contained no provision for variations, nor for power to extend the time for performance, but nevertheless, both during and after the contract completion dates, Shawton ordered variations and DGP put them into effect. Over 12 months after the last completion date had passed, Shawton took the view that DGP’s failure to complete by the due dates was a repudiation of their series of contracts and purported to terminate. The Court of Appeal held that, by the time Shawton took any action, the original completion periods had ceased to be of any relevance. May LJ said: “The original completion dates, and, indeed, the original completion periods had ceased to be of any relevance. Shawton were, in the language of Denning LJ in Rickards v Oppenheim, not insisting on the stipulations as to time, nor were they insisting on any times or periods for completion. This circumstance, in my view, overlaid to extinction any question of calculating time periods by reference to the original dates for completion and the work content of variations. In the strange circumstances of this case, a reasonable time for completion was literally at large, in the sense of being undefined.”172

As a result, the misjudged contract schedule (which was initially at DGP’s risk) became irrelevant in determination of a reasonable time to complete. 6–110 A further example is the case of Astea v Time Group173. In this case, C was a provider of software to D, which was a manufacturer and retailer of personal computers. C had agreed to complete performance of its services by the end of October 2000, or by 6 November 2000 (the facts appear to have been unclear). The dates passed, no new completion date was set and, in March 2001, D subsequently claimed the contract had been repudiated and terminated the contract174. It was common ground that strict compliance with an agreement to complete by the end of October 2000, or by 6 November 2000 had been waived by failure to treat such failure as repudiatory and that C’s obligation thereafter was to complete within a reasonable time. 6–111 The effect of the absence of any contract at all is illustrated by the case of BSC v Cleveland Bridge175. Here, no formal contract had been signed, but the steel, the subject of the contract, had been delivered. The claimant refused to pay for the steel, saying that late and out-of-sequence delivery had caused them loss and that such late delivery was a breach of contract. The defendant claimed that there could be no contractual delivery date as there had been no contract executed. Goff J (as he then was) observed: “Both parties confidently expected a formal contract to eventuate. In these circumstances, to expedite performance under that anticipated contract, one requested the other to commence the contract work, and the other complied with that request. If thereafter, as anticipated, a contract was entered into, the work done as requested will be treated as having been performed under that contract; if, contrary to their expectation, no contract was entered into, then the performance of the work is not referable to any contract the terms of which can be ascertained.”176

172 Shawton Engineering Ltd [2005] EWCA Civ 1359 at [71]. 173 Astea (UK) Ltd v Time Group Ltd [2003] EWHC 725 (TCC). 174 It was not contended that it had been expressly agreed that C would do anything by a date proximate to March 2001, nor that any notice had been given making time of the essence of the contract in relation to C doing something by a date proximate to March 2001, it was just the date when D’s patience expired. 175 British Steel Corp v Cleveland Bridge and Engineering Co Ltd (1981) 24 BLR 94. 176 British Steel Corp (1981) 24 BLR 94 at 121.

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Where there is no contract completion date under the contract 6–112 Under the standard forms of building and civil engineering contract, the specification of time to complete is dealt with in two different ways. On the one hand, the building contracts tend to invite the insertion (in the appendix to the building contract) of a fixed calendar date for the handover of possession of the site to C, coupled with a fixed completion date by which the contract must be practically completed. There, the period between the two dates is described as the contract period, during which C must carry out and complete the work. On the other hand, the engineering contracts tend to stipulate that the work shall be completed within a specified number of days, or weeks from the notice to proceed. The date on which the notice to proceed may be given is then left open for a limited period of time. It is only once the notice to proceed has been given that the contract period can commence and the date for completion can be calculated. 6–113 Here, notwithstanding that there is an enforceable contract, which, amongst other things, contains provision for a number of D’s risk events, on the occurrence of which D may extend the time to complete, time may be at large, and thus to be completed in a reasonable time, simply because the draftsman has failed to specify the contract completion date, or time for performance in the contract177.

When completion is prevented 6–114 In the Edwardian English case of Wells v Army & Navy178, it was held by Vaughan Williams LJ that: “In the contract one finds the time limited within which [C] is to do his work. This means, not only that he is to do it within that time but it means also that he is to have that time within which to do it.”

Thus, if the work is expanded so as to require more time, C must be given that time, otherwise D may not be permitted to rely upon its right to liquidated damages because at least one of the causes of delay to the completion date will have arisen as a result of an event for which D takes the risk and the prevention principle then arises. 6–115 The genesis of the prevention principle is usefully set out by Jackson J (as he then was) in Multiplex v Honeywell179, from which the following extracts are taken. 6–116 The principle was first enunciated in Holme v Guppy180. In this case C agreed to carry out carpentry and joinery work forming part of a new brewery in Liverpool for £1,700. The contract specified a completion date of 31 August 1836 and provided for liquidated damages at the rate of £40 per week in the event of delay beyond that date. Delay occurred. D withheld certain payments. C brought an action in assumpsit for the balance of the contract price. Evidence called at the Liverpool Assizes established that D failed to give possession of the site for four weeks following execution of the contract. Other causes of delay established were certain defaults on the part of D and 177 See, for example, Portland Utilities Construction Co v Chase Creek LLC (Tenn App, 2004); Mies Equipment Inc v NCI Building System LP, 167 F Supp 2d 1077 (D Minn, 2001). 178 Wells v Army & Navy Co-operative Society (1903) Construction Law Year Book Vol. 4, 65 CA at 69–70. 179 Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd (No 2) [2007] EWHC 447 (TCC) at [50]. 180 Holme (1838) 3 M & W 387.

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also certain defaults on the part of other contractors engaged by D. Coltman J awarded £200 to C. That award was challenged by D but upheld by the Court of Exchequer. Parke B, delivering the judgment of the Court of Exchequer, said: “On looking into the facts of the case we think no deduction ought to be allowed to [D]. It is clear from the terms of the agreement that [C] undertake[s] that they will complete the work in a given four months and a half and the particular time is extremely material because they probably would not have entered into the contract unless they had had those four months and a half within which they could work a greater number of hours a day. Then it appears that they were disabled from by the act of [D] from the performance of that contract. There are clear authorities that if the party be prevented by the refusal of the other contracting party from completing the contract within the time limited he is not liable in law for the default. It is clear, therefore, that [C] were excused from performing the agreement contained in the original contract and there is nothing to show that they entered into a new contract by which to perform the work in four months and a half ending at a later period. [C] were therefore left at large. Consequently they are not to forfeit anything for the delay.”

6–117 In Dodd v Churton181, C agreed to carry out construction work for D for £664. The contract specified a completion date of 1 June 1892 with liquidated damages of £2 per week for delay thereafter. Clause 4 of the contract empowered the CA to order additional works or different works by way of variation. Pursuant to that clause the CA ordered additional works to the value of £22 8s 8d, which caused completion to be delayed beyond 1 June 1892. In the event the works were not completed until 5 December 1892. C sued for the balance of the contract price and D counterclaimed for £50 as liquidated damages for late completion. At trial in the Shropshire County Court the judge held that by ordering extra work D had waived his entitlement to liquidated damages for non-completion by 1 June. That county court judgment was reviewed by the Divisional Court, where the two judges differed, but on further appeal the county court judgment was upheld by the Court of Appeal. Lord Esher MR182 said: “It was, no doubt, part of the original Contract that [D] should have a right to call upon [C] to do that extra work, and if he did give an order for it, [C] could not refuse to do it. The principle is laid down in Comyns’ Digest, Condition L(6.), that, where one party to a contract is prevented from performing it by the act of the other, he is not liable in law for that default; and, accordingly, a well recognised rule has been established in cases of this kind, beginning with Holme v Guppy, to the effect that, if the building owner has ordered extra work beyond that specified by the original contract which has necessarily the time requisite for finishing the work, he is thereby disentitled to claim the penalties for noncompletion provided by the contract. The reason for that rule is that otherwise a most unreasonable burden would be imposed upon [C]. Then this further complication arose. Contracts were entered into by which [C] agreed to do any extra work which [D], or [the CA] might order. It was urged in such cases, as, for instance, in Westwood v SS India183, that the fact that [C] had contracted to do any extra work that might be ordered prevented the application of the rule which I have mentioned. But it was held that that was not so.”

6–118 The effect of Dodd v Churton was considered both by the Court of Appeal and by the House of Lords in Trollope & Colls v NMRHB184, in which Lord Denning MR said this: “It is well settled that in building contracts and in other contracts too when there is a stipulation for work to be done in a limited time, if one party by his conduct – it may be quite

181 182 183 184

Dodd v Churton [1897] 1 QB 566. At p.566. Westwood v The Secretary of State for India (1863) 11 WR 261; 7 LT 736. Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board [1973] 1 WLR 601.

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legitimate conduct, such as ordering extra work – renders it impossible, or impracticable for the other party to do his work within the stipulated time, then the one whose conduct caused the trouble can no longer insist upon strict adherence to the time stated. He cannot claim any penalties, or liquidated damages for noncompletion in that time.”

6–119 Having rehearsed the above authorities185, Jackson J said186: “From this review of authority I derive three propositions: 1. 2. 3.

Actions by [D] which are perfectly legitimate under a construction contract may still be characterised as prevention, if those actions cause delay beyond the contractual completion date. Acts of prevention by [D] do not set time at large, if the contract provides for extension of time in respect of those events. In so far as the extension of time clause is ambiguous, it should be construed in favour of [C].”

6–120 In summary, therefore, where there is a contractually binding date for completion but, for reasons within D’s control, C is prevented from completing by the contract completion date, D can no longer insist upon completion by the due date, C is then left without a firm date by which to complete and must then complete within a reasonable period as a result of the effect of what is known as the “prevention principle”. Although there appears to be no US case law on the point187, this equitable remedy is familiar to most common law countries, and it is a remedy that is encapsulated in art.7.1.2 of the Unidroit Principles of International Commercial Contracts (2004) and in some civil law codes188. 6–121 The principle has been described thus: “It is a maxim of law recognised and established that no man shall take advantage of his own wrong and this maxim, which is based on elementary principles, is fully recognised in courts of law and equity.”189 “It is moreover a sound principle that he who prevents a thing from being done shall not avail himself of the non-performance he has occasioned.”190

6–122 The effects of the principle have usefully been summarised191 as: “[D] will lose the right to claim liquidated damages if some of the delay is due to its own, employees’, or agents’ defaults, unless: 1. 2.

the extension of time clause, strictly construed192, allows for extensions to be granted for delays caused by acts, or defaults of the owner; and an extension has been validly granted thereunder.

185 Multiplex Constructions (UK) Ltd [2007] EWHC 447 (TCC) at [50]–[54]. 186 Multiplex Constructions (UK) Ltd [2007] EWHC 447 (TCC) at [56]. 187 B Bramble and M Callahan, Construction Delay Claims (New York: Aspen Publishers, 2009) Cumulative Supplement at p.25. 188 See D Jones, “Can prevention be cured by time bars?” (2009) Society of Construction Law; and P Cowan and J Bellhouse, “Common law ‘time at large’ arguments in a civil law context” (2007) 23 Const LJ 592. 189 H Broom, A Selection of Legal Maxims, Classified and Illustrated, 8th edn (London: Sweet & Maxwell, 1911) at p.233; see also Drinkwater v Caddyrack Pty Ltd (1997) NSWSG [?], AustLII, in which Young J in the Supreme Court of New South Wales Equity Division set out other authorities for the principle and a number of examples of its application. 190 H Broom, A Selection of Legal Maxims, Classified and Illustrated, 8th edn (1911) at p.235. 191 D Jones, “Can prevention be cured by time bars?” (2009) Society of Construction Law. See also M Ross, “The status of the prevention principle: good from far, but far from good” (2011) 27 Const LJ 15. 192 Peak Construction (Liverpool) Ltd (1970) 1 BLR 111 per Salmon LJ at 121; MacMahon Construction Pty v Crestwood Estates [1971] WAR 162.

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This will be the case even if [D’s] delays form only part of the total delay – the court will not seek to apportion delay, at least when considering the enforceability of the liquidated damages clause. In Rapid Building v Ealing, Lloyd LJ confirmed this result whilst expressing dissatisfaction with it in the Court of Appeal193. Even if [C] would have been unable to complete on time in the absence of a delay by [D], the liquidated damages clause will still cease to apply if [D] is responsible for some of the delay194. However, if [C] has already breached the completion date, due to no fault of [D], then [D] will be entitled to liquidated damages up until any act of prevention by [D]195. If the liquidated damages clause is held inoperative because of the application of this principle, [D] will still be entitled to sue [C] for any general law damages that it can prove flow from [C’s] default.”196

6–123 Whether this principle is in fact a rule of law, or no more than a rule of construction is not entirely without doubt. In Roberts v Bury Commissioners, in 1870197, the rule was expressed thus: “[I]t is a principle very well established at common law, that no person can take advantage of the non-fulfilment of a condition the performance of which it has hindered itself.”198

6–124 In Alghussein v Eton199, however, Lord Jauncey thought that there was no substantial difference between a clause that allowed a party to rely on its own wrong to avoid a contract and one that entitled it to enjoy a contractual benefit because of its wrong, the principle being one of construction. Having interpreted Lord Jauncey’s remarks as conceiving it to be a rule of construction, in Micklefields v SAC200, the court said that “if that was correct, and the rule is only one of construction, then it can be excluded by a sufficiently clear contrary provision in the contract”. In this case, a director of a company had an option to subscribe for shares under a contract that provided that, if the holder ceased to be an executive for any reason, he would lose his rights under the scheme. Having given notice of his intention to exercise the option before the date of exercise fell due, he was dismissed from his employment. The court held that the wording was a sufficiently clear contrary provision in the contract that had the effect to “exclude the principle and to operate as an exemption clause”. 6–125 On the other hand, in the Australian case of Gaymark201, the principle seems to have been treated as a rule of law so that where, in the absence of a formal claim by C, the CA had no power to grant an extension of time and where at least some of the delay to the completion date was caused by D, D was in that case considered to be prevented from taking liquidated damages and time was set at large. The correctness of this has, however, been doubted202.

193 194 195 196 197 198 199 200 201 202

Rapid Building Group Ltd v Ealing Family Housing Association Ltd (1984) 29 BLR 5, CA. SMK Cabinets v Hili Modern Electrics Pty Ltd [1984] VR 391 at 398–400. SMK Cabinets [1984] VR 391 at 398–400. Peak Construction (Liverpool) Ltd (1970) 1 BLR 111 per Salmon LJ at 121. Roberts v Bury Improvement Commissioners [1870] LR 5 CP 310. Roberts [1870] LR 5 CP 310 per Blackburn and Mellor JJ at 326. Alghussein Establishment v Eton College [1988] 1 WLR 587. Micklefield v SAC Technology Ltd [1990] 1 WLR 1002. Gaymark Investments Property Ltd v Walter Construction Group (1999) 16 BCL 449. See Ch.5, “Notices, claims and early warnings”, at paras 5–136 to 5–147.

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6–126 What, at common law and by leading authorities, has been held to be an “act of prevention” has been usefully summarised by Brooking J in the case of SMK v Hili203 as follows: “At times, words are employed which suggest that any act, or omission preventing performance will suffice (see Dodd v Churton204, where all three members of the court speak of an act; Bruce v The Queen205, where the court simply refers to prevention, and Bilton v GLC206 for acts or omissions). Hudson207 speaks of acts, whether authorised by, or breach of the contract, but also refers to wrongful acts208. The expressions used by Salmon LJ and Phillimore LJ in Peak v McKinney209 of ‘fault’, or ‘breach of contract’. Another phrase to be found is ‘act, or default’ (Amalgamated v Waltham UDC210 per Denning LJ (as he then was)). Words used by Lord Denning (‘his conduct–it may be quite legitimate conduct, such as ordering extra work’) appear in a passage cited with approval in the leading speech in the House of Lords in Trollope & Colls v NMRHB.”211

In ONWR v Dominion212, Davis J of the Supreme Court of Canada said: “if [D] by the ordering of extra work, or by the doing, or omitting to do any act which he ought to have done, or omitted, has delayed [C] in beginning the work, or necessarily increased the time for finishing the work he thereby disentitles himself to claim the penalties for non-completion provided by the contract.”

6–127 In SMK Cabinets v Hili213, Brooking J said that what constitutes an act of prevention “must accommodate the case of the ordering of extras, whether or not in the exercise of power conferred by the contract” unless the contract “makes it clear that [C] is undertaking to complete by the due date notwithstanding extras or other variations”. 6–128 In Multiplex v Honeywell214, it was argued that, whereas an extension of time could be granted for delay caused by directions given under Cl.4.6 of the contract, but there was no provision for extending time for such a direction under Cl.4.2, by issuing a revised schedule under Cl.4.2, impliedly directing the subcontractor (Honeywell) to comply with a later completion date, C (Multiplex) thereby caused an act of prevention for which it could not extend time. Before rejecting the point on the basis that such a direction was either a direction to postpone, or an act of prevention, for both of which there were express provisions in the contract by which C could extend time, Jackson J explained the arguments as follows215:

203 SMK Cabinets [1984] VR 391; (1984) 1 Const LJ 159 at 396 and also by D Jones, “Subcontractor’s remedies and liabilities for delay” (1989) 5 BCL 16 at 22–23. 204 Dodd [1897] 1 QB 562. 205 Bruce v The Queen [1866] 2 WW & AB (L) 193 at 221. 206 Percy Bilton Ltd v The Greater London Council [1982] 1 WLR 794 at 801. 207 I. Duncan Wallace QC (ed), Hudson’s Building and Engineering Contracts, 11th edn (London: Sweet & Maxwell, 1995) at pp.631–632. 208 Duncan Wallace QC (ed), Hudson’s Building and Engineering Contracts, 11th edn (1995) at p.700. 209 Peak Construction (Liverpool) Ltd (1970) 1 BLR 111 at 121 and 127. 210 Amalgamated Building Contractors Ltd [1952] 2 All ER 452 at 455. 211 Trollope & Colls Ltd [1973] 1 WLR 601 at 607. 212 Ottawa Northern and Western Railway Co v Dominion Bridge Co [1905] 36 SCR 347 at 359. 213 SMK Cabinets [1984] VR 391; (1984) 1 Const LJ 159 at 396. 214 Multiplex Constructions (UK) Ltd [2007] EWHC 447 (TCC). 215 Multiplex Constructions (UK) Ltd [2007] EWHC 447 (TCC) at [60].

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“[Counsel for the subcontractor] submits that a direction causing delay is at most an act of hindrance, not prevention, and this falls outside [the extension of time clause]. Again, I am not persuaded. If a variation instruction affects the date upon which [the subcontractor] is going to complete by a small period, one may say that this is a hindrance; it does not in any sense make the installation of the electronic systems impossible. On the other hand, that matter does prevent completion on the due date and it should be characterised as ‘prevention’. Pursuant to clause 4.2 of the SubContract Conditions [C] issued to [the subcontractor] [schedules] CB7, FO15 and DC10. The issue of these [schedules] has been held to constitute variation instructions. In my judgment, the fact that these [schedules] were issued under clause 4.2 rather than clause 4.6 does not prevent [C] from awarding such extension of time as may be appropriate. In so far as [the subcontractor] can demonstrate that any extension of time would be appropriate in consequence of those [schedules], such an extension of time can be awarded pursuant to clause 11. The issue of those [schedules] should be characterised as acts of prevention for the purpose of 11.10.7, or alternatively as postponement instructions under clause 46 for the purposes of clause 11.10.5.1.”

6–129 Thus, time may be rendered at large simply because there is no effective power to extend time for an act, or omission by D which adversely affects C’s performance. This may occur where: under the contract in question, there is no provision to extend time at all; or there is a provision to extend time, but in the particular circumstances it is ineffective.

Illustration Facts: Adyard Abu Dhabi (Adyard) was a shipyard on the Abu Dhabi shoreline, SD Marine Services (SDMS) being a supplier of services to the public sector. Pursuant to a PFI agreement with the UK government, SDMS entered into an output contract for the delivery of marine port services and small moorings, together with navigational services, for the Royal Navy. Under the PFI agreement, SDMS entered into a contract dated 14 December 2007 for the construction by Adyard and purchase by SDMS of two 50m moorings and special operations support vessels namely Hulls 10 and 11 (the vessels), for US$14,837,000 and US$13,932,000 respectively (“the contract”). A dispute arose as to whether SDMS could rescind the contract under art.II, cl.3.3 thereof, by reason of the vessels not being ready for sea trials by 30 September and November 2009 respectively. It was common ground that the vessels were not ready for sea trials by those dates. Adyard contended that: (1) it was prevented from completing the vessels for sea trials by the acts of SDMS, (2) there was no contractual mechanism for resolving the time issues arising from such prevention and, accordingly, time for completion was set at large and Adyard merely had an obligation to complete within a reasonable time (1 and 2 above being called “the prevention issue”); and/or (3) it was entitled to an extension of time (EoT) to the sea trials date for both vessels. The prevention issue was further broken down into an issue concerning causation (“the causation issue”), Adyard’s case on the facts being that it was delayed by various new design items (“the variations issues”), which were imposed by the UK Maritime Coastguard Agency (MCA), or instructed by SDMS in June and/or July 2009 (“the factual case”). By the time of trial, the relevant design items (“the design items”) had been narrowed down to the following: (1) a change from watertight-hinged to watertightsliding doors at frames 5, 12, 36 and 49, (2) the need for watertight valves and hot-air vent arrangements at frame 36.

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Held, by Hamblen J, as follows: 1. 2.

3.

On the variations issue, that the design items were not variations; On the prevention issue, that, where an EoT clause is ambiguous, courts should favour an interpretation pursuant to which a contractor can be granted an appropriate EoT (citing, with approval, Jackson J (as he then was) in Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd216 and Lewison217). On the proper construction of this contract, the provisions in art.V (which entitled Adyard to adjustments to the delivery date, as a consequence of delays caused by modifications to the specification) fell within the very wide definition of permissible delay in art.VIII cl.31 (since they were “delays of a nature which under the terms of this Contract permit postponement of the Delivery Date”). On the causation issue, that: 3.1 Adyard’s causation case (both in relation to the prevention principle and any claim for an EoT) was that causation is established by showing that the duration of the relevant event, or act of prevention, extended over the original contractual sea trials date; 3.2 This approach was incorrect in principle, authority and common sense: in principle and common sense: because, if correct, there was no need for Adyard to prove the event, or cause of delay, a notional, or hypothetical delay being sufficient; in authority: as this went against the established principles laid down for assessing: EoTs, which were to be assessed on the “net” basis: see Balfour Beatty Building Ltd v Chestermount Properties Ltd218; the effect of concurrent events, namely that there is only concurrence of both events in fact causing delay to the progress of the works and the delaying effect of the two events is felt at the same time: see Royal Brompton Hospital NHS Trust v Hammond (No 7)219; although Adyard’s contract completion date approach was supported by the SCL Protocol, that protocol was not in general use in the construction industry and could be of no assistance to the legal and factual issues in this case: “[177] The general rule in construction and engineering cases is that where there is concurrent delay to completion caused by matters for which both employer and contractor are responsible, the contractor is entitled to an extension of time but he cannot recover in respect of the loss caused by the delay. In the case of the former, this is because the rule where delay is caused by the employer is that not only must the contractor complete within a reasonable time but also the contractor must have a reasonable time within which to complete. It therefore does not matter if the contractor would have been unable to complete by the contractual completion date if there had been no breaches of contract by the employer (or other events which entitled the contractor to an extension of time), because he is entitled to have the time within which to complete which

216 [2007] EWHC 447 (TCC); [2007] Bus LR D109 at [57]. 217 K Lewison, The Interpretation of Contracts, 3rd edn (London: Sweet & Maxwell, 2004) at p.231 para.7.14. 218 (1993) 62 BLR 1 QBD at 27. 219 [2001] EWCA Civ 206; 76 Con LR 148.

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the contract allows or which the employer’s conduct has made reasonably necessary.” 3.3 On the facts, Adyard was not entitled to an EoT under the contract and, accordingly, Adyard’s submissions failed and SDMS was entitled to rescind the contract: Adyard Abu Dhabi v SD Marine Services220.

Where there is no power to extend time 6–130 The leading case on there being no power to extend time at all is Peak v McKinney221. In this case, under a subcontract between Peak (C) and Mckinney (SC), said to be under the same terms as the contract between the Liverpool Corporation (D) and C, the piling subcontractor carried out defective work that had to be corrected but, before the repairs were carried out, D wanted to have the advice of its consultants and various committees of the council, which took many months to obtain. Because there was no clause in the contract between D and C that permitted D to extend time for delayed approval of the subcontractor’s repair process, the Court of Appeal held the contractual completion date to be unenforceable. Salmon LJ put it thus222: “In my judgment, however, [C] are not entitled to anything at all under this head, because they were not liable to pay any liquidated damages for delay to [D]. A clause giving [D] liquidated damages at so much a week, or month which elapses between the date fixed for completion and the actual date of completion is usually coupled, as in the present case, with an extension of time clause. The liquidated damages clause contemplates a failure to complete on time due to the fault of [C]. It is inserted by [D] for his own protection; for it enables him to recover a fixed sum as compensation for delay instead of facing the difficulty and expense of proving the actual damage which the delay may have caused him. If the failure to complete on time is due to the fault of both [D] and [C], in my view, the clause does not bite. I cannot see how, in the ordinary course, [D] can insist on compliance with a condition if it is partly his own fault that it cannot be fulfilled. I consider that unless the contract expresses a contrary intention, [D], in the circumstances postulated, is left to his ordinary remedy; that is to say, to recover such damages as he can prove flow from [C’s] breach. No doubt if the extension of time clause provided for a postponement of the completion date on account of delay caused by some breach, or fault on the part of [D], the position would be different. This would mean that the parties had intended that [D] could recover liquidated damages notwithstanding that he was partly to blame for the failure to achieve the completion date. In such a case the [CA] would extend the date for completion, and [C] would then be liable to pay liquidated damages for delay as from the extended completion date.” (internal references removed)

6–131 This principle was also applied in Rapid Building v Ealing223, in which D had failed to grant exclusive possession of the site for a period of three weeks (during which a couple resided with its dog in an Austin Cambridge in a “significant portion of the site”). This was a case under JCT63, under which because there was no power to award an extension of time for a failure to grant possession, there was no completion date from which liquidated damages could then run and time was therefore set at large. 6–132 However, under most of the current standard forms of contract, D is now provided with the power to extend the time for completion in the event of the occurrence

220 [2011] EWHC 848 (Comm); [2011] BLR 384; 136 Con LR 190. See also M Curtis QC, “Time for completion, concurrent delay and Adyard Abu Dhabi v SD Marine Services” (2011) 27 Const LJ 560. 221 Peak Construction (Liverpool) Ltd (1970) 1 BLR 111 CA. 222 Peak Construction (Liverpool) Ltd (1970) 1 BLR 111 at 121–122. 223 Rapid Building Group Ltd (1984) 29 BLR 10 CA.

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of more widely described D’s time risk events224. Typically, these provide for an extension of time to be granted under such anodyne expressions as: “any act, neglect, or default of [D], the [CA], or any other person for whom [D] is responsible (not arising because of any default, or neglect by [C], or by any employee, agent, or subcontractor of his)”225; “a breach of contract on the part of [D]”226; “any default, whether by act, or omission, of [D], or any persons for whom [D] is responsible in regard to the project”227; “any delay impediment prevention, or default by [D]”228; “any act, instruction, default, or omission of [D], or of the [CA]”229; “any delay, impediment, or prevention caused by, or attributable to [D, D’s] personnel, or [D’s] other contractors on the site”230; “any breach of contract by [D] that is not one of the other compensation events referred to”231; “an act of prevention, a breach of contract, or other default by [D], or any person for whom [D] is responsible”232; “any breach by [D] of the contract delaying the works that is not listed elsewhere in this table”233.

6–133 As a result, it is now less likely, except in the case of a standard234 or bespoke form that has no such provisions, that circumstances within the control of D could occur to delay the works that cannot be excused by the award of an extension of time under the contract.

Where the power to extend time is inoperable 6–134 Where there is an effective power under the contract to extend the time for performance, the failure to exercise that power competently and to determine a fair and reasonable extension of time is not, of itself, sufficient to render the completion date unenforceable and time at large. In the absence of the decision being said to be final and binding and without review, or outside the contractual provisions, so that it is not a decision under the contract, or undermined by collusion, in the current standard forms, it can be corrected by a competent tribunal under the contract. So, for example, in the absence of collusion, the mere fact that the CA’s decision is to issue an extension of time that is less than C wishes, or indeed to grant no extension of time at all, will not render time at large. If the true position can be restored by the operation of other contractual machinery, for example reference to an adjudicator, arbitrator,

224 See Ch.4, “Standard form provisions for time and cost” at paras 4–028 to 4–036. 225 GC/Works/1, Cl.36(2)(b). 226 IChemE Cl.44.1(d). 227 MC98 Cl.2.13.2. 228 ICE7 Cl.44(1)(e). 229 ACA98 Cl.11.5(e). 230 FIDIC/Build99 Cl.8.4(e). 231 ECC3 Cl.60.1(18). 232 HK05 Cl.25.1(3)(v). 233 The schedule to IGBW/09, IGCE/09, IGCEDB/09, IGDB/09 and IGMW/09 Pt 1, section K, item 16. 234 NZ03 contains no such provisions.

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or the court to open up and review the decision, or absence of a decision, the failure of the CA during the course of the contract will not set time at large simply because such a tribunal can restore the parties’ rights under the contract: “If the true position is, or can be established by other contractual means then the breakdown is likely to be immaterial even where the result of the breakdown is that one party does not obtain the contractual right, or benefit which would, or might otherwise have been established by the machinery, eg the issue of a certificate, provided that the true position can be restored by the operation of other contractual machinery.”235

6–135 There are thus many examples of the willingness of arbitral tribunals and the courts to proceed to correct a perverse award under the contract where they can, rather than to determine time to be at large and set a reasonable time to complete outside the contract236. A recent example from the Australian Courts is the case of Kane v Sopov237. In this case, the court proceeded to determine afresh C’s entitlement to an extension of time under the Australian standard form AS2124 for, amongst other things, the effect of 18 separate events where the CA had been found not to have reached its decision in a competent, or independent manner and in this case had also “demonstrated an undesirably close relationship with [D]”. 6–136 However, whilst there may be provision for the contract period legitimately to be extended, the circumstances at the operative time may be such that they are outside the administrative process contemplated by the contract and thereby rendered inoperable. For example, where the contract specifies the party who is to make the decision, but in the circumstances the decision is made by another, it will be a nullity and not a decision under the contract238. 6–137 Where a decision is to be made at a particular time, if made other than in accordance with the contract provisions, it will also not be a decision under the contract and a nullity. For example, where the contract provides that an extension of time for the effect of variations instructed may only be granted before the stipulated completion date, the effect is that, once the completion date has passed, time cannot be extended for that cause239. However, as a result of a recent arbitration in Hong Kong240, it would appear that this is unlikely to be in point in relation to standard form contracts that follow the phraseology of many modern forms. The case was in relation to HK86, which empowers the CA to extend time if, as a result of a D’s time risk event, completion is likely to be, or has been delayed beyond the completion date. In this case, the arbitrator determined that the contractual power to extend time was broad enough to entitle the CA to extend time for the effect of variation instructions issued after the completion date had passed. 6–138 Where a decision is said to be final and binding and not subject to review, the courts have been astute to see that the contract terms have been closely followed and, when not so performed, because of the absence of a power of review under the

235 Bernhard’s Rugby Landscapes Ltd [1998] All ER 249, per HH Humphrey LLoyd QC, at the decision on issue 6. 236 See for example, John Barker Construction Ltd (1996) 83 BLR 31. 237 Kane Constructions Pty Ltd v Sopov [2005] VSC 237; (2006) 22 BCL 92; (2007) 23 Const LJ 2 at 145. 238 Bernhard’s Rugby Landscapes Ltd [1998] All ER 249. 239 SMK Cabinets [1984] VR 391; (1984) 1 Const LJ 159 Supreme Court of Victoria. 240 See (2005) 21 Const LJ 321 for the award on the preliminary issue, which usefully discusses the results of other arbitrations on similar facts.

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contract, have held the improper decision to be a nullity. In Hawl Mac241, for example, the contract required that upon receipt of an application for an extension of time, the CA was fully and fairly to consider it. The clause also contained exclusion clauses to the effect of a waiver of all C’s rights if the claim was not made within seven days of the occurrence giving rise to its entitlement and limiting C’s redress to the express terms of the contract. The work should have been finished by 4 December 1981. Two months before the completion date, C applied to the CA for an extension of time, but the CA failed to reply until over a year later. Relying on Anderson v Tauepeka242, where, on a similar contractual scenario, it had been held that such exclusion clauses must be strictly construed, the court found that due to the delay in responding to the application, there was no longer any power under the contract to determine the application and thus no fixed time in which to complete. Wallace J said: “The extension clause in the present contract provides that the time for completion shall be extended for the time lost due to [D]-caused delays and that the [CA], upon receipt of an application for an extension of time, shall fully and fairly consider it and fix the time of the extension. Having failed to perform this obligation before the original time for the completion of the contract expired, it is my opinion there was no longer a specified date within which the contract was to be completed, or from which penalties could be imposed. The original completion date was no longer applicable since [C] was entitled to have the time for completion extended by reason of [D]-caused delays and a new completion date had not been substituted for the original in accordance with the procedure contemplated by the extension clause. The clause with which the parties here are concerned has no provision permitting the [CA] to retrospectively fix a substituted completion date. Rather, it contemplates an application for an extension within seven days of the occurrence and the fixing of a substituted completion date ‘upon receipt of the written claim.’ Clearly the fixing of a new date for completion subsequent to the substituted date is beyond the authority granted the [CA] by [the clause] of the contract. I find the original time for completion of the contract was nullified by reason of the failure of the [CA] to fix a substituted completion date upon receipt of the [CA’s] application for an extension of time attributable to [D]-caused delays.” (emphasis in the original)

6–139 Where a CA’s decision is said to be final and binding and there is no power to review that decision under the contract, it may also be rendered a nullity if the CA fails to take due account of relevant matters, or takes into account matters that are not relevant to his decision. In Panamena v Frederick Leyland243, the surveyor’s certificate, which was a precondition to payment, was expressed to be “accepted by the parties hereto as final and conclusive”. Payment was said not to be due until the surveyor had issued his certificate that work had been correctly carried out, and without any power to ask for any documentary proof of the costs. In the event, the surveyor refused to issue the payment certificate until C had provided details of its labour and materials costs and dock charges. The House of Lords held that, because the surveyor had declined to issue the certificate until the information he had unlawfully requested had been provided, the certificate as a precondition to payment was dispensed with and C was entitled to be paid without the certificate.

241 British 242 243 428.

Hawl Mac Construction Ltd (1985) 60 BCLR 57; (1985) 1 Const LJ 370 Supreme Court of Columbia. Anderson (1900) 19 NZLR 1. Panamena Europea Navigacion (Compania Limitada) v Frederick Leyland & Co Ltd [1947] AC

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6–140 Collusion, or the interference by D with the CA’s independence, will also render the CA’s decision a nullity. In a recent Peruvian arbitration, under civil law, concerning a modified version of FIDIC4, in which it was expressly stated that the CA had to obtain D’s approval before any extension of time could be granted any necessary approvals were “not to be unreasonably withheld, or delayed”, the CA was effectively prevented from granting any extensions of time, because D never gave any approval. The effect of this proviso was to emasculate the CA’s ability to carry out its function which, amongst other things required it to discharge its duties fairly and impartially244. As a result, it was successfully argued that C was not bound by the completion date and C was entitled to a reasonable time in which to complete245. 6–141 A similar result followed from similar inhibitions upon the ability of the construction manager to function in the case of Bernhard’s Rugby Landscapes246. In this case, the contract between the CM and trade contractor required the CM to exercise its discretion fairly but, amongst other things, the contract between CM and D restricted the CM’s freedom to decide, amongst other things, an appropriate extension of time. In finding the extension of time clause incapable of being put into operation, HH Judge LLoyd QC observed: “A breakdown of the contractual machinery occurs when without material default, or interference by a party to the contract, the machinery is not followed by the person appointed to administer and operate it and, as a result, its purpose is not achieved, and is either no longer capable of being achieved, or is not likely to be achieved. It can for most practical purposes be equated to interference by a contracting party in the process whereby the other is deprived of a right, or benefit, eg the failure of [D] to re-appoint a [CA] on the resignation of a previously appointed person: see Panamena”.

6–142 The power to extend the time for performance might also be expressed to be conditional upon an administrative act (such as notice of delay being given by C), in the absence of which, the power to extend the time for performance may be held not to arise. Typically, this can be construed to affect interim extensions of time under a number of standard forms of contract247, but not the power to reconsider entitlement to an extension of time after completion has been achieved, which commonly is not dependent upon notice.

Assessing a reasonable time to complete 6–143 What is a reasonable time is not a question of law, but is of course a question of fact to be determined on the basis of the evidence offered, in all the circumstances. There are few authorities available, however, as to how such a question of fact is to be determined248. 6–144 The primary focus of the alternative approaches is whether, on the facts, C should be entitled to additional time for all those events that are not at C’s risk under the contract, that is those events beyond C’s control, or should be entitled to all the

244 245 (2007) 246 247 248 [2006]

Cl.2.6. See P Cowan and J Bellhouse, “Common law ‘time at large’ arguments in a civil law context” 23 Const LJ 592. Bernhard’s Rugby Landscapes Ltd [1998] All ER 249. See, for example, JCT98 Cl.25.3.1. See also K Pickavance, “Calculation of a reasonable time to complete when time is at large” ICLR 167.

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time taken less only those events for which C is culpable, that is those events that are within C’s control. 6–145 Where a “contract period” can be established and the effects of D’s delays are to be added, it would be entirely possible in most contracts to take C’s planned schedule for the contract scope as a baseline and add to it the putative effect of D’s risk events that had occurred. In practical execution, this would be an as-planned impacted, or modelled, additive, single base analysis249. It is also the type of analysis adopted to prove C’s entitlement to an extension of time in Barker, where the contractual machinery, whilst having broken down, was still in place and could be repaired by opening up and reviewing the CA’s faulty assessment in accordance with the dispute resolution provisions in the contract250. The effect of this is to entitle C to what C claims to be the gross effect of D’s risk events on C’s schedule for the works, regardless of any culpable delay by C251. 6–146 That was also the approach taken in Australia by the Supreme Court of Victoria in SMK Cabinets v Hili252. In that case, where the ordering of variations for which time could not be extended, but which had contributed to the delay to the date for completion, the court found that, notwithstanding that C could not have completed on time as a result of the effects of its own culpable delay to progress, because the contract did not allow D to extend time for the effects of variations it had ordered, D could not enforce the completion date. However, whilst acknowledging that the prevention principle was grounded upon “considerations of fairness and reasonableness”, Brooking J concluded that the ordering of variations after the completion date had passed (where there was no power in the contract to extend time for that reason) only served to prevent D from taking liquidated damages that accrued after the date of instruction of the variation, but did not upset the parties’ contractual rights and obligations accruing prior to the date upon which the instruction was given. 6–147 One of the perceived difficulties with this method of calculation is that C’s baseline schedule (even if well thought out, fully logic-linked and resource-calculated, without any hidden time contingencies which, at the moment, most are not253), at its highest only represents C’s intent. It is a manifestation of an intent that, in most forms of contract, is not binding upon C. There are usually many other mixtures of resources, durations and logic available which would have achieved the same end-date, but which might not illustrate the same predicted impact of D’s risk events, or breaches. 6–148 On the other hand, if sufficient records were to be made available, it would be possible to carry out a time impact analysis254. That is, on the basis of the effect, from time to time, of each time risk event, or act of prevention as it impacted C’s 249 See American Association of Cost Engineers International, Forensic Schedule Analysis (2009) AACE International Recommended Practice No 29R-03; see also Ch.15, “Forensic programme analysis”, throughout. 250 John Barker Construction Ltd (1996) 83 BLR 31. 251 A contingency that renders this method unsuitable where as-built records are available. See Ch.14, “Cause and effect” at paras 14–168 to 14–169, Ch.15, “Forensic programme analysis” at paras 15–076 to 15–115 and see also, for example, Great Eastern Hotel Co Ltd v John Laing Construction Ltd [2005] EWHC 181 (TCC) at [184]. 252 SMK Cabinets [1984] VR 391; (1984) 1 Const LJ 159. 253 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008). 254 Also known as a modelled/additive/multiple base analysis; see American Association of Cost Engineers International, Forensic Schedule Analysis (2009) AACE International Recommended Practice No 29R-03; see also Ch.15, “Forensic programme analysis”, at paras 15–149 to 15–163.

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contemporaneous planned critical path to completion, absent any identifiable time contingency. This is the method acknowledged by the Delay and Disruption Protocol255 as being the most thorough and was implied to be an appropriate method of calculating an extension of time by HH Judge LLoyd QC in Balfour Beatty v Lambeth256 and by HH Judge Seymour QC in Brompton Hospital v Hammond257. 6–149 By taking into consideration C’s culpable delay (if any) and identifying the net effect of D’s acts, or omissions on C’s contemporaneous critical path to completion, C does not benefit from additional time other than that caused by D’s time risk event or breach. So, say C is in culpable delay as a result of not being able to obtain sufficient labour, there are no other events and the only breach is a variation, C would then only be entitled to the putative effect of the variation on the schedule it was then following in addition to the contract period and no more, regardless of how long the works actually took to complete. 6–150 In both of these scenarios, the burden of proof as to entitlement rests with C. However, it is thought that, where D has either not stipulated a date for completion, or, by its own acts, has prevented the due date from being achieved, it should not be for C to prove the period of time to which it is entitled, but it should be for D to demonstrate that the time actually taken by C is excessive in all the circumstances and not at D’s risk at common law. 6–151 In the United States, the expression “beyond the control and without the fault, or negligence” of C has been interpreted to encompass acts of government in either its sovereign, or contractual capacity and delays of subcontractors, or suppliers at any tier, arising from unforeseeable causes beyond the control and without the fault, or negligence of both C and the subcontractors, or suppliers. However, it appears to have been accepted that the expression does not include delay caused to the works while the contract director was involved with domestic affairs arising out of the death of his grandmother258. 6–152 In Scott Lithgow259, D had agreed to pay C the cost of delay caused by amongst other things “any other cause beyond [C’s] control”. During the works, faulty cable installed by a subcontractor was discovered and had to be taken out and replaced, causing delay to the date for completion. C compromised its claim with the subcontractor and claimed the balance from D as being due to a “cause beyond [C’s] control”. 6–153 Lord Keith of Kinkel allowed the claim, saying that he thought that prima facie it was not within the power of a contracting party to prevent breaches of contract as to quality on the part of a supplier or subcontractor such as might lead to delay. The obvious objection to this interpretation is that C’s “control” in this case has been interpreted in such a way that it effectively removes all risk from C for the effects of the contracts C enters into with its subcontractors260. Lord Keith noted that Lord Jauncey, who, as a Judge of the Court of Session, had sat as arbitrator in the matter, made the point when he said: “Can it then be said that, in a situation where [C] has responsibility for the supply of material, the failure by a sub-contractor to perform his contractual obligations in relation to that material is a cause beyond the control of [C]? I do not think it can. [C] dictates his 255 Society of Construction Law, Delay and Disruption Protocol (2002). 256 Balfour Beatty Construction Ltd v London Borough of Lambeth [2002] BLR 288 (TCC) at 302. 257 Royal Brompton Hospital NHS Trust v Frederick A Hammond (No 1) [2000] EWHC 39 (TCC) at [32]. 258 RP Wallace Inc v The United States COFC No 96–222 C (2004); (2005) 21 Const LJ 378. 259 Scott Lithgow Ltd v Secretary of State for Defence (1989) 45 BLR 6. 260 For a detailed criticism of this decision see I Duncan Wallace QC, “Beyond the Contractor’s Control” (1991) 7 Const LJ 3.

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requirements to the sub-contractor and can decide what contractual provisions he will, or will not accept. He can proceed against the sub-contractor in the event of the latter failing to perform his obligation. It would be curious if [D] had accepted the risk of a price variation caused by an event in respect of which, at the date of the contract, they would have had no recourse against a sub-contractor, whereas [C] would have had.”261

6–154 In Pantland262, the issue was whether C was in breach of a contractual obligation to discharge the relevant vessel within a reasonable time where there was a single cause of delay, namely a strike of dockworkers, over which C had no control and the effect of which, while it lasted, was totally to prevent performance of the obligation. D’s case was that the appropriate test was what time would have been required for the discharge of the vessel under ordinary circumstances. C argued that the question was not what time would have been reasonable under ordinary circumstances, but what time was reasonable under the circumstances as they then were, absent any fault on the part of C. The issues were rationalised by Lord Herschell as follows: “My Lords, there appears to me to be no direct authority upon the point, I would observe, in the first place, that there is of course no such thing as a reasonable time in the abstract. It must always depend upon circumstances. Upon ‘the ordinary circumstances’ say the learned counsel for [D]. But what may without impropriety be termed the ordinary circumstances differ in particular ports at different times of the year. It appears to me that [D’s] contention would involve constant difficulty and dispute, and that the only sound principle is that the ‘reasonable time’ should depend on the circumstances which actually exist. If the cargo has been taken with all reasonable despatch under those circumstances I think the obligation of [C] has been fulfilled. When I say the circumstances which actually exist, I, of course, imply that those circumstances, in so far as they involve delay, have not been caused, or contributed to by [C].”

In the same case, Lord Watson took the view that C would only be disentitled to more time in regard to events that were both beyond C’s control and were neither negligent nor unreasonable263. 6–155 In Astea v Time Group264, HH Judge Seymour QC explained the decision in Pantland, saying: “What it seems to me the application of the test formulated by the House of Lords in Pantland Hick v Raymond & Reid involves in a case such as the present is a broad consideration, with the benefit of hindsight, and viewed from the time as at which one party contends that a reasonable time for performance has been exceeded, of what would, in all the circumstances which are by then known to have happened, have been a reasonable time for performance.”

Those events that are “beyond C’s control” under a contract are not necessarily the events that are implied to be at C’s risk at common law where there is no contract. Although most factors beyond C’s control may well serve to justify an extended construction period, factors which the parties expressly, or impliedly had in mind at the time of the contract may not justify the time actually taken and, it is submitted, a better view is that a reasonable time to complete should not so much be based upon

261 262 28–29. 263 264

I Duncan Wallace QC, “Beyond the Contractor’s Control” (1991) 7 Const LJ 3 at 11. Pantland Hick v Raymond & Reid [1893] AC 22, per the Lord Chancellor, Lord Herschell, at Pantland Hick v Raymond & Reid [1893] AC 22, 32–33. Astea (UK) Ltd v Time Group Ltd [2003] EWHC 725 (TCC).

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“circumstances beyond C’s control”, but along the line taken by Lord Herschell in Pantland and Judge Seymour in Astea upon the subtraction of the time to execute circumstances expressly, or impliedly within C’s control that have caused, or contributed to the delay to the completion date. 6–156 The effect of this would be that C is then entitled to all the time the works actually take to complete less the time for the acts, or omissions that are deemed to be within C’s control. The burden of proof is then on D to demonstrate that the time actually taken by C for which D is not liable is time taken up by acts, or omissions constituting a breach of contract on C’s part of its subsisting obligations to perform the works. 6–157 Amongst other things, such considerations might reasonably encompass, for example, whether, or not C had in all the circumstances: 1. 2. 3. 4. 5.

carried out the work with adequate materials, goods and workmanship which did not prove defective; arranged deliveries so that materials, goods, plant and other resources were available when needed; expressly or impliedly warranted its ability to maintain progress in a particular situation or at a particular speed; had adequate site, organisation, labour force and plant and materials; and remained responsible for acts, or omissions within the control of C’s subcontractors and suppliers notwithstanding that they may not have been within the direct control of C.

6–158 In construing a method for calculating a reasonable time to complete, there are three basic scenarios to be considered: where there is no contract;

where there is a contract but no contract period; and where there is a stipulated contract period.

Where there is no contract 6–159 Where there is no contract, a reasonable time to complete can only be determined by assessing what would have been the completion date, but for those acts, or omissions of C, for which C is not entitled, at common law, to be given time by D. If there is no contract, there can obviously be no risk structure under the contract. As was determined in Shawton, under these circumstances, a reasonable time to complete can usually be determined by assessing what would have been the completion date, but for those events for which it would be inequitable for the contractor to be given more time. Whilst the calculation is easy enough, provided the data is available on which to make the calculation, in many cases, in which there is no contract, it is highly likely that there will be no planned schedule and few, if any, as-built records upon which to base a calculation. Although the issue of entitlement to an extension of time has hitherto been construed to be relevant to contract law, of course where there is no contract, the issues are equally applicable to the calculation of a reasonable time to complete in a restitutionary context. 6–160 Whilst there may not be many circumstances in which this is applicable, it has been found to be of practical importance in the case of a tenant of a shop, which had its business interfered with by another tenant, which took longer than was reasonable to

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complete repairs, thereby interfering with the shop owner’s business265. Thus, in the event that sufficient as-built records are available, it is possible to make the calculation on the basis of the as-built schedule, less only the effects of C’s culpable delays. In practical execution, this is usually a collapsed as-built, “but for” or modelled/deductive/single base analysis266. However, in this calculation, it is also necessary to establish what events are at C’s risk. 6–161 Where there is no indication of a contract period for the contract content, nor any indication from C as to its intentions, the reasonable period for the contract content remains to be resolved. For example, in the case of BSC v Cleveland Bridge267, there never was any date indicated, by which C thought it could complete. No formal contract was ever signed, the steel was delivered, but C refused to pay, saying that late delivery had caused them loss and that such late delivery was a breach of contract. The subcontractor claimed that, as there was no contract, there could be no contractual delivery date. As to time to complete, Goff J (as he then was) said: “I have first to consider what would, in ordinary circumstances, be a reasonable time for the performance of the relevant services; and then to consider what extended time the performance by D was in fact extended by an extraordinary circumstance outside their control.”268

In this case, the judge declined to take the as-built period as a baseline, saying: “[I]t follows that the rate of production actually achieved provides little, or no clue to the assessment of a reasonable time for production.”269

He took the view that where there had been accelerative measures put in place, the appropriate baseline was the putative planned period, calculated from the oral evidence. 6–162 However, in the absence of a stipulated period, calculating what would, in ordinary circumstances, be a reasonable time for the performance of the works, is a difficult task. Different sized contractors can be expected to have different resources at their disposal and it is reasonable to suppose that resources and productivity coefficients will be essential parts of the equation. There is, for example, the possibility that D may have deliberately chosen a contractor of a type of which it expected exceptional workmanship, for which it was prepared to sacrifice some time and cost and so on. In the Astea v Time Group270 case, Judge Seymour accepted that C’s resources were an important concept, saying: “[T]he focus of attention is likely to be upon the allocation of resources to performance of the relevant contractual obligations. In any sphere of commercial, or personal life it is necessary for decisions to be made as to the relative priority of matters which need to be dealt with and as to the resources which it is appropriate to allocate to such matters. It would, I think, be wrong in principle to proceed upon the basis that an obligation to do something within a reasonable time was equivalent to an obligation to do it as soon as

265 K Pickavance, “Calculation of a reasonable time to complete when time is at large” [2006] ICLR 167. 266 See American Association of Cost Engineers International, Forensic Schedule Analysis (2009) AACE International Recommended Practice No 29R-03; see also Ch.15, “Forensic programme analysis” at paras 15–117 to 15–148. 267 British Steel Corp (1983) 24 BLR 94. 268 British Steel Corp (1983) 24 BLR 94 at 123. 269 British Steel Corp (1983) 24 BLR 94 at 125. 270 Astea (UK) Ltd [2003] EWHC 725 (TCC).

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was practicably possible, subject only to not being held responsible for causes of delay outwith one’s control.”

6–163 However, apart from C’s capabilities at the time and in the circumstances of the works in question, the judge appeared to think that the computation should also take into account D’s and others’ circumstances, as follows: “[W]hether the party for whose benefit the relevant obligation was to be performed needed to participate in the performance, actively, in the sense of collaborating in what was needed to be done, or passively, in the sense of being in a position to receive performance, or not at all; whether it was necessary for third parties to collaborate with the performing party in order to enable it to perform; and what exactly was the cause, or were the causes of the delay to performance.”

In the end, what should have been a reasonable period for the required works is probably a question that can be determined only by reference to all the factual information available that can be provided by the various project consultants involved, the contractor, its subcontractors and suppliers and statutory undertakings. Given that the entire scope of C’s works falls to be considered, the full ambit of those factual matters is likely to be wide and the scope of expertise, in identifying the activity durations applicable, will depend in some measure upon usual practice and market conditions then prevailing in the place in which the works were built. This is the equivalent construction difficulty, perceived by Lord Herschell, in the shipping case of Pantland271. 6–164 Accordingly, it is submitted that, where there is no contract, the appropriate calculation of a reasonable time to complete should not be based upon a hypothetical baseline to which the effect of D’s risk events is added, but by reference to the time actually taken, less only the time taken up by those events within C’s control and responsibility.

Where there is no completion date under the contract “What constitutes a reasonable time within which an act is to be performed where a contract is silent upon the subject depends on the subject-matter of the contract, the situation of the parties, their intention in what they contemplated at the time the contract was made, and the circumstances attending the performance.”272

6–165 Where, notwithstanding that nothing has been agreed as a contract period, in the course of negotiations C has indicated what it thinks is an adequate completion period then, in the absence of anything that would indicate it to be at fault, it would appear that such a date would be a reasonable point from which to assess such a period. For example, in Fee v Express Lift273, there had been correspondence between the parties on the date of commencement and completion. The last correspondence from C stated that it could see little possibility of improvement on the dates previously given, but suggested that the situation be monitored and, if it became possible to review the situation, then it would try to improve upon it. In this case, HH Judge Bowsher QC gave a provisional view (without deciding) on the documents before him that it would be impossible for C to contend that a reasonable time for completion of the

271 Pantland Hick [1893] AC 22. 272 Minor v Minor, 863 SW 2d 51 (Tenn Ct App, 1993) at 54. 273 J & J Fee Ltd v The Express Lift Co Ltd (1993) 34 Con LR 147.

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works would be any later than the date they had consistently put forward in contract negotiations. In Astea v Time274, HH Judge Seymour QC also seemed to think that C’s “contract period” was the appropriate starting point in saying that consideration of a reasonable time for performance “is likely to include taking into account any estimate given by the performing party of how long it would take him to perform”. 6–166 In this scenario, there are three possibilities as to C’s entitlement: the “contract period” (however that is established), plus the putative effects of those events agreed to be at D’s risk;

the “contract period” (however that is established), plus the putative effects of everything that is not caused by C’s culpable delay; or the time that the works actually took to complete, less only any time on the critical path lost because of C’s culpable delay. 6–167 In the case of the first possibility, the risk structure of the contract is left in place and, in effect, C is granted the same time to complete as it would have been granted had the contract completion date been calculated correctly in relation to the planned content of work at the outset, together with the content of a reasonable extension of time based upon the mechanism set out in the contract. This leaves C in exactly the same position when having to complete within a reasonable time as the period it would have had free of liquidated damages had the contract period been correctly stipulated and the contractual machinery correctly operated. This is thought by some learned commentators275 to be the appropriate approach. As Hudson suggests: “It also seems possible that, in deciding on a reasonable time for completion in such a case, there should be consideration of the circumstances stipulated in any contractual extension of time clause as justifying an extension of time, either as indicating circumstances which should be taken into account, or possibly as excluding any circumstances not mentioned in the clause.”276

This appears to leave the burden of proof as to what is a reasonable time to complete with C and in the same position when having to complete within a reasonable time as the period for which it would have had to prove entitlement to relief from liquidated damages had the contractual machinery been operated effectively. 6–168 In the second possibility, the risk structure of the contract is discarded. C is permitted the “contract period” but, in addition, C is granted all the time to complete that the additional works took to achieve in relation to the critical path, less only any time taken up on the critical path as a result of C’s own culpable delay to progress. In effect, this puts the burden of proof as to what extra time should be awarded on D to show that it is not all at D’s risk at common law. As Emden’s Building Contracts277 puts it: “Where a reasonable time for completion becomes substituted for a time specified in the contract, then in order to ascertain what is a reasonable time, the whole circumstances must be taken into consideration and not merely those existing at the time of the making of the contract.”

274 Astea (UK) Ltd [2003] EWHC 725 (TCC). 275 See for example, D Jones, “Subcontractor’s remedies and liabilities for delay” (1989) 5 BCL 16 at 24. 276 Ian Duncan Wallace QC (ed), Hudson’s Building and Engineering Contracts, 11th edn (London: Sweet & Maxwell, 1995), at para.9.031. 277 HH Judge Humphrey LLoyd QC (ed), Emden’s Building Contracts, 8th edn (London: Butterworths, 2002) Vol 1, p.177.

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Where there is a stipulated contract period 6–169 Where there is a stipulated period for the works defined by the contract under which there is no effective machinery for extending the contract period either ab initio, or by virtue of a specific event, there are four possibilities. C may be entitled to: the contract period as extended (or should have been extended under the risk structure in the contract) for the effect of all that happened up until the machinery broke down plus the putative effects of everything that is caused by D’s acts, or omissions thereafter; or

the contract period as extended (or should have been extended under the risk structure in the contract) for the effect of all that happened up until the machinery broke down plus the putative effects of everything that is not caused by C’s culpable delay thereafter; or the “contract period” (however that is established) plus (ignoring the risk structure in the contract) the putative effects of everything that is not caused by C’s culpable delay; or the time that the works actually took to complete, less only any time on the critical path lost because of C’s culpable delay. 6–170 The first possibility is that in which the risks lie where they fall under the contract. When an event happens to prevent C from completing, for which D is at risk at common law, C is entitled to its contractual rights up until then, together with the putative effects on completion of D’s acts and omissions thereafter. This puts the burden of proof of a reasonable time on C, to demonstrate the effect of the act of prevention and the reasonable time flowing from it. 6–171 In the second possibility, the risks lie where they fall until an event happens to prevent C from completing for which D is at risk at common law. C is then entitled to its contractual rights up until then together with whatever time it took thereafter, less only the time for which C is at risk at common law. This puts the burden of proof of a reasonable time on C, up to the time that D’s act of prevention occurred and upon D thereafter, as to the reasonable time arising out of the act of prevention. 6–172 In the third possibility, C is permitted the “contract period” for the work it was contractually obliged to complete and then, in addition, C is granted all the time to complete that the additional works took to achieve, less only any time taken up on the critical path as a result of its own culpable delay to progress. This effectively puts the burden of proof upon D as to why the time the works actually took is not the time to which C fairly is entitled. 6–173 In the fourth possibility which, it is submitted, is the only practical one if there is not only no risk structure and contractual machinery for extending time, but also no contract completion date to which it could be applied, C is entitled to all the time the works actually took less only the time taken up on the critical path to completion by C’s culpable delay to progress. This effectively puts the burden of proof upon D as to why the time the works actually took is not the time to which C fairly is entitled and is the position that was adopted by the House of Lords in Pantland278.

278 Pantland Hick [1893] AC 22.

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CHAPTER 7

Planning and programming

Introduction Planning Familiarisation Outline plan Strategic plan Detailed plan Programming Varieties of programme Introduction Baseline and target programmes The development programme The tender programme The working programme The occupational programme The as-built programme Subcontractors’ programmes Programme preparation The critical path method The contract period Early completion Milestones, key dates and sectional completion Work content Logical relationships Activity durations Calculating durations Project planning method statements Standard form requirements for programmes The programme as a contract document Specifying the programme requirements Pricing the programme requirements

7–001 7–015 7–021 7–022 7–023 7–024 7–025 7–026 7–026 7–028 7–038 7–043 7–047 7–055 7–058 7–059 7–068 7–068 7–085 7–091 7–098 7–110 7–116 7–126 7–143 7–164 7–179 7–222 7–229 7–243

Introduction “A schedule defends from chaos and whim. It is a net for catching days. It is a scaffolding on which a worker can stand and labour with both hands at sections of time.”1 1 A Dillard, The Writing Life (San Francisco: Harper & Row, 1989), ch.2.

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7–001 Planning, programming and delay analysis, although allied disciplines, are not one and the same. In principle, planning is very much an art form, similar to designing an intellectual application. It requires experience, vocabulary, communication and imagination and, at its highest, provides the logistic formula for the difference between the achievement of predicted desire and chaos. Programming is a mixture of art and science, involving the interpretation of the results of planning usually, these days, in a database of programming software, which facilitates the fast and efficient manipulation of the planning data. The results can then be produced in an infinite variety of formats for the purpose of decision-making during the course of the works. Delay analysis, on the other hand, is the use of the historical planning, programming and progress material as a factual basis for the calculation of the effects of change and the rights and liabilities that flow from them. 7–002 In theory, there can be little delay analysis without programming and little programming without planning. Unfortunately, that is not how it always works out in practice2. It is not unknown for a contractor to go into court with print-outs of bar charts, that it refers to as a delay analysis, which have not been “planned”, bear little resemblance to a workable programme illustrating a planned intent, and are indistinguishable from print-outs of pictures drawn on a screen to support its case. As HH Judge Humphrey LLoyd QC remarked in Masons v WD King: “as a matter of general practice within the industry it is quite common for contractors not to produce satisfactory schedules as a matter of course throughout the job but rather to produce them retrospectively at the end of the job when they actually begin to litigate, or arbitrate extension of time claims.”3

7–003 Simon and Murray-Webster have expressed the current difficulty in the industry thus: “30 years ago in order to produce a project schedule a strict sequential process would be followed. Firstly all the work to be undertaken would be identified and listed as tasks or activities. The logical sequence of each activity would then be determined, perhaps by using an activity dependency list; a critical path network diagram would then be drawn up. Once the ‘logic’ was agreed the likely elapsed time of each activity would be estimated, where appropriate taking into consideration the required effort and likely resource availability. And finally, the early and late start dates and floats would then be calculated and the duration for the project established. Today, due to the very nature of available computer software, it is no longer necessary to follow anything like the old sequential process. In the extreme case a project schedule is created by first establishing the desired end date, importing activity descriptions from a pre-determined template, and then literally drawing bars to represent elapsed time ensuring that the end date is not exceeded. In truth this is nothing more than a pretty picture that was created without any thought to the project scope and without any consideration for the logical dependencies between activities. Unfortunately, the final result is also often regarded as perfectly acceptable.”4

7–004 The common enough practice of contractors of producing something by way of a schedule that is superficially attractive, but effectively meaningless, is a serious

2 See Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008). 3 Masons v WD King [2003] EWHC 3124 (TCC) per HH Judge Humphrey LLoyd QC at [37]. 4 P Simon and R Murray-Webster, “The Ancient Art of Planning” (December 2003) Project Manager Today p.37.

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problem5. The CIOB’s research indicated, amongst other things, that only 14% of respondents were familiar with the use of a fully linked critical path network to manage the sequence and timing of the work. (By comparison, similar research carried out in Australia found that, in over 1,000 construction schedules examined, fewer than 10% had adequate logic.) 54% were familiar with the use of a simple bar chart, identifying only the dates upon which activities were initially planned to start or finish, without any sequence, or identification of priority. 8% were familiar with a partially linked network being used to show some of the priorities and sequence, but without the benefit of a dynamic network. 4% were familiar with either a flow chart, or a time-chainage diagram, being used to predict the sequence. 20% were familiar with other methods of communicating their intended progress being used, without reference to a schedule of any sort. 7–005 The research revealed that the growth in training, education and skill levels of the industry in the use of time-management techniques has not kept pace with the technology available. 95% of the respondents thought that the standard of education and training in the management of time was unsatisfactory. It is thus apparent that time management in the construction industry is now in about the same state as was construction cost control about 100 years ago: there are no accepted standards to which to work; no formal educational programme for those who set out to do it; no formal training for those doing it; and no accreditation, nor qualifications to demonstrate competence6. Project planning and project scheduling are currently carried out by those whose primary profession (if any) is another discipline. They may have come from an industry trade, be construction managers, project managers, architects, engineers (of one form, or another), quantity surveyors, or just someone who understands how the software works, but without any professional education, or training at all. Some are extremely talented and experienced and some are not and, as a result, quality of performance tends to be unpredictable. 7–006 Since carrying out the research, the CIOB have produced a guide to good practice in the proactive management of time7. However, it is clear that guidance in the standards to be achieved, alone, is not sufficient to secure an improvement in the management of time in the industry. Without education and training in time management, without forms of contract that require compliance, without sanctions for failure, without developers, contract administrators and project managers complaining during the course of the works, and the courts and tribunals taking the issue seriously when disputes arise, improvement in the standards of time management will be slow to be achieved. 7–007 On the other hand, whatever the state of education and training, there is no good reason why contractors who are in breach of contract by failing promptly to produce good quality planning and scheduling material and records during the course of the works should be able to take advantage of that failure after the project has finished late and in dispute8. Regrettably, tribunals can sometimes be persuaded by

5 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008), Chart 18. 6 See, K Pickavance, “Managing the Risk of Delayed Completion in the 21st century: The CIOB research” (Society of Construction Law, 2009); and K Pickavance, “Time for change – The practical aspects of time and the CIOB reforms”, 2009, Herbert Smith Construction Conference, London. 7 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010). 8 But, see Great Eastern Hotel Co Ltd v John Laing Construction Ltd [2005] EWHC 181 (TCC), in which the court roundly condemned the management contractor for not carrying out competently its scheduling obligations under the contract.

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self-serving anecdotal evidence allegedly supported by misleading graphics, which are not always recognised for what they are. So long as developers, contract administrators and project managers are prepared to ignore the inadequacy of contractors’ planning and scheduling materials and the courts and tribunals permit the perpetuation of this fiction there is little impetus for contractors to improve the standard of their timemanagement materials. 7–008 The latitude occasionally given by courts and tribunals in the United Kingdom to contractors to claim “delay” to be anything they want it to be and the reluctance of some courts and tribunals to interpret C’s updated schedule as an expression of its intent by which its entitlement should be calculated9 is in marked contrast to the views of legal commentators and the views of the courts and Boards of Contract Appeals in the United States. For the last 40 years or so, US government contracts have required CPM programming and proof of excusable delay by the time impact method10 and the schedule has commonly been used to measure progress and calculate valuation payments. In the US case of Sollitt v US11, for example, in dismissing C’s claim to an extension of time, the court held that C had only itself to blame for not being unable to prove its entitlement by reference to a competent CPM schedule, saying: “As the Claims Court noted in Fortec, ‘delay encountered in completion of a non-critical item may make that item critical so that “every month, conceivably, the critical path would change”’12. When delays are entered into a CPM schedule, even without deserved time extensions, this court can analyze the effect of the delays on the critical path of the project. Submitting monthly updated CPM schedules was a contract requirement. [C] may not excuse its failure to enter delaying events on the CPM schedule updates because of [D’s] alleged failure to grant timely extensions based on those delays. If [C’s] updated CPM schedules are of limited use in meeting its burden of establishing the critical path of the project, [C] is now facing the consequences of its own performance of the contract requirement to provide updated CPM schedules.”

7–009 Accordingly, in the United States there has been a greater incentive for contractors involved in government contracts to dedicate resources towards getting the programme correct at every stage of the works. As a consequence of the contractual background in government contracts and the greater effort put into programming by contractors, and tribunals in the United States having also taken the view that, without a good provable updated working programme, any subsequent CPM analysis that relies upon a programme, or other evidence as a baseline against which delay can be measured, is of dubious value13.

9 For example, compare Kvaerner Construction Ltd v Egger (Barony) Ltd (2000) (unreported All ER Official transcript) at [56], [64] and [288] with Skanska Construction Ltd v Egger (Barony) Ltd [2004] EWHC 1748 (TCC) at [420]–[422]. 10 In the United States this is now referred to as a “modelled/additive/multiple base analysis”: see American Association of Cost Engineers International, Forensic Schedule Analysis, Recommended Practice No 29R-03 (2009, Taxonomy). 11 George Sollitt Construction Co v The United States, No 99–979 C (2005), 26. 12 Fortec Constructors v United States, 8 Cl Ct 490, 505 (1985), affirmed 804 F 2d 141 (Fed Cir, 1986). 13 See, for example, The Gassman Corporation (1999) ASBCA Nos 44975 and 44976; Kemron Environmental Services Corp (1999) ASBCA 51536; Galaxy Builders Inc (2000) ASBCA Nos 50018 and 50136; WG Yates & Sons Construction Co (2001) ASBCA Nos 49398, 49399; see also Ch.14, “Cause and effect” and Ch.15, “Forensic programme analysis” throughout.

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7–010 It is readily apparent that, at the moment, few CAs have the practical expertise in programming and construction management necessary to understand how the job is to be accomplished, on a detailed day-to-day level, or to know how C should advance the work and co-ordinate the work of others. However, by the adoption of the procedures recommended in the CMS14, these are issues that can reasonably be expected to be successfully dealt with by competent scheduling, review, revision and update, effective quality assurance and third party audits of schedules completed in differing density on a rolling basis as recommended by the CIOB Guide15. 7–011 No matter which contracting party produces the schedule, those responsible for the primary review and approval of the schedule should also be those working on and evaluating the progress of the project work. There is thus a potential difficulty in D being deeply involved in the construction process, unless there are some contract modifications along the lines of those suggested by the CMS, which provide for adequate controls and provisions for control to be effectively exercised. 7–012 The Armed Services Board of Contract Appeals case of Gassman16 concerned a contract for a four-storey extension on top of an existing three-storey building to form an AIDS research facility for the National Institute of Health in Bethesda, Maryland, which included a “provisional preliminary schedule” for the work, as recommended by the CIOB Guide. The tender documents stated that the “[D] makes no warranty as to the reasonableness or feasibility of the schedule”. In this case, C had the duty to review and analyse D’s schedule, but was advised that it could present “a revised network showing what, in [its] opinion, is the best sequence of work”, since it was recognised that the schedule provided “may not optimize [C’s] resources”. This is the approach that the CIOB Guide advises should be followed. 7–013 In the case of Utley-James17, where the contract between C and D contained, in the specifications, a section entitled “critical path method of planning and scheduling”, the Board of Contract Appeals had held that the specification was a tool for D’s use, rather than a device for C’s management of the job: C was not contractually entitled to use, nor was D contractually obliged to furnish, a CPM schedule suited to C. On appeal, the US Claims Court considered whether C could reasonably rely on a clause in the contract under which D could prepare its own schedule from information supplied by C. The court upheld the finding of the Board that the CPM schedule arrived at by D was effectively useless. However, since the CPM schedule was for D’s benefit and not C’s, and since C was not contractually obliged to follow and in fact did not follow this useless CPM schedule, it was not entitled to damages merely because the schedule was defective. 7–014 The court went on to say that damages would be recoverable to the extent that the defective schedule was wrongfully used by D to support its position with regard to C’s claims for acceleration costs and specific damage. While C tried to blame early schedule delays in the work on, amongst other things, inaccuracies in the CPM schedule itself, the Court of Claims held that:

14 See App.2 to the 4th edn. 15 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), at Pts 3 and 4. 16 The Gassman Corporation (1999) ASBCA Nos 44975 and 44976. 17 Utley-James Inc v United States (1985) GSBCA No 5370, 85–1 BCA (CCH) para.17,816, (1988) 14 Cl Ct 804.

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“It is [C] who is charged with construction of the project. He must, as a general rule, prepare a schedule of work, performance and co-ordinate the work. [C] must temper his CPM schedule in light of its construction experience and capabilities. It is unreasonable to expect that a CPM schedule prepared by [D] would be required which may well impinge on or interfere with the construction experiences and the capabilities of [C]. [D] indicates by means of plans and specification what kind of building it wants. [C] as the successful bidder analyses the said plans, sets up its CPM schedules outlining the way it intends to perform the work and complete the said work within the period called for by the contract. [D] who contracts to have a building constructed usually does not tell [C] how to do his job. [D] relies on [C’s] experience from past jobs in this regard The [C’s] actions during the contract performance clearly support the board’s conclusion that [D’s] CPM schedule was not intended to be nor was it the road map for completion of the project. The [C’s] own CPM schedule was to control and it did control the progress of the work, [D’s] CPM schedule was used for payment purposes only as testified by [C’s] scheduler and the CPM expert.”18

Planning “While it may seem self evident and trite, a contractor that fails to plan is planning to fail.”19

7–015 Planning is the intellectual process of deciding in advance when and where work will be performed, how it is to be performed and by whom it is to be performed. It involves decisions concerning: 1. 2. 3. 4. 5. 6. 7.

the overall strategy of how the work process is to be zoned for control; how the control is to be managed; what methods are to be used for construction and materials handling; the strategy for sub-contracting and materials supply; the principal periods of operation of the zones of work and their interface; maximising efficiency of the project strategy, with regard to cost and time; and risk and opportunity management.

7–016 To some extent, everything except the unforeseen is planned to happen; planning is therefore the antithesis of chaos. Most of the plans we create as individuals are short in duration. They are developed in the mind and rarely committed to writing. This form of planning is a sanity-preserving device that we all carry with us; without it we would not be able to make sense of the world in which we live; nothing could be anticipated and everything would be a surprise. But this formulation of anticipation is infinitely flexible, relatively uncommitted and safe because we never really accomplish our tasks in the procedural pattern we first imagined them. Because the plan predominantly affects only the party in ultimate control of the plan, simple and relatively instantaneous adjustments to the plan are also constantly being made as we go about our daily business. 7–017 However, the process of planning the future becomes infinitely more complex when other people are involved. Then, the personal plan has to integrate with the personal plans of others. Because the others have plans of their own, different priorities and different commitments, the process of planning the participation of others requires forethought. It also requires that the plan ultimately put in place has the tacit 18 Utley-James Inc v United States (1988) Cl Ct 804, 812, per Lydon SJ. 19 A Garlick, “Construction contracts: power to the schedule”, University of Melbourne, 2001.

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agreement to co-operate from those others involved in the plan. This necessarily requires imagination and communication, with the inevitable result that the plan prepared tends to be in regard to activities that are likely to take place at a time in the future and usually over a longer period. The more parties that are involved and the larger the number of actions to be co-ordinated, then the longer will be the timeframe over which the actions are planned and the longer in the future the plan will anticipate; the more complex the plan will then become and the more scientific must be the approach to review, revision and updating of the plan for the purposes of time management. 7–018 In contrast to what is currently recognised as reasonably required for effective time management, the CIOB research20 found that, in practice, the planning process is generally not well thought-out, nor well managed. By way of example, 29% of respondents were found to be familiar with the planned sequence of work being left entirely to the project scheduler to determine, in isolation from everyone else; 16% were familiar with other jobs being used as a baseline for the planned sequence of work; 12% were familiar with other jobs being used entirely and without reference to any peculiarities of the contract for which the schedule was to be used. In a construction contract, it is usually the case that, when C starts to plan the work, it is somewhat disadvantaged compared to the design team. Whereas the design team will have “lived” with the project for many months or, in complex projects, even years, C will usually not start to think about how the construction should be planned until after the construction contract has been let21. In such circumstances, much could sensibly be gained from C’s point of view by a visit to the offices of the architects, engineers and quantity surveyors who have participated in the design process. Surprisingly, notwithstanding the good sense of it, the CIOB research indicates that such enquiry is rarely made22: 26% experienced the architect being involved and only 12% were familiar with the electrical engineer being involved in such discussions. The abbreviated report observes: “The common experience of those concerned with the planning and management of construction projects, seems to be that the complexity of a project is defined by its services’ content, and that the more complex the project the more likely it is to be delayed. Bearing this in mind, it is surprising that project designers were not consulted more often in the determination of time-related strategies for projects.”

7–019 Every project starts with some sort of plan of execution and the earlier it is produced in the project development, the more likely that time can effectively be managed during the construction stages. In this regard, the CIOB Guide advises23: “An effective time-management strategy will recognise that time expires at a regular and consistent rate, from inception to completion, whether it is used effectively, or not used at all. Accordingly, an effective planning strategy will demonstrate the most effective use of available time in all circumstances.

20 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008), Chart 19. 21 This is often the case, notwithstanding that C is required to produce a tender programme. 22 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008), Charts 20 and 21. 23 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) at paras 2.1.1 to 2.1.6.

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Major projects are necessarily conceived a long time before they are designed; designed a long time before they are constructed; and put into use a long time after construction starts. The larger and more complex the project, then the greater will be the time between inception and completion, and the more likely it is that there will be changes and other intervening events to be taken into consideration in the future. A planning strategy which facilitates the effective management of changing subject-matter, work content, sequences and resources and other intervening events is thus an essential prerequisite of the effective management of time on major projects. The most effective time-management strategy starts in the design stages of a project. In the same way that, to some extent, it is possible on all projects to identify a cost-effective way of achieving the same quality, so projects can be designed to be time-effective without compromising outturn cost, or quality. If time management considerations have not been entertained during the design stages of a project, then the opportunities for effective management of change and other impeding events may be limited during the construction stages.”

7–020 Just as it is possible to start designing a building with the detailing of the skirting and architraves, it is equally possible to start planning the construction process with the interface between the decorators and plasterers but, in both cases, such an approach is unlikely to produce a satisfactory design on the one hand, or a satisfactory planning solution on the other. Rarely will a satisfactory result be achieved from starting on the particular and adding the bits together afterwards. In essence, the procedure of the planning process should be as follows.

Familiarisation 7–021 Before commencing to plan, the project planner has to have a good grip on the overall scheme of the construction contract, the type and disposition of potentially severable zones of operation, their interdependencies, site influences, access, services, adjoining buildings and so on. This stage is very much analogous to familiarising oneself with the size of the board, the pattern of squares and the movement capability of pieces in a chess game, before trying to work out a playing strategy.

Outline plan 7–022 The next stage in the planning process is to determine the broad strategy, very much along the lines of an architect’s or engineer’s sketches of the outline design. The project planner’s first objective will be to identify a policy for how the main operations are going to be tackled and what major items of construction plant will be employed. For example, the number and type of cranes and whether they are to be fixed, or on rails; whether there are any resource constraints, such as a restriction on the use of labour that is not local; and what administrative structure will be required in terms of identifiable zones of operation and so on.

Strategic plan 7–023 Then some detail can be added to the outline: analogous to working up the outline design to a scheme design. In this the project planner will generally turn its mind to the principal resources and trade-orientated operations, how they are to be administered as subcontracts, some of which will have design work to execute, what contingencies are required against foreseeable risks. The logistics of deliveries and waste removal, the disposition on site of cranage, possible alternatives for scaffolding and weather enclosures will also be considered at this stage. As with the relationship between outline design and

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scheme design, some revisions to the policy may have to be made and the planning strategy may have to be revisited in the light of these later considerations.

Detailed plan 7–024 When the general principles are established, the detail can then be considered. It is here that the project planner establishes the primary interfaces, resources, identifies productivity quotients where it can, calculates primary durations and targets cash flow predictions. When all that is done, the scheduling can start.

Programming “The overarching purpose of a schedule is to indicate when work is to be performed in the future. The strategy for effective schedule preparation must be to provide a prediction of what is the intended timing and sequence of work yet to be carried out. In other words, it must show how the work is planned to happen and be a predictive, practical model for the future conduct of the work.”24

7–025 Programming is the art and science of creating the time model by which the project can be controlled. It entails putting the decisions made at the planning stage into a database that will: enable the programmer to allocate calendar periods to the various sections of the work, to make decisions as to preferred sequences, logical predecessors and successors, the calculation of durations and float in relation to resources available, and to present the plan in a form acceptable to D and the CA as a processmanagement tool. In the process of converting the plan into a schedule, the programmer should pursue the following development process: 1. definition of the work content; 2. defining the policy and strategy in regard to: planning, programme preparation, programme review, progress update, change management, planning method statement, record keeping, time management quality control, and communications, 3. 4. 5. 6. 7. 8. 9. 10. 11.

carrying out a risk assessment and ascertaining contingencies; designing the programme; developing a programme of work packages; developing a detailed work content analysis; assigning responsibility for individual activities; developing a detailed network logic; establishing activity durations and lead times; reassessing risk and contingencies; solving the CPM logic to determine start and completion dates;

24 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) at para.2.2.1.

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12. verifying the consistency of the programme at different levels and revise logic if necessary; 13. loading resources at activity level; 14. making the CPM programme without resource, or end date restrictions; 15. defining priorities for resource levelling; 16. resource level programming; 17. quality assurance reviewing the CPM programme for: inclusion of all work products, responsibility assignments, schedule integrity and logic restraints, resource plan practicability, any necessary revision, and 18. approving the programme.

Varieties of programme Introduction 7–026 The CIOB Guide25 advises that, in practice, there should be no more than five programmes. The element that distinguishes these programmes, one from the other, is the parties who participate in their creation. The five types of programme are: development; tender; working; occupational commissioning; and as-built. Of the five types of programme, only two are frozen in time – the tender programme and the as-built programme. The others can and should change significantly as the works proceed and more information becomes available. 7–027 Unless the work is designed in its entirety and all subcontractors and specialists appointed before any work commences, it is unlikely to be possible to plan the work in its entirety at the beginning of a project and, save in regard to the simplest of projects, completing all design work before commencement of construction on site is unlikely to be a practical possibility. However, if time is to be managed effectively, the activities to be carried out, the resources to be applied and their expected productivity must be identified before work on the activity commences. Accordingly, as better and more certain information becomes available, the density of the schedule can be expected to increase from that which is possible and necessary for feasibility purposes, to that which is possible and necessary for construction purposes. The CIOB Guide identifies these26 as low, medium and high and describes them thus: “Low-density is appropriate for work that is intended to take place nine months or more after the schedule date. Depending upon the purpose for which the schedule is intended, 25 Chartered Institute Projects (Chichester: Wiley 26 Chartered Institute Projects (Chichester: Wiley

of Building, Guide to Good Practice in the Management of Time in Complex Blackwell, 2010), at para.3.3.2. of Building, Guide to Good Practice in the Management of Time in Complex Blackwell, 2010), at para.3.1.12.1.

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tasks may reasonably be no more than the proposed duration of one building type, amongst others, or be trade grouped into such descriptions as ‘mechanical and electrical services’ and may conveniently be several months in duration. Medium density is appropriate for work that is intended to take place between three and nine months after the schedule date. At this stage the work should be designed in sufficient detail to be allocated to contractors or subcontractors. Activities may reasonably be grouped into trade activities in locations of durations not exceeding two months. High-density scheduling is a prerequisite of work that is intended to take place in the short term, say within 3 months after the schedule date; it is at high density that the work in progress will be recorded, monitored and reported upon. At this stage the work should be designed in detail, the sequence and intended progress of the work clarified and the resources and productivity identified. At this level the activity duration should be related to discrete tasks identified by a limited area and be no greater in duration than the period against which progress is reported.”

Baseline and target programmes 7–028 In the past, time management has been achieved intuitively, if at all, by either: rendering the schedule prepared for bid purposes (referred to as a “tender programme”) a contract document and insisting upon conformity with it; or discarding the tender programme and using an overall strategic, long-term schedule (referred to as the “master programme”), coupled with non-contractual independent27 short-term programmes for the various discrete time periods, or sections of the master programme28. 7–029 This shoddy approach to time management has been apparent, even on major projects. In Mirant v Ove Arup, a case concerning liability for the failure of boiler foundations in a major power station in the Philippines, the court found that no critical path network had ever been created for the project and that not only had management decisions during the works been based on poor planning and a fictitious assumption of where the critical path lay, but so had the claim, which failed. HH Judge Toulmin CMG QC recorded that29: “On 1 February 1996 the ‘contract effective date’ was specified under the Construction Contract. In January 1997 the works were still being monitored against strategy programme Rev D in February 1997 a revised programme, Revision E, was agreed. By March 1997, the civil works were reported to be two to three months behind Rev E programme. The Revision E programme for the Project was used by the programming experts as their benchmark in calculating delay. It was not, and did not contain, a critical path analysis showing what activities were at or near the critical path as the Project progressed. The experts also agreed that in a number of respects the Rev E programme was unreliable. In relation to the Revision E programme I have reached the following conclusions30:

27 Independent in the sense that neither the CA nor C’s subcontractors generally have access to these until a dispute arises, if at all. 28 For an example of the futility of this procedure and the difficulties it can cause, see Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd (No 2) [2007] EWHC 447 (TCC) (6 March 2007). 29 Multiplex Constructions (UK) Ltd (No 2) [2007] EWHC 447 (TCC) (6 March 2007), [143]–[147]. 30 Multiplex Constructions (UK) Ltd (No 2) [2007] EWHC 447 (TCC) (6 March 2007), at [477].

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1. 2.

3. 4.

5.

By the end of March 1997, one month after being introduced, it was already in significant delay. The evidence before me and the time that had elapsed between the introduction of the revised programme and the end of March 1997 makes it impossible to predict with accuracy what the scale of delay would have been in that period without costly measures being taken to remedy the general and specific problems identified in the [Independent engineer’s report]. [C’s expert’s] estimate of 42 days (since February 1997) may well be a reasonable estimate. These delays did continue to increase until the end of the year when the incoming [replacement for C’s] management started to reverse the trend. By the end of 1997 there appears to have been the potential for up to four months’ delay to completion of the project caused by problems other than boiler unit 1. This conclusion is based on what must inevitably be a somewhat uncertain analysis because it uses uncertain data but is amply supported by the contemporaneous documents which have been disclosed. On the basis of [C’s expert] and [D’s expert] analysis, the boiler unit was not on the critical path as of 1 April 1997. Had a monthly critical path analysis been undertaken, as would have been normal at the time in a similar project in the United States, the parties would have been able to determine how much time was available (if any) to deal with the boiler foundation problem before it affected the project as a whole and therefore how urgent it was for the consortium to agree and implement a solution.”

7–030 Notwithstanding its importance, the tender programme is often produced “in an informational vacuum”, based upon a global strategy devised over a very brief period, simply as a document that must be delivered with the bid for tender purposes, but without any intention of following it as a manifestation of intent. In agreeing that this should be a contract document to which both parties are to conform, there is arguably a degree of commercial cynicism at play. The appreciation that reliance upon a tender programme is unrealistic is not new. Over 40 years ago, when network planning was in its infancy, it was recognised that: “At or about the time of contract, a programme is required of [C]. This programme will be produced and agreed. But such agreement cannot be undertaken at this stage except by collusion in acceptance of unreality by all parties. It is not possible to put exact dates to specified phases of the project at this time. The future holds too much uncertainty.”31

7–031 In complex projects, the design will rarely have been completed in its entirety at tender stage and much will often still remain to be decided. Even if the time and costs were to be available to prepare a detailed schedule, the information on which it could be based would have to be guessed and the tender schedule would thus rarely be anything better than a guess no matter in how much detail that guess was illustrated. For example, it is not unusual at this stage to find that the enclosure of the shell, mechanical services, electrical services, fittings and finishes are not determined in finite detail, but are included in the contract by reference to a budgetary prime cost, or provisional sum, or approximate quantities estimated in relation to conceptual design. This is so, irrespective of whether the contract is based upon a lump sum, in which both the conceptual and detail design are D’s responsibility, or upon design and build, in which the conceptual design is D’s responsibility, but the responsibility for detail design falls to C.

31 Tavistock Institute, Interdependence and Uncertainty – A Study of the Building Industry (1966, Tavistock Publications), p.83.

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7–032 Apart from incomplete information and shortness of time, for economic reasons, C will often attempt to minimise the tender costs of unsuccessful bidding by the adoption of standardised planning modules for the principal elements. The technique of preparing a tender schedule primarily by reference to the amalgamation of standard modules is not new32. Inevitably, however, this will also have an adverse effect upon the quality of the tender schedule and the amount of thought that can realistically be put into it. 7–033 Thus, for all these reasons, the tender schedule should not be thought of as the product of a single, finalised intent embodied in one product for all purposes, although that is what many conceive it to be and, indeed, some contract forms actually require it to be33. Such a concept is counter-productive and inhibits both C and D from making proper use of the schedule as a management tool for the prediction of consequences. It will inhibit competent scheduling, review, revision and updating and, as a result, the schedule will fall into disuse, being resurrected only for the purpose of the inevitable dispute about the liability for delay. 7–034 The second current alternative requires the delivery of a “master programme” as a baseline with the day-to-day management being conducted by reference to other schedules, unrelated to it and rarely integrated. Many contractors choose to create shortterm look-ahead schedules manually, or in a different type of software from that used for the master programme. This is a serious mistake, which often causes insurmountable difficulties in reconciling C’s actual intent, as manifest in its short-term look-ahead schedules, with its published master programme. In Multiplex v Honeywell34, for instance, such difficulties were claimed (unsuccessfully) even to have set time at large, where: “The overall programmes. issued by [C] were not used by [C] to programme [the SC’s] works on site. On site [C] used 3 [month] and 3 week look ahead programmes. The said 3 month and 3 week programmes were not in the same format as the overall programmes, and they were not linked to the overall programmes. Further, the activities in the said programmes are not comparable to the activities in the overall programmes. Where the overall programmes identified the said dependencies, [the SC] could in theory plan its works by reference to the overall programmes. However, in practice [C’s] project managers did not use or follow the overall programmes. [The SC] was informed of when work was to be released by reference to the 3 month and 3 week look ahead programmes, rather than by reference to the overall programmes. Therefore dates and sequences in the overall programmes were not the dates and sequences which would in fact be followed in practice. In the premises, although [the SC] has used some of the overall programmes to report progress, the said programmes have not given [the SC] any guidance for planning the work, or for identifying the critical path, or for identifying the future sequence. In July 2005, Multiplex ceased to issue 3 month look ahead programmes and from the on the release of work areas to Honeywell proceeded solely by reference to 3 week look ahead programmes and by weekly meetings.”

7–035 Under the majority of the current standard forms of contract commented upon here, the master programme is not generally required to be reviewed, revised, or updated

32 See for example, DC Uprichard, “Computerised standard networks in tender planning”, Technical Information Service (No 59, 1986), Chartered Institute of Building. 33 Consider, for example, the status of the tender schedule which becomes a schedule to which C is contractually obliged to perform, a possible option under GC/Works/1. Consider also AS2124 at Cl.33.2, which refers to the construction schedule as that included in the contract, and AS4000, which specifies at Cl.33.2 that the schedule shall be deemed to be a contract document. 34 Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd (No 2) [2007] EWHC 447 (TCC) (6 March 2007) [45]–[50].

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but, (as nothing is said in any contract as to what it is to be used for) it is presumably intended to function as a baseline or target against which the parties may measure their performance. But some contractors have expressed doubts as to whether even for that they are given sufficient time before they are expected to start work on site. There is considerable weight in this concern. The preparation of a master programme even if only fit for monitoring performance takes a degree of interplay between C and its subcontractors and other direct works contracts and necessarily requires a degree of commitment before it can be started. D should allow sufficient time between the notice of award and notice to proceed so that C can thoroughly plan its work. However, no matter what time is given and how much thought goes into it, in a complex project, the master programme is unlikely to last long as a meaningful representation of C’s planned intent, baseline and target. Under some contracts, when work falls behind the master programme, it will be discarded and a new programme put in its place as a replacement target. It is not unknown for as many as a dozen such replacement target programmes to be found in major projects, using different ID codes, descriptions, logic and timing. 7–036 The CIOB Guide advises that both of these historical approaches are most unsatisfactory and are likely only to inhibit effective time management35. For effective time management, a fully integrated schedule, starting with the development schedule and incorporating, in due course, the working schedule and commissioning schedule, are essential: “An integrated project schedule provides a complete picture of the entire project life cycle, which is critical to effective project planning. Having all project phases incorporated into the same model gives the project team an opportunity to plan the critical interfaces between definition and detailed design, design and construction, and construction and start up. Limiting the project schedule to only the engineering, procurement, construction phases limits the usefulness of the schedule and ignores the critical planning phase and the final start up phase. Projects with integrated schedules at the time of authorization had better absolute cost performance and less schedule slip than projects without integrated schedules.”36

7–037 However, the fact is that the current standard forms of contract do not follow the advice of any of the current recommendations as to good practice in time management and tend to call for printed copies of C’s “programme”, before commencement, as a target for the whole of the works, without provision for, amongst other things: design integration; commissioning; review and revision; updating with progress; integrity; quality control; access to the software copy; redress for default; or any relationship between the requirements for the timing and sequence of the project and the provisions for relief and compensation for delay37. 35 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) at Pt 1. 36 Dr AF Griffith, “Scheduling practices and project success” 2005, AACE International Transactions. 37 See App.2 to the 4th edn for the CMS, as an example of the manner in which such provisions can be applied to the 1998 suite of JCT forms of contract.

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The development programme 7–038 The development schedule is the schedule that will be worked to by D and its consultants, before C is involved. It will necessarily include the work of all designing consultants and may also include the work of those involved in land acquisition, finance and legal arrangements. The content of the development schedule should include the planned construction period in relation to access and possessions, and the design schedules for all the designing consultants, identifying the logical sequence and the interface between them. 7–039 It has long been assumed that it is not possible to plan and schedule design work because, at one stage or another, the process is bound to be iterative and, to that extent, open ended, but this is not a good reason for not planning, scheduling and controlling the process. The development of a design ultimately follows a logical progression and there is no good reason why the essential processes cannot be planned and scheduled, just like any other, together with their interfaces and with appropriate contingencies for possibly repetitive sequences. Indeed, it has been found that, unless properly planned, scheduled and controlled, where a design schedule is carried out in parallel with construction and commissioning, there is an enhanced risk of project failure38. 7–040 For most projects the development schedule will also demonstrate the logic and timing of such things as land acquisition, development permissions and licences, finance acquisition, and legal matters. Some projects will also require such other things such as tenancies and lease provisions to be planned for. Ultimately, it should contain a provision for construction, commissioning and testing, handover, training and occupation. 7–041 The variety of considerations that will apply to the preparation of the development schedule is no different in principle from those considerations that apply to the construction of the working schedule, discussed below. Similarly, the development schedule should follow the same rules as to density as any other schedule. For example, at inception, the anticipated design and construction periods for the project may be represented, at low density, by two bars. However, by the time the scheme design has evolved, much of the anticipated process will be identified in medium density amongst the various disciplines and trades and in high density for the foreseeable three months hence. 7–042 By the time C is due to tender for the works, the development schedule should be sufficiently well developed to include anticipated construction operations integrated with the planned design and procurement procedures to form the basis of the contract period. It should be provided to C as one of the tender documents, but not as a document that will form the basis of contract.

The tender programme 7–043 Theoretically, tender planning is the selection of the method of work and its graphical presentation as a schedule. Because the quantum of the bid will depend to 38 See, for example, R Archibald, “Planning, scheduling and controlling the efforts of knowledge workers”, 1969, The Project Management Institute; and Dr AF Griffith, “Scheduling practices and project success”, 2005, AACE International Transactions.

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some extent upon the construction method to be adopted and the assessment of the effects of the time-related obligations, the tender schedule also becomes the basis of the cost structure of the bid. 7–044 The CIOB Guide39 advises that C’s tender schedule will not necessarily follow the development schedule, but it can follow it, if that is what C wishes. However, whether C adopts the development schedule, or produces their own, the tender schedule will usually be the first schedule for which C is responsible. It will incorporate any information required by the design team transferred from the development schedule and illustrate, at a mixture of low and medium density, what C intends to achieve and when. There are three obvious benefits to be achieved from permitting C to offer its own contract period and sequences: 1. 2. 3.

it enables C to exercise its commercial and technical judgement in arriving at its best price; it gives D the opportunity to compare tenders on both price and time; and if C’s own time for completion is used as the contractual time, it eliminates the contentious and clumsy business of shortening schedules.

7–045 Where there is a contract period, but no start date, it is normally the practice to agree, post-tender, a start date and then calculate the completion date from the tendered contract period. In the event of substantial delay between the receipt of tenders and the agreement of a commencement date, the tendered construction period should be reassessed in the light of any substantial change in the working calendar, the anticipated weather conditions in the working sequence, or holiday periods that would affect C’s calculation of the contract period. 7–046 For example, consider a two-year road construction project in which ground works are only permitted outside the high rainfall season of say 31 October to 1 March of the following year. By C’s tender design, the first part of ground works is to be completed before the start of the first “wet” season. For the purposes of calculating its contract period, C assumes a site start by the end of July, which will allow it to complete major land clearance within the available time window. In the event that C is not given site access before August, it will be impossible for it to complete its ground works before the wet season starts, with the result that the project is likely to span over three wet periods instead of two, resulting in a threeyear contract instead of a two-year contract. As originally tendered, it might well have been carrying out “dry” construction during the winter months and been relieved from the effects of the weather. Subsequently, the change of start date will have had the effect of adding many months, if not an additional year, to the construction contract period.

The working programme 7–047 C’s working schedule should not be thought of as being a complete and accurate prediction of its intent for the total duration of the works. The options available to the project planner, scheduler and construction manager will vary throughout

39 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) at Pt 3.

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the course of the project, as will the information available, and the perception of importance of the criteria driving the decision-making process. Accordingly, whatever choices are made and/or decisions taken at tender stage, they can never be any better than the information upon which they are based; if the information on which they are based is sketchy and ill-defined, notwithstanding that the choices may be precisely described and the decisions recorded, they may turn out to be poor in the light of later and better information made available as the project proceeds. 7–048 In this regard, the CIOB Guide advises that the schedule should be regularly reviewed and revised in the light of better information and to preserve the forthcoming three months window in high density. The Guide states40: “The strategy for schedule review must take account of the development of the schedule as better information becomes available and, as the project proceeds, the increasing density of the schedule as it develops from initiation through the work on site to commissioning the completed project. Any positive control of revision to the schedule should encourage safety, contract and legal compliance and effective time control.”

7–049 Despite the general reluctance on the part of construction managers to use CPM scheduling as a management tool, there can be no real doubt that a well thought-out working schedule, complete with a fully resourced, high density, short-term, look-ahead portion, is an essential management tool for complex projects. The only sensible way to produce the working schedule is to break down the activity durations at low density into finer detail and produce the short-term look-ahead at high density within the working schedule. The particular period in question can then easily be filtered out for presentation and, in this way, C’s published intent can be demonstrated to be practically achievable. 7–050 It is only by reference to a properly thought-out and updated high-density, resourced working schedule, which represents C’s intent for the future conduct of the works, that a delay to progress can be identified. It is axiomatic that, if there is no identifiable intention to perform at any particular rate of progress, it is not possible to demonstrate a delay to it. 7–051 Without a working schedule to predict the future, personnel on site will only have experience and intuition to guide them and research has shown that, in complex projects, that is unlikely to achieve success, no matter how talented the personnel. Accordingly, at any one time, the working schedule is the management tool from which the following is established: 1. 2. 3. 4. 5. 6.

the intended periods of activity and future sequence of the works; the dates and logic by which the flow of design information will be planned; the dates and logic by which the procurement of major items of plant, goods, or equipment on long delivery will be planned; the dates and logic by which the arrival on site of materials, goods, or contractors employed by D will be planned; any time contingency required by C and its subcontractors; and the free float and total float available (if any) which may be used by C and/ or D for managing the expenditure of their respective time contingencies.

7–052 It is also normally the baseline which will be used for: 40 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) at paras 2.3.3 to 2.3.5.

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recording the degree of progress actually achieved from time to time; calculating the effect of progress achieved on the planned intent; calculating the likely effect of any delay to progress on the completion date, if any, caused by a D’s time risk event for the purposes of an extension of time; and calculating the effect on progress and/or the date for completion, if any, caused by a D’s cost risk event. 7–053 When multiple separate trade contracts are involved, either as a result of the use of management contracting, or construction management as the method of procurement, or because of the need for developer-employed specialists, the management contractor or construction manager should draw together the various schedules to come up with one project working schedule from which to co-ordinate the project. In these circumstances, there is no intrinsic reason why D, or its project manager, or risk manager on its behalf, should not produce the working schedule from their own development schedule. On the other hand, unless they are the fully integrated result of participation by the works contractors, there are likely to be some real difficulties inherent in the use of developer-prepared working schedules for site management and retrospective delay analysis. 7–054 In West Faulkner v Newham41, for example, it was specified that “the work is to be executed in the order shown on [CA’s] drawing and the external works phase as shown at the end of this bill”. Under “working [programme]”, the bill required that, as soon as practicable after appointment, but before work on site commenced, C was to prepare, in conjunction with the CA’s drawing and the external works phasing plans, a fully detailed programme in the form of a bar chart or a network diagram. The programme was to indicate the dates upon which it was proposed that the various operations and sections of the work would be started and completed in order to conform with the overall duration of the contract. The CA’s drawing was a bar chart, showing first “Site Mobilisation Decant (Blocks) C, D and E” and then the order in which tenants in individual blocks and house groups would be decanted to “hostel accommodation” and would return to their houses. The draft bills of quantities had contained a provision giving C the option of carrying out the works according to a programme of its own, but it had elected not to do so and signed a statement reading “[C] agrees to carry out works in accordance with the [CA’s] drawing”. In the event, C found the schedule entirely unworkable and for many reasons fell woefully behind time. Sadly, the result of this was that the CA was successfully sued in negligence for not recommending to D that C’s employment under the contract be terminated for its poor progress in relation to the CA’s schedule.

The occupational programme 7–055 The CIOB Guide42 describes the occupational schedule as: “[D’s] schedule as to how it will occupy and use the project. It will contain details of possessions, furnishing, commissioning and testing, access and training. The schedule will

41 West Faulkner Associates v London Borough of Newham (1992) 61 BLR 81; affirmed on appeal (1994) 71 BLR 1 in which the point was not considered. 42 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) at para.3.3.6.

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usually be prepared by [D] or its consultants from the working schedule and reviewed and revised in light of changes made during the course of construction.”

Whilst, in a simple project, it is unlikely that an occupational and commissioning schedule will be extensive, in complex projects it may reasonably extend over many months and even years. For commercial reasons, in complex projects, it is highly likely that the commissioning, testing and occupation will be phased in according to completed sections, or while C is in possession of the site by virtue of partial possession rules, if any43. 7–056 It thus follows that D’s schedule for such commissioning and occupation must closely follow C’s working schedule which is relevant at the time. 7–057 Accordingly, effective time management must provide for an exchange of information between C and D and the consequential review, revision and updating of the working and occupational and testing schedule to meet the progress of the works being carried out.

The as-built programme 7–058 The CIOB Guide44 describes this as: “the final programme to be completed. It will evolve through the course of the project as activities are started, progressed and completed as the work is executed. The last update should complete the as-built schedule as a high-density record of the sequence in which the works were actually constructed, the resources actually used and the productivity actually achieved.”

Whilst, at first blush, it might be thought that an as-built programme could not have much to do with planning, or programming, it would be a mistake to dismiss it as irrelevant. Provided that the data used is accurately recorded and used correctly, the as-built programme is a mine of useful information, not only for retrospective delay analysis, but also for planning purposes in the future. The CIOB Guide observes45: “Trends in productivity achieved, derived from the as-built productivity data, should be used to verify the planned schedule for the remainder of those activities. If a discrepancy is found between what is planned to be achieved and what, by reference to the progress records, can be proved to be achievable, changes should be made to the schedule to accommodate the discrepancy, going forward. In relation to an activity such as piling, for example, each rig’s productivity should be analysed (in order to ascertain the optimum pile-cycle achievable and the effect of any prior departures from it). The demonstrable, achieved productivity cycle can then be used to verify the activity durations planned for the remaining piling works. If it should be found that the productivity that has been achieved is insufficient to maintain the programme, changes can then be made in good time to the planned resources and/ or to the sequence of the works in order to bring the work back on programme. One of the advantages of this repetitive sequence review is that in the case of an occurrence which disrupts productivity, the bench-marked proven optimum productivity will be the best possible baseline from which to calculate the effects of the disruptive event.”

43 See, for example, JCT05 Cl.2.33. 44 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) at para.3.3.7. 45 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) at paras 4.2.4.4 to 4.2.4.6.

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Subcontractors’ programmes “Today, important project work is often performed by multiple departments and supervised by managers of different disciplines and experiences.Work occurs in different physical locations anywhere in the enterprise where talent and appropriate experience reside.To control this starburst of projects, companies need a new model, a different kind of project management. They need a scheme that provides simultaneous emphasis on co-ordination and consolidation, the bringing together of information to achieve common focus, priorities and understandings, while encouraging autonomy, and hands-on management at the project control points by people who understand the project best.”46

7–059 Sadly, that strategic vision is rarely reflected in the relationship of contractor to subcontractor in the management of building and civil engineering contracts. Most construction work involves either subcontracting, or separate trade contracts. Specialist and trade contractors have particular skills and ways of working that make their role and contribution not only critical to the success of the project, but also difficult to manage. The complexity associated with the integration of separate trade contractors is not diminished by any particular procurement method: their contribution is important, regardless of the type of contract. The critical questions on which to focus are: who will actually undertake the work on site? and how can their skills be harnessed to provide a positive contribution to the construction process? 7–060 Whilst, in theory, subcontractors are entitled to share C’s scheduling information, in practice it is common for C (misguidedly) to refuse to give the subcontractor anything more than a start and completion date within which to work. Where the subcontractor has to interface with other subcontractors that likewise only have a start and completion date to which to work, without any guidance on how C sees the interface working, the resultant difficulties are notorious47. 7–061 Specialist subcontractors are particularly vulnerable when a substantial design contribution is required from them. Where such a subcontractor is appointed too late for its design to be integrated into the normal design development, the work can become the subject of contention, because it is very likely to be out of step with the working schedule, affecting both design and construction. The consequential results of the necessary revision of C’s schedule can obviously have a “domino effect” on the timing of the work of the other subcontractors, often resulting in variations, consequent rescheduling and an attendant escalation of claims. 7–062 In Pigott v Shepherd48, Shepherd Construction Ltd (C) was the main contractor for the development of a new 14-storey office block at Chapel Street, Coventry, in which Pigott was a specialist piling subcontractor. In February 1989, the subcontractor submitted an offer to C which, incorporating the subcontractor’s “particular conditions of quotations”, included the condition: “The period of notice of commencement, [schedule] time for the work and the level or amount of liquidated or consequential damages to apply to this contract are to be agreed prior to contractual commitment. In this particular connection, and in view of our current 46 JM Koppelman, Concentric Project Management (1994, Primavera Systems), an occasional paper. 47 See, for example, Kitsons Sheet Metal Ltd v Matthew Hall Mechanical & Electrical Engineering Ltd (1989) 47 BLR 82. 48 Pigott Foundations Ltd v Shepherd Construction Ltd (1993) 67 BLR 48.

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and projected level of activity, no guarantee is given or implied as to our availability at the time you may require, or to comply with your stipulated [schedule] requirements.”

7–063 The contract also incorporated DOM/149, the appendix to which included a sequence of work which simply showed a subcontract period of eight weeks. Clause 11.8 provides: “The operation of clause 11 shall be subject to the proviso that the sub-contractor shall use constantly his best endeavours to prevent delay in the progress of the sub-contract works or any part thereof however caused, and to prevent any such delay resulting in the completion of the sub-contract works being delayed or further delayed beyond the period or periods for completion, and the sub-contractor shall do all that may reasonably be required to the satisfaction of the architect and the contractor to proceed with the sub-contract works.”

7–064 Notice to start was given on 26 June 1989 and works commenced. The works should have been completed by 27 August 1989, but the subcontractor did not vacate the site until 20 October 1989 (returning in April 1990 to complete outstanding works). C’s case was that the subcontractor’s obligation was not merely to complete the work within the specified period, but also to progress the work reasonably in accordance with the progress of the “works” and, because of the slow progress of the piling during the contract period, C was unable to carry out various works on the site which it would have been able to carry out had the subcontractor proceeded with the piling with reasonable expedition. 7–065 The subcontractor argued that it was not under any obligation to C to work to any schedule other than the eight-week period in total for carrying out the piling work, with no indication that the piling work should be carried out at any particular rate of progress. The subcontractor relied on the decision in GLC v Cleveland Bridge50, in which the Court of Appeal held that C’s obligation under the contract in that case was merely to work within the dates specified. Dismissing C’s claim, HH Judge Gilliland QC said that: “[C’s] master programme for the main contract shows that it had programmed its work on the basis that it would be possible to commence the excavation of the foundations in the east car park area 2 weeks after the commencement of piling by [the sub-contractor], followed after a further 2 weeks by construction of concrete foundations by [another subcontractor]. It is however clear that [C’s] master programme was not itself a contractual document and indeed the programme which has been exhibited did not exist at the date of the pre-contract meeting between [C and the sub-contractor] on 25 April 1989. That programme was not produced until 29 May 1989. There is no suggestion that any programme of work was produced at the meeting on 25 April and there is no specific provision in the contractual documents which requires the sub-contractor to carry out its piling work so as to enable [C] to carry out its work as shown on its master programme. In my judgement the obligation of the sub-contractor under clause 11.1 of DOM/1 to carry out and complete the sub-contract works ‘reasonably in accordance with the progress of the works’ does not upon its true construction require the sub-contractor to comply with [C’s] programme of works nor does it entitle [C] to claim that the sub-contractor must finish or complete a particular part of the sub-contract works by a particular date in order to enable [C] to proceed with other parts of the works. The words ‘the progress of the works’ are in my judgement directed to requiring the sub-contractor to carry out his sub-contract works in such a manner as would not unreasonably interfere with the actual carrying out of any other works which can conveniently be carried out at the same time. The words do not however in my judgement require the sub-contractor to plan his sub-contract work so as 49 JCT standard form of domestic subcontract agreement. 50 Greater London Council v The Cleveland Bridge and Engineering Co Ltd (1986) 34 BLR 50.

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to fit in with either any scheme of work of [C] or to finish any part of the sub-contract works by a particular date so as to enable [C] to proceed with other parts of the work.”

Thus, it is evident that C should involve all subcontractors in preparing, revising and updating the programme but, under the current standard forms of contract that simply require a master programme as an inflexible target, rarely, in fact, does adequate communication between them take place, with the result that the master programme becomes more a source of dispute than anything else. If it is to avoid delay and disruption, it would appear to be essential that C’s working programme incorporate the subcontractor’s interfacing and periodic working patterns, be referred to in the contract between them and that the subcontractor must work within the constraints imposed by C’s working programme. 7–066 Without well-developed programmes that are regularly reviewed and updated, control of subcontractors is difficult, if not impossible, and the identification of delay and disruption and proposals for the development and implementation of mitigating measures cannot be satisfactorily addressed. However, under the current standard forms of contract regime, it seems that contractors are reluctant to disclose schedule information to their subcontractors, often out of a fear that in the light of the information on what other subcontractors and C are supposed to be doing, their failure to keep to it might be used against them in claims for delay and disruption. 7–067 Whilst particular care should be taken in connection with programming the work content of the design phases of specialist works and lead-in, procurement and prefabrication periods, research has demonstrated that the principal difficulties that are likely to have to be faced will be in interfacing and resource loading51. Some commentators have said that, if C refuses to accept a subcontractor’s reasonable work periods, or refuses to demonstrate its preferred interface requirements to avoid the inevitable conflict between schedule and work periods, the subcontractor should object to C’s programme52. With respect, this hardly seems sufficient from a practical point of view. Simply telling C that the subcontractor is unhappy about the targets set without also setting down why C’s programme is unacceptable and what should be done to put it right, would not normally be considered sufficient to enable the subcontractor to show that its objection was reasonably made. For this reason, it seems that a subcontractor that does not receive a programme setting out the essential interface requirements with other subcontractors and practical time periods that are attainable, would benefit from producing its own programme. That subnetwork, or fragnet, should demonstrate those interface requirements and subcontractor’s needs, which should then be served on C, as a statement of the subcontractor’s requirements and intentions.

Programme preparation The critical path method 7–068 In Galaxy53, the Board of Contract Appeals recorded that, in the contract in question, C was contractually required to “prepare a schedule for construction which 51 A Jaafari, “Criticisms of CPM for project planning analysis” (1984) Journal of Construction Engineering and Management, Proceedings of the American Society of Civil Engineers, 110.2, 222. 52 PD Galloway and KR Nielsen, Control for PCM Projects, a paper given at the Annual Convention (1980) of the American Society of Civil Engineers. 53 Galaxy Builders Inc ASBCA Nos 50018 and 50136, para.6.

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shall be based upon a critical path method of network analysis system as described below”. In this case, the CPM method was defined as: “The critical path method is an efficient way of organizing and scheduling a complex project which consists of numerous interrelated small projects. Each subproject is identified and classified as to the duration and precedent of the work. The data is then analysed, usually by computer, to determine the most efficient schedule for the entire project. Many subprojects may be performed at any time within a given period without any effect on the completion of the entire project. However, some items of work are given no leeway and must be performed on schedule; otherwise, the entire project will be delayed. These latter items of work are on the ‘critical path.’ A delay, or acceleration, of work along the critical path will affect the entire project54. [A] schematic and written description of the sequence of work that [C] plans to use to complete the project within the contractually prescribed time. It is based upon a network, which is a graphic diagram displaying all of the activities that must be accomplished to construct the project, as well as their mutual time dependencies and durations. Work activities are linked together to show their interdependency or logic. Network logic is the planned sequence in which activities are to be performed, with the start of some activities logically dependent, or restrained, by the completion of other activities, and some activities independent of others and hence capable of being performed concurrently. A series of activities that precede and follow each other constitute a path. The critical path is the longest path from notice to proceed to project completion, or the path with the least amount of slack or float.”

Illustration Facts: The contractor (C) immediately fell behind schedule, having repeatedly failed to proceed in accordance with the contract. The owner (O) accepted a revised schedule of completion dates. After C failed to meet its own revised deadlines, O terminated the contract for default. O distinguished between delays on the critical path and delays of non-critical activity. C’s methodology to demonstrate excusable delays made no distinction between critical path and noncritical activities. C cited Weaver-Bailey Contractors Inc v United States55, which concluded that “regardless of whether an activity is on the critical path of a project, if the time required to complete the activity is greater than the time remaining to complete the project, then project completion will be delayed.” The contract in this case provided that C was responsible for paying liquidated damages (LADs) in the amount of $7,775 per day for every day that the project was not completed after 24 June 2006. LADs, however, were not assessed for periods of “excusable delay”, which was defined as any period of delay that C could demonstrate was caused by another party which “affected” project completion. Held, that CPM was an accepted methodology for determining whether a claimed delay affected the completion date and the court eventually held that, even if the delay was not related to a critical path activity, if it would have delayed the project anyway, according to C, there was no need to identify it as an activity on the critical path. If O wanted only delays to critical activities to be excusable, why did the contract not express this? Had O not wanted to impose an obligation to prepare a critical path schedule on C? Had C refused to accept an obligation to use a CPM? The ground rules of the O–C relationship were set at the time the contract was signed. At that time, there was no obligation placed upon C to provide a critical path method schedule (or at least the court did not refer to such an obligation in its decision): Deluxe Building System v Constructamax Inc56.

54 States 55 56

Haney v United States (1982) 676 F 2d 584, 595 (Ct Cl), see also, Manuel Bros, Inc v United (2002) 55 Fed Cl 8, 49, fn 8. 19 Cl Ct 474 (1990). 2013 US Dist LEXIS 131296 (DNJ, 13 Sept 2013).

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7–069 The relevant British Standard defines the critical path as: “the sequence of activities through a project network from start to finish, the sum of whose durations determines the overall project duration.”57

7–070 CPM scheduling has evolved as a time-management technique to serve the many different parties in the construction team and can be used, amongst other things, for such diverse purposes as identifying: the periods of activity, the sequence and interface of the work of the design team and others prior to the commencement of construction; the periods of activity and sequence of the works and the interface with any other contracts incidental to the works; the dates and logic by which the information described in the information release schedule, information request schedule, or any other request for information, is to be supplied in relation to the activity dependent upon such information; the dates and logic by which plant, materials, or goods are to be supplied, or work is to be carried out by D, or those engaged, or employed by D in relation to the activity dependent upon them; any time contingency required by C, any subcontractor and/or supplier in relation to any activity, sequence of activities, or key dates, or sectional completion dates and the completion date; any time contingency required by the D, or any directly employed contractor, or consultant, in relation to any activity, sequence of activities, key dates, sectional completion dates and the completion date; the resources planned to be used for any activity, or group of activities; the planned cost and revenue of any activity, or group of activities; and free float and total float that is available to be used by C and/or D for managing the re-sequencing of the work, or redeployment of resources from time to time. 7–071 During the course of the works, the CPM programme can also be updated and used for recording: the degree of progress actually achieved on all activities from time to time; and the resources actually employed and their productivity from time to time. 7–072 Because of its essential integrity as the product of a relational database, the CPM programme can also be used for calculating: the value of work completed from time to time; the likely and actual effect of any delay to progress on the completion of any sequence, key dates, sectional completion dates and completion date, if any, caused by a change or other intervening event; and the likely effect of any proposed acceleration or recovery measures on any such sequence, key dates, sectional completion dates and completion date. 7–073 Whilst the UK and Commonwealth standard forms of contract often refer to the critical path, it is unknown for any UK standard form to define it, or say for what

57 BS 6079–2:2000, Pt 2, 2.41.

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it is to be used58. On the other hand, it is common in US government contracts to find that the critical path is defined59 and the method of management of the works is required to be by reference to the critical path and entitlement to an extension of time calculated by reference to the impact of an event upon the updated critical path. 7–074 It is possible to find more than one critical path in a given network60. If the network is segmented into zones (areas) for analysis between two given dates, the critical path may change. If work is added, or deleted from the project, the critical path may change61. However, the critical path will always be the shortest chain of the expected duration for the completion of a project, and if time durations are not met as planned, then the project completion date will not be met. The SCL Protocol provides further guidance in this regard, adding that: “there may be more than one critical path depending on workflow logic. A delay to progress of any activity on the critical path will, without acceleration or re-sequencing, cause the overall project duration to be extended.”62

7–075 In relation to the form of schedule, the SCL Protocol recommends that: “in all but the simplest of projects, it should be prepared as a critical path network using commercially available critical path method project-planning software. Both the [C] and the CA should have a copy of the software package used to prepare the project [schedule]. For the [schedule] to be suitable for use as a tool for the analysis and management of change, it must be properly prepared so that, when a change occurs, it can accurately predict the effects of that change. The [schedule] should be provided in electronic form to the CA. Using the software, [C] should identify on the [schedule] where the critical path(s) lie(s).”63

7–076 Critical path method scheduling was developed during the 1950s virtually simultaneously by ICI and the CEGB in England, by B Roi in France and by Du Pont and Remington Rand Corporations in the United States. The CEGB64 found, in connection with the development of the Keadby Power Station, that CPM scheduling enabled it to reduce the previous average construction time by 42%65. Similar success was experienced in the United States where its use in controlling the progress of the Polaris missile programme enabled the work to be completed two years ahead of the original target date66. Soon after that the construction industry began to use CPM techniques and the first recognised formal use of a network schedule methodology in 58 See, for example, JCT05, Cl.2.9.1.2. 59 But see M Woolf, “When is the critical path not the most critical?” (November 2009) Civil Engineering Surveyor, p.34 for a discussion as to the merits of the various methods of defining a critical path in the light of open ends, date constraints and multiple completion dates. 60 M Woolf, “When is the critical path not the most critical?” for a discussion on the disadvantages of a failure to recognise that where there are multiple completion dates either by sectional completion or key date requirements, there will be a separate identifiable critical path to each. 61 The earliest UK case in which this appears to have been recognised is John Barker Construction Ltd v London Portman Hotel (1996) 83 BLR 31. 62 Society of Construction Law, Delay and Disruption Protocol (2002), p.54. 63 Guidance Section 2. 64 The Central Electricity Generating Board, the UK’s public electricity authority prior to privatisation in the 1990s. 65 M Hinds, “Critical Path Network Planning – A Review of Recent Experience” (1981) The Building Economist, Journal of The Australian Institute of Quantity Surveying 20.2, 47. 66 In the construction industry, there is a widely held belief that anyone who finishes ahead of the contract completion date merely had an incorrect schedule in the first place. In light of the CIOB’s research, into the way time is managed, this is clearly not mere cynicism. See Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008).

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a construction project was made in the United States by EI Pont de Nemours & Company, in 1957, for new plant construction. By 1961, the use of CPM in construction management was widespread and, in August 1961, the Wall Street Journal reported a representative of the Perini Corporation in the United States as having remarked: “before critical path analysis if you got into trouble on the construction job you started expediting everything. By using critical path techniques we found it necessary to expedite only 1 activity out of 10.”67

7–077 In the field of retrospective delay analysis, it seems that CPM scheduling techniques were first used in the United States, in 1967, in the case of Chaney v US68. Nowadays CPM scheduling techniques, when used properly, are accepted in the United States by most courts and Boards of Contract Appeals in proving delay and disruption claims69. 7–078 Before the critical path can be defined, the schedule logic and activity durations must be identified. Schedule logic consists of interrelationships or constraints that link the tasks through the logic of how the work is to be performed. A commonly used constraint is the finish-to-start relationship. Under this constraint, the predecessor activity must be completed before its successor activity may begin. It is this characteristic of reliance upon interrelationships between activities that separates CPM scheduling from other planning methods. In CPM scheduling, the durations are a function of the resources anticipated as being available to perform the work. By way of contrast, in bar chart scheduling, the activity durations are settled on the basis of whatever dates activities are required to start or finish and resources are assumed to be likely to be available to complete the activities at the stipulated time. 7–079 At first run, the resource requirements of a critical path will tend to be uneven, with peaks and troughs at various times. However, one of the special features of computer-based schedules is that the computer can “level” these resources over float periods by spreading the resources over longer periods of activity to use up available float. By recalculating the network using more evenly spread resources, a more economically efficient plan can be proposed. Resource levelling is important, because it allows C to see the time implications of resource restrictions and enables it to make judgements about where to use available resources, and to judge the time/cost benefits of buying additional short-term resources. 7–080 Accordingly, it can readily be appreciated that the development of CPM techniques has revolutionised the way construction projects are scheduled and managed and, indeed, the way in which the effect of delay to the date for completion can be predicted and calculated. The essential logical connections between activities and a more scientific way of managing the calculation and planning of activity durations has, at once, provided the structural basis for linking cause and effect and demonstrated the redundancy of the simple un-linked bar chart for such purposes. 7–081 In practice, CPM network scheduling techniques, whether imposed by the contract documents or not, have made huge practical differences to the ways in which activities are carried out, with quite dramatic time savings when compared with traditional

67 M. Hinds, “Critical Path Network Planning – A Review of Recent Experience” (1981). 68 Chaney & James Construction Co v United States F2d 728 (190 Ct Cl 699) (1970). 69 See, for example, Williams Enterprises Inc v Strait Manufacturing and Welding, 728 F Supp 12 (DDC 1990).

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methods70. They have made it relatively easy to prepare an illustration of the schedule, to update it on the basis of historical fact and, in the case of the inevitable departure from the planned schedule, to redraft possible mitigation, virtually at will, to simulate different “what if ?” scenarios for the future conduct of the project. 7–082 Because of the facility they provide for the rapid analysis of a large quantity of information and consideration of alternative approaches to sequencing problems, in the contemporaneous management of the works and in the field of delay analysis, the use of computers has revolutionised the process of construction management. Since the early 1990s, the power of the personal computer has increased so much that it is now possible to do more things, more quickly, on a machine little bigger than a pocket wallet, than it was possible to do 50 years ago on a mainframe computer the size of a generous living room. This computing power has brought with it a new generation of schedules that perform the mathematical calculations so fast, and demonstrate the results graphically (and in colour) with such clarity, that the production of an illustration of a construction schedule is now virtually as easy as writing a letter. Thus, it is this, the fruit of better technology, that has rendered the critical path method of producing the schedule crucial in the proactive management of time during the course of construction. [Please refer to Figure 7.1] 7–083 Notwithstanding the value of CPM scheduling to the process of time management, the CIOB research found that the majority of projects were managed intuitively without it. See Figure 7.1. 7–084 The reluctance of the industry to use CPM more widely can only be understood by reference to, on the one hand, the appalling quality of the current standard forms of contract in this field and, on the other, in relation to the absence of performance standards, education and training and hence the quality of output. As to the latter, the CIOB research revealed that 93% of respondents thought that the education and training of project schedulers was unsatisfactory and, as a result, the CIOB has now published its Guide to Time Management71 and has announced its intention to initiate educational courses, training and accreditation in this field72.

The contract period 7–085 Whilst, in the US Court of Claims, it has been held that it is an implied term that the specifications and drawings provided to C should be such that, if a contract period is specified, C will be able to complete the contract within the period specified73, in the United Kingdom it seems that C is responsible for the means, methods and sequences of its performance and has the obligation to co-ordinate the performance of the subcontractors so as to achieve completion of the works, even if it is impossible74.

70 The Central Unit on Purchasing, Guidance No 7, Project Sponsorship: Planning and Progress Monitoring (1986, Central Unit on Purchasing, HM Treasury). 71 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010). 72 See, K Pickavance, Managing the Risk of Delayed Completion in the 21st Century: The CIOB Research (Society of Construction Law, 2009); and K Pickavance, “Time for Change – The practical aspects of time and the CIOB reforms”, 2009 Herbert Smith Construction Conference. 73 Laburnum Construction Corporation v The United States (1964) 163 Ct Cl 339. 74 I Duncan Wallace, QC (ed), Hudson’s Building and Engineering Contracts, 11th edn (London: Sweet & Maxwell, 1995) p.99.

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7–086 Generally, the start and completion dates, or the means by which they are to be calculated should be specified in the tender documents and be recorded in the contract documents. In scheduling terms, a start and completion date provided by the contract are called the “directed dates”. Sometimes, C is given only a possession date and required to tender for the contract period. Alternatively, C may only be given a completion date as: “please complete the work on or before 17 July 1998”, or the contract period may be defined by a number of days, or weeks from a “notice to proceed”. For example, the clause might read: “This contract shall be completed within 730 calendar days of the notice to proceed, day 1 being the date of the notice to proceed.” 7–087 If the start and completion dates are not provided, then an assumption must be made for the purposes of tender. Provided that the basis of the assumption is clearly set down in the method statement, any revision to the schedule as a result of incorrect assumptions can easily be put into perspective and its effects quantified. 7–088 Most construction contracts specify a time for performance in achieving completion of the whole of the works, many additional requirements being “phased”, or “sectional” handovers. Even in fixed fee contracts75, notwithstanding that the form is primarily for use where the content of the work is difficult to specify, there is a period of time set down for the completion of the work between a start and completion date. However, in measured-term contracts76, the time period specified is not referable to the content of the work, but to the period during which the tendered rates will subsist. 7–089 The JCT forms of contract usually specify a date for completion in the appendix, whereas civil engineering forms usually specify a time for completion, leaving the date for completion to be calculated from a date for commencement given by the CA. But, in both cases, procedural variations are frequently introduced and sight can be lost of the objective, which is to establish a precise date for completion. 7–090 Similar problems in fixing the date for completion can arise when extensions of time are granted. Again, differences of approach in various standard forms of contract may, in part, be responsible. For example, the JCT family of contracts requires the CA to fix a new completion date when an extension of time has been granted, but the ICE, ACA and the FIDIC forms77 require the CA to determine the amount of an extension of time, ie to fix an additional period of time. In practice, however, no matter what the contract provides for, the CA often grants a period of time, or fixes a new completion date according to its whim. Because of the uncertainty that can arise as to whether such periods (particularly where they are expressed in days) are referable to working days only, or include weekends and holidays, granting periods of time instead of fixing new dates is not recommended.

Early completion 7–091 The tender schedule and working schedule should relate to the contract period imposed by the commencement and completion dates set down in the contract agreement, in so far as that is possible. However, the construction works do not have to 75 For example, PCC06. 76 Eg MTC89. 77 Other than FIDIC/Build98 which does not require the CA to do anything but simply refers to C being “entitled to an (extension of time) for completion”.

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cease at the last hour of the last day of the contract, or be scheduled so to do. Under ICE6, ICE778 and SGC9579, the obligation is to complete within the time prescribed. JCT80 and JCT9880, the 2005 and later series of JCT forms81, and SIA8082 similarly only require C to complete the works on, or before the completion date. GC/Works/1 and GC/Works/1DB83 require C to complete “by the completion date”. AS212484, while not specifically providing an option to complete early, requires C’s schedule to show “the dates by which or the times within which” the works, or the parts of the works are to be completed. On the other hand, AS400085 requires C to reach practical completion “by the date for practical completion” and also provides bonus arrangements for early completion. Accordingly, under these forms, C is entitled to schedule the works to be finished before the completion date if it so wishes. 7–092 It is worth noting that, whilst delay, disruption and late completion are the matters of primary concern in this book, contractors sometimes manage to finish early and, when they do so, it can be inconvenient, or financially embarrassing to D. D may have no use for a building or engineering project before the contract completion date. Tenants or users may be under contract to take over after the contract completion date and D may have no wish to be saddled with the responsibilities of heating, maintenance and insurance in the interim. Apart from that, an early completion will normally involve accelerated cash flow and more intense activity from D’s consultants and earlier delivery of developer-supplied plant and accelerated working by D’s directly employed contractors. Generally, however, under most standard forms, such matters are of no concern to C and it is entitled to finish early if it can. 7–093 Essentially, the effect of a works completion date that is earlier than the contract completion date is to put every part of the schedule in float. Unless that total float is described by C as its time contingency, the default position it would seem is that any change affecting time, up to the date of completion, would be to absorb the float and not cause delay to the contract completion date. This point was made in Gassman86, in which the Board of Contract Appeals held that: “It is well-established that, when [D’s] change is absorbed by available float, [C’s] completion date is not affected87. While [C] will not be denied the benefit of completing early if it has planned its work reasonably to do so88, there is no evidence in the record that [C] devoted any additional resources to mobilization or demolition. Absent such evidence, we cannot conclude that the work was accelerated89. In addition, [C’s] June 1990 initial CPM submitted after completion of mobilization and demolition, and discovery of problems regarding caisson foundations, reveals no plan or intent to rely upon ‘early’ finish dates and

78 Cl.43. 79 Cl.14.1. 80 Cl.23.1. 81 See, for example, IFC05 Cl.2.4 and DB05 Cl.2.3. 82 Cl.22(1). 83 Cl.34(1). 84 Cl.33(2). 85 Cl.34(1). 86 The Gassman Corporation, ASBCA Nos 44975 and 44976 (1999). 87 See also Maron Constr Co, Inc, GSBCA No 13625, 98–1 BCA, para.29,685 at 147, 110–11; Santa Fe Inc, VABCA Nos 1943, et al, 84–2 BCA, para.17,341 at 86,410–11; Blackhawk Heating & Plumbing Co Inc, GSBCA No 2432, 75–1 BCA, para.11,261 at 53,678, motion for recon. den., 76–1 BCA para.11,649. 88 See also, Interstate Gen Gov’t Contractors, Inc v West, 12 F 3d 1053, 1059 (Fed Cir, 1993). 89 See also, DEW, Inc, ASBCA No 35173, 93–2 BCA, para.25,706 at 127,900.

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to complete the project several weeks early90. We note that, if there had been such an intent, it would appear contrary to the contract clause providing that float is not for the exclusive benefit of either contracting party.”91

7–094 On the other hand, a schedule that starts off by indicating a completion of works after the completion date will often demonstrate that very little is even in free float and virtually any change will affect the completion of the works in relation to the contract completion date92. Similarly, unless forbidden from doing so by the terms of the contract, there is no reason why C should not indicate in its working schedule a completion later than the contract completion date, although it is not immediately obvious why it should want to do so93. The effect of such variance between the working schedule and the contract period has been a matter of some debate. However, one thing is certain. No matter what is shown on the schedule, unless it is itself a contract document94 and thus evidences a bilateral agreement, it cannot of itself unilaterally change the rights of the parties so as to impose obligations beyond those set out in the contract documents. 7–095 Under the standard forms that require a schedule to be submitted after contract, absent express terms to the contrary, there is no obligation on D to facilitate an earlier completion than is specified in the contract as the contract completion date, for instance by ensuring information is available to allow the works to be progressed in accordance with an accelerated schedule. D’s only limit is the full time allowed as the contract period. This point was considered by the predecessor to the Technology and Construction Court in Glenlion95. In this case, C submitted a schedule projecting completion of the project in 101 weeks, where the contract allowed 104 weeks. On appeal from arbitration, HH Judge Fox-Andrews QC said that C was entitled to complete on an earlier date, whether or not it produced a schedule with an earlier date and whether or not it was contractually bound to produce a schedule. However, in considering whether a contract term should be implied such that D should perform its obligations to provide drawings, details, levels and instructions to enable C to carry out the works in accordance with the shortened schedule, the judge said: “it is not suggested by [C] that they were both entitled and obliged to finish by the earlier completion date. If there is such an implied term it imposed an obligation on [D] but none on [C]. It is not immediately apparent why it is reasonable or equitable that a unilateral absolute obligation should be placed on D.”96

7–096 On the other hand, if the early completion date was to be shown on a schedule that had become a contract document, or the schedule had been accepted or approved by D, or the CA with D’s authority, there seems to be no good reason why D should not be bound to comply with the schedule. 7–097 In contrast to the norm, the 2009 Irish government standard forms of contract97 provide that, notwithstanding that the works are substantially completed earlier 90 See also, Sierra Blanca Inc, ASBCA Nos 30943, et al, 91–2 BCA, para.23,990 at 120,081. 91 See also, Santa Fe Engineers, Inc, ASBCA Nos 24578, et al, 94–2 BCA, para.26,872 at 133,726. 92 See Ch.16, “Float and time contingencies”, throughout. 93 In some contract forms, this may be a reason for rejection, ie because it would not conform to the contract. 94 See paras 7–222 to 7–228, below. 95 Glenlion Construction Ltd v The Guinness Trust (1988) 39 BLR 89. 96 Glenlion Construction Ltd (1988) 39 BLR 89, 104. 97 See, for example, IGBW/09 Cl.9.6 and Sch.1, Section H.

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than planned, the CA may be required not to issue its certificate of substantial completion before the contractual completion date.

Milestones, key dates and sectional completion 7–098 Apart from final completion dates, it is not unusual in construction and civil engineering projects to have multiple sectional completion dates. Sometimes, these are based upon completion of defined zones of operation such as “power house access tunnel completed”, but can equally be defined in relation to a state of completion required for a follow-on contractor to be able to commence, for example, “civil engineering works ready for installation of over-head crane”. In major projects, it is not unknown for there to be 20 or more sectional completion periods specified, each with a separately calculated liquidated damages provision for failure to complete on time. 7–099 The essential difference between an enforceable milestone date and an enforceable sectional completion date is that, in the former, C remains in full possession of the whole of the contract works, the milestone date merely affecting an interface with other provisions such as procurement, or the entry on site of other contractors whereas, in the latter, the idea is that D should take the relevant part into possession. The provisions for sectional completion entail the practical completion of a defined and valued part of the works, which is then handed over to D for its beneficial use, whilst C continues with the rest of the works. In this regard, there is no significant difference between a contract with sectional completion requirements and a chain of separate contracts with the same conditions of performance. 7–100 By way of contrast, the sort of activities typically chosen as milestones would be physical operations on the site, such as the completion of a particular floor slab, the commencement of the installation of plant, “power-on”, or “weather-tightness”. Non-physical stages may also be selected, like the approval of design drawings. The most usual method of imposing a progress schedule on C is for the tender documents to allocate dates by which particular site activities are to be either commenced, or completed. 7–101 Whenever a contract interfaces with other contracts in a project, interim milestone dates can be made terms of the contract and this is the way most subcontracts are integrated into the schedule. The purpose of this is generally to attempt to ensure that other contractors can be guaranteed access, or that specific deliveries (usually of significant plant) can be required to be made at specific times, rather than completion and handover of specific portions of the work. 7–102 The standard forms of contract generally impose sanctions only if C does not actually complete the works by the contract completion date, or a specified section of the works by a sectional completion date. C is typically required to work “regularly and diligently”98, but currently, short of terminating C’s engagement, there is nothing under the standard forms of contract by which a failure to proceed regularly and diligently can be controlled by D. The imposition of interim stages of completion, with the imposition of financial sanctions in the event of a contractor falling behind in the specified schedule, has been used in the past as a way to control C’s performance. Typically, the financial sanction has taken the form of either the deduction of damages, or the withholding of interim payments in whole, or in part, until the milestone date has been achieved. Save

98 West Faulkner Associates v Newham London Borough Council (1994) 42 Con LR 144.

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when the possibility of taking such action has been expressly agreed between C and D in the contract, however, the HGCRA has brought an end to all that99. 7–103 The mere fact that a stage of the work on which liquidated damages are to be imposed does not relate to a physical stage of work will not per se be fatal to the liquidated damages provisions, provided that they do not exceed a genuine pre-estimate of damages likely to be suffered in the event of breach100. The possibility of such a method of control was canvassed before Mayo J in the High Court in Hong Kong101. The contract provided for the payment of liquidated damages for non-completion by key dates of both physical and non-physical stages of work. In considering the plaintiff’s objections on this ground, the judge said: “It is however imperative to bear in mind that the plaintiffs are only one of a number of contractors and I can see no objection to interlinking the penalty clauses of the different contracts and introducing the concept of key dates. The fact that it may be necessary to establish damages which are suffered as a result of a knock-on effect does not seem to me to be fatal in attempting to assess sensibly what damages might arise if key dates are not adhered to. The third objection made is that the operation of a penalty clause is by reference to sections of work rather than to physical stages I do not consider that this is necessarily fatal. Provided that drafting is sufficiently clear and explicit I do not think that there is any inherent objection in the concept of key dates. It may well be possible to make genuine preestimates of damages referable to different sections of work.”102

This decision was reversed by the Court of Appeal in Hong Kong on the basis that the disputed provisions of the government’s form of contract had no application to the particular circumstances before the court. However, the Court of Appeal did not disapprove of the views expressed by Mayo J in the High Court, which were upheld by the Privy Council103. 7–104 It seems that the extent to which key dates are legally capable of being enforced will depend largely upon the integrity of the contract documents. However, the rules for the application of an effective sanction would appear to be as follows: 1. 2. 3. 4.

5.

there should be a clearly defined and unambiguous description of the key date in the contract; the fact that the key date is not referable to completion of a non-physical stage of the work will not be fatal to the application of sanctions; there should be a clear breach of contract on the part of C by its failure to meet the specified key date; the deduction of liquidated damages is permissible where those liquidated damages represent no more than what is reasonably estimated to be the foreseeable loss to D, estimated at the time the contract was entered into; and the withholding of interim payments is permissible, provided the amount withheld is not extravagant in relation to the loss D has incurred or is reasonably likely to incur as a result of the breach.

99 Housing Grants, Construction and Regeneration Act 1996 ss 109–113. 100 Dunlop Pneumatic Tyre Co Ltd v New Garage Motor Co [1915] AC 79, applied in Philips Hong Kong Ltd v Attorney-General of Hong Kong (1993) 61 BLR 41 (PC); and see also, Masons v W D King [2003] EWHC 3124 (TCC), in which the liquidated damages were set at a level well below the losses anticipated. 101 Philips Hong Kong Ltd v Attorney-General of Hong Kong (1990) 50 BLR 122 (HCHK). 102 Philips Hong Kong (1990) 50 BLR 122 (HCHK), 128. 103 Philips Hong Kong Ltd v Attorney-General of Hong Kong [1993] 61 BLR 41.

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7–105 A common cause of delay-related dispute arises out of the misapplication of sectional completion dates. Most standard forms of contract deal with this in a rational way and contain provisions for completion by sections, or standard sectional completion provisions referring to an apportionment of the rates of liquidated damages to correspond with the value of any work handed over by agreement. For example, the JCT Sectional Completion Supplement provides for JCT98 to be amended so as to be suitable for use where the works are to be completed in phased sections and adds a reference to a “section”, or “sections” in some of the conditions where the expression “the works” appears. The 2005 and later series of JCT forms and the 2009 edition of the Irish government standard forms deal with this by defining “the works” as also including any defined section of the works and providing a schedule of different liquidated damages for each defined section. 7–106 Sectional completion is for use only where tenderers are notified that D requires the works to be carried out in phased sections, each of which D is intended to take into possession upon practical completion of the section, or phase. Sectional completion cannot be used for contracts where the works are not, at the tender stage, divided into sections in the tender documents. In such circumstances, D can only rely on the provisions for partial possession104 that enable it, with C’s agreement, to take possession of a part of the works. Thus, if the contractual dates for the various sections are to be enforceable, it is essential that the tender documents identify clearly the sections that, together, comprise the whole works. The sections should then be serially numbered and these section numbers inserted in the appendix to the contract. Care should be taken, in dealing with any part of the works that is common to all, or several sections, to put this part of the works into a separate section and to ascribe to it a section value105. 7–107 In the event that sectional completion provisions are not also set out in the contract, then it appears that a reference to sections of work only in the bills or specification will be unenforceable. For example, in Gleeson v Hillingdon106, under JCT63, the bills of quantities set out detailed provisions for sectional completion, each with damages, but the contract conditions were unamended and stipulated an overall date for completion, also with damages. Relying on a clause in the contract providing that nothing in the bills could override the conditions, Woodcotter J held that the provisions in the bills were to be ignored. 7–108 In Barker107, the sectional completion supplement had been used in connection with JCT80 to ensure that the work was completed in three sections, in relation to each of which liquidated damages of £30,000 per week were to be paid in the event of non-completion. Subsequently, in the course of the works, which were running late, D entered into an acceleration agreement whereby C would be paid additional sums of £50,000 in the first valuation, £20,000 in the following valuation and £20,000 on completion by the contract completion date for accelerating the works and overcoming the delay. In so far as only one completion date had been referred to in the acceleration agreement, it was argued on behalf of C that the effect of the acceleration agreement was to dispense with all the provisions of the sectional agreement supplement, including the provisions for payment of liquidated damages, because the substitution 104 105 106 107

Cl.18. Such as a boiler-house serving different sections, which have different completion dates. M J Gleeson (Contractors) Ltd v London Borough of Hillingdon (1970) 215 EG 165. John Barker Construction Ltd v London Portman Hotel Ltd (1996) 83 BLR 31.

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of a single date for completion of all works under the contract was logically inconsistent with those provisions continuing to have contractual force. It was acknowledged that success under this argument would mean that C would not be liable for any liquidated damages for failure to complete on time, howsoever that delay might have been caused. For D, it was contended that the sole effect of the acceleration agreement in relation to the sectional agreement supplement was that, in place of the date specified for completion of the three separate sections, there should be substituted in each case the same date. 7–109 Mr Recorder Toulson QC observed: “it is common ground that at the time of the acceleration agreement nobody raised the question of abandoning the provision to the contract regarding liquidated damages, and I have no doubt that if [C] had suggested it [the CA] would not have agreed. Acceptance of [C’s counsel’s] submission would be to produce an effect which was neither intended by the parties nor is logically necessary. The provisions of the sectional completion supplement regarding liquidated damages are capable of continuing to have force by merely substituting a new date August 26 1994 for the completion of each section as [D’s counsel] has submitted and I am satisfied that the parties’ intentions did not go beyond that.”108

Work content 7–110 The key to a good project programme is to have enough detail for the party carrying out the work to convince a stranger that the work is properly documented, planned and under control. 7–111 Good programming provisions for the working programme should specify, amongst other things, site construction operations, delivery and approval of all compliance submissions, including acceptable turnaround times, procurement of materials and equipment furnished by C, or D, interface activities performed by D and others upon which C’s schedule depends, as well as equipment installation and testing. A reasonable working schedule must include outside interface activities. These interface activities are often omitted, and problems frequently arise because the parties fail to co-ordinate the interrelationships if they are not shown on the schedule. The CIOB Guide advises109 that, whilst every project will have its own determining characteristics, those general matters that ordinarily should be considered in designing the schedule are those identified in Figure 7.2. [Please refer to Figure 7.2] 7–112 No working schedule can realistically be expected to detail all the activities necessary, even on a simple project. Thus, the schedule should be designed to strike a balance between the need for sufficient information and simplicity. If a schedule is too ambitious or complicated, it loses its value because it cannot be readily understood. On the other hand, if a working schedule is not sufficiently detailed at the time the relevant work is to be carried out, the important activities may not be recognised, regular monitoring of the contract will tend to lapse and the schedule will fall into disuse. 7–113 Whichever stage of planning the schedule is aimed at, the work content definition is vital. Definition of what has to be done within each activity description needs to be written down, reviewed and agreed between the party requesting that the work

108 John Barker Construction Ltd (1996) 83 BLR 31, p.38. 109 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), Pt 3.

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be accomplished and the party who will accomplish the work. The work content method statement should be drafted to encompass all the effort intended to be accomplished in a given phase of the project. It should be stated plainly enough so that all parties are assured that the content of the work anticipated by the planned task is understandable and correctly communicated. A good method statement definition is normally written by a team comprising the project office and the individual who will assume the responsibility for accomplishing the work content. Without the documented work content, the proper scheduling of the tasks cannot begin and, if the work content is not properly defined, the schedule for the work content is meaningless and cannot be monitored. In this regard, the CIOB Guide advises110: “Activity descriptions capture the essence of the intended project deliverables. Given that they are often truncated summaries of the fuller descriptions contained elsewhere, for example, in [D’s] requirements, it is important that whatever density of schedule is adopted from time to time, the activity description is clear and unambiguous. Most software products have a limited field for the activity description. Thus, apart from configuring a unique identifying code for each activity, it is important to establish a formula for the naming of each activity so that the descriptive content of each is unique and unambiguous. Depending upon the purpose of the schedule, at feasibility stage the activity description may be so coarse as to facilitate no more than an intended duration, from start to finish each building within a group. On the other hand, at construction level, significantly greater detail will be required for time management. As the density of the schedule increases, so the clarity and unique quality of the description becomes more important. However, whatever the density of the schedule, the activity description must be clear and concise and fit for its purpose.”

7–114 In regard to the requirements of activity descriptions at different densities, the CIOB Guide continues111: “Descriptions at low density may be generated at a time in the project when the scope of work is not fully defined. Accordingly, for low-density schedules an activity description which facilitates later sub-division will be required (eg substructures). [In regard to] descriptions at medium density, it is important to note that the early construction-related schedule will be submitted to fulfil contractual obligations and it is of paramount importance, therefore, that all elements of the work are adequately described. It is worth keeping the activity description at the early stage of development at a reasonably high level in order to maintain a degree of scheduling flexibility once the scope of work is further defined and detailed (eg excavations, piling, ground beams, floor slabs). Descriptions at high density must clearly identify, unambiguously, exactly what work is to be done and where it is to be carried out. Without such clarity, it will be impossible to accurately record the progress of it. For example: ground beams formwork reinforcement placing concrete curing strike formwork Backfill.”

110 Projects 111 Projects

Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex (Chichester: Wiley Blackwell, 2010) at paras 3.8.3.1 to 3.8.3.4. Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex (Chichester: Wiley Blackwell, 2010) at paras 3.8.4 to 3.8.6.

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[Please refer to Figure 7.3] 7–115 An example of how the increasing density of activity description works in relation to the unique activity IDs in practice is given at Figure 7.3112, which illustrates how the descriptions are related to the IDs and nested but rendered unique by reference to the data identifying such things as location, zone, area, section, item and so on.

Logical relationships 7–116 All contract work activities should be formally scheduled in a manner that will permit the evaluation of actual progress against contract milestones and that will identify interdependencies of individual tasks. Adding the dependencies and determining the sequence of activities results in a schedule that can be layered to illustrate only those tasks, responsibilities or phases required, without ignoring the effect and position of the remaining activities. It provides a schedule that can be revised with the logical effects of each adjustment being carried through to the remaining activities, which, depending on the logical successors, will shift with every change. This enables the scheduler to see the effects on the timing of any proposed change in durations relatively quickly.

Illustration Facts: Simon Carves Ltd (the appellant) was the main contractor for the building of a bio-ethanol plant, which contracted with Geldof Metaalconstructie NV (the respondent) for the sale of pressure vessels. On 7 November 2008, the vessels were delivered on site and, on 12 November, R invoiced for 30% of the price, amounting to €1,692,000, due on 27 December 2008. The installation contract was separately tendered and completion was due by 30 November 2008. The appellant alleged that the respondent was in breach of the installation contract and issued notice of default on 29 August 2008. Payment due on 27 December 2008 was unpaid. The respondent communicated to the appellant in a letter dated 23 December 2008, that it would not restart works after the Christmas break, unless payment was made. On 13 January 2009, the appellant issued notice of termination of the installation contract, alleging default and repudiation on the respondent’s side. The respondent brought an action for summary judgment and the appellant counterclaimed for £5,311,118 for the completion of the work under the installation contract, in addition to £76,430 and €278,674.71 for minor defects in the vessels and liquidated damages under the installation contract. The summary judgment was in favour to the respondent, because the appellant failed to show an “inseparable connection” between claim and counterclaim. The appellant appealed. Held, by Kay LJ, that the practical links as between these two contracts were inseparable, since the vessels under the supply contract were of no use whatsoever to A unless the installation contract was also properly performed; the warranty under the supply contract was linked to completion of the plant, for which proper performance of the installation contract was needed; that it would not be fair for R to enforce payment under the supply contract, if A’s responsibilities were prejudiced by the R’s repudiation of the installation contract: Geldof Metaalconstructie NV v Simon Carves Ltd113.

112 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) Fig.16. 113 [2010] EWCA Civ 667.

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7–117 The definition of the logical connection between activities is the key step in network planning114 and one that requires very careful thought. The task is to analyse each activity to determine the other activity or activities that should be completed in whole or in part before any activity can be started. With modern scheduling software, it is very easy to build in artificial constraints rather than genuine logical constraints. However, clearly expressing the assumptions underlying the reason for the constraint will often expose faulty logic that, whilst conforming to what has hitherto been considered common practice, may be inappropriate. The CIOB Guide identifies that construction logic can be categorised in four ways: engineering; preferential; resource; and inter-zonal. 7–118 The Guide describes115 these, as follows: “Engineering logic, sometimes called ‘hard logic’ is that which is indisputably essential to the process (eg foundations must precede superstructure, superstructure must precede fittingout and so on). This logic is immutable. Preferential logic, sometimes called ‘soft logic’, is that which relates to managerial processes rather than engineering. For example: ‘part A’ of land clearance will be planned to precede ‘part B’ of land clearance and ‘part A’ of the foundations will be planned to precede ‘part B’ of the foundations. Provided it is done in good time so as to avoid unproductive resourcing, there is no practical inhibition to changing preferential logic to, in the same example, ‘part B’ preceding ‘part A’. If there is a practical inhibition to such inversion, the logic is not preferential logic. Resource logic is a variety of preferential logic whereby, for managerial reasons, particular resources are to proceed in a particular sequence. For example: a particular resource will commence in ‘area A’ and will be planned to proceed to ‘area B’. Provided it is done in good time so as to avoid unproductive resourcing or any other loss of efficiency, there is no practical inhibition to changing resource logic to, in the same example, the resource commencing in ‘area B’ and proceeding to ‘area A’). If there is a practical inhibition to such inversion, the logic is not resource logic. Zonal logic is a variety of preferential logic, in which, for managerial reasons, one part of the physical work is required to precede another. For example: work in the location of ‘building A’ will be planned to precede commencement of work in ‘building B’. Provided it is done in good time so as to avoid unproductive resourcing, there is no practical inhibition to changing zonal logic so that, in the same example, ‘building B’ is carried out before ‘building A’. If there is a practical inhibition to such inversion, the logic is not zonal.”

7–119 In most scheduling software products, there are options available for manipulating the effect of logic with date, or float constraints. The effect of these is to override what would otherwise be the logic of the network. Accordingly, the logical constraints that can be applied to any activity depend not only on the dates by which the activity is due to either start, or finish, but also on the degree of float that can be allowed to the activity, or the lag between that activity and another, or completion. The CIOB Guide advises116 that: 114 The Central Unit on Purchasing Guidance No 7, Project Sponsorship: Planning and Progress Monitoring (1986, Central Unit on Purchasing, HM Treasury). 115 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) at paras 3.8.26 to 3.8.30. 116 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) at paras 3.8.45.2 to 3.8.49.1.

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“The effect of applying a constraint to an activity is to inhibit the activity from obeying any logic inconsistent with that constraint. The consequence of that may be that the schedule will be unable to predict, according to the logic, the dates upon which activities are due to start and finish and it may also give a false impression of criticality. Accordingly, optional constraints, if used at all, must be used with great care and be justified in the planning method statement. The date for the commencement or finish of an activity, or chain of activities, may need to be established as a constraint when resources are expected to be unavailable until a specified point in time (referred to as a start-on, or start-after constraint), or where events are to be scheduled at their latest possible dates (referred to as an as-late-as possible constraint). Constraints can usefully be categorised as: Flexible, in which activity start and finish dates will change according to any changes in logic and the associated resources; Moderate, in which the activity start and finish dates will respect some changes in logic and the associated resources but not all; or Inflexible, in which the activity start and finish dates for an activity are dictated solely by the constraint and will not change to reflect changes in logic and the associated resources. Flexible constraints are: As-soon-as-possible schedules the earliest possible start and finish dates for the activity. In some software products this is the default constraint by which the critical path is calculated in a forward pass. As-late-as-possible schedules the latest possible start and finish dates for the activity. In some software products this is the default constraint by which the critical path is calculated in a backward pass. Moderate constraints should generally be avoided unless essential. They are: Zero-free-float will schedule the activity so that it finishes immediately prior to the commencement of the successor activity. This is an acceptable way of identifying, for example, the planned date of information release preceding a dependent activity (often coupled with a defined lag representing a mobilisation period) or for modelling ‘just in time’ materials deliveries. Finish-no-earlier-than indicates the earliest possible date that the activity can be completed, and the activity cannot finish any time before the specified date. The occasions on which this is an appropriate constraint to apply will be rare. Finish-no-later-than indicates the latest possible date that the activity can be completed, but the activity can be finished on or before the specified date. The occasions on which this is an appropriate constraint to apply will be rare. Start-no-earlier-than indicates the earliest possible date that the activity can begin, and the activity cannot start at any time before the specified date. This is often used for the commencement of different phases of operation within a schedule where the phases otherwise have no logical dependencies. Start-no-later-than indicates the latest possible date that the activity can begin, but the activity can start on, or before the specified date. Inflexible constraints inhibit the schedule from reacting to change and hence must never be used. They are: Must-finish-on indicates the date on which the activity must finish. This takes priority over other scheduling parameters such as activity dependencies, lead or lag time, and resource levelling. Must-start-on indicates the date on which the activity must begin. This takes priority over other scheduling parameters such as activity dependencies, lead or lag time, and resource levelling. Zero-total-float. The effect of this is to set the early and late dates to be the same and to render critical the activity to which it is applied, together with its controlling predecessors and successors.

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Expected-finish identifies a finish date in the future, that is, to the right of the data date. Its effect is to change the duration of the activity to which it is applied to span between its early and expected finish date. Mandatory-project-finish. Some scheduling software products permit finishing constraints to be assigned not only to activities but also to the project as a whole. The effect of such a constraint is to determine the latest permissible finish date of the project. This is usually set up in a way that is undetectable except by electronically interrogating the schedule set-up. Inflexible combinations of constraints result in inhibiting the schedule from reacting to change and hence must not be used. They are: Start-no-earlier-than in combination with start-no-later-than on the same date has the same effect as zero-total-float. Finish-no-earlier-than in combination with finish-no-later-than on the same date has the same effect as zero-total-float.”

7–120 When building the development programme or working programme at low density, it is often convenient to use date constraints on milestones to indicate, for example, when particular plant, or equipment needs to be procured, or information issued. However, one of the prerequisites of an effective dynamically reacting working programme is that, at the time that change occurs, the baseline programme should not be inhibited from reacting dynamically to the change by, amongst other things, manually applied date constraints. Thus, in order for the programme to be able to react to changes, it is necessary before completing the programme to check for any manually applied date constraints inserted during the building of the programme. 7–121 In this regard, the SCL Protocol recommends that: “Activities should be linked together by the appropriate logic links such as finish to start, start to start and finish to finish. Manually applied constraints such as ‘must start’ or ‘must finish’ fixed dates, ‘zero float’ and other scheduling techniques that can have the effect of inhibiting the schedule from reacting dynamically to change should be avoided.”117

7–122 Some activities represent a significant point in the project, but have no duration, for example those that usually mark the beginning or end of a set of related activities and can be designated as milestones, or flags118. However, because finish milestones do not have start dates, they cannot be given a successor relationship, which depends on the start of the finishing milestone (start-to-start or start-to-finish). Similarly, a finishing milestone cannot normally be the successor of a start-to-start relationship119. The only constraints that typically can be applied to start milestone dates are those which restrict its start date such as start-no-earlier-than, start-no-later-than, start-on and mandatory start. No other logical constraints can normally be applied. Similarly, a finishing milestone can usually only be assigned a date constraint that restricts its finish date such as finish-no-earlier-than, finish-no-later-than, finish-on and mandatory finish. 7–123 A zero-duration activity is not the same as a milestone. A zero-duration activity is one that has no residual, or remaining time and is not designated as a milestone or as a flag. When an activity with zero-duration is added to a project, it displays both the start and finishing date, but they are both represented at the same

117 Guidance Note 2.2.8. 118 For example, making expected payment certificates and material and equipment deliveries. 119 For example, in P3.

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point in time120. The purpose of zero-duration activities is generally to indicate a position in the construction logic for an activity to take place, the duration of which is not known at the time that the schedule is prepared, or which, whilst originally allowed for, has since been omitted. For example, this includes the imposition of work by means of an undefined provisional sum where, under the terms of SMM7, C is not required to take the content of the work into consideration at the time of tender, but C knows that at a later date it will be given sufficient information to expand the description of time for that activity. In such circumstances, if no contingency period is specified, it would be appropriate for the undefined provisional sum to be identified in the programme logic as a zero-duration activity until sufficient information is given to identify its duration. 7–124 Apart from programming activities with a logic that requires contiguous or uninterrupted activities, it is sometimes appropriate to demonstrate activities as an interrupted process. Interruptible durations provide a way of rationalising an inconsistency between the logic and activity durations such that, in order to obey the logic, the activity duration would exceed the stipulated, or calculated duration121. The facility for designating activities as of interruptible, or flexible, duration, rather than of contiguous, or of fixed duration, can be useful where the programme contains ladders of activities with fixed start-start lag and fixed finish-finish lag. Where the software is configured for contiguous durations and hence gives priority to the activity duration over the logic, any reduction in the duration of the activities in the ladder can, without warning, produce ridiculous results. Unfortunately, the software products currently available permit the user to choose between contiguous and interruptible, only on a programme-wide and not an activity-by-activity basis. 7–125 In some programmes, a relationship, or constraint, controls the start and finish of an activity. For example, when a finish-to-finish relationship controls the finish date of an activity, the activity cannot finish until its predecessor has finished. When contiguous durations are used, the finish date of the activity governs its start date because the work must be performed without interruption. However, by using interruptible durations122, the programme software will permit the apparent period of the activity to be generated from the logic applied to it, instead of the allotted activity period. It will readily be appreciated that, by using the constraints facilities in the software, an unscrupulous project programmer can easily manipulate the programme to render any activities to appear “critical” and thus appear to steer the critical path123. The only practical defence available to the CA and to D in such circumstances is to have access to the soft copy of the programme, in the software in which it was created, from which the manually applied constraints can be located and removed to demonstrate the true criticality124.

120 Some software illustrates the finish date as occurring before the start date when a duration of zero is applied. 121 This condition is referred to as “activity float”. 122 Referred to in some software as discontinuous durations. 123 See, for example, JG Zack Jr, “‘Games’ people play and some suggested remedies” (1992) Journal of Management in Engineering, Vol.8, No 2; and see J M Wickwire and S Ockman, “Obstacles to success, use of critical path method on contract claims”, 2000, Construction Lawyer, Vol 19, No 4. 124 Currently, none of the standard forms of contract other than C21/09 require C to provide an electronic copy of its programme to D or the CA, an omission which can be rectified by the use of the sort of conditions set out for the 1998 suite of JCT contracts in the CMS. See Ch.10, “Project control”, at para.10–056 and App.2 to the 4th edn thereof.

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Activity durations 7–126 The standard forms of contract generally make no requirement as to activities and durations, although there will generally be a term implied that C should demonstrate a reasonably efficient programme for proceeding from commencement to completion. 7–127 GC/Works/1 and GC/Works/1/98125, GC/Works/1DB and GC/Works/1DB98126 require that C shows on its programme events that (in C’s opinion) are critical to the satisfactory completion of the works and allows “reasonable periods of time for the provision of information”. However, whilst the standard forms say nothing about the duration of activities, probably the most important consideration in the preparation of a workable programme127 is the content of an activity network and whether the duration of the activity is: 1. 2.

determined deductively as a product of the resources to be applied to it against a given productivity quotient; or determined inductively by the application of empirical dates128.

7–128 In other words, the decision to be made involves the following questions: 1.

2.

will the duration of the activity be dictated by the resources that can reasonably be allocated129 and the rate of performance of the allocated labour and/ or plant? will the duration of the activity be dictated by setting down the date it will start and the date it will finish and then working out from that what resources will be required in order to perform to that standard?

7–129 In general terms, a duration can be derived from: 1. 2. 3.

specifications (by contract); calculation (quantities, time and production rates); and assessment (experience);

and should take account of: 1. 2. 3. 4.

complexity; working environment; availability of supporting facilities; and continuity.

7–130 When calculating the duration of an activity, it is prudent to consider information sources such as: 1. 2.

the tender estimate; the content of the work;

125 Cl.33(1). 126 Cl.33(10). 127 RMW Horner and BT Talhouni, Effects of accelerated working delays and disruption on labour productivity (1995, Chartered Institute of Building). 128 When the duration of an activity is dictated by the determined start and finish dates only, it is implicit that there can be no limit on the resources available. 129 The resources applicable may be limited in practice because of the difficulties of getting more labour or the practical limitations of the available working area.

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3. 4. 5. 6.

labour productivity standards; the gang size; equipment and material requirements; and availability.

7–131 In connection with the effects on durations of likely productivity, the following should also be considered: 1. 2. 3. 4. 5. 6.

physical working conditions; safety requirements and labour agreements which may be in effect; site down-time130; seasonal weather fluctuations131; seasonally related activities132; and resources for seasonal work133.

7–132 A programme that is limited only by resources generally results in a programme in which the project completion date is a product of the degree of productivity that is achieved by the labour force. However, when the completion date is inflexible, independent of cost, or efficiency, and the overriding objective is to ensure that the activities can be scheduled to be started and completed by a specified date134, it generally follows that any predicted resource overloads must be accommodated by increasing the labour and/or plant, the working hours, or making other suitable short-term resource arrangements, and there must be the space available to accommodate all the labour and/or plant necessary. It follows, in such a case, that if the resources fail, the programme also fails. 7–133 Economic profitability generally depends upon ensuring that the workforce is as productive as possible. Hence, even though resource constraints are then seen as having a secondary priority in a time-orientated programme, the project programmer will normally attempt some resource levelling, or smoothing, to achieve as few peaks and troughs in the resource usage pattern as possible. 7–134 All methods of computerised programme analysis calculate either directly or indirectly the earliest time at which an activity can be performed and the latest time at which it must be performed if the shortest possible total time for the project is to be achieved. In practice, however, it may not be desirable to start all the activities at their earliest calculated times, for example because it might cause uneconomic, periodic peak demands on manpower and other resources. 7–135 Computerised project programming provides the facility for the adjustment of the timing of activities within their calculated float in such a way as to ensure a smooth demand on resources. The process of improving the pattern of demand on these resources is called “levelling”, “smoothing”, or “resource allocation”. 7–136 In most projects, the activity durations are a mixture of time limitations and resource limitations, but some activities, such as concrete and screed-curing times, will inevitably be dictated by external objective criteria alone, that is the time it takes for the concrete, or screed, to cure. Equally, those activities such as the fitting-out of a 130 131 and so 132 133 134

Christmas, Easter, local holidays, and so on. Freezing on wet trades, wind on cranes and roofing, heat in all trades, rain on external work forth. Landscaping in the planting season. Turfing in the heat of the summer is rarely successful. Artificial light in winter conditions, pumping equipment in rainy conditions and so on. As it is in a traditional bar chart.

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bathroom will inevitably be limited by the quantity of labour that physically can be applied to the workface in the limited space available. 7–137 An added complication in programming activity durations is the change in the methods of construction that has taken place in the industry over the last few decades. Prior to the 1960s, in the United Kingdom, the majority of labourers employed in the construction industry were employed by a main contractor and it was common for such contractors to have on their staff both craftsmen and labourers in the major trades. It was common then to see even mass concrete being mixed on site and it was an unusual builder who did not employ its own bricklayers and joiners. During the 1970s, however, much of that was replaced by subcontract labour and, in the early 1970s, owing to the then boom in construction work, it was common for tradesmen to work in self-employed gangs135. Typically, these gangs would be employed on a piece-work basis (or “lump”), whereby the price they were paid was geared to the amount of work they would have to do, rather than the time it would take. So, for example, a bricklaying gang might have been paid so much per thousand bricks laid and it would be of no consequence to the gang (except in terms of their earning capacity) whether those thousand bricks were laid in eight or 12 hours136. However, the downside of piece-work was, of course, the pressure that speed of performance placed on quality and the resultant loss of quality that was generally experienced in working to that method of payment. 7–138 By the late 1980s, it was not unusual for contractors to employ a minimum of direct labour and even general labour tended to be hired through labour-only subcontractors, or agencies. A development of this from the late 1970s that attracted a level of credibility as a result of the NEDO report137 was management contracting and construction management. Here, the duration of each activity is not so much dependent upon the time that can be calculated as a result of the resources to be applied as the period of time that the works contractor has been allocated to its particular task and to which it is contractually bound. The calculation of the duration of the activity resources then passes from the managing contractor down to the works contractor. At the works contract level, the principles of calculation are no different for the works contractor than they would be for a contractor under the traditional form of contracting, except in that, where the interfaces between trades are concerned, the works contractor must rely on the allocation of periods provided by the construction manager. 7–139 Thus, historically, for the managing contractor, or construction manager, the programme has tended to be objectively calculated from fixed criteria modified by the data provided by the works contractor. In this form of procurement, good communication is essential. Without it, delay and disruption to the planned programme as a result of poor integration are the predictable results. 7–140 Unfortunately, complicating matters further, practical experience tends to show that activity durations dependent upon productivity on a construction site vary considerably. The reasons for this are many, ranging from the day-to-day temperature,

135 Such as two bricklayers and a labourer employed as a team. 136 However, in practice, when paid on a piece-work basis, the productivity of the gang was often demonstrably better than when paid on an hourly rate. 137 The National Economic Development Office, Achieving Quality on Building Sites (London: HMSO, 1987). The Report of the Building and Civil Engineering Economic Development Committees’ Joint Working Party.

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or humidity138, to the success (or otherwise) of the local football team. Buildability and the form of contract can be expected to affect productivity, as will shortages of materials and equipment, lack of instructions, sequencing problems, inadequate supervision and weather. These will all have an effect on the model durations calculated by activity. Research139 suggests that disruptions cause an average loss of productivity of about 25%, whilst interruptions lasting longer than half an hour cause productivity losses of about 33% of the time that the men are at work. 7–141 It appears from Jaafari’s research140 that, unlike the findings of some US guides, in the United Kingdom, unless intricate work is attempted in freezing conditions, the range of temperature and humidity normally encountered in the working environment is unlikely to have a significant effect on productivity. It may therefore be unreasonable for a UK contractor to rely on the effect of climatic variation in extension of time claims to the extent that a US contractor might be expected to do. On the other hand, increases in the level of management control can be expected to improve labour productivity as a result of the reduction in idle time and defective work. 7–142 It can thus be seen that calculations of duration are important, but the way in which such calculations are produced is by no means an exact science. It depends upon experience and insight as much as mathematics. However, because of the multiplicity of possible results arising out of dealing with people and their performance, it is generally thought not to be a practical proposition to consider changing only one variable at any time to study its effect. Accordingly, until the CIOB Guide is put into practice, it is unlikely that any substantial data will be found to support finite and logically demonstrable standards of productivity. However, in the United States, research has been undertaken into the applicability of a model standard, which is intended to be applied as a formula for effecting change in productivity, depending on the special circumstances that might require adjustment of the standard141.

Calculating durations 7–143 Normally, an activity duration is one that is expected to absorb resources in terms of men, materials and plant. However, an activity can also be an operation that has no resources attached to it, for example curing concrete or a contingency period. 7–144 The duration of an activity that absorbs resources can be measured in working hours, working days, working weeks, or any comparable unit, depending upon the type of work for which the duration is being calculated142. The only basic requirement is that the same unit of time be used throughout the project plan. For most construction

138 It has been found that this was unlikely except in extreme conditions. See A Jaafari, “Criticisms of CPM for project planning analysis” (1984) Journal of Construction Engineering and Management, Proceedings of the American Society of Civil Engineers, 110.2, 222. 139 RMW Horner and B T Talhouni, Effects of Accelerated Working Delays and Disruption on Labour Productivity (1995, Chartered Institute of Building). 140 A Jaafari, “Criticisms of CPM for project planning analysis” (1984) Journal of Construction Engineering and Management, Proceedings of the American Society of Civil Engineers, 110.2, 222. 141 See Ch.17, “Disruption to progress and lost productivity”, at paras 17–108 to 17–117; and see also PD Galloway and KR Nielsen, Control for PCM Projects, a paper given at the Annual Convention (1980) of the American Society of Civil Engineers. 142 Primavera P3 is designed to permit the calculation of durations in minutes if required, although this is unlikely to have any relevance to the construction industry.

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projects, it is not practical to break down an activity into a time unit of less than a half day and, for most activities, the time unit will be a day. 7–145 Durations can be calculated in a number of different ways, typically by means of: 1. 2. 3. 4. 5. 6.

experience; industry standards; time and motion; comparison with other projects; calculation from labour and material content; and by specification.

7–146 Whereas small contractors on small projects may tend to do their estimating by experience, all large contractors and most medium-sized contractors have their own estimating standards, derived from trade standards, which indicate for the purposes of their project planning not only the charge-out rates for particular types of work but also the time rates between which that work can be expected to be completed in differing site conditions. 7–147 Most major contractors have guides for general building works, which, for example, will give such information as that topsoil 150mm to 200mm deep can probably be removed at a rate of 60m3 per hour, if excavated and tipped to one side. On the other hand, if it is to be excavated and carted away for tipping, it may only be shifted at the rate of 8m3 per hour. There will be guidance on the time it might take to fix 1m2 of plasterboard or, alternatively, it will state that it might take a week to plaster the walls and ceilings of a house with a gang of two plasterers and a labourer143. There will be different data on the types of finishes, indicating, for example, that for each hour of labour 4m2 of plasterboard dry lining might be fixed to walls, whereas wet plastering can probably be completed at no more than 2.5m2 per hour. 7–148 Bricklaying, on the other hand, is an extremely complicated activity for which to estimate durations. In each case the duration will depend on the degree of continuity, the type of brick, the type of joint, the method of bonding, the thickness of the wall and so on. Typically, for example, the duration for laying 1,000 bricks in common brickwork could range between eight hours for deep foundations in repetitive work to 15 hours in shallow excavations without continuity. With facing bricks, the time it will take to lay 1,000 bricks will change depending on the shape of the bricks, their size, quality and type of joint and they will often have to be selected for colour as they are laid. In high-quality complicated brickwork, it may take as much as 20 hours to lay 1,000 bricks, whereas in ordinary quality uncomplicated work, the same number of bricks may be laid in fewer than ten hours and, typically, in isolated piers of high quality facing bricks it may take more than 25 hours to lay the same 1,000 bricks. 7–149 In the United States, estimating guidelines are published by trade organisations, such as the National Electrical Contractors Association and the Mechanical Contractors Association of America, and there are accepted industry estimating standards such as RS Means and The Richardson Rapid Construction Cost Estimating System. In the United Kingdom, most builders’ pricing books, such as Laxton’s144, Spon’s145, and 143 The labourers are responsible for mixing materials and clearing up and the tradesmen apply the materials placed beside them. 144 Laxton’s Building Price Book (Harlow: Butterworth–Heinemann 2010). 145 Spon’s Architects and Builders Price Book (Abingdon: Chapman and Hall 2009).

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Wessex146, will give an indication of durations, as well as price for a multitude of different activities147. 7–150 POMI 148 Building Price Book, rather helpfully, advises the user as to what the authors have relied upon, in estimating activity durations: “labour constraints are based on feedback from a number of professional estimators, surveyors, tradesmen and specialist contractors. In some instances we have had to take a view where new products have as yet not produced estimating feedback. In the majority of cases site labour times have been carried from real life outputs, reflecting the performance of supervised men working under typical site conditions.”

Notwithstanding this reassurance, these standards should be viewed cautiously. The practitioner should be careful to compare situations that are inherently job-specific with standard work descriptions. 7–151 A paper on the uses and misuses of loss of productivity studies found (amongst other things) that: “The main drawback of many of these studies is that they rely on self-reported data (questionnaires) without any independent verification as to whether or not that data is, in fact true. It is troubling that many of the studies fail to provide basic information as to the studies’ reliability or validity. In addition, the bias by some researchers is detrimental to the overall conclusions reached.”149

On the other hand, in the case of Ace v US150, the court found that a Business Round Table Report published in the United States in 1980, entitled “Overtime effect on construction projects”, was both “credible and relevant” to the quantification of a claim for recovery of lost productivity arising out of increased man-hours. 7–152 When used retrospectively, it is wise to demonstrate not only that the estimates of durations reflect the work actually performed, but also that the estimating guidelines relied upon are relevant to the work and conditions to which they are applied. 7–153 With particularly difficult, but repetitive, operations, it may be possible to carry out a work study by sample to check the estimated performance baseline. So, for example, if there are 500 bedrooms to be fitted out, the time it will take to fit out one will be an extremely important consideration: any error will be multiplied 500 times. Similar considerations may be applied to the structural lifts of a tower block, piling, pipeline laying, and indeed on a micro-level to any repeatable activity such as fitting a door. Thus, checking the exercise by time and motion study in sample may be an extremely valuable exercise, and that is especially so if changes are later made that go to time and disruption costs. 7–154 Site control of productivity and conformity with plans is best carried out using work study techniques. However, for activities of short duration and of an odd nature this can be impractical. For major operations, where the activity is likely to last more

146 Wessex Engineering Services Price Book (Poole: Wessex Electronic Publishing Ltd 2010). 147 Spence Geddes’ Estimating for Building and Civil Engineering Works (Harlow: Butterworth–Heinemann), POMI Building Price Book (Principles of Measurement (International) for Works of Construction) (Brighton: Barton Publishers) and DMG Cross, Builders’ Estimating Data (Harlow: Butterworth–Heinemann, 1990) also contain similar information. 148 POMI Building Price Book (Principles of Measurement (International) for Works of Construction) (Brighton: Barton Publishers). 149 Dr KMJ Harmon and B Cole, “Loss of Productivity Studies – Current Uses and Misuses”, Construction Briefings, Pt 1, August 2006 and Pt 2, September 2006, 15. 150 Ace Constructors Inc v United States 70 Fed Cl 253 (2006).

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than, say, four weeks, work study and sampling techniques may be employed to ensure full productivity of the process selection beforehand and the reduction of potential bottlenecks. Such a study may demonstrate that what at first appeared to be an inefficient process may be changed in logic to meet the target date or lower the costs. 7–155 Horner and Talhouni151 have carried out research into the possibility of identifying a productivity quotient and have concluded that productivity is predominantly a function of management: “Practical observations tend to show that contrary to common assumptions and theoretical considerations the actual productivity in construction varies considerably at random. This is so even when work is typically repetitive.”152

Their conclusion is that the duration of an activity can be estimated by the equation: d=Q (f × q) Where: d = duration of the activity; Q = the quantity of work in the activity; q = the ideal productivity of the gang; and f = the job management efficiency factor (typically around 0.4 and rarely greater than 0.5). As a rule, they found that productivity tended to build up gradually, the slow start being sometimes associated with lack of information, key craftsmen, materials or equipment. Progress was then found to increase steadily to the peak norm, until it met what they described as “an unexplained drag” at the end. 7–156 The tail-off of productivity at the end of an activity is a phenomenon that is evident not only on a construction site, but can also be observed in architects’ drawing offices. Horner and Talhouni have associated this phenomenon on construction sites with the proximity of new work elsewhere, technical problems, or breakdowns in tools. Others have suggested more improbably that it might be caused by a perception of the end of the work being supplemented by a desire to fill the allotted time available153. It is a phenomenon that is not just referable to the end of an activity, but also the end of a work period. For example, there is also an observable reduction in productivity during the last few days before traditional holidays. 7–157 One of the key functions of site management is to minimise avoidable delay and to maximise productivity. As the size of the workforce grows, so there should be a growth in the site management if loss of productivity due to inadequate information, materials, or plant is not to affect progress and the need to replace defective work is not to delay completion of otherwise complete activities. 7–158 In the United Kingdom, the motivation of the labour force to secure good quality work first time round tends to be more difficult in construction than in other industries, simply because of the itinerant nature of the labour force. Other industries

151 RMW Horner and BT Talhouni, Effects of Accelerated Working Delays and Disruption on Labour Productivity (Chartered Institute of Building, 1995). 152 RMW Horner and BT Talhouni, Effects of Accelerated Working Delays and Disruption on Labour Productivity (Chartered Institute of Building, 1995). 153 The principle identified by Northcote Parkinson in Parkinson’s Law, Ch.1, “Work expands so as to fill the time available for its completion”.

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still tend to have the permanent labour force and a corporate identity which the UK construction industry enjoyed prior to its collapse in the mid-1970s. 7–159 The principal research into trade productivity in brickwork in the United Kingdom has been carried out by Talhouni154. Progress and disruptions were recorded over a nine-month period on seven sites, resulting in more than 1,000 data points. He found that155: 1. 2. 3.

productivity was about 25% lower on disrupted days than on days when no delays occurred; interruptions caused an average loss of productivity of 35% during the time that men remained at work; and the longer the interruption, the greater the loss of productivity.

7–160 The difference between trades in relation to the effect of interruption might be a function of the possibility of finding other alternative work to perform if the information, materials, or plant is not available for a particular operation. It should be noted that the effect of interruptions on brickwork should also be viewed in the light of the disproportionate amount of preparatory and finishing work compared to other trades such as joinery, or plumbing156. 7–161 The object of resource levelling is to smooth out requirements for labour and plant so that, wherever possible, sudden peaks and troughs are avoided. This is done by adjusting the position, or duration of activities wherever practical in order to even out the resource requirements. The purpose is to avoid arriving at a plan that, for example, requires 100 men and 20 machines one week, none at all the following week, and 50 men and ten machines the week after that. 7–162 Essentially, there are three methods of resource levelling: 1. 2. 3.

reducing the labour to fill the available time157; altering the start times of non-critical activity158; and changing logic159.

7–163 Two of these methods make use of float160, the third alters the duration of activities and the logic of the network. When a situation is arrived at where there is no float, it will be necessary to decide between the cost of importing greater resources to enable the job to be finished on time and the cost in terms of liquidated damages and disruption to connected activities of allowing the job to overrun its completion date.

154 BT Talhouni, Measurement and analysis of construction labour productivity (1990, PhD thesis, University of Dundee). 155 Estimates of typical productivity rates are also now available on the website http://www.planningplanet.com (accessed July 2010). Similarly, productivity information is intended to be made available. See also, generally, W Schwartzkopf, Calculating Lost Labor Productivity in Construction Claims (Aspen, 2000). 156 Bricklaying requires mortar mixing before and protection and cleaning up after the bricklaying has finished, the duration of which is not directly proportionate to the amount of brickwork laid. Thus, the shorter the working period, the greater the unproductive activities in relation thereto. 157 Using up the float. 158 For example, where there are two paths for float, by delaying the start of one until after work on the other is completed. 159 Increasing the number of activities which take place over a given period of time by trade stacking. 160 See Ch.16, “Float and time contingencies”, paras 16–007 to 16–119.

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Project planning method statements “Only 3% of respondents to the planning and scheduling part of the survey perceived that the intended construction process was formulated following discussions between the interested parties and the planning engineer or scheduler, coupled with a formal written method statement.”161 “in around 10% of projects some of the designers (the architect, structural engineer and the mechanical engineer) were likely to be consulted about the drafting of a method statement.”162

7–164 A programme with nothing by way of explanation to support it is of very little use when it comes to incorporating the results of change. 7–165 However, although it is usually a term of the civil engineering contracts163, on the whole, the standard forms of building contract do not contemplate that a project planning method statement should be prepared in conjunction with the working programme. None of the JCT forms nor the old UK government GC/Works series of forms make any reference to a planning method statement. Other than in IGCE/09 and IGCE/DB09, which require that C’s programme should include details of the methods by which C proposes to execute the works and any temporary works164, the 2009 edition of the Irish government standard forms of contract also make no reference to a “method statement” nor to any requirement for any description of the activities, logic, or resources to which reference is made in the scheduling requirements. 7–166 On the other hand, FIDIC/DB95 requires that, when requested by the CA, C is to provide a general description of the arrangements and methods of working that C proposes to adopt for the execution of the works. FIDIC/Build99, FIDIC/DB99 and FIDIC/PD+B99 also require that the submitted programme is to be supported by a report setting out: “(i) (ii)

a general description of the methods which [C] intends to adopt, and of the major stages in the execution of the works, and details showing [C’s] reasonable estimate of the number of each class of [C’s] personnel and of each type of [C’s] Equipment, required on the Site for each major stage.”165

7–167 HK05166 requires C to provide a method statement “describing the methods of construction and the resources that it intends to use”, but does not require it to be related to the activities on the programme. This form also requires C to provide a list of the plant equipment and temporary works it intends to employ167. However, as with the method statement, C is not required to cross-relate this information to any particular activities on the programme and, in the absence of contractual stipulation to the contrary, it is for C to decide upon its method of construction. This was established in the case of AMF v Magnet Bowling, where it was held that:

161 See Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008), Chart 19. 162 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008), Chart 20. 163 Apart from the CMS (see App.2 to the 4th edn), ECC2 and ECC3 are unusual in describing the expression programme so as to include a method statement. 164 Cl.4.9.1(4). 165 Cl.8.3(d). 166 Cl.3.1(1)(b). 167 Cl.3.1(1)(d).

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“A [CA] has no right to instruct [C] how his work is to be done. It is the function and right of [C] to carry out his own building operations as he sees fit,”168

7–168 As with programmes, there is no useful purpose served in stipulating that a method statement should be a contract document. Ostensibly, the purpose of specifying a particular construction method is to secure for D the quality that a given method will produce and sometimes to control extraneous factors such as safety, noise and pollution. This has proved to be a double-edged sword for developers, as required changes to construction method specified by D can give rise to variations. In Holland Dredging169, for example, C claimed a variation arising from a method statement for dredging that incorrectly presupposed a location from which backfill material would be available. The Court of Appeal approved the claim, notwithstanding the principle of the AMF International case, on the grounds that the method statement had status as a full contractual document and specified a method that was impossible to achieve. 7–169 Similarly, in Havant v SCSC (No 1)170, HH Judge Fox-Andrews QC (sitting in the Commercial Court) considered the ICE contract in connection with the Hayling Island Beach replenishment scheme. The work was expected to be noisy and the specifications required C to minimise disturbance to those living nearby. During the execution of the works, a local resident obtained an injunction restraining South Coast Shipping, the subcontractors, from making any noise audible from the claimant’s house between the hours of 5pm and 9am. South Coast Shipping sought a variation under Cl.51 to cover the additional cost of the works resulting from the injunction. It was held that the method set down in C’s method statement was within the definition of “works” for the purposes of Cll.13 and 14 of the ICE contract. Consequently, C was entitled to a variation order to change work that, in relation to the approved method statement, was then physically, or legally impossible. 7–170 It therefore appears that, where C is required to programme D by identifying the method that it proposes to adopt for the work, and C’s methodology becomes a contract document, D may be liable for the costs if that method later turns out to be unworkable. On the other hand, the CMS specifically recommend in regard to the JCT98 suite of contracts that acceptance that C’s project planning method statement complies with the contract does not require that the works shall be constructed in accordance therewith nor shall it relieve C from any of its obligations under the contract and C shall not be entitled to rely upon any such acceptance as indicating that the accepted planning method statement is feasible. 7–171 The SCL Protocol recommends that C be required to programme the works in accordance with a critical path network, supported by a planning method statement, which will facilitate the effective management of the progress of the work. Accordingly, the CMS define the master programme as a critical path network, together with a method statement, the two of which are to be read together. The requirements for the method statement are set down in an appendix171, which describes it as C’s description of the activities, durations, work sequences and resources, referred to in the critical path network and produced in conformity with the applicable standard. The method statement is to be fully cross-referenced to the activities to which it relates in the

168 169 170 171

AMF International v Magnet Bowling [1968] 1 WLR 1028. Holland Dredging (UK) Ltd v The Dredging and Construction Co Ltd (1987) 37 BLR 1 (CA). Havant Borough Council v South Coast Shipping Co Ltd (No 1) (1998) 14 Const LJ 420. See App.2 to the 4th edn.

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critical path network and is to include sufficient information as may be reasonably necessary to enable the risk manager to interpret, evaluate and accept the method statement as being compliant with the contract requirements. 7–172 Under these conditions, the planning method statement is to include by reference to each activity on the critical path network: 1. 2.

3. 4.

a description of each activity planned to be carried out during the period in sufficient detail to enable the work to be monitored; where the logical interface between one activity and another is illustrated on the critical path network to be by way of start-start, or finish-finish relationships, the method of calculation of the time lag represented by each relationship, in sufficient detail to be able to identify the critical path, if any; a schedule of all activities lying on the paths containing the least float, namely the critical activities; in relation to each activity listed as critical, in sufficient detail to explain C’s activity durations, details of C’s resource requirements in terms of subcontractor, supplier, or other workforce by name and trade, in relation to each activity, its proposed: manpower, gang sizes, tradesmen, work rates, plant, equipment, materials, and quantities of work.

5.

6.

a schedule of all activities that may be expedited by use of overtime, additional shifts, re-scheduling, or by any other means, identifying the relevant activities and explaining any management or other constraints on any such acceleration; and a schedule giving the monetary value of each activity for cashflow purposes.

7–173 In regard to the high density, short-term look-ahead part of the network, the CMS also specify that the method statement is also to include for each subcontractor and supplier appointed the planned manpower, gang sizes, tradesmen, work rates, items of plant, or equipment and materials and quantities of work allowed for in sufficient detail to explain C’s activity durations. 7–174 One of the core principles of the CIOB Guide172 is also that: “The time management strategy is to be set down in writing in a regularly updated method statement, which is to deal with, amongst other things, the stated strategy and assumptions adopted for: project planning risk management schedule preparation schedule review and revision

172 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), para.1.1.26.

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progress update record keeping quality control communications.”

At para.2.6, the Guide advises that: “Consultation and effective communication are pre-requisites of a meaningful and effective schedule and planning method statement defining the strategy for how the project will be executed and managed. At inception the planner will draft an appropriate planning method statement with the input and co-operation of others. Those who may participate will depend upon the nature of the project but might reasonably include: the the the the the the the

[developer] design team risk manager project manager construction manager project scheduler health and safety planning manager.

As the density of the planning method statement increases, so the input of others will be required, for example: other directly employed contractors utilities and statutory undertakers specialist designing subcontractors and third-party projects trade package contractors domestic subcontractors specialist suppliers. The purpose of the planning method statement is to facilitate the understanding and co-operation of the participants. It should make clear what constraints have been identified, what assumptions have been made in the process of risk management, planning, scheduling, review and update of the schedule and the reasoning underpinning those constraints and choices. Because it will have a life independent of those who, from time to time, may be required to work upon it, it is important that the planning method statement is designed for use by those independent of the project. The content of the planning method statement will change during the development of the project and must be designed to accommodate change in subject-matter, content and source, without compromising transparency between the planning method statement and other time-related information. Any amendments made to the underlying assumptions contained in the planning method statement will also need to be carefully recorded in a clear and conscise manner.”

7–175 Thus, a planning method statement demonstrating the assumptions that have been made in forming the factual basis for setting key dates and the logic by way of which the schedule has been developed are just as essential in this as the schedule that will necessarily follow from the methodology. So, in Kitsons Sheet Metal173, where there was little or nothing to support the methodology of a works programme, which had been changed many times, HH Judge Newey QC held that the programme was not a binding statements of intention and that the works contractor had merely contracted to work within the calendar periods stipulated by the management contractor from time to time. 173 Kitsons Sheet Metal Ltd v Matthew Hall Mechanical & Electrical Engineers Ltd (1989) 47 BLR 82.

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7–176 In order to render the method statement at all meaningful and useful, both the CMS174 and the CIOB Guide175 require that its content should be considered in relation to the density of the schedule to which it applies. The CIOB Guide states that, at high density, that is for work that is not expected to take place until at least nine months later, the method statement should contain: a description of the work to be carried out, including design, procurement and development strategy and constraints; third-party and neighbour interests and interfaces; a description of the approach to risk assessment and the risks identified (eg work affecting river crossings in the fish breeding season, earthworks in winter, and weather cycles, to which any resource is sensitive); an assessment of contingencies to be allowed for those risks; a description of the activities contained in the schedule by reference to their activity identifying codes; the work breakdown structure; calendars for working weeks and holiday periods; generic resources anticipated and anticipated resource constraints; permits and licences required and the decision periods expected in relation to each application and their dependencies; material and equipment restrictions and availability; the approach to utilities, licences and restrictions such as power outages; the approach to schedule review, revision and updating; activity codes applied; cost codes applied; details of the phasing and zonal relationships of the project; principal methods of construction; details of major plant requirements; site management, logistic assumptions and site welfare, temporary works including scaffolding, access and traffic management; health and safety; principal methods of procurement and their effects; the methods used to estimate durations; the assumed sequencing logic and an explanation of any logical constraints; description of the critical and near-critical paths to key dates, sectional completion dates and completion of the works as a whole; and reporting formats, communications strategy and information format. 7–177 At medium density, that is for work to be carried between three and nine months hence, the Guide advises that the detail will be filled in to the outline information given in the low-density schedule, including any additions, deletions, amendments or refinement of that information and it should also include: identified specialist contractors, subcontractors and suppliers; key trade interface management strategy; design and procurement interface management strategy; limited possessions; 174 App.2 to the 4th edn hereof. 175 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), paras 3.8.60 to 3.8.62.

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planned overtime; temporary traffic diversions; plant maintenance down-time; resources anticipated and any anticipated resource constraints; material and equipment restrictions, and availability; utilities, licences and restrictions such as power outages; schedule review, revision and updating; the methods used to estimate durations; and details of plant requirements and their assumed productivity, down-time and maintenance. 7–178 At high density, that is for work that is intended to be carried out in the period up to three months in the future, the Guide adds that the method statement should be refined to detail the activities to be carried out in the short term, including any additions, deletions, amendments, or refinement of the medium-density planning method statement, also to include the definitions of: resources to be employed; productivity quotients expected; detailed calculations of activity duration; detailed methods of construction; and details of plant requirements and their productivity, downtime and maintenance.

Standard form requirements for programmes 7–179 Whilst, up to the early 1990s, the absence of any contractual development in time control may have been forgivable, 20 years later, by reference to currently accepted good practice, the current standard of drafting of time provisions in the standard forms of contract is woeful. It is apparent that, over the years, little or no thought has been given in any of the forms discussed here as to what D might reasonably require as to the management of time, nor how it could be achieved with any certainty. It is generally the case, amongst the standard forms of contract that, whereas the provisions for cost control may run to several pages of conditions, the requirements for time control will not be mentioned at all or, if mentioned, then the requirements are hopelessly inadequate and unrelated to the provisions for extension of time, or time-related compensation. In JCT05, for example, the provisions for cost control run to eight pages176, a further two pages are given over to dealing with the pre-agreement of the effects of change177 and a further schedule of 11 pages deals with cost fluctuations178. By comparison, for time control, there is Cl.2.9 alone which, in regard to time control states: “As soon as possible after the execution of this contract, if not previously provided, [C] shall without charge provide the [CA] with his master programme for the execution of the works identifying, where required in the contract particulars, the critical paths and/or providing such other details as are specified in the contract documents. Nothing in the master programme or any amendment or revision of it, shall however impose any obligation beyond those imposed by the contract documents.”179 176 Section 4, Payment, Cll.4.1 to 4.26. 177 Sch.2, Cll.1–5. 178 Sch.7, Fluctuations options, Cll.A.1–C.6. 179 Odd though it may seem, the only option available in the contract particulars, in this regard, is to delete the requirement for the critical paths to be shown.

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By analogy to the cost provisions, where C has simply provided a lump sum price against drawings and specification, this amounts to saying no more than: “As soon as possible after the execution of this contract, if not previously provided C shall without charge provide the CA with his breakdown of cost for the execution of the works identifying, where required in the contract particulars, the major cost items and/or providing such other details as are specified in the contract documents. Nothing in the cost breakdown or any amendment or revision of it, shall however impose any obligation beyond those imposed by the contract documents.”

7–180 It is not difficult to imagine that such provisions would render it impossible for D to have any control at all of the cost effects of any change, or the ultimate final cost of the works and, in the same way, the published provisions for time in JCT05 do not give D any control at all over the effects of change or the ultimate contract period. JCT05 is not alone. It is significant that, of all the standard forms considered, only approximately 50% of the standard forms refer to a schedule at all, less than a third of those forms actually require C to produce a construction schedule for the works and none provide any effective control of quality, nor say how it is to be used. 7–181 Amongst the older forms that actually require a schedule to be prepared are HK05180, AS2124, AS4000, PPC2000181, MF/1182, IChemE183, A201/97184, JCT80 and JCT98185, ICE6 and ICE7186, ICE/DC187, MC87 and MC98188, ECC2 and ECC3189, and, unusually amongst the minor works forms, NEC/SF99190, FIDIC4191, FIDIC/M&E87192, FIDIC/DB95193, FIDIC/Build98194, FIDIC/Build99 and, unusually amongst the design and build forms, FIDIC/DB99 and FIDIC/PD+B99. 7–182 GC/Works/1 and GC/Works/1/98 deal with the requirements of scheduling at Cl.33(1)195 and provide that C should demonstrate on the schedule: “the sequence in which the [C] proposes to execute the works, details of any temporary work, method of work, labour and plant proposed to be employed, and events, which, in his opinion, are critical to satisfactory completion of the works: that the [schedule] is achievable, conforms with the requirements of the contract, permits effective monitoring of progress and allows reasonable periods of time for the provision of information required from [D]; and that the [schedule] is based on a period for the execution of the works to the date or dates for completion.”196

180 Cl.3.1(1)(a). 181 Cl.6. 182 Cl.14.2. 183 Cl.13.3. 184 Cl.3.10. 185 Cl.5.3.1.2. 186 Cl.14.1(a). 187 Cl.14.1. 188 Cl.1.5.1. 189 Cl.31.1. 190 Cl.31.1. 191 Cl.14.1. 192 Cl.12.1. 193 Cl.4.14. 194 Cl.8.3. 195 GC/Works/1DB and GC/Works/1DB98 contain similar provisions but include the requirement to demonstrate also the execution of the design of the works on the schedule. 196 This is the wording employed by the 1998 version. The 1990 version is not identical, but is virtually the same.

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7–183 FIDIC/Build98 and FIDIC/Build99197 require that C should submit a detailed schedule to the CA including: “(a)

the order in which [C] intends to carry out the works, including the anticipated timing of each stage of design (if any), [C’s] documents, procurement, manufacture of plant, delivery to site, construction, erection and testing, (b) each of these stages of work for each nominated sub-contractor (c) the sequence and timing of inspections and tests specified in the Contract, and (d) a supporting report which includes: (i) a general description of the methods which [C] intends to adopt, and of the major stages, in the execution of the works, and (ii) details of [C’s] reasonable estimate of the number of each class of [C’s] personnel and of each type of [C’s] equipment, required on the site for each major stage”.

7–184 FIDIC/DB99198 and FIDIC/PD+B99199 are similar and unusual amongst the design and build forms in requiring that C should submit a detailed schedule to the CA including: “(a)

the order in which [C] intends to carry out the works, including the anticipated timing of each stage of design, [C’s] documents, procurement, manufacture of Plant, delivery to site, construction, erection and testing, (b) the periods for reviews under clause 5.2 and for any other submissions, approvals and consents specified in [D’s] requirements, (c) the sequence and timing of inspections and tests specified in the contract, and (d) a supporting report which includes: (i) a general description of the methods which [C] intends to adopt, and of the major stages, in the execution of the works, and (ii) details of [C’s] reasonable estimate of the number of each class of [C’s] personnel and of each type of [C’s] equipment, required on the site for each major stage.”

7–185 FIDIC/Build99, FIDIC/DB99200 and FIDIC/PD+B99201 all require this programme to be submitted to the CA within 28 days of receipt of the notice to proceed. Unless the CA notifies C within a further 21 days of its receipt that, in the CA’s opinion, the programme fails to conform to the contract requirements, C is required to proceed in accordance with the submitted programme, but “subject to his other obligations under the contract”. The provision that whatever is indicated in C’s schedule is subservient to C’s other obligations under the contract is a normal provision in the standard forms, whether or not the programme is subject to the agreement of, or acceptance by C, or D. 7–186 FIDIC/DB95 appears to be unique in requiring the schedule to be prepared using precedence network techniques202 and showing early start, late start, early finish and late finish dates. As to the content of the schedule, this form requires C’s schedule to include: “(a) (b)

197 198 199 200 201 202

the order in which [C] intends to carry out the works, (including each stage of design, procurement, manufacture, delivery to site, construction, erection, testing and commissioning), all major events and activities in the production of construction documents,

Cl.8.3. Cl.8.3. Cl.8.3. Cl.8.3. Cl.8.3. Cl.4.14.

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(c) (d)

the periods for pre-construction reviews and for any other submissions, approvals and consents specified in [D’s] requirements, the sequence of all tests specified in the contract.”

By way of contrast, FIDIC/M&E87203 provides that, within 28 days of the commencement date, C is to provide a schedule for the CA’s approval. This form makes no demands as to the form of the schedule, but dictates that the schedule should illustrate: “(a)

the order in which [C] intends to carry out the works, (including design, manufacture, delivery to Site, construction, erection, testing and commissioning), (b) the times when submission and approval of [C’s] drawings are required, (c) the times by which [C] requires [D] to: (i) furnish any [D’s] drawings (ii) to provide access to the site (iii) to have completed the necessary civil engineering work (including foundations for the plant) and (iv) to have obtained any import licences, consents, wayleaves and approvals necessary for the purpose of the works.”

7–187 Apart from FIDIC/DB95204, which requires a precedence diagram method network, none of the other FIDIC forms makes any mention of the form the schedule should take. Whilst setting out detailed requirements of the schedule, ECC2 and ECC3205 also fail expressly to require a CPM network and that the construction logic should be illustrated. 7–188 MC87 and MC98206, and MC08207 provide a more detailed listing of what is required including: 1. 2. 3. 4. 5.

6.

preparing the project schedule for acceptance by the professional team; preparing a detailed construction schedule for the project; maintaining and regularly updating the detailed construction schedule for the project and for all works contracts; monitoring progress of the design work and working drawings of all works contractors and suppliers and reporting to the professional team; monitoring the performance of works contractors against the detailed construction schedule to enable corrective action to be taken to prevent stoppages and delays; and ensuring that works contractors are issued with and made fully aware at all times of the requirements of the detailed construction schedule.

7–189 ECC2 and ECC3 give an even fuller listing of what is required in the content of a construction schedule; ECC3208 states: “If a [schedule] is not identified in the contract data, [C] submits a first [schedule] to the [CA] for acceptance within the period stated in the contract data. [C] shows on each [schedule] which he submits for acceptance the starting date, access dates, key dates and completion date, planned completion, the order and timing of the operations which [C] plans to do in order to provide the works,

203 204 205 206 207 208

Cl.12.1. Cl.4.14. Cl.31.2. Sch.3 Annex B. Cl.31.

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the order and timing of the work of [D] and Others as last agreed with them by [C] or, if not so agreed, as stated in the works information, the dates when [C] plans to meet each condition stated for the key dates and to complete other work needed to allow [D] and others to do their work, provisions for float, time risk allowances, health and safety requirements and the procedures set out in this contract, the dates when, in order to provide the works in accordance with his [schedule, C] will need access to a part of the Site if later than its access date, acceptances, plant and materials and other things to be provided by [D] and information from Others, for each operation, a statement of how [C] plans to do the work identifying the principal equipment and other resources which he plans to use, and other information which the works information requires [C] to show on a schedule submitted for acceptance.”

7–190 Whilst, at first blush, this might appear to go a lot further than most standard forms of contract, it is wholly inadequate. ECC3 does not require a CPM network (save by implication), it does not require it to be delivered for approval in electronic format, and there is nothing to indicate how such a schedule is to be constructed nor any control over its integrity. In effect, a schedule in strict compliance and no more would be useless for the purposes for which it is intended under this form of contract. 7–191 Its predecessor C21/03 eschewed any notion of a critical path so it is perhaps something of a paradox that the most advanced of the current Australian contracts is its successor, C21/09. However, although it is an improvement in that it empowers D to require a CPM network to be provided electronically, there is no control over the schedule integrity, nothing required by way of a method statement or the production of progress records in support of an update and no useful redress if C should fail to conform. In this form, under the heading of “Time Management”, it states209: “25.6 [C] must submit to [D] a program which complies with clause 25.9 within 14 days of the date of contract. Until [C] provides this program complying with clause 25.9, the program submitted by [C] with its tender shall be the contractual program, if [D] so advises [C] in writing. 25.7 [D] need not respond to [C] about the program submitted. If [D] raises no objection and the program submitted by [C] under this clause 25 complies with clause 25.9, it becomes the contract program. If the program does not comply with clause 25.9, [C] must promptly and in any event within 14 days of being notified by [D] of the non-compliance, submit to [D] a further program complying with the requirements for the contract program in clause 25.9. 25.8 [C] must update and resubmit the contract program when directed by [D] acting reasonably, taking into account actual progress, any changed circumstances and the effects of delays and approved extensions of time. 25.9 The contract program must comply with the following requirements: 1.

2. 3. 4.

Show the dates of, or, in the case of future activities and events, the dates for commencement and completion of design and construction activities, other significant events, milestones and the works and also include contractual completion dates; Reflect scheduled progress and be consistent with all constraints on access, performance and co-ordination; Show the logical relationship between activities and events shown in the program, identify time leads and lags, resource and other constraints and the sequence of activities which constitute the critical path or critical paths; Show the dates when [C] will require information, documents, materials or instructions from [D] and the dates when [C] will provide information or documents to [D]. These dates are to be consistent with dates which [D] could reasonably have anticipated at the date of contract that this information, documents, materials and instructions would be required and provided; and

209 Cl.25.6 to Cl.25.12.

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5.

Be in such form and include such detail as [D] reasonably requires and be accurate, comprehensive and complete in all respects.

When requested by [D], [C] must provide the contract program in electronic form to [D]. All of the requirements of clauses 25.9.1 to 25.9.5 must be accessible and clearly shown in the electronic form of the contract program. The software used by [C] must be acceptable to [D]. 25.10 [C] will not be entitled to claim an extension of time under clause 54.3 or otherwise, until [C] has submitted to [D] a contract program in conformance with clause 25.9. The contract program submitted in respect of a claim for an extension of time must be the contract program current (as adjusted under clause 25.8) at the time of the event or events giving rise to the claim. 25.11 All extension of time claims must show how [C] has been or will be delayed in reaching completion, by specific reference to an activity or activities on the then current (as adjusted under clause 25.8) critical path or paths of the contract program. 25.12 Provision of the contract program does not relieve [C] of any of its obligations under the contract.”

7–192 Although they do not dictate what is to be allowed for in the schedule, by exclusion, JCT80210 and JCT98 do indicate what is not to be allowed for by the incorporation of SMM7211. On the other hand, the 2005 and later series of JCT contracts do not incorporate a particular version of SMM, nor do they provide any relevant extracts, but by a footnote to the articles of agreement say: “The Base Date is relevant (inter alia) to clause 2.17.2.1 (changes in Statutory Requirements) and the Fluctuations Options (Schedule 7) and it helps to determine the edition/ issue and/or version of documents relevant to this Contract, eg the Standard Method of Measurement and definitions of the prime cost of daywork (clause 5.7). In principle, unless SMM7, or similar provision, is incorporated by reference, it would appear that C will be bound to include a time allowance in its schedule for expenditure on contingencies and other provisional sums, no matter how badly they may be described, simply because those sums represent the value of work anticipated under the contract. On the other hand, the essence of rule 10 of SMM7 is that it specifically negates the obligation to include in the contract schedule the time to execute work for which an element of cost is included in the contract sum, but for which the work is not described in detail. Rule 10 concerns the procedure to be adopted when information in the specification and drawings required by SMM7 is not available.”

7–193 Under SMM7, C is assumed to have made due allowance in its schedule for the work involved in “defined provisional sums” so that the execution of work under this kind of provisional sum does not provide grounds for an extension of time. On the other hand, if any of the information for such sums required by SMM7 rule 10.3 is not given in the contract bills then, irrespective of what it is called, the provisional sum amounts to an “undefined provisional sum”. An instruction amounting to a variation must be given to expend an undefined provisional sum. Compliance with that instruction would then rank as a D’s time and cost risk event212. Thus, unless D specifies a time contingency for such expenditure, C may be entitled to an extension of time and the reimbursement of any loss and expense suffered as a result. 210 Amendment 7 to JCT80, issued in July 1988, incorporated the provisions of SMM7, giving effect to rule 10 in respect of provisional sums for defined work and inaccurate approximate quantities. 211 Standard Method of Measurement of Building Works, 7th edn (Dubai: CPI Publishing, 1988) is the standard for quantifying works most commonly incorporated into UK building contracts, which include bills of quantities among the contract documents. 212 Cl.25.4.5.1 and Cl.26.2.7 refer to Cl.13.2 instructions.

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7–194 The D’s risk event213 regarding approximate quantities relates entirely to the effect of SMM7 rule 10.1. It is limited in effect to those items where the approximate quantities are not a reasonable forecast of the actual quantity of work required. If it is a reasonable forecast, no extension of time can be required for the execution of the work covered by the approximate quantity. 7–195 These provisions are important because, in effect, they are the contractual provisions that dictate the content of the schedule in terms of durations to be planned for activities comprised in approximate quantities214 and defined provisional sums. The execution of work comprised in an undefined provisional sum (even if described in the bills under the heading of “defined provisional sums”) will entitle C to relief from damages and to compensation for what may be the effect of change, unless it is otherwise provided for by way of an adequate stipulated contingency period215. 7–196 Amongst the JCT2005 and later series of forms, PCC06, DB05, MWA05, CM08, JCTsub/05, IFC05, IFWCD/05, MP05 and WC/08, contain no requirement at all for any schedule by which to manage the timing of the works. In those forms, the only such reference is contained in the supplementary provisions which, identically, in all forms state: “[C] is encouraged to propose changes to designs and specifications for the works and/or to the [schedule] for their execution that may benefit [D].”216

7–197 Some standard forms, whilst requiring a schedule, give no definition of its content, nor how it is to be prepared and monitored217. None of the standard forms of contract contain any guidance as to the integrity of the schedule, nor any sanctions for a failure to meet whatever is subsequently required by way of content and quality specification, although some contain a power to levy an enhanced retention against certified value where C fails to provide a schedule at all. For instance, the provision in the Irish government forms218 to the effect that “If the [C] has not submitted a [schedule] when required [D] is entitled to deduct 15% of each payment to [C] until the schedule] has been submitted” is inadequate for ensuring compliance for two reasons. On the one hand, because there is no qualitative specification, it is not possible to ascertain whether anything that is ultimately provided is of any use and, on the other, the specified redress is an enhanced retention and, whilst that would certainly hamper C’s cash flow, it is only a retention and eventually must be returned to C, leaving only D the worse off by C’s breach. 7–198 GC/Works/1, GC/Works/1/98, GC/Works/1DB, GC/Works/1DB/98, FIDIC/ SF98, ICE/MW and MTC89 fudge the issue and, whilst not actually requiring a schedule to be prepared, give a specification of content (but not integrity) of what the contract schedule should include if, by the terms of the contract preliminaries, C is required to prepare one. Similarly, ICE/MW, whilst not requiring a schedule under the

213 JCT98, Cl.25.4.14. 214 Because of the provisions for identifying relief for inaccuracies, it would be prudent to allow sufficient time in the programme to execute 10% more work than is measured. 215 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), Pt 3. 216 How such encouragement is to be manifest, or to what document this refers, is left unanswered. 217 See, for example, A201/07 at Cl.3.10. 218 See, for example, IGBW/09 Cl.11.4.2.

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contract, makes provision for the way the schedule is to be dealt with if one is required in the specification. 7–199 NEC/SF99219, whilst not requiring a schedule under the contract conditions, makes provision for the specification for the way the schedule is to be dealt with to be a contract condition if one is required in the works information. Conversely, ECC2, ECC3220 and NEC/SF99221 provide that, in the event that C does not comply with the contract requirements for the submission of the first schedule, D may deduct 25% retention off all valuations until it is submitted as specified. A similar provision is made in SGC95222, but where the retention is stated to be 10%. 7–200 PCC92 and PCC98223 contain provisions for monitoring and reviewing progress and determining whether, in the light of any review, additional resources are required to maintain progress, but they do not require C to produce any schedule by which progress can be monitored. 7–201 ACA82 and ACA98, whilst not referring to a contractor’s schedule, provide for a time for the receipt by C of the CA’s drawings and further information224. 7–202 Whilst the absence of a CPM schedule may be perfectly satisfactory for some simple projects, which commonly are to be carried over a short period, the absence of the requirement for any schedule at all, in any of these forms, is regrettable. 7–203 In JCT05, for example, there are no provisions for a specified type, or standard to which the schedule is to be prepared, nothing to indicate how, or in what form it is to be provided, nothing by way of quality control, nothing specified by way of content, no requirement to review, revise, or update the schedule save that, if an extension of time is granted (the CA’s powers in connection with which make no mention of C’s schedule), C is to revise the schedule to take account of it (which, for strict compliance, really requires no more than an ex post facto change in the completion date). Nor is there any redress available to D, if C decides to ignore entirely the contract conditions and any supplementary specification. 7–204 None of the contract forms discussed here (other than C21/09, the 2009 edition of the Irish government standard forms of contract and JCT05, if it is not deleted by the option provided) actually requires C to indicate the critical path. Although FIDIC/DB95 requires the programme to be constructed using the precedence diagram method225, GC/Works/1, GC/Works/1/98, GC/Works/1DB and GC/Works/1/DB98226 require the programme to indicate critical events, and ECC2 and ECC3 require the programme to indicate float227. Failure to require the schedule to show the critical path at commencement, and to state whether and when it has changed, seems a strange omission as it is principally by reference to the critical path, and changes in it, that the likely effect of delay to progress on the completion date can be identified. 7–205 CM/08 defines the “project programme” at Cl.1.1, but thereafter makes no reference to it, save in relation to the JCT standard supplementary provisions228. TC08

219 220 221 222 223 224 225 226 227 228

Cl.31.1. Cl.50.3. Cl.50.7. Cl.9.4. Cl.2.5.5. Cl.3.2. Cl.4.14. Cl.33(1). Cl.31.2. See para.7–196, above.

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requires a schedule and, at Pt 3 of the trade contract particulars, invites D to insert the stipulated durations of the following activities: the preparation of the trade contractor’s drawings, etc; review and approval of C’s submittals; procurement of materials; the trade contractor’s CDM planning period; the period of notice to commence; and the period for carrying out the works. At Cl.2.5, TC08 requires that “the whole works shall be carried out and completed in accordance with the [schedule]”. Similar to the requirements of JCT05, this form also requires that “As soon as possible after the execution of this trade contract, if not previously provided: [C] shall without charge provide the [CA] with two copies of his master [schedule] for the execution of the works”. 7–206 CE06 makes a very modest attempt to get to grips with the issue of time management but, consistent with JCT05, contains the option for omitting the requirements entirely and suffers from the same deficiencies as JCT05. This form defines the schedule and links payment to the progressed schedule, or “other programme applicable”, whatever that might be and also makes provision for managing the effects of change. This form requires C to “prepare the [schedule] and monitor and update it as necessary to show any amendments to the sequencing of events or the likely time for any events occurring prior to the delivery of the completed project and, in particular, identify key decision events which are likely to involve [D] or the [CA] during the project”229. 7–207 Only in the case of the C21/09, ECC2, ECC3 and 2009 Irish government forms is there any connection made in the contracts between the requirements for scheduling and the rights of the parties in regard to notices, the receipt of timely information, delay and extensions of time. 7–208 The 2009 edition of the Irish government standard forms of contract contains a somewhat eclectic mixture of desirable standards and ineffectual ambiguities and inconsistencies. Clause 4.9.1, for example, requires C to provide a detailed schedule to the CA before the starting date, but there is nothing provided here to indicate what is meant by “detail” and the starting date is identified as (by default) not more than 20 working days from the date of contract but, in order to achieve anything meaningful within that period, C would have had to have, for every part of the works: the the the the

detailed design completed; subcontractors appointed; subcontractors’ programmes agreed; and subcontractors’ resources and productivity identified.

This would appear to be a requirement that, in all but the simplest of build-only projects, is likely to produce a programme that, effectively, is meaningless. Where it is anticipated that it is not until after contract that C will complete the design of the works (as, for example, in IGDB09 and IGCE/DB09), the requirement to schedule the works in detail, within 20 days of the contract being awarded, is impossible to perform to any meaningful standard.

229 At Cl.4.19.1.1.

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7–209 On the other hand, Cl.4.9.1 only requires that the schedule should be sufficient for “effective monitoring of the works” and not sufficient for project control, nor for managing the parties’ time risks under the contract, nor for facilitating a competent calculation of entitlement to an extension of time and/or compensation for prolongation of the works. 7–210 Monitoring requires no more than diary dates of the planned start and finish dates of activities, whereas project control and competent time risk management always requires a dynamic, logically stable, fully networked CPM schedule as its baseline from which calculations of the effect of partial progress, and the effects of events can be made. Bearing in mind that, in para.5 of Circular 33/06 issued by the Irish Department of Finance in October 2006, the justification for these new forms of contract was stated to be “to help to achieve greater cost certainty, better value for money and timely and more efficient delivery of projects”, the absence of schedule requirements for a dynamic time model, by which such timely and efficient delivery can be managed, is a surprising omission. 7–211 In the absence of an enforceable qualitative specification for a schedule and any meaningful redress for its non-provision, it is unclear how this standard form conforms to the Irish government’s stated policy. Although the type of schedule is unspecified, and theoretically could be a simple bar chart, under the 2009 edition of the Irish government standard forms of contract (other than in IGMW/09), C’s schedule is to include details of: when C will require any instructions, works items, or other things to be given by D, or anything else the contract requires D, D’s representative, or others to give to C; the order in which and times at which C proposes to execute the works, including details of procurement, manufacture, delivery, installation, construction, testing, commissioning and trial operation of the works items, and the sequencing and timing of inspections and tests; when C’s documents will be submitted to the CA; C’s estimate of each category of C’s personnel and C’s things expected to be on site for each period; works to be carried out at the site by D’s personnel and others as provided in the works requirements; current critical path, critical resources, floats and other flexibility; details of the last review made of the schedule logic and durations, and of the purposes of any changes; and anything else required by the works requirements. 7–212 Although IGCE/09 and IGCE/DB09 also require a statement of “the methods by which [C] proposes to execute the works and any temporary works”, no such method statement is required by the other standard forms. Apart from that, IGMW/09 only requires that C’s schedule be fit for “monitoring the works” and to include details of when C will require any instructions, works items, or other things to be given by D, or anything else the contract requires D, D’s representative, or others to give to C. 7–213 The “Training Version” of the standard forms dated December 2006 also required C to indicate on its schedule “the time required for D and its personnel to comply with its obligations” but, for no obvious reason, this has been deleted from the 2009 edition of the standard forms of contract. 7–214 In view of the fact that the “current critical path, critical resources, floats, and other flexibility” are nowhere defined, and could, theoretically, be construed to be

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anything at all, it is possible to comply with the Irish government’s requirements without also providing a CPM network. On the other hand, it would be futile and unnecessarily cumbersome not to do so, and it is likely that, in practice, a CPM network of some sort would be used to calculate the logic, the current critical path and float. 7–215 Whilst, in this regard, the Irish government standard forms are no worse than any other current standard form provision, there is nothing going to the integrity of the schedule required. For example, there is no prohibition as to open ends, negative lag, long lags, long durations, ladders, manually applied finish, or float constraints, nor any of the other techniques available in many software applications to manipulate the critical activities and float paths. Neither does it require any method statement to describe the logic, or resources anticipated by the schedule nor any activity, nor resource coding that might help a user of the schedule to be able to understand what it is intended to represent. 7–216 The absence of such a specification and software requirements, together with the absence of any requirement for the schedule to be distributed electronically, in an editable version of the software in which it was created (so that such manipulative devices can be identified), leaves the CA and, through it, D, remarkably exposed in regard to the inferences that reasonably might be drawn from C’s schedule. 7–217 Although para.7 of Circular 33/06 issued by the Irish Department of Finance in October 2006 makes it plain that the Irish government standard forms of contract are to be used without amendment in all but exceptional circumstances, it would be prudent for consultants wishing to manage D’s time and compensation risks under these standard forms to incorporate additional and supplementary conditions in the contract specifications to overcome the deficiencies in the scheduling requirements. 7–218 There is a curious omission from the management combination of MC87– WC/87, MC98–WC/98 and MC08–WC/08 that, although the management contract requires the management contractor in collaboration with the consultant team (but not the works contractors) to prepare “all necessary [schedules] for the execution of the project”230, and under annex B requires both a development schedule231 and working schedule232 to be prepared by the managing contractor, the works contract simply requires the works to be “carried out and completed in accordance with the [schedule] details in the works contract particulars”. There is nothing in the works contract that requires the works contractor to co-operate in any way with the management contractor in preparing the schedule, nor is there any requirement that the works contractor should assist in planning and scheduling the integration and interrelationship of various works packages where the works contractors will have to work alongside each other. The standard form merely requires the management contractor to ensure that “works contractors are issued with and made fully aware at all times of the requirements of the detailed construction schedule”233. 7–219 What the management contractor is supposed to do if the works contractor does not give it the information it needs to produce a working schedule is left open. It seems that the way the schedule is intended to work is that the management contractor will set down empirical start and completion dates for works contract packages and then it is down to each works contractor to plan its own work within those two 230 231 232 233

See for example MC08 Cl.2.3.2 MC08, Annex B, Services at Cl.1.1, refers to this as the “project programme”. MC08, Annex B, Services at Cl.1.11, refers to this as the “detailed construction programme”. Cl.42 of the third schedule to MC87 and MC98 and MC08, Annex B, Pt 2 Cl.2.27.

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dates. However, that fails to come to terms with the reality of the interfacing required in a construction schedule. Rarely does a single trade or specialist contractor have sole access to part of the works for continuous progress. Such singularity is seldom a practical proposition. In most construction projects, integration of partial performance by various trades, each relying on part of the work to be done by one contractor followed by a part to be done by another and then re-entry by the first contractor is essential. Take, for example, the common process of inserting an electrical service in a traditionally constructed building. Typically, the process might follow this logic: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

building works contractor constructs building envelope; electrical works contractor marks where chases and ducts are to be cut; building works contractor cuts chases and ducts; joinery works contractor fixes carcass joinery and supports for back boxes in dry wall partitions; electrical works contractor lays wiring carcass conduits and back boxes; plastering works contractor plasters walls; suspended ceiling works contractor fixes ceilings; electrical works contractor fixes ceiling-mounted fittings234; electrical works contractor fixes wall-mounted plate switches and socket outlets235; joinery works contractor fixes joinery fittings; electrical works contractor fixes joinery-mounted electrical fittings; decorating works contractor paints walls and wallpapers; and electrical works contractor commissions services.

7–220 Only in the smallest of projects will an activity have to be fully completed before a succeeding activity can begin. For most projects, there will be sufficient to be done in each trade for there to be some overlap. For example, let us say trade 1 is planned to start in zone A, move to zone B and then to zone C, by the time trade 1 is in zone B, trade 2 can start in zone A and so on. Thus, this is a process that needs to be managed if delay to progress is not to be caused through lack of integration of the works contract packages. 7–221 A delay caused to one works contractor through interference by another works contractor is not a reason why the management contractor should be granted an extension of time under the management contract. Therefore, it would appear to be in the management contractor’s interest to develop a specification for the works contractors to provide an integratable sub-network, or “fragnet”, for the separate works contractors’ schedules for their own separate sections of the works, which could then be copied and integrated into the management contractor’s programme236.

The programme as a contract document “The mathematical precision of critical path scheduling has definitely caught the attention of lawyers and contract draftsmen leading to the evolving concept of the ‘contract program’ and conferring a degree of legal certainty onto the schedule that cannot be supported by objective analysis.”237 234 This often has to be integrated with the ceiling fixers on a room-by-room basis. 235 Depending upon the types of finishes and fittings, it is sometimes expedient to decorate before the second fix electrical fittings are fitted. 236 Primavera P3 is one of a number of multi-user project planning software systems which has email capability and integrates with single-user software which can be used for this purpose. 237 P Weaver, “Float – is it real?” an occasional paper presented to the 9th Australian International Performance Management Symposium, Canberra, March 2006.

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7–222 The CIOB Guide recommends that the preparation of a schedule should not be seen as a one-step preparation of a target, at every part of which C is bound to aim, and against which the failure to hit every part can be measured, but as a dynamic time model for the purposes of managing time. It states238: “The purpose of the time model is to indicate when in the future and in what sequence the planned work is to be performed, so that the intended work and the consequences of any changes, or departures from that intention can be predicted, communicated and managed efficiently. Because, at any one time, the time model can only be as accurate a prediction of the future as current knowledge will allow, it must be conceived as a model which can be improved upon as information becomes available, or circumstances change. In order to facilitate efficient time management, the time model should be constructed so as to differentiate between that work which can be predicted: in outline in the long term; in detail but with some information missing in the medium term; and accurately as to the content sequence and resources to be employed on work which will be carried out in the short term.”

7–223 Accordingly, any attempt to render the content of a schedule contractually binding, at any stage, is likely to prove to be at best meaningless and, at worst, a serious inhibition to effective time management. On the other hand, there is a great deal to be gained by stating what the schedule is supposed to do and how it is to be done, so that it remains an effective management tool. Whilst there is currently no standard form of contract which requires it, in relation to C’s working schedule, there is no good reason why the contract should not stipulate as binding, amongst other things: of what type the schedule is to be; by whom it is to be prepared; the purposes of the schedule; to what other schedules it is to relate and how it is to be co-ordinated with them; the manner and timing of its preparation; the form, quality and integrity of the schedule; quality assurance and how integrity is to be ascertained and maintained; how and when the schedule is to be reviewed, revised and updated; how the schedule is to be used in relation to extensions of time and time-related costs; who is to receive the schedule; how the schedule is to be communicated and reported upon; how a failure to conform to the contractual requirements for the schedule is to be avoided; and what is to be done in the event of a failure to conform to the contractual requirements. 7–224 The contract schedule is not a contract document under most of the standard forms, including A201/97, A201/07, MF/1, IChemE, the JCT, ICE, FIDIC and ACA conditions. On the other hand, where “contract documents” is defined in Cl.1.1 of the 2009 edition of the Irish government standard forms of contract as being wide enough to include any scheduling material required by the works requirements, any such 238 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), paras 3.1.2 to 3.1.4.

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specification should be carefully described so as to render the type and quality of the schedule contractually binding, rather than its content. 7–225 Incorporation of the schedule within the contract is an express option in GC/ Works/1, GC/Works/1/98, GC/Works/1DB, GC/Works/1/DB98 and ECC2 and ECC3. AS2124239 actually defines the construction schedule not as a CPM network but as “a statement in writing showing the dates by which, or at the times within which, the various stages or parts of the work under the contract are to be executed”. Although it is not specified to be a contract document, it refers to the construction schedule “included in the contract”. On the other hand, AS4000, which broadly repeats that definition, adds “it shall be deemed a contract document”240, which C is bound to follow unless it has “reasonable cause” to deviate from it. However, as Garlick points out241, it is difficult to know what this is intended to convey because Cl.33.2 does not anticipate that the construction schedule is in existence at the time of contract, does not require that it is accepted, or approved, by D but requires it to be delivered to the CA within the stipulated time, after contract. 7–226 The schedule under GC/Works/1 and GC/Works/1/98 must model sequence, timing, resources and critical events. It forms an integral part of the reporting process242 and C must proceed with the works in accordance with the schedule. GC/Works/1, GC/Works/1DB, GC/Works/1/98 and GC/Works/1DB98 define the schedule which C is bound to follow as that which was “submitted prior to the acceptance of tender and agreed by [D] at that time”, and thus imply that the schedule is one of the contract documents with which C and D are bound to conform. 7–227 In so far as the schedule can be construed as a contract document, it appears that: 1.

2.

C is bound to start and finish every activity on the dates indicated on the schedule. If it were not to do so, it would be in breach of contract (although it is difficult to see what loss to D would flow from a failure by C to start, or finish a particular activity on time, as opposed to completion of the project on time). D (or the CA as its agent) is bound to facilitate C in carrying out the work in accordance with the schedule. In particular, it must provide every piece of information in good time in order that C is not prevented from carrying out its scheduled obligations. Similarly, a failure to do so would be a breach of contract (but, in this case, the damages would inevitably comprise lost productivity and, depending upon the circumstances, perhaps prolongation).

7–228 In the absence of terms to the contrary, the effect of a breach of these obligations, which are distinct from the obligation to complete by the completion date, leaves it open to the innocent party to terminate the contract. It would thus appear not to be in D’s interests to render the content of the schedule binding by contract.

Specifying the programme requirements 7–229 In considering specification requirements, it is important to recognise that it is necessary not only to specify the content, but also the method of compilation, and 239 240 241 242

Cl.33.2. Cl.33.2. A Garlick, Construction Contracts: Power to the Schedule (University of Melbourne, 2001). Cl.38.

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the requirements as to programme integrity. In the same way that, in any building, the requirement for “foundations” alone without any specification as to excavations, width, thickness, depth, formwork, reinforcement, concrete, method of placing, testing and so on, would not be considered to be competent (and the result unlikely to prove successful except by good fortune), so it is with programming. Simply asking for a schedule, or even going one stage further and saying what is to be illustrated on it, is insufficient for competent time control. 7–230 Notwithstanding the expressed reluctance of the Irish government to sanction amendments to the 2009 series of Irish government forms, the phraseology of the standard forms of contract does not prevent the CA including specific requirements in the preambles or specification to the contract. However, because it is apparent that, without effective sanctions for non-compliance, the specification is often ignored, this may not always be the most appropriate place to define the level of detail and type of programme required243. 7–231 Certainly, the planning, monitoring and record retrieval requirements should reflect the specific requirements of the project being undertaken, but care is necessary when expanding upon provisions written into the contract conditions that, in the process, conflicts and inconsistencies are avoided. Notwithstanding that there is the opportunity to do so, the unfortunate fact is that, in the majority of projects, the CA rarely particularises the requirements for the construction schedule in sufficient detail, or with sufficient control, to make sure that the specification is performed244. 7–232 On the other hand, if the requirements for programming can be determined prior to tender and are clearly described in the contract documents, it will be easy for C to estimate its costs for providing the schedule in its tender. Clear and concise specifications eliminate doubt and misunderstanding, and result in better prices. For instance, The Texas Department of Transportation245 (which adopts as its basic procurement strategy similar requirements to those of the CMS)246 advises, for example, in relation to activity coding in its contract programming specifications: “A good coding structure is essential for grouping activities for reporting and plotting purposes. The lack of useable activity coding in CPM schedules can be one of the biggest setbacks to getting the full benefit of the schedule. There are many instances where project personnel have given up and abandoned the schedule because the networks resemble electrical wiring diagrams and were impossible to understand. Many individuals and entities must effectively communicate to successfully complete a project. Each person or entity has different information needs. For instance, administrative personnel may need to have just a broad overview of the project. This can be provided by project phase coding. Project managers may need more detail that can be provided by phase and area coding or area and location coding used together. The paving inspectors are more interested in when the paving work is scheduled. The work type or work item coding would be used to generate the information for these inspectors. The work type and work item coding is also useful for project managers to effectively manage resources.”

243 See App.2 to the 4th edn, for the CMS as an example of an appropriate form of specification. 244 See Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), for the general requirements for managing time. 245 M Lehmann, PE, “CPM development, review and analysis guidelines,” Accelerated Construction Strategies Guideline (Texas Department of Transportation, 2003). 246 See App.2 to the 4th edn.

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7–233 If C is to prepare the schedule, D should be careful in specifying the method and detail of scheduling required. The scheduling requirements should be described fully and the expected performance reviewed at the pre-tender and pre-construction meetings. This will allow contractors to evaluate the scheduling detail required and accurately to estimate its cost. 7–234 The CIOB Guide247 sets out the requirements for managing time in complex construction projects in which the core principles (concerning the specification of the planning and scheduling requirements) are stated to be: “1.1.4. The word ‘programme’, often used in the past to describe a printed paper copy of a listed process and dates on which the proposed activities might be carried out, is not used in connection with the management of time in complex projects. 1.1.5. The word ‘schedule’ is used to describe the computerised calculated activity dates and logic; the process is to be referred to as scheduling and the occupation that of the scheduler. It is a process manifest in an editable computer file. 1.1.7. Planning must precede scheduling. They cannot be carried out in parallel, nor can scheduling precede planning. 1.1.8. Schedule preparation must be a quality assured process against a standard which will ensure the integrity of the schedule, so that it can function as a time model. 1.1.9. The schedule (and any revisions and updates) is to be independently audited for integrity and technical competence. 1.1.13. Time contingencies for [D’s], the design team’s and [C’s] risks must be a part of the strategy for effective time control. 1.1.15. The development schedule cannot be prepared in one process at a single density at inception. It must be prepared in varying densities consistent with the information available from time to time, and reviewed and revised at regular intervals, as better and more certain information becomes available. 1.1.16. The working schedule must follow from the development schedule and must also be prepared in varying densities consistent with the information available from time to time. It must also be reviewed and revised at regular intervals as better and more certain information becomes available. 1.1.17. Specialist contractors’ and subcontractors’ schedules are to be prepared in the same software as the development and working schedules and integrated into them. 1.1.18. Progress-monitoring techniques, which are rooted in comparison of data against a static baseline, have limited value in competent time management in complex projects in which the work content, resources and sequence necessarily change from time to time. 1.1.19. The work to be carried out in the short term must be scheduled according to the resources to be provided and the productivity quotients for the various work types to be carried out. The absence of a high-density, short-term part of the schedule, or a shortterm part calculated other than by reference to resources, is not permitted under this Guide.”

7–235 Under JCT80, JCT98 and JCT05, the format and detail of the schedule is not specified so that, if a schedule is required, the form and content should be indicated in the contract bills, or specification. In so far as a standard form of contract is used, which does not incorporate any satisfactory provisions, then the recommendations of the CIOB Guide can be incorporated via the provisions of the CMS, suitably amended248, or amendments of a like kind. 7–236 The first requirement to be reviewed when analysing contract scheduling clauses is whether a simple unlinked bar chart, or a CPM network schedule, must be prepared. Unless one is involved in a small-scale simple project, bar charts, by themselves, do not provide what is needed. That is so notwithstanding the fact that the 247 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), para.1.1. 248 See App.2 to the 4th edn hereof.

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CIOB’s research found that 54% of contract schedules were produced as simple barcharts identifying only the dates upon which activities were initially planned to start, or finish, without any sequence, or identification of priority249. 7–237 The schedule requirements in HK05 are inadequate for time management, or extension of time calculation, and anticipate that supplementary provisions will be contained in a specification, or bills of quantity, stating that: “where any other part of the contract sets out requirements in respect of the submission to be made by [C] under the [clause requiring a master schedule], the submissions shall be made in accordance with those requirements.”250

With no description of the form of schedule required, this is an implicit invitation to draft elsewhere more detailed and functional requirements for the working schedule, which are to take priority over the requirements in this clause. However, by virtue of the priority of documents clause, the conditions of contract are to take priority over anything written in the specification, or contract bills251, and anything written therein intended to overcome the inadequacy of this clause would be inconsistent with that hierarchy, requiring an instruction for its resolution252, ranking as a variation. 7–238 By way of contrast, FIDIC4253 anticipates that the scheduling requirements will be entirely contained elsewhere than in the contract conditions and requires C to submit to the CA for consent: “a [schedule], in such form and detail as the [CA] shall reasonably prescribe for the execution of the works. [C] shall, whenever required by the [CA], also provide in writing for his information a general description of the arrangements and methods which C proposed to adopt for the execution of the works”.

7–239 FIDIC4254 provides only that the schedule is to be in “such form and detail as the engineer shall reasonably prescribe”. Similar provisions appear in MF/1255. 7–240 By comparison, the US Army Corps of Engineers (USACOE) scheduling requirements256 run to 15 pages and, by way of an appended schedule, the CMS257 provide a proforma of similar requirements to those of USACOE as to the CPM network to be provided. 7–241 Whilst not a contract document in the style of USACOE and the CMS, in regard to scheduling for the purposes of effective time management, the CIOB Guide258 runs to in excess of 60 pages and covers detailed advice on such subject-matter as: programme types; programming techniques; resource planning and programming; 249 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008), Chart 18. 250 Cl.3.1(4). 251 Cl.5.1. 252 Cl.2.4. 253 Cl.14.1. 254 Cl.14.1. 255 Cl.14.2. 256 US Army Corps of Engineers, “Section 01320A – Project”, Unified Facilities Guide Specifications (May 2002). 257 See App.2 to the 4th edn hereof. 258 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), Pt 3.

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software considerations; programme design; programme preparation; work breakdown structure; activity identifier codes; activity descriptions; activity durations; ascertaining activity durations; calendars; activity content codes; cost codes; logic; constraints; float; risk and contingencies; the critical path; planning method statement; and quality assurance. 7–242 Whilst this approach may be criticised by some as being overly prescriptive, it is apparent that this is the minimum of information necessary in a competent schedule specification to be used for the purposes of managing time; and without a detailed performance specification of what C is required to provide and the quality to which it is to be provided, it is not possible to determine objectively whether what C actually provides complies with the contract.

Pricing the programme requirements 7–243 Traditionally, contractors have been required to include in their tender their anticipated costs of complying with the requirements set down in the tender documents for the preparation of schedules, historical records and other managerial information. However, it is rare for a specification, or bill of quantities to require that the provision of such management information is to be separately priced and, typically, whatever costs C includes in its tender for compliance with the time-management requirements are buried in the general overheads, or preliminaries section and are generally unauditable259. On the other hand, comprehensive and effective scheduling requirements will cost more to comply with at the time of contract than those that are less prescriptive and a failure to include this cost in C’s estimate, or tender may be a cause of lost profits and less than perfect scheduling co-operation between itself and the CA, D and other direct contractors. 7–244 In many construction contracts, the specification of detailed scheduling arrangements, which are too easily ignored by C, has proved to be an unsatisfactory arrangement. It is a fact that the less work C plans to do, the lower will be its costs and the lower its costs the more attractive the tender. The result is that contracts have tended to be awarded to those contractors which, regardless of the specified requirements, did not plan to spend much time, or money managing the timing of the works. The result 259 See, for instance, ECC2 and ECC3, which contain no reference to the planning and updating requirements of Cl.31 of the contract in the Cost Components.

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has generally been manifest in confusion, delay and claims. For this reason, the estimated costs of compliance with the scheduling and time-management provisions should be clearly identifiable. The CMS require that the estimated costs sum should be set aside in a provisional sum, the purpose of which is to take out of the competitive tendering equation the costs of planning and preparing the time-management information and to make the cost of those elements a common factor amongst all tendering contractors260. 7–245 Because the software and hardware will have a value to C beyond any particular contract, it is also recommended that purchase, installation and any training in the use of the specified software and any necessary computers should be a cost to be included in C’s priced tender as general overheads. Similar reasoning will apply to the cost of the software and hardware used by the other pre-identified recipients of the information. Generally, it is anticipated that the provisional sum in the contract bills will provide for the costs of the preparation of: 1. the first critical path network as the working programme for the construction of the works; 2. the first method statement describing the network; 3. the number of reviews and revisions to take account of improved information; 4. the number of updates required within the contract period; and 5. the number of historical records necessary to fulfil the requirements of the production recording specification within the contract period. 7–246 Such a provisional sum would not be required to include the costs of: 1. the correction of any part of any submittal which fails to comply with the contract (which is to be borne by C); and 2. the re-sequencing, re-planning, or the taking of any other steps to manage the delay to progress or the predicted effects thereof, whether such delay is caused by C, or D, the costs of which are intended to be allocated accordingly. 7–247 More generally, among the issues that it is normally appropriate for D and the CA to address when preparing specifications for programming are the following261: 1. technical terms or words are to be interpreted by reference to their technical meaning, unless the context shows a contrary intention; 2. the programming technique to be used and submission timing should be stated; 3. the name and qualifications of the party who is to prepare the programme should be identified; 4. the type of programmes to be used and what they are to be used for should be identified, eg any contemplated use of the programme to determine progress payments, extension of times and/or compensation for disruption should be identified; 5. instructions should be given for how progress is to be measured against the programme;

260 See App.2 to the 4th edn hereof. 261 The schedules to CMS for the critical path network and method statement for use with JCT98 appear at App.2 to the 4th edn.

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6. instructions should be included as to how and when the programme will be updated; 7. the responsibilities of C and subcontractors for the programme should be identified; 8. the programming of receipt and approval of shop drawings should be addressed; 9. the procedure for reviewing the programme should be identified; 10. if the construction logic is to be indicated, this should be stated; 11. the method statement supporting the programme should be equally subject to the same approval process as the programme itself; 12. the resource allocations and cash flow forecast reflected in the programme should be required in support of the programme; and 13. the way the programme is to be used for delay analysis should be clarified.

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CHAPTER 8

Presentation and approval of programmes

Introduction Bar chart Flow chart Line-of-balance chart Time chainage diagram Milestone programme and chart Network diagrams Arrow diagram Precedence diagram Cascade diagram Standard form provisions The initial programme Programme approval, acceptance and rejection

8–001 8–007 8–018 8–020 8–027 8–029 8–033 8–036 8–043 8–048 8–050 8–050 8–054

Introduction “Most of our occupations are low comedy.We must play our part duly, but as the part of a borrowed character. Of the mask and appearance we must not make a real essence, nor of what is foreign what is our very own.”1

8–001 Reading tables of written information in an attempt to divine the differences between columns of data is not easy. It is for this reason that graphical representations are important. In the past, schedules had to be designed and drawn by hand. They were thus rarely performed2 and rarely revised, or updated3 but the advent of the computer and myriad simple computer programmes which will turn figures into graphs, pie charts, histograms, bar charts and various other easily interpreted diagrams has changed the way we approach the understanding of complicated data. 1 M De Montaigne, “Of Husbanding Your Will”, The Essays (Les Essais), Vol.III, Ch.10 (Paris: Abel Langier, 1588). 2 Until JCT80 was published in 1980, none of the standard forms of contract current in the UK required a construction programme at all. 3 Of the standard forms of contract considered here, none anticipate review and revision, only ECC and the Irish government forms anticipate updating with progress and no forms have any redress for default.

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8–002 Cascade diagrams, arrow networks, precedence diagrams, bar charts, milestone charts, graphs, and histograms: all can be acceptable methods of presentation, depending on the nature of the data, the work content, work period, and the purpose for which the output is intended. However, regardless of the technique used, if they are to be worthwhile, formality, consistency and discipline are vital. In the past, in most UK projects, programmes have been produced at inception, to represent the intended timing as a target, in simple bar chart form, for the totality of the works, and neither revised nor updated. Whilst this may be acceptable for simple projects4, more complex projects require a more scientific approach, if they are to be managed effectively. For effective time management, project control, and particularly for re-scheduling sequences to overcome delay, as well as delay analysis, a more detailed, activity-based CPM schedule with logical links, preferably with resource loading, is essential. With the advent of PC-based scheduling software, the distinction between the bar chart and CPM networks may not be very important. This is simply because the computer uses CPMbased algorithms and, provided that the schedule is created as a network and distributed electronically, it does not matter whether, for particular reporting purposes, a hard copy is then produced as an arrow diagram, cascade diagram, or a precedence diagram, or even a bar chart, the visual output type being usually the product of no more than the push of a button, or the click of a mouse, provided that the schedule is also available electronically. 8–003 Typically, the contract specification for the schedule will be designed to provide the D with a strategy that will give some confidence that the sequence, events, interrelationships and timing of C’s proposed work plan is realistic and achievable within the contract period. If the contract specifies a format for the layout of the schedule, then that is the layout and presentation that must be adopted for the project reporting profile. However, it sometimes occurs that, in spite of what is written (or not written) in the specification, as a condition of approval, D, or the CA on its behalf will demand, a whole range of embellishments. For example, it is not unusual for D to ask for a change in something as basic as the colours and fonts used, or perhaps the addition of high-level milestones. However, many design aspects have to be set up at commencement and later changes to, for example, the application of cost loaded and resource data and reorganisation of the work breakdown structure (WBS) can require a significant amount of work and, in some circumstances, changes such as the WBS layout may even inhibit the effective use of the programme5. 8–004 Generally, the standard forms of building and engineering contract require that schedules, if provided at all, only be issued in hard copy. As is recognised by the SCL Protocol, it is difficult, if not impossible, to investigate the content of the CPM network in sufficient detail to audit its integrity, or to be able to say that it complies with the contract, without being able to organise it, filter it and inspect the make-up of it. Thus, it is recommended by the SCL Protocol that management information must be provided electronically in a form in which it can be interrogated and from which calculations can be made. As there is no mention of it in any of the standard forms, it is prudent for developers to specify the method to be adopted in making electronic submittals. For example, in the CMS, this requirement is specified as:

4 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008). See Ch.3, “Project Procurement”, at para.3–004 for definitions of simple and complex projects. 5 See also constructive change at Ch.12, “Variation and change”, at paras 12–158 to 12–195.

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“the supply to those identified [in the schedule] of any information in the form of a computerised editable file, in the specified software, by disk, or electronic mail, for acceptance by the risk manager.”6

8–005 However, it is not unknown for contractors to be either very late in submission of a schedule, or, despite contract provisions to the contrary, not to produce one at all. The solution to this problem is probably to make it financially attractive for C to conform to the contract requirements whilst rendering it financially unattractive not to conform to them. For example by: 1.

2.

treating the provision of a schedule like any other off-site pre-commencement procurement and agreeing to pay for the production of it, irrespective of whether the contract proceeds7; making it a term of the contract that, until satisfactory performance of the terms of the contract, and following a period of warning: 2.1. the CA can employ and pay others to produce a schedule and monitor it, for which C must pay by deduction from monies due8; 2.2. the interim, or progress payments to be made against the provisional sum for the scheduling and time management functions will not be made9; and 2.3. liquidated damages based upon the reasonably likely costs of preparing the schedule and updating it retrospectively will be deducted10.

8–006 Other methods of attempting to secure compliance with scheduling specifications include: 1.

2.

Providing an enhanced retention fund to be retained pending completion of the scheduling obligations11. However, it is doubted whether this could be enforced, because an amount based upon the value of the work done on site can hardly represent D’s likely losses for the failure to produce a schedule. Accordingly, if it is retained, on the one hand it may be disallowed as a penalty and, on the other, because it is only a retention, it must be repaid on completion of the contract. Specifying the scheduling, method statement and project records provisions to be priced as separate identifiable items, against which C is entitled to payment only when the documents have been competently prepared and approved. This deals with the problem of being required to pay through the unidentifiable “preliminaries” provisions for information that is not prepared. It also leaves the costing as a matter for competitive tender. It does not, however, encourage

6 See App.2 to the 4th edn. 7 The obvious benefit to this is in relation to the working schedule is that D can see what it is getting before it enters into the contract. However, this method does not also secure revisions and updates. 8 This can only apply to the as-built programme, of course but, if the record also contains resources used, it and the sequence followed, will be a very useful tool for the ex post facto analysis of delay and disruption. 9 This only secures that D does not pay for what it does not receive. 10 This avoids the otherwise inevitable dispute that D has incurred higher costs than was reasonable in fulfilling C’s obligations. 11 This is the solution adopted by ECC2 and ECC3 Cl.50.3; by SGC95 Cl.9.4; and by Cl.11.4.2 of the 2009 edition of the Irish government standard forms.

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3.

4.

C to provide the information, it just ensures that, if C does not, then C is not paid for what D has not received. It is not uncommon in some jurisdictions for contractors to be provided with one or more “mobilisation” payments, which are in effect advance funding of operations. Rendering such advances as being contingent upon the submittal of acceptable management information, such as the initial schedule and method statement, would, it is thought, provide an incentive to prepare the working schedule and supporting information competently12 but may not be sufficient to secure competent review, revision, updates and progress records. A fixed fee for updating regularly and impacting the schedule in the event of the occurrence of any D’s time and/or cost risk event. A clause stipulating a fixed fee for the receipt of an accurate and competent update and time impact analysis of each event would act as a real incentive to most contractors to keep their schedule up to date13.

Bar chart 8–007 The term “bar chart” in this context refers to a programme, whether electronic, or on paper, which does not have sufficient logic links to form a CPM network14. Although it is true that bar chart programmes can be enhanced by adding labour resource requirements and distributing a budget to the various bars, or activities, because, by its nature, a bar chart cannot demonstrate the interrelationships between programmed activities; is of limited use as a programming and management tool and is even more limited in its use in proving causation in construction delay and disruption claims and serves no useful purpose within an effective time model. 8–008 Bar charts, as shown in Figure 8.1, look at first glance like Gantt15 charts and are sometimes referred to as such. A number of project management software programmes refer to their bar chart view as a Gantt chart, but there are significant differences between a Gantt chart and a bar chart. 8–009 The Gantt chart was the first formal programming system to be used in conjunction with scientific management techniques. It is normally constructed with the time graduation shown along the horizontal axis with personnel, organisations, plant, materials and so on along the vertical axis. The bar of a Gantt chart is usually open (as opposed to the closed box of the bar on a bar chart) and contains details of the activity time units of work for each piece of plant, person, or organisation. 8–010 By way of contrast, the bar chart is a chart upon which the activities are presented by lines drawn to a common time-scale, showing the time periods allocated to specific operations. It shows start and finish times and illustrates fixed periods of time for activities. The passage of time for each activity is then plotted proportionately 12 See J G Zack Jr, “Schedule ‘games’ people play and some suggested remedies” (1992) 8 Journal of Management in Engineering, No 2 (American Society of Cost Engineers). 13 See J G Zack Jr, “Schedule ‘games’ people play and some suggested remedies” (1992) 8 Journal of Management in Engineering, No 2 (American Society of Cost Engineers) at p.151. 14 Although note that, typically, modern planning software enables a CPM network to be displayed in, amongst other things, bar chart form. 15 H L Gantt (1861–1919) was a mechanical engineer, who developed Gantt charts in the early part of the twentieth century. Now accepted as a commonplace project management tool today, it was an innovation of worldwide importance in the 1920s. Gantt charts were used on large construction projects such as the Hoover Dam, started in 1931, and the interstate highway network, started in 1956.

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against a time-scale and the chosen sequence of activities is built up to determine the project duration. [Please refer to Figure 8.1] 8–011 A bar chart is easy to understand and useful for indicating relative progress against a target, but only for activities included on the chart. It becomes difficult and time-consuming to explore alternative resourcing options, or activity sequences. Generally, a completely new bar chart will be needed for each option. Several specific bar charts can be generated for a project that relate, for example, to a particular specified resource type, or to activity types, or interrelated activities. 8–012 Many programmes are presented in simple bar chart form, even on large projects16. However, bar charts are intrinsically vague: there is no illustrated planned margin for early, or late start, or finish, no float time and no indication of the interrelationship between activities. On the other hand, because there are no links from one activity to another, the mere fact that an activity started on a different date, or took longer than it was planned to take cannot be used logically to demonstrate that it has had an effect on any other activity17. It will be readily appreciated that, with such programmes, the timing of every activity (other than one that is planned to finish on the completion date) can appear to be not critical, because the others are planned to be finished long before the completion date or, on another interpretation, it is equally possible to say that all activities are critical simply because there are no planned alternative times implied for when the activity can occur18. 8–013 Because bar charts produce only early-start information, they also eliminate the benefit of knowing how much float is available to be allocated among scarce resources. This means that resource availability must be assumed to be adequate for the schedule dates set. 8–014 Although the bar chart is very limited in its use, it still has a number of obvious advantages: it it it it it

works with any project; is quick and easy to produce; is easy to understand; can be prioritised with arrows to show an intended process; and can be resource loaded.

8–015 Its disadvantages are, however, significant. They include the following: there is no interrelationship of activities; because of the absence of activity interdependencies, the illustrated timing of activities unwittingly, may be quite impractical; there is no interdependency of activities; the size is limited;

16 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008), found that 54% of approximately 2,000 projects executed over a three-year period were carried out by reference to a bar chart. 17 Minmar Builders Inc, GSBCA No 3,430, 72–2 BCA (CCH), para.9,599. 18 It is a common mistake to assume that, simply because an activity has not started, or finished on the date the bar chart indicated, there has therefore been a delay to progress. That may not always be the case. The shift in the planned period of an activity is simply that: a shift in the timing of a discrete activity in relation to the planned schedule. It will represent a delay to progress only if the planned schedule represented C’s actual intent.

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there is no control of manpower, or cost; it is not subject to computer analysis; it is best suited to simple projects; the more detail included in the bar chart, the harder it is to read; and it can rarely be used to demonstrate entitlement to relief from damages, or entitlement to compensation. 8–016 The CIOB Guide19 adds: “Bar charts have no logic. They are useful for illustrative purposes in high-level low-density reporting but are of no value in the management of time in complex projects.”

8–017 In summary, bar charts can provide a simple and flexible system for showing the relationship between activities and calendar dates, but they serve best when used only as an illustrative form of a more detailed logic-based scheduling method, such as a critical path network.

Flow chart 8–018 Flow charts or process charts do not normally have a time-scale and thus are not truly schedules and are of no use in managing time, nor in analysing cause and effect. They do, however, provide an indication of sequential relationships of tasks to be performed, thereby providing the project planner, or scheduler with a process chart. All process charts use geometric symbols to represent tasks and straight lines to illustrate task sequence and can have time-scales imposed on the links between symbols. 8–019 These are most useful for identifying “what-if” scenarios and dictating the alternatively acceptable processes in different conditions. Typically, flow charts have been used successfully in helping to identify sequences in construction contracts20. Figure 8.2 illustrates the procedures for determining the jurisdiction of the adjudicator under the Housing Grants, Construction and Regeneration Act 1996. [Please refer to Figure 8.2]

Line-of-balance chart 8–020 The “line-of-balance” technique was originated by the Goodyear Company in the 1940s and further developed by the US Navy in the 1950s as a scheduling method for managing and controlling repetitive-type processes21. The principle of this form of diagram is that a programme technique is used not for the sequencing of different activities within a particular construction project, but for the balancing of resources through the sequencing of multiple trades in a project, or between trades in multiple projects of like types. 8–021 The essential difference between this form of chart and a traditional CPM network is that, instead of having a single activity per line, each line occupies a project, with the activities segmented along the line. So, for example, on a house building site, 19 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), para.3.4.5.1. 20 See, for example, the NEC forms, which have a series of flow charts to illustrate each contract procedure. 21 See D Goodman, “The use of the ‘line-of-balance’ programming technique for planning and managing construction projects”, an occasional paper, December 2009.

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where the programming of the activities on a single house unit might be programmed on a traditional CPM, the progress of the bricklayers, plumbers, plasterers, etc from one house to the next, would be set out on a line of balance chart, as in Figure 8.4. 8–022 The line of balance chart at Figure 8.4 demonstrates the progress of a few trades through five houses. That at Figure 8.3 shows what a similar programme might look like with 25 houses. The diagram method is the same but, for convenience of plotting, the bars on Figure 8.3 are merged together. 8–023 As in the case of a CPM network, in order to identify what progress should be achieved at a particular date, it is only necessary to cast a vertical line from the date point down the chart or, as with a bar chart, count the squares. However, its principal value would appear to be in resource modelling. 8–024 However, as the CIOB Guide observes22, its principal value would appear to be in resource modelling along the lines of critical chain management: “The line-of-balance diagram which is commonly used to indicate the progression of resources through a multiplicity of areas, is a useful techniques for coming to grips with the underlying philosophy of resource logic and critical chain management. The line-ofbalance technique has also been proven to be useful in the management of linear projects (eg rail, road and pipeline projects). It has a useful role to play in progress monitoring of repetitive modular work (eg structural floors in multi-storey buildings).”

[Please refer to Figures 8.3 and 8.4] 8–025 Goodman23 gives the example of the use of this technique in balancing the resources in the fitting out of a tower block so that the optimum period of the trade taking the longest time per floor can be balanced against others. The otherwise faster trades are adjusted in their productivity to match the optimum duration per floor of the slower trade to avoid overcrowding, or broken continuity: “Such analysis can be carried out to a much more sophisticated level with gang sizes varying as required through the life of the project, key interdependencies between trades detailed, or highlighting when specific additional items of plant are to be brought on to the project at key times to meet required productivity levels.”24

8–026 The principle can also be applied to increase limiting resources. For instance, when a non-critical intermittent resource cannot be reduced below a single unit of plant, other resources can be increased to provide better continuity and hence, efficiency. Archibald describes a similar process management on a gas pipeline project where, under the heading of “critical chain management” they observe: “In large buildings, we often find separate elevators for a different number of floors, so each elevator doesn’t lose time by stopping at each and every floor and as in the general result we have more people transported in little time. The same approach is seeing here when we concentrate the available machinery to quickly finish a phase in one subproject, even when this represents an immediate delay for another subproject. The fact is that the necessary result for each subproject is achieved earlier, thus liberating the same machinery to improve the results in the following subprojects.

22 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), para.3.4.6. 23 See D Goodman, “The use of the ‘line-of-balance’ programming technique for planning and managing construction projects”. 24 See D Goodman, “The use of the ‘line-of-balance’ programming technique for planning and managing construction projects”.

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If we consider each necessary activity for the ‘fragnet’, we can deploy the necessary manpower and machinery so that each team can advance one kilometer per day. As one team depends of the work done by others, the resulting ‘fragnet’ for 1 kilometer takes from 25 to 30 days to execute the necessary activities. By organizing many ‘fragnets’ together and optimizing the resulting schedule, it is possible to administrate several teams and then build 35 to 40 kilometers for each 35 to 40 days, giving an average speed of 1 kilometer of pipeline per day.”25

Time chainage diagram “Time chainage diagrams are commonly used in connection with work of a linear nature to provide a graphical indication of both time and location of each work front (eg road, rail, tunnelling and pipeline operations). Time chainage diagrams have limited application in the construction of complex building projects.”26

8–027 Time chainage diagrams are often used in connection with resource scheduling of major activities. Although in building construction, work on site will generally follow activities of short duration in discrete areas that are, to a great extent, subject to a critical path and thus subject to critical path network time modelling, major projects will often include a number of other construction works, some of which will be in the nature of civil engineering and/or mechanical engineering and will not necessarily be subject to the same type of time control. For example, in major land clearance, or cut and fill of land profiles, work may continue over a long period and may usefully follow some sequence (land will be dug out before depressions are filled), but not necessarily a sequence that is cogently linked from beginning to end of the operation as a whole. Commonly, such a process may usefully be mapped out in what is referred to as a time-chainage diagram which illustrates, in linear terms, where work is intended to be carried out. See Figure 8.5, below. Although such figures may be logically linked to some extent, because they are drawn rather than calculated from a database, they do not commonly function as a time model and other methods must usually be used to manage time and predict the consequences of change. 8–028 In such circumstances, where activities can be carried out over a long period in a multiplicity of areas, in any order (subject perhaps to limited sequences in any particular area), the time model will commonly focus on the management of resources and productivity, instead of critical path sequences within the particular activity and critical path sequences between sections of the activity and the interface with the remainder of the works. [Please refer to Figure 8.5]

Milestone programme and chart 8–029 A milestone programme is a CPM programme filtered to illustrate only the milestones. “Provided they are logically linked to the appropriate predecessor and successor activities, when properly reviewed, revised, updated and impacted, the programme will reflect the dates upon which the milestones are likely to be achieved.”27 25 R Archibald, P Berndt and J Guimarâes, “The application of SDPM, critical chain and portfolio project management principles to the construction of the 670 km Urucu/Manaus (Petrobras) pipeline”, 2007, PMI Global Congress Proceedings – Cancun, Mexico. 26 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), para.3.4.7. 27 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley-Blackwell, 2010), para.4.6.8.3.

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Conversely, a milestone chart is a diagram containing only milestones. 8–030 Typically, milestones may be set up for such physical accomplishments as completion of floor slab, roof on, structure watertight, power on, and so on, or for non-physical accomplishments, such as the submission of drawings, or details and design approval. 8–031 ACA82 and ACA98 require that the contract appendix (in the second alternative) be completed with a series of sectional milestones by description, including the date they are to be completed. There is provision for each individual milestone to be the subject of a separate sum of liquidated and ascertained damages and separate maintenance period28. 8–032 Whilst it is common to think of monitoring the effect of change by reference to the completion date or one or more sectional completion dates, it is often desirable to monitor, independently of sectional, or overall completion, the start, or completion of individual activities, or chains of activities, particular contractors, or events, such as “watertight”, or “power-on”, or the delivery of information, plant, materials and goods. A milestone linked to a “key date” (which is not necessarily a sectional, or overall completion date against which liquidated damages and extensions of time apply) may be monitored in such a manner29. The CIOB Guide advises that milestones may be adopted to mark such things as: completion of user requirements and sign-offs; design stages and interfaces; applications for licences and permissions; key dates for “topping-out”, “weather-proof” or “power-on”, or other contract requirements; a payment stage; a sectional completion date; the start and finish of a subcontractor’s work or phase of work; delivery and removal of key personnel, facilities, equipment or other important resources; handovers and interfaces with key suppliers, statutory authorities and third parties; and significant dates for receipt or delivery of approvals and information.

Network diagrams 8–033 Critical path network diagrams identify both the critical and non-critical activities and their interrelationships. A network diagram is the method of displaying the results of a schedule prepared by the critical path method. Essentially, the terms “network analysis” and “critical path analysis” encompass all the methods available that break down work into an element diagram showing the sequence and interrelationship of the separate activities and events. They illustrate the logical interrelationships of all the individual activities, which together combine to complete a complex project. 28 In effect, this is a detailed sectional completion schedule. ACA82 and ACA98 refer to a maintenance period in relation to each section. However, by the wording of Cl.12.2 it appears not to extend C’s responsibility beyond that for defects in that the cost of maintenance work other than repair of defects is to be borne by D under Cl.12.3. 29 This is a requirement of the CMS (see App.2 to the 4th edn hereof), and has also been incorporated in the 2005 NEC form, ECC3 at Cl.31.2.

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8–034 CPM is a generic title for schedules produced by this method, which includes diagrams such as: 1. 2. 3.

the arrow diagram30; the precedence diagram31; and the cascade diagram32.

8–035 The two basic methods of network planning techniques were developed in the mid-1950s as: the “activity-orientated” (sometimes referred to as the “activity-on-arrow diagram”, or “I-J diagram”) and the “event-orientated” (sometimes referred to as the “activity-on-node diagram”)33 CPM systems. Each has its merits but, as a result of development work in the 1960s in CPM planning, others have emerged. The most important of these is probably the precedence diagram method devised by ED Zachry & Co, which incorporates the better features of the two original methods and is sometimes thought of as the forerunner of the cascade diagram method34. However, the disadvantages of critical path methods are principally in interpretation. Historically, network arrow diagrams and precedence diagrams have been notoriously difficult to read.

Arrow diagram 8–036 The arrow diagram method (ADM)35 is one in which the task is represented by a line between geometric figures as a connector between tasks. In this method, the network diagram consists of a number of nodes, or points in time (often identified by circles, squares and diamonds) connected by arrows, which represent the activity taking place between the nodes. [Please refer to Figure 8.5] 8–037 An activity that consumes neither time nor resources, but that indicates an essential sequential relationship, is called a “dummy” activity, which is generally drawn as a dotted arrow. 8–038 The time requirement of an activity is generally indicated in this method by the number of hours, days, or weeks written beneath the activity lines. This inscription does not normally specify the manpower required to complete the work in that time. That comes from resource allocation, which is generally carried out as an independent exercise and on a separate document, or software schedule. The arrows drawn on the activity lines indicate the general direction of the workflow through the project, much as would be the case with a flow chart. This is illustrated at Figure 8.6.

30 Sometimes known as the “activity-on-arrow diagram”, or “I-J diagram”. 31 Sometimes known as the “activity-on-node” diagram and in some project planning software products it is referred to as a PERT diagram. 32 Sometimes known as the linked bar chart and in some project-planning software products it is referred to as a Gantt chart. 33 In some project-planning software products, this is also referred to as a PERT diagram. 34 For a detailed history of the development of CPM programming see P Weaver, “A brief history of programming – back to the future” (February 2008) PM World Today. 35 Micro Planner, the origins of which was the ICL Pert mainframe software, is one of the few known programming products which will produce an ADM network see: http://www.microplanning.co.uk/ (accessed July 2010).“The predominance of PDM is absolute, well over 95% of the software used by programmers today cannot create an ADM programme and probably 99% of programmers under the age of 40 have never seen or used an ADM schedule.” P Weaver, “Calculating and using float” (November 2009) PM World Today.

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8–039 In Figure 8.6, the solid arrows represent the activities, with the durations noted below the line, and the nodes represent the beginnings and the ends of activities. The dotted arrows represent “dummy” activities, ie logical links that do not have a duration. Unless drawn with the description of the activity on the arrow, in order to understand what is anticipated by such a network, one normally needs a key to the nodes, a part of the listing for which is illustrated at Figure 8.7. 8–040 Small networks of this sort can be analysed manually but, as the number of nodes increases, they present a difficulty. Fortunately, computers offer a powerful facility for calculating float and the critical path and reducing the result to a usable form. Thus, for complex networks, a computer-based system will be essential. 8–041 In the construction industry, network analysis by the arrow diagram method has not been as popular as the precedence diagram, because the resultant diagram is so notoriously difficult to interpret and, when produced manually, expensive to produce. However, the acknowledged advantages of an arrow diagram are that it: 1. 2. 3. 4. 5. 6.

is not limited in size; can be resource loaded; can be computerised; demonstrates all relationships; can be used as a management tool; and can be used to determine the extent and effect of delays and provide a basis for allocation of responsibility.

[Please refer to Figures 8.6 and 8.7] 8–042 Apart from the arrow diagram method of reproducing a network as described above, CPM programmes can also be developed using the precedence diagram method. Both systems have advantages and disadvantages. Which one is used is normally a matter of convenience and/or personal preference. However, it is generally accepted that precedence diagramming techniques are easier to follow and allow greater flexibility in defining the logical relationships between activities.

Precedence diagram 8–043 In contrast to ADM, in which the line linking the node represents the activity, in the precedence diagram method (PDM), the product of which is sometimes referred to an activity-on-node network, the node symbolises the activities. The activity is described within the geometric figure, and the arrows are then used for the connector device merely to demonstrate the logical flow. In this respect, there is much similarity to a flow chart. Amendment of the schedule is generally achieved by redrawing the appropriate data. No renumbering is required, and the symbols and information written on the diagram are those required for direct insertion into the associated computer system. 8–044 Figure 8.8 illustrates a part of a precedence diagram method network for substructures with lag start-to-start, lead finish-to-start and finish-to-start relationships. 8–045 Precedence diagram networks are a format that many computer programs provide as displays36 and show the earliest and latest start and finishing dates, durations, critical activities and float. 36 Although many software programs refer to it as a PERT diagram.

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8–046 The advantages of the precedence network diagram are not dissimilar from those of the arrow diagram method in that it: 1. 2. 3. 4. 5. 6.

is not limited in size; can be resource loaded; can be computerised; demonstrates all relationships; can be used as a management tool; and can be used to determine the extent and effect of delays and to provide a basis for allocation of responsibility.

8–047 However, there are also disadvantages as for the network diagram in that it tends to be equally: 1. 2.

difficult to read; and if produced manually, expensive to produce.

[Please refer to Figure 8.8]

Cascade diagram 8–048 The “cascade diagram” format attempts to merge the benefits of CPM precedence diagram with the appearance of a bar chart. The format is generally similar to the bar chart, but the activities are linked with the logical connections between the bars and the length of the bars is proportionate to the activity duration. Figure 8.9 illustrates the same bar chart as that at Figure 8.1, but with logical links added and the critical activities highlighted. 8–049 Computer programs for the analysis of cascade diagrams were first demonstrated in the mid-1980s, enabling an analysis to be performed akin to that via the precedence diagram method of programming. Virtually all modern project-planning software programs now offer the cascade diagram as the preferred method of display37.

Standard form provisions The initial programme 8–050 Apart from the requirement to indicate critical activities38 and float39, there is no indication in any of the standard forms other than FIDIC/DB9540 as to in what form the schedule is to be produced. As with the JCT forms, FIDIC/DB9541 requires C’s programme to be submitted to the CA, merely for the CA’s information. None of the standard forms identify for what purpose the programme is to be used, although the 2009 edition of the Irish government standard forms requires that it should be “of 37 However, some project-planning software programs refer to this as a Gantt chart. 38 GC/Works/l, GC/Works/1/98, Cl.33(1); GC/Works/1/DB and GC/Works/1/DB98, Cl.33(1); ECC2 and ECC3, Cl.31.2; FIDIC/M&E87, Cl.12.1; FIDIC/DB95, Cl.4.14; and FIDIC/Build98, Cl.8.3 and, by implication, C21/09, Cl.25.9.3 and Cl.4.9.1(6); the 2009 edition of the Irish government standard forms and (if not deleted by the option in the agreement) JCT05, Cl.2.9.1.2 39 ECC2 and ECC3, Cl.31.2 and, by implication, C21/09, Cl.25.9.3 and see also the 2009 edition of the Irish government standard forms, (which refer to this as “floats”), see for example IGBW/09, Cl.4.9.1(6). 40 Cl.4.14 requires the programme to be in precedence diagram method format. 41 Cl.4.14.

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a quality which will permit effective monitoring of the works”42, and both ECC343 and the Irish government forms44 imply that entitlement to an extension of time should be gauged by reference to the impact of an event on the programme. 8–051 HK0545 provides for a submission period to be stated in the appendix to the contract. The 2009 edition of the Irish government standard forms requires that C is to submit its programme “before the starting date”46. JCT80, JCT98 and JCT0547 require C to submit its programme “so soon as is possible after the execution of this contract”48. FIDIC/Build98, FIDIC/Build99 and FIDIC/PD+B99 require the schedule to be submitted to the CA within 28 days of receipt of the notice to proceed and FIDIC/M&E8749 and FIDIC/DB99 provide that the schedule should be submitted within 28 days of the commencement date. ICE6 and ICE7 require the schedule to be submitted within 21 days of the award of the contract. FIDIC/DB95, FIDIC4 and the NEC forms, on the other hand, provide for a period, within which the schedule is to be submitted, to be inserted in the contract data. In contrast, GC/Works/1, GC/Works/1DB, GC/Works/1/98 and GC/ Works/1DB98 provide no period for submission, but define the schedule which C is bound to follow as that which was “submitted prior to the acceptance of tender and agreed by [D] at that time”, implying that they anticipate only the tender programme. 8–052 Apart from the fact that a programme to be submitted with a tender tends to be based on nothing better than assumptions in regard to C’s performance on partially specified work, it is often of little value and can be unnecessarily expensive. C should not be required to have a full working programme available on the first day of the contract. A more pragmatic approach, and one that can be both useful and informative, is to require C to complete its programming on different levels: tender schedule, master schedule and short-term look-ahead schedule, and so on, or in differing densities on a rolling basis and only the first three months, or so, in a state fit for construction50. 8–053 Normally C should be expected to submit, within a short period after appointment, a working programme, which covers in detail the first two to three months of a project the remaining work illustrated at a lower density. Within the first few months, C can discuss the requirements of the plan with its subcontractors and suppliers and develop its working programme for the remainder for re-submission from time to time. The concept is illustrated in Figure 8.1051.

Programme approval, acceptance and rejection 8–054 The purpose of programme review should be to ensure the quality of the programme and to make sure that it is fit for purpose. Generally, if D is actively to participate in the assessment of the programme, it will need staff who understand industry-endorsed 42 Cl.4.9.1. 43 Cl.63.3. 44 Cl.9.3. 45 Cl.3.1(1). 46 Cl.4.9.1 47 Cl.2.9.1. 48 Cl.5.3.1.2. 49 Cl.12.1. 50 This is the formula adopted by Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) and by the CMS at Sch.2 (see App.2 to the 4th edn). 51 Based upon the diagram contained in Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), at Figure 8.10.

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programming standards who can review the programme of work in light of those standards and who are in a position properly to evaluate D’s or the CA’s responsibilities to meet programme dates. In this regard, the CIOB Guide advises52 that: “Because competent contract administration, timely completion and financial success of the project ultimately depend upon the integrity of the schedule it is essential that the planning strategy and schedule are reasonable, rational, and achievable. Quality assurance audits are best performed by an independent party, unassociated with the project, or any of its participants; the absence of any implied knowledge ensures that the right questions are asked and appropriate and understandable answers are given.”

8–055 Until relatively recently, the use of CPM analysis has been restricted to very large projects and then, often, only to their construction phases. Today, the benefits of a systematic approach to planning and progress monitoring are available to all levels of management. Thus, it is now particularly important in project work that all developers have an understanding of the techniques available and the benefits to be gained from their use. This does not mean that they need to become experts, but they should be able to appraise plans prepared by others. Developers who do not have the skills and/or resources adequately to monitor and review C’s programme have a serious problem, which can only realistically be resolved by the appointment of consultants who do have those skills. The Texas Department of Transportation53, for example, makes it a requirement of its procurement strategy that projects must be staffed with personnel who can: “1. 2. 3.

Review, monitor and analyse CPM Schedules Take suggestions from [C] to re-sequence the project and accelerate the work Work with [C] to revise the schedule to show the effect of re-sequencing on the overall project duration.”

The CMS deal with this issue by creating the position of risk manager for this advisory role. In essence, the risk manager’s task as to time is analogous to that of the developerappointed quantity surveyor (the “project quantity surveyor”, or “PQS”) as to cost. 8–056 So, where it is the PQS’s task during the design period to advise D on the financial economics of the various methods of construction, it is the risk manager’s task to advise on the time efficiency of the intended participatory relationships, zonal possibilities and to establish time-related priorities in relation to separable parts of the design. At pre-tender stage, where it is the PQS’s job to price the tender documents to establish a pre-tender financial estimate, against which C’s tender can be compared, it is the risk manager’s task to programme the works to establish acceptable key dates, sectional completion and completion dates, against which C’s tender programme can be compared. During the course of the works, when it is the PQS’s task to prepare, or check C’s interim valuations for payment against the bill rates and supporting invoices for the CA to certify, it is the risk manager’s task to check the periodic programme updates against the planned or updated schedule and progress records, together with the effect of any events, and to advise the CA for the purpose of extensions of time and time-related loss and expense calculations. In so far as it appears that costs are going awry, it is the PQS’s task to advise D and the CA of what reasonable alternatives 52 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), paras 3.8.63.1 to 3.8.63.2. 53 Texas Department of Transportation, “Construction Considerations”, Accelerated Construction Strategies Guidelines (2003).

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may be exploited to reduce costs. Similarly, when delay is forecast, it is the risk manager’s role to advise the CA and D of what strategies may be instructed for recovery. Finally, after the works have been completed, when it is the PQS’s task to make a final valuation of the works and check C’s final account, it is the risk manager’s task to establish the actual effect of all delays to the project, all recovery measures and the final effect, if any, of any of D’s risks on the completion date, so that the PQS can value the prolongation costs, if any, for certification. The CMS54 recognises that the role of the risk manager is not one normally played by any member of the design or construction teams under the standard forms of building contract. The management of the time-related aspects of the construction process requires the ability to use techniques that may not always be found amongst the consultancies normally employed in order to be able to deal with the risks of change, consequent disruption and delay to progress and to manage them so as to minimise or avoid entirely their effects on the completion date. Much will depend upon each individual case; however, it can reasonably be expected that complex projects will be particularly taxing for professionals inexperienced in time management. 8–057 Under the CMS, the risk manager has no power to commit either D, or C, or any of D’s other advisers, to any course of action. Prior to contract, during the course of the preparation of the production information it is the risk manager’s job to identify, in conjunction with D and their advisers, those significant features of the project design in relation to the intended method of procurement that are likely to be important in the management of time during the course of the construction process. Once these are identified, it is then the risk manager’s job to ensure that such matters are properly specified in the contract as items to be included in the master schedule and monitored during the course of construction by means of the return of the information specified. 8–058 The risk manager’s task is also to advise on the techniques to be used to prepare the schedule, the software to be used and the general shape and feel of the management information that will be required of the contractor subsequently appointed. 8–059 Once tenders have been received and D is in a position to form a contract with the successful contractor, it is anticipated that the CA will instruct C to prepare its master programme, within a defined period, for acceptance. Sometimes, it may be appropriate for such instructions to be given on a collateral basis before contract, so that before the contract is entered into, consideration can be given to the preparation of the programme for the works that C intends to follow. Once the programme has been prepared and is submitted for acceptance, it is the risk manager’s responsibility to examine C’s submittal and to advise the CA whether it complies with the contract. If the risk manager wishes to reject it, they should do so within a limited period of time, otherwise the submittal is deemed to be accepted. The periods of time likely to be appropriate for submittal and acceptance of the schedule for a major project are set down as defaults in the CMS but these may be changed to suit particular projects, or circumstances. 8–060 Because, under the CMS, D is to be compensated in liquidated damages for C’s failure to provide a compliant schedule55, any dispute as to whether it complies

54 App. 2 to the 4th edition hereof. 55 App.2 to the 4th edition hereof.

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with the contract should be promptly dealt with under the available dispute resolution mechanisms. 8–061 The CIOB Guide advises that, typically, the scope of validation will include examination of the following56: review for buildability; review for schedule content; and review for schedule integrity. 8–062 The review for buildability will normally consider elements specific to the project and such generic elements as: employer’s requirements; design and integration of specialist design; quality specifications; procurement; construction; health and safety; environmental matters; design; specification; production information; procurement; cost estimating; scheduling; information management; quality assurance; health and safety; sustainability; and energy. 8–063 The review for programme content will also normally consider elements specific to the project and such generic elements as: planning strategy, means, method and assumptions; work breakdown structure; coding structure; estimates and calculations of resources, productivity and durations; engineering logic, resource logic and preferential logic; contractor, subcontractor, work package logic, production and space restraints; constraints: milestones, external and performance duration; cost coding, budgets and earning; calendars; design fabrication, procurement and delivery lead times; submittal and approvals schedule; risk register and contingencies; and the critical path to each key date, section, or completion date of the works as a whole. 56 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), para.6.8.63.

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8–064 Where as-built data and/or the effects of events are incorporated into an update, the review will also include validation of: submittal and approvals register; as-built and progress data; performance and productivity data; cost budgets and earnings; event register; event synopses and fragnets; impact methodology and calculated effect; the critical path to each key date, section or completion date of the works as a whole; recovery strategy and proposals; and recovery monitoring. 8–065 The review for programme integrity is perhaps the most often overlooked and, for the purposes of time management, often the most crucial. It will always include consideration of the introduction and effect of: constraints and constraint types; logic including; open ends; long lags; negative lags; ladders; scheduling options; and critical paths. 8–066 Some developers prefer contracts that say that the schedule will be submitted to D for information only57, although how that serves any useful quality assurance process is difficult to see. 8–067 Other contracts provide for D’s, or the CA’s agreement with58 acceptance of59, approval of60, or consent to61, C’s programme. Under Cl.4.9.1 of the May 2007 edition of the Irish government standard forms of contract, for example, C is required to submit its programme to the CA, but the forms of contract do not say for what purpose the programme is submitted nor whether they require the CA to accept or reject it. On the other hand, at Cl.4.7, the standard forms provide a generic process for dealing with anything to be submitted under contract within ten working days from when C has given the CA enough information “to make a purposeful review of the matter submitted should he wish to make one”. 8–068 Clause 4.7.10 provides that the CA may object to a programme submission if it: “1. 2. 3. 57 58 59 60 61

See See See See See

would not comply with a contract; would have an adverse effect on D, or the public interest; would impose an obligation on D that the contract does not require D to bear; JCT80 and JCT98, Cl.5.3.1.2 and FIDIC/DB95, Cl.4.14. GC/Works/1, GC/Works/1/98, GC/Works/1/DB and GC/Works/1/DB98, Cl.1(1). ECC2 and ECC3, Cl.31.1, and ICE6 and ICE7, Cl.14. FIDIC/M&E87, Cl.12.1. FIDIC4, Cl.14.1.

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4. 5.

would be contrary to a legal requirement; would have an adverse effect on C’s ability to comply with the contract;

or, any other ground stated in the contract”

none of which is particularly helpful in keeping control of the project. Neither are these considerations helpful in securing a meaningful time model for the conduct of the works, or a programme that can be used for calculating the effects of delay to progress and on completion. On the other hand, under ECC2 and ECC362, within two weeks of C’s submission of its programme to D for acceptance, the CA must either accept or notify C of its reasons for rejecting it. There are only four grounds upon which it can be rejected: 1. 2. 3. 4.

C’s schedule is not practicable; it does not show the information that the contract requires; it does not represent C’s intentions realistically; or it does not comply with the “works information”.

8–069 Whilst rejection for the objective reasons that the programme does not show the information that the contract requires, or that it does not comply with the works information, is entirely understandable, the provision that the CA may reject C’s schedule because it conceives that the programme does not realistically represent C’s intentions, or believes it to be impractical, seems fraught with difficulties. 8–070 By way of contrast, the CIOB Guide advises63 that the strategy for programme review should: “take account of the development of the schedule as better information becomes available and, as the project proceeds, the increasing density of the schedule as it develops from initiation through the work on site to commissioning the completed project. Irrespective of whether approval of revisions is required contractually, the scheduler is to ensure that no schedule revision is to constitute, or lead to: an illegal operation; or a breach of contract; or a hazard to health and/or safety in the process of construction; or a hazard to the safety and/or stability of the permanent work; or a method, or sequence that is not conducive to effective time control; or misrepresentation or other unethical conduct. Any positive control of revision to the schedule should encourage safety, contract and legal compliance and effective time control. In so far as a submittal of a revision is required to be made for any reason, it is to be submitted as soon as the proposals for revision are defined. A submittal for approval of a proposed revision is to be considered promptly and either approved (in which case the revised schedule becomes the working schedule for the future of the project), or rejected. The criteria for rejection are limited to those set out above against which full details of the reasons for any such rejection should be given.”

8–071 The CMS deals with acceptance by expressly stating that acceptance does not require the works to be constructed in accordance with the accepted programme, that such acceptance does not relieve C from any of their obligations under the contract,

62 Cl.31.3. 63 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), paras 2.3.3 to 2.3.4.

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and that C are not entitled to rely upon acceptance as indicating that the programme is feasible. Those terms however do not appear expressly in all the standard forms64. 8–072 ICE6 and ICE765 require C to submit to the CA for acceptance a programme showing the order in which it proposes to carry out the works and a method statement66 containing a general description of the arrangements and methods of construction that C proposes to adopt for carrying out the works. 8–073 ICE6 and ICE767 provide that, within 21 days after receipt of C’s programme, the CA should either accept it, reject it with reasons, or request C to provide further information to clarify or substantiate the programme, or to satisfy the CA as to its reasonableness. In the absence of such a statement, the CA is deemed to have accepted the programme as submitted. Clause 14(4) also provides for C to be required to update the programme at any time the actual progress does not conform with the accepted programme. 8–074 Under ICE6 and ICE768, the CA can ask C to submit further information to substantiate the reasonableness of the programme. The guidance notes to the contract form indicate that it is hoped that this will lead to more realistic programming, but conceivably it may also lead to further claims on the grounds of unreasonable rejection. 8–075 Under C21/09, HK05, JCT80, JCT98 and the 2005 and later series of JCT forms, the CA is under no obligation to comment on the programme. Neither do C21/09, HK05, A201/97, A201/07, AS2124, AS4000 and C21 require any approval, or acceptance of C’s programme. 8–076 PPC2000 provides that C’s proposed “project timetable”69 is to be reviewed by the “core group” and approved by D but, unsatisfactorily, does not provide any description of content, or quality, nor any objective basis for review, approval, or rejection70. 8–077 Clause 8.3 of FIDIC/Build98, FIDIC/Build99, FIDIC/PD+B99 and FIDIC/ DB99 similarly provides that the CA may reject C’s schedule within 21 days of its receipt only on the objective ground that it fails to comply with the contract. 8–078 A developer that does not require submission and approval of C’s schedule and does not clearly indicate its performance intentions limits its ability to secure a meaningful time model against which it can adequately monitor the progress of the work, or to manage its own risks of the delaying effect of events. The benefits of requiring a programme to be submitted are usually easy for developers to understand. However, the thought of accepting or approving C’s programme sometimes causes difficulties over how such acceptance or approval may be used against them. 8–079 Because programme approval can cut both ways, D’s choice between the contractual options may be worrisome for D, particularly if the specification for what is required of C is not particularly clear, with the effect that it is not easy to see whether C has complied with the specification or not. In those circumstances, the requirement for approval, or rejection may simply be an additional cause of disputes. On the other hand, the CMS71 suggest a partial remedy in providing that the only grounds for rejecting C’s submittal of a network

64 App.2 to the 4th edn hereof. 65 See Cl.14(1)(a). 66 See Cl.14(1)(b). 67 Cl.14(2). 68 Cl.14(3). 69 PPC2000 does not identify the character of a “project timetable”; it is merely defined as “the timetable agreed in accordance with clause 6 of the partnering terms for implementation of the project after the commencement agreement”. In essence it might be no more than a listing. 70 Cl.6.2. 71 See App.2 to the 4th edn.

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and method statement should be that they do not comply with the contract requirements set down in the schedules to the CMS. It is thought that this objective approach to acceptance and approval is fairer to both parties and is less likely to result in the prolonged periods of exchange, which are common in the less prescriptive forms of contract. 8–080 It seems that if D approves, or does not reject C’s programme without delay, in the absence of express terms to the contrary, D may be bound by the programme as a target and be expected to meet its obligations in accordance therewith72. In the case of Freeman-Darling73, the Board of Contract Appeals considered the effect of an approved programme showing an early completion date and held that the approval of the programme constituted an agreement to a revised contract period. The Board said: “[C] intended to finish the job early, specifically on July 31, 1982. It communicated this intention on, or about February 9, 1982, when it submitted to [D] a bar chart depicting the estimated construction schedule. As a result of the submission of the schedule with a completion date of July 31, 1982, and approval by [D], the parties evidenced their intent to alter the contract completion date. In addition, the parties subsequently referred to the July date as the contract completion date, thus further evincing such an intention. We therefore find that the completion date was changed from September 11, 1982 to July 31, 1982.”

8–081 In some forms of contract, failure to approve C’s programme without outright rejection may be found to constitute implied acceptance and, therefore, may not release D, or the CA (on D’s behalf) from the obligation to perform its duties in the time required by the programme74. Similarly, if the parties agree that the programme is a complete and reasonable plan of the contract work and has been frequently used and updated throughout the project, the schedule may be presumed to be correct. Thereafter, if a dispute occurs and either party argues that the programme did not reflect the proper sequences or durations for executing the work, or was over-optimistic regarding the time allowed for performance by the programme, they are likely to have to overcome this presumption. 8–082 AMEC v Stork75 was a case in which one of the preliminary issues before the court was whether a programme accepted by D could become a programme for contractual purposes, notwithstanding that it did not comply with the terms of the contract between the parties. In this case, the contract specified that the programme by which the parties were to perform their respective duties was the detailed work plan prepared by the subcontractor “which [D] acknowledges as being the current detailed work plan that [C] shall utilise in the performance of the work”. Additionally, the contract also specified that: “The detailed work plan shall become the contract [schedule] when it complies with the requirements of the contract and when acknowledged as such by [D].” 8–083 In this case, D had expected to be able to issue all the design information on the single date specified in the tender documents on which C had based its tender schedule. By the time of the pre-contract meeting, however, D had changes imposed upon it that made it difficult or impossible as a practical matter for it to keep to that one date, and so had forced it to spread the dates out, some being later than the original, but which, as a result of pre-contract negotiations, had been incorporated into the contract. 8–084 However, the programme ultimately approved did not contain the lead-in times that C had stated it required during pre-commencement negotiations. The question for 72 See App.2 to the 4th edn at p.129. 73 Freeman-Darling Inc (1989) GSBCA LEXIS 191, 89–2 BCA (CCH), 21,882. 74 Mackay v Dick (1881) LR 6 App Cas 251, per Lord Blackburn at p.263. 75 AMEC Process and Energy Ltd v Stork Engineers & Contractors BV (No 1) [1999] EWHC 238 (TCC).

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the court was whether a work plan, even if approved and accepted as the schedule and acted upon, did not become “the schedule” for contractual purposes if, ex post facto, it was found not to have complied with the requirements of the contract. 8–085 The first possible interpretation, namely that the result of a non-compliant but approved work plan is that there is no contract programme at all, or that there is one, differing from the approved plan, was dismissed shortly by HH Judge Hicks QC as “so unattractive that if saddled with that consequence, is untenable”. Judge Hicks observed that, in such a complex, highly organised and tightly programmed engineering project, for which an agreed and binding programme was essential, it could never have been contemplated by either party that in such circumstances work must proceed, but without any deadlines, or critical path requirements for any specific step or process. 8–086 C’s second argument was that there was a “contract” schedule: not one that had been approved, but one that could be retrospectively constructed from the factual material as to lead-in times and start dates that had been agreed. This was also rejected by Judge Hicks for both positive and negative reasons. The negative reasons, he said were twofold: “The first difficulty with that formulation is that it falls foul of the very canon of construction by which [C] reaches this stage of its argument, namely that both conditions of [contract] must concurrently be fulfilled. If, as it contends, a work plan becomes the contract [schedule] only when it both ‘complies with the requirements’ and has been ‘acknowledged as such’ how can a work plan qualify which, ex hypothesi, is not the one so acknowledged but a departure from it, and which does not even have any documentary, or other detectable existence? Sauce for the goose is sauce for the gander. That is in truth a fatal flaw, but there are equally powerful objections of a more obviously practical nature. A [schedule] of this kind is a formidable document. Rev A occupies some 223 pages in the trial bundles. It has to be available to, relied upon and operated by a substantial number of persons at varying levels of skill and responsibility in both organisations and with varying degrees of knowledge of how what they are doing fits into a wider picture. [C’s] contention entails that every such person must be assumed to know (how?) of the existence, terms and effect of the lead-time answers, to be aware of the need to disregard the dates in the [schedule] where inconsistent with those answers, despite its having been approved, and to be capable of adjusting such dates accordingly and acting on the adjusted timetable. That is not at all persuasive. The second practical objection is that this contention disregards the realities of the process of negotiation by which [C’s] work plan is likely to be, as in this case it was, analysed by [D], criticised and amended before it is finally accepted. The ‘contract requirements’ whether, or not they include such additional material as the lead-time answers, will in a contract of this size and complexity inevitably leave room for debate as to whether particular features of a work plan comply. Why are such debates not to be taken to be settled by the agreement of the [schedule]? Even if a departure is not just debatable but clear, why should the parties not be free to vary the contract terms in that regard by incorporating that departure in the agreed [schedule]? It is simply not commercially realistic to construe [the clauses] in such a way that disputes of those kinds can be reopened after the [schedule] has been settled. Moreover (combining this point with that in the previous paragraph) [D’s] argument, if valid, goes not just to what should be the result of this, or any litigation but to how the persons actually doing the work should have acted, and entails that they should have disregarded the [schedule] actually agreed and operated, the one which [D] now says should have been agreed. The implausibility of any such suggestion is self-evident.”

8–087 As to the positive objection, Judge Hicks observed that C had a duty to provide a compliant programme, in default of which D could plainly have objected and sought relief. Similarly, if the programme submitted had been compliant, D would have

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had to have approved it and, if it had not done so, C could have objected and sought relief. Judge Hicks said: “On the one hand repudiatory breaches ordinarily give the other party the election of accepting the repudiation, or affirming the contract and many contracts proceed to completion with claims for damages for non-repudiatory breach outstanding. On the other hand it is arguable that the sentence as a whole, and the second condition in particular, are intended to produce finality in every case, [C] being bound by the work plan it has produced and [D] by an acknowledgment of it ‘as such’ (that is as complying with the requirements of the contract). In my view that gives full and realistic effect to the words ‘when [the work plan] complies with the contract’, without running into the insuperable difficulties which, for the reasons given in paragraphs 22 to 24 above, face a construction which extends the temporal and operational scope of those words so as to nullify an unqualified acceptance by [D] of [C’s] proposals. In my judgment the acceptance by the letter of 16 May 1995 was, indeed, for this purpose, unqualified. Although there was some faint attempt to suggest that the use of the word ‘baseline’ in the first paragraph of that letter somehow made it only a provisional acceptance that is plainly not so. The ordinary and natural meaning to be derived from the word’s sporting origin is that of a fixed criterion by reference to which a step can unequivocally be judged good, or bad. It recurs twice in the second paragraph of the letter in a context which makes it clear that the ‘baseline’ (that is the [schedule]) can be changed only in specified and, in practice, quite limited circumstances. It is clear that unless and until so changed it is intended to be final and binding on both parties. There are no words in the letter to suggest that the work plan does not comply with the contractual requirements, whatever the effect of such words might have been.”

8–088 In order to overcome this sort of problem, some forms of contract state expressly that approval, or acceptance of the programme will not affect C’s obligations under the contract, thereby leaving the responsibility for preparing a workable schedule entirely with C. ICE7 for example, states: “Acceptance (or deemed acceptance) by the [CA] of [C’s] schedule in accordance with sub-clauses (2), (3), or (4) of this clause and the consent of the [CA] to [C’s] methods of construction in accordance with sub-clause (7) of this clause shall not relieve [C] of any of his duties, or responsibilities under the contract.”

Similar phraseology appears in the CMS76. 8–089 Once C’s programme has been accepted, it is D’s responsibility (and also that of the CA on D’s behalf) to perform certain time-related contractual duties in accordance with the programme. These duties usually consist of approval and timely delivery of developer-furnished material and equipment in accordance with C’s programme, and include the timely issue of drawings, details and further information. 8–090 However, review and adoption of C’s programme brings into play the implied warranty that both parties have a duty not to interfere with each other and to co-operate to achieve the co-ordination and timely progress of the work. Therefore, before accepting the programme, D should be particularly careful in making sure that those activities, for which D and its agents are responsible, are reasonable and can be achieved. 8–091 Under the CMS, once accepted, the network and the method statement together become the master programme. The relationship of the various stages of the approval process under the CMS is illustrated at Figure 8.977. [Please refer to Figure 8.9]

76 See App.2 to the 4th edn. 77 Based upon the diagram contained in Pickavance Consulting Ltd and Fenwick Elliott LLP, Practice Note for Use with the Change Management Supplement for Use with JCT98 (2003).

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CHAPTER 9

Revising, updating, monitoring and reporting

Introduction Standard form provisions Programme revision Programme updating Progress monitoring Target CPM programme monitoring Resource monitoring Cash flow monitoring Cost monitoring Earned value monitoring Milestone monitoring Bar chart monitoring Count the squares chart monitoring Jagged line monitoring Work content monitoring Progress reporting Visual aids

9–001 9–033 9–061 9–069 9–089 9–091 9–097 9–105 9–111 9–116 9–119 9–123 9–128 9–136 9–144 9–150 9–161

Introduction “The road to hell is paved with work-in-progress.”1

9–001 The construction industry does not have a good reputation for using its words with precision and, unfortunately, the words “revising”, “updating”, “monitoring” and “reporting” often seem to be used interchangeably, and without a high regard for their meaning. They are seldom defined by contract, or specification and, accordingly, often confused. 9–002 Revision, in the sense used here, means amendment to the planned intent. The procedure may normally include a revision of such things as methodology, resources, logic, durations, activity descriptions, schedule density and so on in regard to the contract scope. It does not require the impacting of change, or the identification of

1 Philip Roth, New York Times (15 July 1979), Book Review.

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the effect of progress on the planned intent, but it does require the re-sequencing of the schedule to accommodate the revised intent. Accordingly, at any point in time, revision should be taken to be referable only to the planned intent for the future conduct of the works. 9–003 Updating has nothing to do with change in the planned intent nor does it comprise impacting the effect of change. It can only be achieved in regard to a fixed date in the past, usually referred to as a data date and simply involves the replacement of planned data with actual data for those activities and resources, which have started, progressed, or finished and re-sequencing of the schedule. 9–004 Progress monitoring is really no more than keeping score. It can be carried out against cost, revenue, work content, productivity, or schedule and requires a target as a baseline, together with a model containing the data, the effect of which is to be compared and analysed2. From the difference between the two, it is possible to determine whether, as a matter of fact: resources, costs, expenditure, revenue, or activities have started, progressed and/or finished as they were planned to start, progress and/or finish. 9–005 Reporting requires communication and at its best will tell the recipient exactly what it wants to know, clearly and unambiguously. It may require the communication of the effects of revision, updating, progress monitoring, recovery, acceleration, or indeed, any other matter upon which information is required to be conveyed, affecting the project. 9–006 The CIOB Guide usefully illustrates a flow chart of the interrelationship of these separate functions and their dependencies. It is reproduced at Figure 9.1. 9–007 Ultimately, the use of project planning computer software enables more effective management of projects than was the case before the prevalence of such technology. Network analysis can be used to control the work as it proceeds by using it rapidly to review, revise and update the working schedule at intervals throughout the project, to take account of changes in work content and timing. With all the data available on databases, it is possible to know, virtually instantaneously, what stage a project has achieved, who is involved, how progress is proceeding and what resources are available, or being used, or proving inefficient. It is not at the planning stage, but in the project control stage, that the use of project planning computer software becomes invaluable. To prepare a revised schedule, it is necessary to ascertain which activities have been completed, the time required for completion of activities currently in progress and the revised times of future activities if these have changed. The revised earliest and latest times can then be calculated for each activity, a revised critical path traced by analysis, and the process of resource allocation repeated to produce the revised schedule3. [Please refer to Figure 9.1] 9–008 Modelling “what if?” scenarios, tracking costs, scheduling projects suffering from delay to progress and reallocating people, plant and materials can help to analyse defaults and to work towards putting things right. However, very detailed consideration of resources takes time; judgement is therefore required in deciding the frequency of

2 It is important that the difference between the baseline and the model to be analysed is limited to progress, work content, or sequence, and not a combination of two, or more, of those issues. If more than one of those is apparent, identifying the cause of a departure between the baseline and the model will be difficult, if not impossible. Whichever is in issue, a comprehensive analysis will account for both past performance and the resultant effect on the works going forward. 3 Based upon Figure 28 from Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) at Fig.30.

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such modelling and the degree of detail to be employed in order to retain the value of rapid revision without introducing unacceptable errors into the updated working schedule. 9–009 It is often suggested by contractors, who do not wish to plan their work, or do not wish to revise, or update their schedule, that the frequent disruption of a construction schedule through strikes, inclement weather, and so on, negates the value of any detailed advance scheduling. That argument is based upon the false assumption that, because it is only a target schedule, produced before the work starts, which they are contractually required to produce, that is all that is necessary for effective management. However, as the SCL Protocol recognises, it is only by reference to a computerised network model of the anticipated project development process (often the only tool that can usefully be employed rapidly to recast and adjust, repeatedly, if necessary) to produce a viable schedule that rational decisions can be made for the future conduct of the project. 9–010 It has been observed over the last 20 years or so that site operatives often have difficulty in using critical path network diagrams as a means of managing, controlling, or monitoring progress on site unless the networks have been converted into some form of bar chart. On the other hand, advances in computing power and improvements in computer literacy have made the prospect considerably less daunting. In addition to its value as a tool for scheduling and monitoring progress, a critical path network, or precedence diagram is also an ideal control tool for forecasting the effect of change. To be of any permanent value, the output from the progress often has to be recast in bar chart form, preferably as a cascade diagram, so that it continues to show the interrelationship and timing of activities, whether critical, or in float. This, however, is a standard report format in most project-planning software. 9–011 A complete and regularly updated CPM schedule thus provides C, D and the CA with a management tool to identify the time and cost of contract performance, which can be a vital element in the proof of delay, or entitlement to damages. It is not always appreciated that a construction schedule updated on a periodic basis creates an as-built record of the project, which can be invaluable in demonstrating the relationships between root causes and ultimate effects, if the occurrence of an event results in a claim. 9–012 Without progress monitoring, neither C nor D can know where it stands in relation to completion. If C does not update its schedule, the absence of evidence of the state of the works at a particular moment in time will hinder the retrospective proof of the cause of delay and will make it difficult, if not impossible. 9–013 In the Brompton Hospital4 case, it was expressly recognised that, because planned activities rarely start and finish on the dates on which they are planned to start and finish, the critical path (and hence the activities critical to completion) will change. That is why the schedule must be updated as a result of progress actually achieved. If the working schedule is to identify C’s intent for the future conduct of the works, it must also be reappraised, where necessary, in the light of later information becoming available and the occurrence of other changes. In this case, the court held that: “In order to make an assessment of whether a particular occurrence has affected the ultimate completion of the work, rather than just a particular operation, it is desirable to consider

4 Royal Brompton Hospital NHS Trust v Frederick A Hammond (No 1) [2000] EWHC 39 (TCC); [2001] 76 Con LR 148 (CA).

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what operations, at the time the event with which one is concerned happens, are critical to the forward progress of the work as a whole. On the evidence of [the experts] the establishment of the critical path of a particular construction project can itself be a difficult task if one does not know how [C] planned the job. Not only that, but the critical path may well change during the course of the works, and almost certainly will do if the progress of the works is affected by some unforeseen event.”5 (emphasis added)

9–014 On the same point, in Balfour Beatty v Lambeth6, HH Judge LLoyd QC observed: “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 [schedule] (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.” (emphasis added)

9–015 Whilst it would appear trite that, unless C has a definite intent to make progress, it cannot demonstrate that its progress has been delayed, and the intent, which C claims to have been impeded, must be evidenced by its latest updated schedule, a somewhat surprising conclusion in relation to the measurement of delay was reached in the TCC case of Skanska v Egger7. In the preceding case of Kvaerner v Egger, Mr Recorder Black QC had observed: “At the commencement of the trial of the preliminary issue, a further document was added to the list of documents, namely the tender programme 100B.”8

9–016 Following this, in Skanska v Egger9, the evolution of the programmes was described by HH Judge Wilcox thus: “Mr Recorder Black QC held that programme 100B was the contract programme in the period from 17 April 1997 to 24 April 1997. During the lead-up to the commencement of the contract, adjustments to [programme] 100B were agreed in the course of a series of meetings involving [C], [D] and the ground works consultant and contractors. [Programme] 100B post 24 April became the contract [programme]. On 23 May 1997 [C] provided three large [programme] sheets, which reflected events on site since 100B had been issued. These were intended to constitute the construction [programme] to which the works would be carried out on site. 100B remained of course the contract [programme].”10

5 Royal Brompton Hospital NHS Trust [2000] EWHC 39 (TCC) at [32] per HH Judge Seymour QC. But see also City Inn Ltd v Shepherd Construction Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590, affirmed City Inn Ltd v Shepherd Construction Ltd [2010] CSIH 68, in which the English court’s approach was expressly rejected as being inapplicable to causation under JCT80. 6 Balfour Beatty Construction Ltd v The Mayor And Burgesses of The London Borough of Lambeth [2002] 1 BLR 288 per HH Judge LLoyd QC at 302. 7 Skanska Construction UK Ltd v Egger (Barony) Ltd [2004] EWHC 1748 (TCC). 8 Kvaerner Construction Ltd v Egger (Barony) Ltd (2000) QBD (TCC) Lawtel 8 September/2000 (unreported). The claimant changed its name to Skanska Construction while proceedings were underway. 9 Skanska Construction UK Ltd v Egger (Barony) Ltd [2004] EWHC 1748 (TCC). 10 Skanska Construction UK Ltd [2004] EWHC 1748 (TCC) at [420]–[421].

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Notwithstanding that it was plainly acknowledged by C, and accepted by the court, that the tender (or so-called “contract”) programme was not intended to be followed by C, Judge Wilcox found that11: “[Programme] 100B post 24 April became the contract [programme]. It is against this [schedule] that any extensions of time entitlements should be determined.”

9–017 In that case, without referring to any evidence, or argument upon the point, the court held that, notwithstanding that C’s later, updated “construction programme” demonstrated an entirely different approach to phased possessions and starting dates of the various zones than was indicated on its tender programme, delay should nevertheless be measured against the tender programme, which Judge Wilcox referred to as “the contract [programme]”, a term that he had derived from the earlier decision of Mr Recorder Black QC in Kvaerner v Egger12. 9–018 Whilst it is not clear from the judgment what special significance Judge Wilcox ascribed to the term “contract [programme]”, it is clear that, in identifying that particular programme (which he acknowledged C did not attempt to follow) as the baseline programme from which extensions of time should be measured, he effectively gave C the benefit of the effects of D’s risks on its tender programme, whilst ignoring entirely the slippages caused by C13. 9–019 It is one thing to identify D’s risk events by reference to the contract. It is another thing entirely to construe delay caused by those events by reference to a programme, which was patently not followed. It is considered that a more logical approach is to construe delay to the progress of an activity by reference to what was intended at the time the activity was planned to be performed and not by reference to a hypothetical guess, elevated by the nomenclature of “contract” to a status, which is irrelevant to the purpose to which it is put. As was observed in the case of Sollitt v US14: “Accurate CPM schedule updates produced during actual construction are better evidence of the critical path than the baseline CPM schedule provided at the beginning of the project. As this court acknowledged in Blinderman Constr Co v United States15, ‘accurate, informed assessments of the effect of delays upon critical path activities are possible only if up-to-date CPM schedules are faithfully maintained throughout the course of construction’.”

9–020 The practical illustration of the point can be shown by a straightforward example. If: 1. 2.

A and B have a meeting arranged for 2.00pm; and at 11.30am B advises A that B will not be ready to meet until 3.00pm,

it defies common sense to say that, when A arrives at 2.30pm, A has delayed the commencement of the meeting (which is not then planned to start until a half hour after A’s arrival). 11 Skanska Construction UK Ltd [2004] EWHC 1748 (TCC) at [420]. A similar approach was taken by the Scottish courts in City Inn Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590, affirmed [2010] CSIH 68, in which C’s updated programme was considered to be no more than an “internal document”. 12 Kvaerner Construction Ltd v Egger (Barony) Ltd (2000) QBD (TCC) Lawtel 8 September 2000 (unreported) at para.17. 13 As was subsequently recognised by the same court in Great Eastern Hotel Co Ltd v John Laing Construction Ltd [2005] EWHC 181 (TCC) at [184]. 14 George Sollitt Construction Co v The United States, No 99–979 C (2005), 10. 15 Blinderman Constr. Co v United States, 39 Fed Cl 529 (1997), 585.

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9–021 Likewise, if: 1. 2. 3.

by contract all phases are to be released on the same day, that is on 24 April; and on 23 May C publishes a schedule showing that it does not require access to start phase 2 until 1 July; and access for phase 2 is in fact given on 1 May,

C cannot complain that it has been delayed by a failure to give access by 24 April simply because on its tender schedule, a schedule that it has indicated that it no longer intended to follow, it had been indicated that access for phase 2 was planned to be required on 24 April. 9–022 In Malmaison16, C had claimed that its entitlement to an extension of time was to be calculated by reference to the putative effect of the D’s risk events on its earlier planned programme, regardless of the evidence of the effect that its own culpable delays were alleged to have had on the programme. The court rehearsed the issues thus: “[D] denies that the works were delayed by the matters alleged by [C], and asserts that [C’s] analysis of delay is ‘misconceived and flawed’ In short, [D] says that the events relied on by [C] did not in fact delay progress of the works for various reasons. These include the fact that [C’s] assessment of delay was based on a revised [programme] which ignored the true state of the works at the date of issue, the part of the work affected by the [D’s time risk events] was not on the critical path, and the fact that ‘[C’s] delay analysis does not take into account any culpable delay on its part, or actual progress at the time of the events relied upon’.”

9–023 Dyson J accepted D’s point17 saying: “I accept the submissions of [counsel for D]. It seems to me that it is a question of fact in any given case whether a [D’s time risk event] has caused, or is likely to cause delay to the works beyond the completion date in the sense described by Colman J. in the Balfour Beatty18 case.” 9–024 In contrast to the Scottish court’s approach in City Inn, and Judge Wilcox’s approach in Egger, the English and US courts and Boards of Contract Appeals have consistently (and, with respect, logically) taken the view that, unless C’s schedule is properly updated, it cannot safely be used as a baseline from which to measure delay to progress and hence delay to completion. For example, in Kemron19, in which C attempted to recover liquidated damages on the basis that it had not been responsible for the subsequent delay to completion, the Board found that:

16 Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 Con LR 32; (1999) CILL 1527. 17 Interestingly, C’s position was propounded by Michael Black QC, then as advocate for C, who would sit as Recorder in Kvaerner. 18 This is a reference to Balfour Beatty Building Ltd v Chestermount Properties Ltd (1993) 62 BLR 1, in which Colman J said that the purpose of the power to grant an extension of time was to fix the period of time to which completion ought to be extended having regard to the incidence of the D’s time risk events, and measured by the standard of what is fair and reasonable. The completion date as adjusted was not the date by which C ought to have achieved practical completion, but the end of the total number of working days starting from the date of possession within which C ought fairly and reasonably to have completed the works. 19 Kemron Environmental Services Corp, ASBCA No 51536 (1999).

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“[C] could not begin work until its design was approved and it submitted its second design within a reasonable period of time after [D] improperly disapproved its first design. The only evidence which suggests that [C] might not have been delayed is found in its revised project schedule. However, inasmuch as it is apparent that the schedules were not updated to reflect contemporaneous events and the record contains no relevant explanations, we find them to be inherently unreliable for purposes of determining the number of days [C] was delayed.”

9–025 Similarly, in Yates20, where C had failed properly to update its schedule, it was held not to have any intent by which delay could be measured and not entitled to adduce evidence as to what was really its intent, so as to demonstrate delay to progress caused by D’s changes. The Board said: “Based on [C’s] failure to segregate the steel work performed after 26 March 1993 into structural steel and miscellaneous steel work, [C’s] failure to provide an updated work schedule for the period after 3 October 1992, and [C’s] own (site diary) entries characterizing much of the work performed after 26 March as ‘misc[ellaneous] steel work’ and structural steel for shops B and C, pumphouse, and administrative offices we conclude that the erection of the structural steel, ie, the truss erection and fill-in steel, was substantially completed on 26 March 1993 when [C’s supervisor] left the site; and that the work after 26 March did not follow a single critical path, but ran through a number of different activities including masonry, carpentry, skin, metal decking and roofing. [C’s] contention that a study was performed from which it was determined it took 4 men 10–11 hours to change one splice plate segment is at best questionable. We conclude the alleged study is nothing more than generalized unsupported self-serving opinion testimony which we have held does not reach the level of credible proof.”

9–026 In Gassman21, where C neither revised its schedule to take account of a change in logic nor updated it with progress, it attempted to demonstrate its entitlement to more time in relation to its original planned schedule, without regard to the sequence actually followed, the court observed: “neither [C] nor its expert ever modified the CPM schedule to reflect [C’s] change in logic regarding erection of steel. The schedule’s usefulness in evaluating the alleged slab ‘delay’, therefore, is limited. [The] CPM schedule must be current to evaluate project22 whether a ‘change’ affects the critical path must be determined on basis of conditions existing immediately prior to its occurrence23. [The] CPM schedule must reflect actual performance to be reliable basis for evaluating delay.”24

9–027 In Europa, the Board went further and declined to accept oral testimony, which was not supported by an updated impacted schedule, saying: “In no instance, has [C] attempted to identify and track the allegedly delayed work in the daily reports and account for the delay period. Only the [pre-construction planned schedule] is in evidence. There are no updated schedules in the record that might demonstrate the relationship of the alleged delays to other work at the site, or the timing and impact of alleged delays on overall completion of the contract. The record does not permit segregation of any delays attributable to [D’s] fault from other non-compensable delays including 20 WG Yates & Sons Construction Co, ASBCA Nos 49398, 49399 (2001). See also, AGH Industries, Inc, ASBCA Nos 27960, 31150, 89–2 BCA, para.21,637. 21 The Gassman Corporation, ASBCA Nos 44975 and 44976 (1999). 22 See also, Fortec Constructors v United States, 8 Cl Ct 490, 505 (1985); affirmed, 804 F 2d 141 (Fed Cir 1986). 23 See also, Norair Engineering Corp, Eng BCA No 3804, et al, 90–1 BCA para.22,327 at 112,205. 24 See also, JA Jones Constr Co, Eng BCA Nos 3035, 3222, 72–1 BCA para.9261 at 42,931.

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delays caused by [C] and/or delays extending over unexplained gaps in [C’s] on-site performance. With respect to the nature of the proof offered by [C] generally, [C] for the most part relies on general, unspecific and conclusory testimony that was not credible.”25

9–028 Thus, in general, the courts in England and the United States have acknowledged the dynamic nature of the project-scheduling process. In the United States, courts and tribunals have often placed great reliance on an analysis of delays affecting the critical path being assessed contemporaneously as the project unfolds by using the schedule updating process as the reference point, and this is also the recommendation of the SCL Protocol. 9–029 The persuasiveness of contemporaneous assessment of delays has been recorded in a number of US decisions over the last 20 years or so, which indicate that the contemporaneously updated, current CPM is the preferred baseline schedule for measuring the delaying effect of excusable events26. Whilst it is true to say that the US courts’ preference for contemporaneous analysis has, on many occasions, been supplied by retrospective analysis of project records, where there has been no updated working schedule, they have been prepared to consider the schedule that best reflects C’s intended progress during the period of the delay27. 9–030 Failure by C to carry out the works in accordance with the tender schedule, or the working schedule does not of itself defeat or otherwise invalidate entitlement to an extension of time or damages for disruption. Nor does the failure to update a schedule change the facts28. It just makes the effect of a cause more difficult to demonstrate, it makes the demonstration more expensive to produce and, if carried out retrospectively, it is less likely to be accepted without supporting evidence. In a US case29 when presented with a claim based upon the retrospective analysis of a schedule which had not been updated to demonstrate the way the construction logic had changed before the events complained of had occurred, the Board of Contract Appeals said: “We have consistently tried to evaluate [C’s] delay claims in terms of the delay actually caused to contract completion. We have found, and still find, that ductwork design delays did not affect such completion. Instead, the critical path, as shown by analyses of [C’s] ‘as built’ CPM, ran through the electrical fixture submittal activities including the shop drawings for such fixtures. The ‘as built’ CPMs were based on [C’s] own work records, which showed that [C] did not adhere to its original CPM construction plan. Under the circumstances argument that certain ductwork delays were critical simply because the original plan indicated that they might be, is not persuasive in the light of the actual construction facts.”30

25 L & C Europa Contracting, ASBCA No 52848, at para.12 (2004). 26 Santa Fe Inc, VABCA No 2,168, 87–3 BCA (CCH), para.21,104 and in 1984, No 1,943, 84–2 BCA (CCH), para.17,341; Fred A Arnold Inc, ASBCA No 20,150, 84–3 BCA (CCH), para.17,517; and Titan Mountain Estates Construction Corporation, ASBCA Nos 22,617, 22,930, 23,095, 23,118, 85–1 BCA (CCH), para.17,931. 27 JA Jones Construction Co, Eng BCA No 3,035, para.3,222 (1972). 28 The position may, however, be different in the case of contracts which impose on C an obligation to perform works in accordance with the schedule. This is the approach taken, for instance, by the Australian standard forms AS2124 and AS4000. See Cl.33.2. 29 Blackhawk Heating & Plumbing Co Inc. GSBCA No 2,432, 75–1 BCA (CCH), para.11,261, GSBCA 76–1 55,577. 30 Blackhawk Heating & Plumbing Co Inc. GSBCA No 2,432, 75–1 BCA (CCH), para.11,261 at 578.

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9–031 In this case, a further argument was run that, if the CA had dealt promptly with the application for an extension of time, it would not have had the as-built records to go on and would only have been able to assess the delay on the basis of the same schedule, which was submitted to the Board. It was argued that, for that reason, the Board should deal with the delay in relation to the original schedule, just as the CA would have done. The argument was not accepted. The Board observed: “Our review of this very complicated record does not persuade us that the [CA] was bound to grant the delay requests on the evidence then before him. We do concede, however, that the amount of delay granted can well depend on the point in time at which the delay claim is analysed and acted upon. [C] could be granted an extension of time because of delay in an apparently critical activity when later evidence might show the activity non-critical and the extension of time therefore unwarranted. The real point is that extension of time must be granted on the best evidence available. We had before us evidence as to how the contract was actually built, evidence which did not exist at the time [C] filed its claims. This evidence compelled us to find that the sixth floor ductwork delays were non-critical. [C] has come forward with nothing to persuade us of any error in such finding.”31

9–032 On balance, the approach taken by the Scottish courts in City Inn32 and by Judge Wilcox in Egger33 seems to have been in error. It is suggested that the reasoned approach taken in the English cases in Chestermount34, Malmaison35, Balfour Beatty v Lambeth36 and in Brompton Hospital37 and that of the US Courts of Claims and Boards of Contract Appeals is correct in holding that no schedule (whether a tender schedule, “contract” schedule, or otherwise) can safely be used as a baseline from which to measure the effect of a D’s time risk event, on progress, or on completion, in the face of persuasive evidence that it has not been followed, and has been impliedly, or, as it was with Egger, expressly acknowledged by C to have been superseded by C’s published revised working programme showing its true intent.

Standard form provisions 9–033 Whilst it is unusual to find detailed procedures for revision, updating and monitoring of programme information to be set down in a building contract, it is more common for it to be dealt with by way of specification. However, the degree to which attention is paid to revision, updating and monitoring will often depend, to a great extent, on what sanctions are available to D, or the CA in the event that the contract requirements for revision, updating and monitoring are not followed. 9–034 The standard forms of contract are diverse in their requirements for revision, updating, monitoring and reporting. PPC200038 refers to an update only to “reflect 31 Blackhawk Heating & Plumbing Co Inc GSBCA No 2,432, 75–1 BCA (CCH), para.11,261 at 578. 32 City Inn Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590, affirmed [2010] CSIH 68. 33 Skanska Construction UK Ltd v Egger (Barony) Ltd [2004] EWHC 1748 (TCC). 34 Balfour Beatty Building Ltd v Chestermount Properties Ltd (1993) 62 BLR 1. 35 Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 Con LR 32; (1999) CILL 1527. 36 Balfour Beatty Construction Ltd v The Mayor and Burgesses of The London Borough of Lambeth [2002] BLR 288. 37 Royal Brompton Hospital NHS Trust v Frederick A Hammond (No 1) [2000] EWHC 39 (TCC); (2001) 76 Con LR 148 (CA). 38 Cl.6.7.

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any agreed adjustment pursuant to these partnering terms”, a provision that is similar in effect to that in JCT80, JCT98 and JCT05, in which C is only required to reissue the schedule if an extension of time is awarded. Whilst C is required to notify the CA of any cause of delay to the progress of the works39, C is not required to update its schedule to demonstrate those changes of timing, but is only required to amend its schedule to illustrate the effect of the grant of an extension of time (which, strictly interpreted, could require no more than a change in the completion date)40. In relation to JCT80 and JCT98, the editors of Walker-Smith41 say that, whilst it may seem restrictive, the intention is that the schedule is related to the contract period and only if that period is extended, by the fixing of a later completion date, is an amendment of the schedule required. However, the questions of what could be the purpose of that and, if there is not a schedule, which demonstrates the current state of the work and C’s current intentions, how, when a D’s time risk event has occurred, the CA is supposed to ascertain that it has impacted the critical path and, hence, is likely to cause delay to completion, are left unanswered. 9–035 Revisions to sequence and delays to progress can shift activities, which were previously in float, to the critical path, and vice versa. In the US case of Sollitt v United States42, the court did not accept that a failure to grant an extension of time was an adequate reason for C not updating its schedule (and, as a result, being unable to prove its entitlement by reference to an updated schedule), saying: “The longest path of interrelated construction activities remains unchanged by a completion date time extension; it makes no difference whether the critical path is extending toward, for example, June 1, or July 1 of the following year. It is far more important to a critical path analysis to enter delays to individual construction activities on the updated CPM schedule than to enter overall time extensions, because these individual delays may have consequences that shift the critical path from one set of activities to another. As the Claims Court noted in Fortec, ‘delay encountered in completion of a non-critical item may make that item critical so that “every month, conceivably, the critical path would change”’43. When delays are entered into a CPM schedule, even without deserved time extensions, this court can analyze the effect of the delays on the critical path of the project. Submitting monthly updated CPM schedules was a contract requirement. [C] may not excuse its failure to enter delaying events on the CPM schedule updates because of [D’s] alleged failure to grant timely extensions based on those delays. If [C’s] updated CPM schedules are of limited use in meeting its burden of establishing the critical path of the project, [C] is now facing the consequences of its own performance of the contract requirement to provide updated CPM schedules.”

9–036 Consider also delays caused by the CA’s failure to provide drawings, instructions and details. In some forms of contract44, if these delays are to constitute the effect of a D’s time risk event and to be excusable, by definition, the information must be requested at a time not too distant from, nor too close to, the time at which C actually needs it, not to the time C might reasonably be expected to need it if everything went

39 JCT80 and JCT98 Cl.25.2.1.1, and JCT05 Cl.2.27.1. 40 See, for example, JCT05 Cl.2.9.2. 41 PJ Povey (ed), Walker-Smith on The Standard Forms of Building Contract (updated 2001, Knight’s Looseleaf Library) Conditions: Pt 1, section 5.3. 42 George Sollitt Construction Co v The United States, No 99–979 C (2005), 26. 43 Fortec Constructors v United States, 8 Cl Ct 490, 505 (1985), affirmed 804 F 2d 141 (Fed Cir 1986). 44 JCT80 Cl.25.4.6 and IFC84 Cl.2.4.7.

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to plan45. Of course, C’s actual need in this must usually be considered in light of the actual progress, not the theoretical progress, C might have made had it been proceeding efficiently46. Under JCT98, C’s obligation to give due warning of its need for further information or instructions has been modified to an obligation to request the necessary information only if C can reasonably anticipate that it will need it and it is reasonably practical to do so47. However, the effect, if any, of the lateness (or otherwise) of delivery to C of further information, drawings and details can be calculated only by reference to the state of the work at the time the information, drawings or details are issued. Thus, the absence of an obligation to incorporate the effects of the substance of notices of delay to progress in an updated schedule seems to be a serious omission from the JCT forms of contract, an omission that is probably at the root of the difficulties some commentators appear to find with the status of C’s schedule in these forms of contract. 9–037 Apart from the JCT forms, which require the schedule to be amended only for the purpose of illustrating a completion date compatible with any award of an extension of time, and A201/97 and A201/0748, which require C to revise the schedule at appropriate intervals, generally, the standard forms of contract seem to contemplate schedule revision only for the purposes of recovery and nothing is said expressly, or by implication about revision to take account of changes in assumptions, or information. However CE06 signals something of a departure from that norm in making a modest attempt to get to grips with the issue of time management49. This form defines the schedule and links payment to the progressed schedule, or “other schedule applicable”, whatever that might be. Amongst other things, this form requires C to: “co-ordinate any proposed changes to the project [schedule] by members of the supply chain and by any other project participants, discuss with and, if appropriate, or requested, meet with [D] to provide an explanation of any proposed changes and discuss how best to achieve any necessary [re-scheduling] so as not to affect the date, or dates for completion, or, with the written agreement of [D], to extend the date, or dates for completion. All amendments to the project [schedule] shall be circulated promptly to all other members of the project team and by them to all project participants who have still to carry out work and/or services. An actual, or proposed amendment to the project [schedule] showing a period for completion of the project extending beyond the date, or dates for completion will not, without [D’s] written agreement, be treated as expressly, or impliedly extending the date, or dates for completion.”50

9–038 Other forms require something less. The UK GC/Works series of government contracts for example, require C, amongst other things, to: “set out any [re-scheduling] proposals to ensure the completion of the works, or any section will be achieved by the relevant date for completion”.

45 London Borough of Merton v Stanley Hugh Leach Ltd (1985) 32 BLR 51. 46 See, for example, Leighton Contractors (Asia) Ltd v Stelux Holdings Ltd [2004] HKCFI 822 and Great Eastern Hotel Co Ltd v John Laing Construction Ltd [2005] EWHC 181 (TCC) at [184]. However, in ECC2 and ECC3 Cl.63.3, C’s rights to an extension of time and compensation are to be gauged by reference to the accepted programme which, in the absence of an updated programme, by virtue of Cl.11.2(1), is to be either the last accepted schedule, or the programme referred to in the contract data, whatever that is. A similar approach is taken by Cl.25 of C21/09. 47 See Cll.25.4.6.2 and 5.4.1. 48 Cl.3.10.1. 49 The contract particulars provide the option for omitting the time management requirements entirely. 50 Cl.4.19.1.

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9–039 Requirements to the same effect appear in FIDIC/Build9851 and the 2009 series of Irish government standard forms. These forms, however, do not require C to report on, or revise its programme for delays to progress that are not likely to affect completion. This seems to be a serious omission. Apart from problems of float and criticality, it is difficult, if not impossible, to calculate with any precision the damage, which flows from disruption to progress, if it cannot be demonstrated when it occurred and the effect it had on other activities. 9–040 ECC2 and ECC352 do not distinguish between a revision, an update and an impacted programme and use the same word “revise” to accommodate all three. Under these forms, C can revise its programme at any time, but it must also do so in accordance with the periods set down in the contract data and whenever instructed to do so. So far as concerns revisions, these forms call on C to revise and reissue its programme to show: C’s proposals for dealing with any delays to progress; C’s proposals for correcting notified defects; and any other changes C proposes to make to the accepted programme. 9–041 PCC92, PCC9853 and PCC0654 are unusual in being the only JCT contracts to contain provisions for monitoring and reviewing progress and determining whether, in the light of any review, additional resources are required to maintain progress. 9–042 In regard to schedule updating, amongst other things, CE06 requires C to: “update it as necessary to show any amendments to the sequencing of events, or the likely time for any events occurring prior to the delivery of the completed project and, in particular, identify key decision events which are likely to involve [D], or the [CA] during the project”.

9–043 The word “event” is undefined in this form and, in order to make useful sense of this provision, it should probably be interpreted as referable to activities on the working programme. 9–044 In FIDIC455, C is required to update the programme when instructed by the CA, if it should appear to the CA that the actual progress of the works does not conform with the programme to which consent has been given. Under Cl.12.3 of FIDIC/M&E87 and Cl.4.14 of FIDIC/DB95, the CA may also instruct C to revise the programme if the progress of the works does not conform to the programme. FIDIC/Build98 contains more stringent conditions than the other forms in this regard. At Cl.8.3, this form requires that: “if at any time the [CA] gives notice to [C] that a schedule fails [to the extent stated] to comply with the contract, or to be inconsistent with actual progress and [C’s] stated intention, [C] shall submit a revised schedule to the [CA].”

9–045 C is also required to update its programme when it is inconsistent with its progress, or when instructed to do so in Cl.8.3 of each of FIDIC/Build99, FIDIC/

51 52 53 54 55

Cl.8.6(b). Cl.32.1. Cl.2.5.5. Cl.2.19.4. Cl.14.2.

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DB99 and FIDIC/PD+B99. More proactively, ICE656 and ICE757 provide for C to be required to update the programme at any time the actual progress does not conform with the accepted programme. 9–046 ECC2 and ECC358 require C to update (using the verb revise) its programme to show: 1. 2.

the actual progress achieved on each operation; and the effect of progress upon the timing of the remaining work.

9–047 C21/0959, ICE/MW60 and ICE6DB61 also provide that C should update the programme if, when behind programme, it is instructed by the CA to do so. The 2009 edition of the Irish government standard forms of contract requires C to update its programme if: 1. 2.

it does not correspond with actual, or reasonably projected progress, or C’s obligations; and the CA directs C to submit a revised programme62.

9–048 An updated programme is required to show: 1. 2. 3.

actual progress; progress projected by C; and substantial completion by the earliest date possible.

9–049 There is thus no overriding obligation placed upon C under these forms to update its programme to show its intentions for the future conduct of the work, unless expressly directed to do so. 9–050 Under HK05, C is required regularly to update the programme “to reflect the current status of the progress of the works”63. On its face, that sounds reasonable; however, it also requires that “schedule update shall be based upon the logic, activities and durations shown on the previous schedule”64. Bearing in mind that any failure to start, or finish any activity on the date it was previously planned to be started, or finished will inevitably change the logic and the duration of activities remaining to be completed, it would appear that, in this sense, the contract is using the word “update” to mean no more than “programme monitoring” of the difference between progress achieved and the original programme as a target, which is patently inadequate for project control, unless the programme is not required to be a quality controlled, revised and updated CPM programme, which, in this form, it is not. 9–051 CE06 requires C to “prepare the [schedule] and monitor it as necessary”65, but without any indication of for what purpose, or how it is to be monitored. FIDIC/ DB95 and FIDIC/Build98 are unusual in stating, as a condition of contract, what is

56 57 58 59 60 61 62 63 64 65

Cl.14(4). Cl.14(2). Cl.32.1. Cl.25.8. Cl.4.3. Cl.14.4. See, for example, IGBW/09, Cl.4.9.3. Cl.3.2(1). Cl.3.2(3). Cl.4.19.1.

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required by way of progress monitoring. FIDIC/DB9566, for example, requires that each monthly report to the CA should be accompanied by amongst other things, “comparisons of actual and planned progress, with details of any aspects which may jeopardise the completion in accordance with the contract”.

9–052 FIDIC/Build9867, whilst requiring a similar analysis, phrases the contractual duties slightly differently. The 2009 edition of the Irish government standard forms (other than in IGMW/09) also requires, amongst other things, at monthly intervals: “a detailed description of progress of each stage of the works against [C’s] current [schedule].”68

9–053 What is meant by a “stage of the works”, in this form, is left undefined and, bearing in mind that the contract does not require the activities to be defined according to any particular work breakdown structure, or activity coding system, it could presumably be anything that C wanted it to be. 9–054 FIDIC/DB95 and FIDIC/Build98 are unusual in stating, as a condition of contract, what C is required to produce to accompany a report of progress achieved. FIDIC/DB9569, for example, requires that each monthly report to the CA should be accompanied by the following: “(a) (b) (c) (d) (e) (f)

photographs and detailed descriptions of progress, including each stage of design, procurement, manufacture, delivery to site, construction, erection, testing and commissioning; charts showing the status of construction documents, purchase, orders, manufacture and construction; for the manufacture of each main item of plant and materials, the name of manufacturer, manufacture location, percentage progress, and the actual, or expected dates of commencement of manufacture, [C’s] inspections, tests and delivery; records of personnel and [C’s] equipment on site; copies of quality assurance documents, test results and certificates of materials; safety statistics, including details of any hazardous incidents and activities relating to environmental aspects and public relations.”

9–055 FIDIC/Build9870, whilst requiring a similar level of detail, phrases the contractual duties slightly differently. In this form, C is required to produce a monthly report of progress achieved, accompanied by: “(a)

(b) (c)

66 67 68 69 70

charts and detailed descriptions of progress, including each stage of design (if any) [C’s] documents, procurement, manufacture, delivery to site, construction, erection and testing; and including these stages of work for each nominated sub-contractor; photographs showing the status of manufacture and of progress on site; for the manufacture of each item of plant and materials, the name of the manufacturer, manufacture location, percentage progress, and the actual, or expected dates of: (i) commencement of manufacture; (ii) [Cs] inspections; (iii) tests; and (iv) shipment and arrival at the site

Cl.4.15 (g). Cl.4.21(g). See for example, IGBW/09, Cl.4.10.2(1). Cl.4.15. Cl.4.21.

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(d) (e) (f )

the details described in sub-clause 6.1071; copies of quality assurance documents, test results and certificates of materials; safety statistics, including details of any hazardous incidents and activities relating to environmental aspects and public relations.”

9–056 Clause 4.10.2 of the 2009 edition of the Irish government standard forms of contract (other than in IGMW/09) prescribes the content of a monthly progress report to be accompanied by the following: “(2) the names of specialists and the off-site suppliers of the main works items, and progress and location of the design, manufacture, fabrication, delivery, installation, testing and commissioning of the works items; (3) details of [C’s] personnel and [C’s] things on the site; (4) status of preparation and review of [C’s] documents; (5) copies of quality assurance documents and test results and certificates; (6) details of when any instructions to be given by the [CA] will be required, and any that are outstanding; (7) details of when any works items, or other things to be given by [D] will be required, and any that are outstanding; (8) details of any delay events and compensation events that have occurred during the period, or are unresolved; (9) details of any accidents, injuries, hazardous incidents, environmental incidents, labour relations problems and public relations problems concerning, or affecting the works; (10) details of anything that might have an adverse effect on the execution of the works, the steps [C] is taking, or proposes to take to reduce those risks, and any steps that [C] proposes that [D], or [D’s] personnel take to reduce those risks; (11) anything else that [C] considers relevant to a progress report; (12) anything else relevant to a progress report that the [CA] directs.”

9–057 There is nothing here that requires such a report to be other than verbal, save that it is to be in a form “to be agreed by the [CA]”. The question of what is to happen if the form of report is not agreed is left open. Unlike the FIDIC forms, it is also apparent that there is nothing contained here that requires C to produce any resource, or productivity records, or to provide anything by way of evidence of the degree of progress which is alleged to have been achieved. 9–058 The UK government contracts GC/Works/1, GC/Works/1/98, GC/Works/1DB and GC/Works/1DB/98 make specific reference to meetings, at which C is required to give a written progress report72 including, amongst other things: describe the progress of the works by reference to the [schedule] and relevant instructions; specify all outstanding requests by C for drawings, levels, or other information; explain any new circumstances, arising since any previous progress meeting, which in his opinion have delayed, or may delay, completion of the works, or a section, or may increase the cost to D of the works, or a section, estimating any increase in such cost; refer to any request for an extension of time since the previous progress meeting; and set out any re-scheduling proposals to ensure that completion of the works, or any section will be achieved by the relevant date for completion. 71 Cl.6.10 requires C to provide to the CA at monthly intervals, a report of the number of each class of C’s personnel and of each type of C’s equipment on the site. 72 Cl.35(3).

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9–059 In some contract forms73, there are provisions for C to identify in advance the prospective effect on time and money of proposed change and to enter into a collateral contract to accommodate the effects of the change. In such circumstances, the ability to revise and update the schedule at regular intervals for the purposes of estimating the effects of a variation in progress is vital. Without such revision and updating, the degree of accuracy with which the effects of such proposed change can be gauged for the purpose of collateral agreements will be minimal. Similarly, it is only by keeping the schedule up to date that it is possible to record the effect on the schedule of the collateral agreement. 9–060 Under ECC2 and ECC374 and NEC/SF9975, for example, C is required, via an early warning mechanism, to provide an estimate of both the cost and time effect of each compensation event. The CA may accept, or negotiate on the estimate. Failure by C to submit the estimate entitles the CA to assess the compensation event. It is thus in C’s interest to provide “early warning” of the event as failure to do so permits the CA to make due allowance in its assessment for the saving, which could have been achieved had C complied with the early warning requirement. Upon agreement, or assessment of the event, the schedule is then updated to take account of the likely effect of the change.

Programme revision “When faced with the task of driving a car across an unfamiliar city with the help of a street plan, different drivers will tackle the problem in different ways. Some confident ones will set off immediately in a rough general direction and keep going without referring to the street plan until they think they are somewhere near their destination. Others will rule a straight line on the plan between the start and finish points, which by itself is of very limited use to the driver except that it may indicate some landmarks which are in the right direction. At the other extreme is the theorist who draws his straight line and then laboriously names every back street and alley along a route which is never wider than a few dozen yards from that line, shutting his mind to the fact that there will inevitably be one way streets, reconstructed areas where the map is out of date, bottlenecks of traffic and many other unforeseeable circumstances which will prevent him from following that route.The driver who strikes the right balance will recognise that there are numerous routes possible and many of them with virtually equal merit, and he will draw one which appears sensible, keeps reasonably close to the straight line, but follows the major roads and passes recognisable landmarks. He will accept that he is very likely to meet obstructions and will have to stop and re-plan sections of the route periodically.When a detour becomes necessary he will have to decide whether to get back onto his original general route, or to revise it and approach his destination from a different angle.The master schedule for a construction job should be treated like the original general route plotted by this last mentioned driver.”76

9–061 Revising a programme involves the reassessment of the data and assumptions upon which the programme was prepared and the reconsideration of method, sequence

73 For example, ECC2 and ECC3 Cl.62; JCT80 Cl.13A; JCT98 Cl.13.4.1.2 alternative A; and GC/Works/1, GC/Works/1/98, GC/Works/1DB and GC/Works/1DB/98 Cl.40(5). 74 Cl.62.1. 75 Cl.61.2. 76 PE Erskine-Murray, “Construction planning – mainly a question of how”, Occasional Paper No 2, Chartered Institute of Building, 1972.

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and resources so as to arrive at a realistic portrayal of the future intent than was previously planned. 9–062 Programmes often fall into disuse during construction projects, not necessarily because of inaccuracy in programming logic, but because of a failure to update the programme regularly to reflect actual progress and changed intent, but if the programme is to be of any further use, it must be updated regularly.

Illustration Facts: Weltz Company LLC (Weltz), the general contractor for the Stoneridge project, subcontracted with Bernhard-Thomas Building Systems LLC (BT) to complete the framing, carpentry, walls and roofing on the project. The sub-contract included clauses stating that the general contractor could terminate the sub-contractor for cause. The contract also required BT to “meet or better the durations established in the Contractor’s Schedule” and to “provide sufficient crews… to maintain or improve on the contractor’s Schedule”. The sub-contractor provided for a strict deadline for the completion of the various buildings included in the project. BT fell substantially behind schedule during the winter of 2003– 2004. In December 2004, BT’s workforce had considerably decreased and it fell further behind. By March 2005, BT had stopped paying the sub-contractors and requested that, if they wanted to be paid, they should consult with Weitz. On 8 March, BT began to load up a truck with its compressors and ladders and Weitz believed that BT was beginning to demobilise the site, therefore Weitz refused to let the truck leave, closed the gate to the construction site and called the police. Weitz then seized all of BT’s material and equipment on site. BT left the site and no further work was completed. Weitz officially terminated BT, which brought a breach of contract claim against Weitz in the district court. BT argued that it was improperly terminated and that the termination was a breach of the sub-contract because it was Weitz that did not comply with section 6.4 since Weitz never updated the schedule to reflect actual job progress. However, Weitz argued that it complied with section 6.4 by issuing short-term “look-ahead” schedules at meetings with its sub-contractors approximately every two weeks and asserting that the meetings and the two-week look-ahead schedules kept BT apprised of what was required. Held, that: (1) the lack of formally revised schedule to reflect actual job progress did not excuse BT from its obligations to meet the durations established in the updated contract schedule and that BT was substantially behind schedule and that termination was proper; (2) that BT had failed to keep up with the schedule and had failed to provide sufficient workforce; (3) that BT had failed to pay its own sub-subcontractors, which also breached a provision of the sub-contract and consequently BT’s claim for damages failed as well; (4) that Weitz was entitled to $1,287,604 in damages and that its termination of the sub-contractor was proper: Bernhard-Thomas Bldg Systems LLC v Weitz Co LLC77.

9–063 Notwithstanding the contract requirements and the recommendations of the SCL Protocol, contractors are often reluctant to revise their first schedule to account for changing circumstances. Indeed, it seems that some contractors sublet the production of their construction schedules to companies, or individuals who offer a “project planning” service, but who are simply not commissioned to revise the schedule. 77 (2011) US Dist LEXIS 91152 (D Conn 16 Aug 2011).

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Frequently, site management will adopt a method considered more “cost-effective”, but without reference to the schedule and without considering a revision of the issued schedule. However, if they are not properly revised, schedules soon become divorced from the way in which the project is actually being built and are then useless for control of the project, let alone as a basis for delay analysis78. It is thus important that the CA should be astute to ensure that C’s schedule is competently revised at regular intervals.

Illustration Facts: Ross Group Construction (Ross) was engaged by the United States Corps of Engineers to construct the KC-135 maintenance hangar at Tinker Air Force Base. Ross subcontracted performance of the structural concrete work to Riggs. Ross sent an unsigned proposed written subcontract agreement to Riggs, which made three alterations, including a stipulation that the subcontract work would proceed according to a mutually agreed construction schedule. Ross sent a proposed project work programme, which called for the work to begin in October 2009. On 6 October 2009, the parties agreed that programme. Ultimately, the sub-contract was not executed by the parties until 19 December 2009, two months after the initial start date had been agreed. Pursuant to that subcontract, Riggs executed a performance bond. After the subcontract was executed, Riggs was unable to begin the work because the employer had encountered site problems. Riggs notified Ross that it was relocating much of its business to the Arizona market and that the delay in the project start date was problematic for it. Approximately eight months after the initial start date, the project had still not begun and Riggs wrote to Ross requesting an additional payment of $144,166 to perform the subcontract. Ross replied that it would not issue a change order for additional costs due to delay because (under art.VIII of the sub-contract), the subcontractor’s sole remedy for delay was an extension of time. Riggs refused to proceed without a price increase. Riggs issued a notice of termination to Riggs and (contemporaneous with the notice) demanded that the surety complete Riggs’ scope of work under the subcontract. Riggs continued to deny that it was in default, because the site was never made available to commence work. After terminating the subcontractor, Ross executed two subcontract agreements with third parties. Ross filed a complaint alleging two claims for breach of contract and action on the performance bond. Riggs argued that, although it knew the schedule was delayed by at least two months at the time it signed the subcontract, it could refuse to agree to a revised schedule unless Ross agreed to additional compensation. Held, that generally, impossibility, or impracticability, was not created by an increased cost of performance and a party was not merely informed of the delays, but knew that the start date for the project was delayed by at least two months at the time it signed the subcontract. Furthermore, because the subcontract provided that the subcontractor would perform according to a “mutually agreeable construction schedule,” the subcontract clearly contemplated the possibility of a revised construction schedule. The parties had clearly contemplated that, at some point,

78 See, for example, Balfour Beatty Construction Ltd v The Mayor and Burgesses of The London Borough of Lambeth [2002] BLR 288; Royal Brompton Hospital NHS Trust v Frederick A Hammond [2000] EWHC 39 (TCC); The Gassman Corporation (1999) ASBCA Nos 44975 and 44976; Kemron Environmental Services Corp ASBCA 51536 (1999) and WG Yates & Sons Construction Co ASBCA Nos 49398, 49399 (2001).

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delays could affect work on the project. Riggs’ economic difficulties created no impossibility of performance that would render its performance excused. Ross’ motion for summary judgment was granted. If Corp vact requires a mutually agreed schedule in the event commencement of work is delayed, one party cannot prevent the obligation to agree upon another, revised schedule in order to escape its performance obligations. A mutually agreed schedule must come into existence, rather than the contract being abandoned. The sub-contractor’s refusal to agree upon a new schedule did not entitle Riggs to refuse to perform: Ross Group Construction Corp v Riggs Contracting Inc79.

9–064 In practice, what tends to happen is that either the revision is not carried out correctly, or is not carried out at all, and the schedule rapidly becomes out of date. Alternatively, progress monitoring is carried out, but not actually recorded, or the effect of the progress achieved is not carried through to an updated schedule, with the result that the implications are not fully understood and the appropriate action is not taken until it is too late. In any case, the schedule then loses credibility as a control tool and is left on the cabin wall to fade while the tradesmen muddle on with the job. 9–065 Some standard forms of contract actually inhibit revision of the programme80, AS212481 and AS400082, for example require that C shall not without reasonable cause depart from its programme, and C21/0383 and C21/0984 require C to carry out the design and construction work “in accordance with scheduled progress”. AS2124 also carries the requirement that “the furnishing of a construction [programme], or a further construction [programme] shall not relieve C of any obligations under the contract including the obligation to not, without reasonable cause, depart from an earlier construction [programme]”. Presumably “a reasonable cause” in this regard includes the effect of any D’s time risk events. It is unclear how these clauses can exert any control over progress in order to achieve completion on time, as all D can do when the unforeseeable occurs to render C’s programme impossible to perform is, rather unhelpfully, to terminate its contract for the breach85. Other forms make any revision conditional on the CA’s approval, MF/186 stating, for example, that “[C] shall not without the [CA’s] consent make any material alteration to the approved [schedule]”. Similar provisions, although not in identical terms, appear in the Australian forms AS212487 and AS400088, others, such as the JCT forms, do not contemplate revision of C’s intent and none give any guidance as to how, or for what purpose, such revision is to be made. 9–066 In simple projects to be carried out over a short period, it is unlikely that schedule revision will be necessary. On the other hand, in complex projects and

79 80 81 82 83 84 85 86 87 88

US Dist LEXIS 162600 (ND Okla, 14 November 2012). AS2124 and AS4000 for example contemplate the programme as a contract document. Cl.33.2. Cl.33.2. Cl.11. Cl.25. See Ch.11, “Mitigation, recovery and acceleration” at paras 11–189 to 11–213. Cl.14.4. Cl.33.2. Cl.33.2.

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particularly those major schemes that take many years to design and often even longer to construct, the need for schedule revision is inevitable and such projects cannot be properly controlled without it. In this connection, the CIOB Guide advises89 that: “The choices available will vary throughout the course of the project, as will the perception of importance of the criteria driving the decision-making process. For example, notwithstanding that at tender stage there may be a method provided for aggregating cost, or for identifying time allowances, in complex projects it is unlikely that full details of all the work actually to be performed will be available at that time and much may remain to be designed, or decided upon during the construction process. Accordingly, whatever choices are made and/or decisions taken at any moment, as to their contribution to effective time management, they can never be any better than the information upon which they are based. It follows that if, when decisions are made, the information on which they are based is sketchy and ill-defined, notwithstanding that the choices may be precisely described and the decisions recorded, they may turn out to be poor in the light of later and better information.”

9–067 The strategy for schedule review must take account of the development of the programme as better information becomes available and, as the project proceeds, the increasing density of the programme as it develops from initiation through the work on site to commissioning the completed project. Apart from impacting excusable events and their effects, which is dealt with elsewhere90, there are thus, effectively, three causes of the need for review and revision of a programme: The receipt of better information, which changes an assumption about what is required under the contract, or the way in which the work is to be performed91. The refinement of the programme to achieve a high density, fully resourced, short-term look ahead for monitoring purposes, including the reassessment of available resources and expected productivity92. The adjustment of contingencies and sequence to accommodate slippage and secure recovery and/or acceleration93. 9–068 As to managing the review and revision process, the CIOB Guide94 says that: “Reviewing and revising a schedule must be the result of a formalised management and governance procedure which encompasses the project team. Prior to commencing any review, the working schedule should be backed up so that the schedule prior to revision can be archived and the revised schedule can then be maintained as the new working schedule. During revision, an audit trail should be maintained of changes, and the reasons for them, and they should be recorded in an update of the planning method statement. On completion of all changes, the critical path should be recalculated and the resultant changes noted and recorded in the planning method statement and all parties notified accordingly.”

89 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), paras 2.3.1 to 2.3.2. 90 See Ch.14, “Cause and effect” and Ch.15, “Forensic programme analysis”, throughout. 91 This is not a change or variation, but a difference in knowledge about what is already contractually required, or the intent to carry it out. 92 For the purposes of project control. 93 For the purposes of risk management. 94 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell. 2010), para.4.2.3.

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Programme updating “The road to hell is paved with works-in-progress.”95

9–069 Updating a programme requires the conversion from planned data to as-built data and the correction of logic, which has not been followed. The CIOB Guide advises that96: “Updating is not progress monitoring nor is it schedule review. It is simply the addition of as-built data to the working schedule and the recalculation of the critical path in the light of progress actually achieved. The records of progress are used to add as-built start and finish dates to those activities that have achieved either status, and progress data to those started, but incomplete at the defined data date. An essential part of the update process is recalculation of the critical path following the addition of progress. The recalculation of the critical path identifies the start and finish of activities to be commenced, those that are then on the critical path and provides a cogent baseline against which the effect of intervening events can be calculated. The advantages of updating the schedule are that: the impact of change can be accurately predicted against the model, whether it be to an activity duration, sequence (logic), or resource (money, people, plant and materials); resource planning is rendered more reliable because past and current experience of productivity can be better used to forecast future trends; the effect of changes to construction activities can be better calculated with ‘what-if scenarios’, enabling the project team to choose the most efficient sequences; potential problems are identified much earlier with resulting increased time available to mitigate any risks, deal effectively with any issues from any ‘crystallised’ risks and thus improve the likelihood of maintaining the project’s time and resource targets; the cause and effect of disruption can more readily be identified and its consequences managed.”

9–070 It is only by updating a schedule that the effect of progress actually achieved in relation to the future plan can be gauged. 9–071 For the relative update period, a schedule update should reasonably include a minimum of: the actual start and finish date of any activities started or finished; the calculated remaining duration of any activities started, but not completed; where activities have started, but no progress has been made during the update period, an explanation for the absence of progress; where activities have been started, or completed in an order different from the planned sequence, the correct sequence and an explanation for the change in logic; where part of the works have been taken into partial possession, the activities, or parts of activities comprised in that possession; and, vitally a recalculation of the critical path and hence the completion date in the light of the progress achieved. 9–072 In the early days of computerised project programming, before sophisticated Windows-based software became available, programme logic normally would be corrected in the next update to reflect the actual sequence of activities on site. The reason 95 P Roth, New York Times (15 July 1979), Book Review. 96 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), para.4.4.

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for this was that, if the logic was not corrected, the update would report incorrect results. In some cases, an out-of-sequence report would prevent further processing of the programme97. However, many of the modern computerised project-planning software products permit the user to by-pass inconsistencies in the data. For example, some inconsistencies between actual sequences and planned sequences are usually ignored, any planned sequence in the past being superseded automatically by the as-built dates on which activities started, or finished and any incomplete activity being prioritised according to the user’s choice of progress override, or retained logic. The purpose of the selection of progress override, or retained logic is to permit the computer program to choose automatically between inconsistent progress and logic data, ignoring one or the other depending upon how it is set. But, as the US case of Sauer98 reveals, such facilities must be used with great care. This case concerned an appeal by C against the Board of Contract Appeals’ determination on the basis that the Board misconstrued the evidence of C’s programming expert by rejecting the expert’s baseline programme, which showed that C was on programme at 24 February 1987, and any delay had occurred after that date. In its original determination, the Board rehearsed that C’s expert had concluded that: “[C] was actually on schedule (as of 24 February 1987) because, according to [C], work associated with Modification Nos. 43, 51 and 67 had been completed prior to 24 February 1987. However, we concluded that the work for Modification Nos. 51 and 67 had not been completed by 24 February 1987, and that after [C’s] adjustments to the CPM data were factored into the analysis, [C] was 70 calendar days behind schedule as of 24 February 1987.”

9–073 In rejecting C’s appeal, the Board found that C’s expert had used Primavera P3 with “progress override” and, without correcting the logic for activities that had been executed out of sequence, had then selected as his baseline (from which to deduce the effect of delays) a schedule that did not record the state of the work at that time. The Board said: “The reference to [C’s expert’s] projected completion date arose from his testimony and his report. In examining the various scheduling reports, he concluded that [C] had erred in preparing the I-J reports. [C] used the Primavera Project Planner in its CPM updates which has a feature called ‘Progress Override’ that calculates earlier completion dates than the ‘Retained Logic’ feature of the software. His report states that ‘care must be exercised when using the Progress Override feature since illogical and impossible sequencing may result.’ Because [C] used Progress Override, the 1 June 1987 completion date shown on the 24 February 1987 I-J report was not accurate, according to [C’s expert]. The completion date projected by the 24 February 1987 data as corrected was 15 June 1987. This meant to the Board, in simple terms, that [C] reported progress that was exaggerated in its I-J reports, and nothing presented, or argued on reconsideration changes that simple conclusion. As we understand [C’s expert’s] report and testimony from our analysis thereof, even were we to allow for the adjustments related to Modification Nos. 51 and 67 for which [C] now argues, a fundamental premise of the expert opinion on which [C’s] delay case is based – that [C] was on schedule as of 24 February 1987 – would still be unsupportable. The lack of probative value of the report and testimony arising from the flaw inherent in its starting point makes it too unreliable to be redeemed by the proffered exhibits and [C’s] arguments. ‘Even uncontradicted opinion testimony is not conclusive if it is intrinsically nonpersuasive’99.

97 Sauer Inc, 98–2 BCA (CCH) para.30,067. 98 See also Joseph Sternberger v United States, 401 F 2d 1012, 1016 (Ct Cl.1968). 99 Sauer Inc, 98–2 BCA (CCH), para.30,067.

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Here, [C’s expert’s] report and testimony are ‘intrinsically nonpersuasive’ and contradicted. Accordingly, we decline to reopen the record as it would not change our conclusion that the opinion of [C’s] expert that [C] was excusably delayed by [D] was based on an analysis too flawed to be convincing. We find [C’s] arguments to be without merit.”100

9–074 Out-of-sequence working against a programme in which the logic is not corrected can produce absurd results. Take, for example, a simple sequence for a retaining wall construction, in which the excavation is planned to be completed in its entirety before the shuttering is started and some shuttering is planned to be started before, but can continue after, the reinforcement has been put in place. On the other hand, no concrete can be poured until both are finished. The programme would look like Figure 9.2. [Please refer to Figure 9.2] 9–075 The logic of this is that excavation is to start on the commencement date and continue for five weeks. When the excavation is completed, the shuttering is planned to start. One week after the shuttering has started, the reinforcement can be started. However, because of restrictions on space, one week must elapse after the excavation has been completed to allow clearing away, before the reinforcement can start. Shuttering cannot be finished until one week after the reinforcement is completed and both shuttering and reinforcement must be finished before concreting can start. As planned, reinforcement has one week of free float, but the completion of the excavation, shuttering and concreting on time is critical to completion on time, the critical path running through those three activities. [Please refer to Figures 9.3 to 9.5 inclusive] 9–076 For the purposes of this example, at the end of week seven a review of progress indicates that excavation is still in progress and still has two weeks’ work left to complete. However, it was found in practice that the commencement of shuttering did not have to wait until all of the excavation had finished before it could be started and was in fact started one week early, at the beginning of week five. Because the reinforcement could not commence until one week had elapsed after the completion of the excavations had been achieved and waste cleared away, at that time, the reinforcement had not started. 9–077 If updated with retained logic, the update would look like that in Figure 9.3. This illustrates that, notwithstanding that three weeks’ work of shuttering has already been carried out and there should be two weeks’ work remaining to complete it, there is still five weeks’ work remaining, which cannot be started until two weeks more have elapsed, at the beginning of week ten. This is patently incorrect. 9–078 If the same programme were to be updated using progress override, the result would be that illustrated in Figure 9.4. This is also incorrect, because it now illustrates that the shuttering is planned to be completed before the reinforcement is started, which is impossible. 9–079 The true position can only be ascertained by correcting the logic, which is illustrated at Figure 9.5. This demonstrates that, unless the resources on the shuttering are to be reduced to take up the time available, the work on that trade must cease for a period of five weeks. Whether that cessation is immediate (as shown), or another week of work is done followed by another week of work after completion of the reinforcement, is a matter of convenience.

100 JM Wickwire and S Ockman, “Use of critical path method on contract claims–2000”, (1999) The Construction Lawyer, Vol. 19, No 4.p.12.

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9–080 In a subsequent case, however, the court came to the conclusion that, not only was competent updating of C’s programme relevant, but that, by failing to update its schedule properly, the management contractor had in fact caused all the delay-related losses that were claimed against it. In Great Eastern Hotel101 D claimed £17m in losses against the management contractor for delayed completion of the refurbishment of a large hotel in London. In this case, Judge Wilcox observed that a competent management contractor requires knowledge of the exact status of the project on a regular basis, in order that they can ensure that D is kept fully apprised, and that the management contractor can deal with problems that have arisen, anticipate potential problems that may arise and make provision for the proper carrying out of the work. In finding that the management contractor’s failure to update its programme competently and report accurately the state of the works from time to time had caused all D’s losses, he said: “From November of 1997 [the management contractor] seriously unreported [sic] the delays on a monthly basis occurring to the project, against the master [programme]. The most flagrant example according to [D] occurred in December of 1998 when the recovery [programme] was presented. [The management contractor] reported a 20 weeks delay as against 34 weeks assessed by the experts. During October of 1997 to February of 1998 inclusively a five-month period, [the management contractor] reported monthly delays to the project of eight weeks only. Alterations were made to the updated copies of the master [programme], which had the effect of showing that no further critical delays were occurring during that reporting period, when in fact because of [the works contractor’s] performance the delay to the temporary roof and the consequential effects were much greater.”

9–081 Judge Wilcox then addressed how the management contractor had sought to interpret the information arising from its reporting systems: “No satisfactory explanation has been given on behalf of [the management contractor] as to why this institutionalised misreporting occurred. [The management contractor was] served by a professional planning team. The intended use made of the construction planning system as it evolved throughout the project seemingly to provide a transparent tool to accomplice [sic] a timely completion of the project, contrasted with its use by [the management contractor] as a source of selective data to mask delay and management incompetence. The [management contractor’s] project managers and their team were clearly privy to the use made of the data extracted from the [programmes], and presented to [D] as construction bench marks accomplished, or as the basis for forecasting the path and timing of the construction yet to be achieved to complete the project. Where the electronic [programme] is shown to have had its logic changed to the end of producing data capable of masking incompetence, the likelihood is that such sophisticated technical manipulation was unlikely to have been part of the detailed knowledge of those other than the dedicated professional planners. I accept that from time to time that professionals including the architects and the engineers voiced concerns about delay, and were aware that some delay was occurring, but I am satisfied that [the management contractor] failed to comply with their contractual obligation to report candidly and objectively as to the extent of the delay which was known to them, and to seek to assuage those concerns.”

9–082 The judge then added the following criticism: “Furthermore on the evidence before me I am driven to the conclusion that [the management contractor’s programmers] knew full well what they were doing when they permitted misleading delay information to be furnished to [D] and their advisors. They were all of them intelligent and experienced personnel who were well able to perceive the advantage

101 Great Eastern Hotel Co Ltd v John Laing Construction Ltd [2005] EWHC 181 (TCC).

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to [the management contractor] of suppressing the true extent of the delay for as long as that remained possible, and giving themselves the opportunity to ‘manage the way out of the difficulty’, or to safeguard the financial interests of [the management contractor] in my judgement there is no doubt that [the management contractor] did deliberately submit incorrect information on the delays and causes of delays.”

9–083 Finally, His Honour concluded as follows: “It translates into causal effect. I accept that had [the management contractor] accurately reported delays and faced up to them there would have been little difficulty reorganising the contract before trade contracts commenced, so that they were properly co-ordinated in accordance with the actual progress of the project. I accept that is one of the key skills which a [management contractor] is supposed to bring to a project, and that their failure to properly report progress meant that they were unable to do this, and [D] and the professional team were not in a position to push [the management contractor] to do so. In consequence [D] was exposed to the inevitable claims for prolongation, delay and disruption as a direct consequence of [the management contractor’s] breaches.”102

9–084 Most project-programming software products have the facility for “automatic updates”, the theory of which is that, once the data date is entered on the computer, an update executed “automatically” will then simply convert any as-planned data, which is chronologically earlier than the data date, to as-built data. Thus, if an activity was planned to be started and finished between 1 February and 15 March, an “automatic update” carried out at the end of March will show that the activity actually started on 1 February and actually finished on 15 March. This is so irrespective of what the progress records indicate simply because the update has not been carried out by reference to progress records, but as a product of a computerised process independent of the facts. Although it is not expressly stated as such, it appears that this is what may have happened in Sauer. 9–085 It is because it is so easy to falsify a progress update, and so time consuming to get it right, that the SCL Protocol recommends that detailed progress records should be maintained to support progress reports and programme updates. The CMS requires that progress records be kept electronically, in a way that will enable them to be used efficiently, and be handed over contemporaneously to D, the CA and other parties involved, to enable them to check schedule updates at regular intervals103. It is readily apparent that, without such contemporaneous data as to progress actually achieved, D is in some difficulty if C misreports progress as it did in Sauer and Great Eastern Hotel. 9–086 The most effective method of monitoring a network programme and measuring the effects of change is to ensure that the schedule is continuously updated after each progress review, by indicating by reference to the date of review (the data date), which activities have started, finished, or are in an estimable state of progress. In order to make sure that the results are reliable, C should check the progress records against the as-built data on the schedule and should not rely on any computerised “jagged line” progress monitoring, “progress override”, or “retained logic” update to by-pass inconsistencies. C should reassess de novo the logic of any shift in timing of planned activities, as well as any changed work so as to render progress and logic consistent and make the appropriate corrections before running any recalculation of the planned

102 Great Eastern Hotel Co Ltd v John Laing Construction Ltd [2005] EWHC 181 (TCC) at [193]–[227] 103 See App.2 to the 4th edn.

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completion date. If that demonstrates a projected overrun and C is not entitled to an extension of time to that extent then, before completing the update, C must reassess its resources and planned sequences to see if some improvement can be made by additional resources and re-scheduling to maintain the existing completion date. 9–087 Notwithstanding that a programme that is not updated is of little use in ascertaining C’s intent, or predicting the completion date, none of the standard forms contain any description of what an “update” should entail. 9–088 Traceability is also an important concept in updating a schedule. A good audit trail between the assumptions and method statements used to prepare the schedule and the resultant network diagram is essential if there is going to be any sort of control on the project when activities change, or milestones begin to move. In this regard, the CIOB Guide advises104: “For general purposes, there should be a direct correlation between the timing of the schedule update and the reporting cycle. In other words the data date of the updated schedule should match the reporting requirements. Legitimately, however, there may be an increase in updating frequency depending on the construction phase and/or criticality of the work in progress. During schedule update, an audit trail should be maintained of the source of the as-built data.”

Progress monitoring 9–089 The purpose of progress monitoring is to identify, at any precise date, whether progress actually achieved up until that date is in line with, is in advance of, or in arrears by comparison with the progress planned to be achieved. Necessarily, there must be a target against which the actual achievement can be measured. If the work actually being carried out is different in content and/or sequence from the planned, then any comparison between the progress achieved and the progress anticipated by the target will be virtually meaningless, simply because the two are incomparable105. Because, except in the simplest of projects, or for more than a very brief period, there is no reasonable likelihood of the initial schedule bearing much similarity with the work actually being carried out, progress monitoring against an initial schedule is only useful for simple short-term projects. For more complex projects, in order to produce a meaningful result, the baseline must change to record changes in content and sequence. The difficulty with progress monitoring is thus in identifying a valid target against which achievement is to be measured. In this regard, the CIOB Guide advises106: “Progress monitoring has the useful function of facilitating the detection of trends and facilitating high-level reporting. However, unless change is accommodated by re-baselining, in a complex project in which change is inevitable, it will be difficult, if not impossible to deduce anything meaningful from a comparison between the baseline and progress achieved. Progress monitoring without re-scheduling should not be adopted as the sole method of managing time in a complex project because it has two significant shortcomings:

104 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester Wiley Blackwell, 2010), paras 4.4.7 to 4.4.8. 105 See also, DB Giegerich, “Early warnings signs of troubled projects”, CDR. 02, 2002 AACE International Transactions, for an indication of what causes of problems should also be monitored. 106 Chartered Institute of Building, Guide to Good Practice in Management of Time in Complex Projects (Chichester Wiley Blackwell, 2010), paras 4.6.2 to 4.6.3.

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1. 2.

It cannot usually distinguish between critical and non-critical activities, or detect shift in criticality; and It is generally impossible to predict the effect of a discrete intervening event simply because it cannot distinguish between the effects of events occurring over the same time-frame, nor can it distinguish between the slippage caused by events at [C]’s risk and by those at [D]’s risk.”

9–090 Whichever method of monitoring is selected, it will involve an attempt to compare some planned progress of activity with actual progress as it occurs. This inevitably requires specific knowledge and judgement, and whether a schedule is produced as a simple bar chart, CMP network, cascade diagram, histogram, or graph, will dictate, to a large extent, the method, or methods of monitoring available. There is a number of accepted methods of progress monitoring, the most common methods being: target schedule; jagged line; bar chart; count the squares; milestone; cash-flow; earned value; and resource.

Target CPM programme monitoring 9–091 Target CPM schedule, or baseline monitoring as it is sometimes called, requires the comparison of two or more CPM schedules on a line-by-line basis with an indication of the measured difference between them. Because of the need to compare the schedules on an activity-by-activity basis, it cannot be carried out with any scheduling software that does not facilitate the viewing of more than one schedule in that format. 9–092 The method of comparison depends upon whether, or not changes have been made to content or sequence since the work was last monitored. If no changes in content or sequence have been made since the project commenced, the initial working schedule will be the target; otherwise, where changes have been made, the previously revised and updated working schedule, which represents the same work content and sequence as the work to be monitored, will be the target schedule. 9–093 The progressed programme must be prepared by: updating the working programme with progress achieved; and reprogramming it to a given data date and recalculating the critical path. 9–094 Progress monitoring is then achieved by comparing the target programme with the progressed programme. A number of different comparisons can be carried out by filtering and organising the programme to provide information upon such things as, but not limited to: activities; subcontracts and work packages; resources; costs; milestones;

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critical activities; critical path; milestones; and completion dates. 9–095 The CIOB Guide advises107: “This is the simplest and potentially most useful method of monitoring progress and compares what was formerly intended as the construction schedule against what actually happened. It is, typically, reported in a bar chart format along with a narrative to explain why the former planned intent was not achieved and why activities became delayed and prolonged. It is a useful method for mapping any departure from a previous intent and, if used in conjunction with filtering, can be used to illustrate such things as a shift in timing of subcontract works and change in the critical path. Because both the target and the working schedule are both critical path networks, this method also provides the necessary information for tracing the cause of departure and for identifying what can be done to correct it”.

9–096 This latter point is perhaps the most important of the benefits of target CPM schedule monitoring and it is a feature that is absent from all other methods of progress monitoring.

Resource monitoring “With resources the comparison can be project-wide, or more discretely focused upon a particular zone, element, or subcontractor if required. The only essential prerequisite is a target against which actual resources employed can be measured against the resources planned to be employed.”108

9–097 The most common measure for trades and resources is “man-hours”. Virtually all contractors and most consultants employ man-hour control systems and are familiar with the process of completing time sheets. If resource monitoring is to be at all effective, it needs to be carried out at the same time intervals as the monitoring of the quantity of work achieved. It is of little use monitoring man-hours spent on a weekly basis if the quantity of work completed is only measured monthly109 and there is no indication of the work the labour was performing, or the activities on which it was engaged. 9–098 It is common practice for C to be required to submit its proposed resource levels for manpower and plant, or equipment levels with its tender. Careful consideration and comparison of these resource predictions against those of the project team and other tenderers is intended to facilitate a better judgement of the ability of various tenderers to meet the schedule. 9–099 However, without such resources being attributed to defined activities with defined durations and productivity quotients, planned resource tables, alone, mean little. Actual resources need to be compared with the planned resources on an activityby-activity basis, in order to monitor progress and the effect upon it of unproductive

107 Projects 108 Projects 109

Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex (Chichester Wiley, Blackwell, 2010), paras 4.6.5.3 to 4.6.5.5. Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex (Chichester, Wiley Blackwell, 2010), para. 4.6.11.2. And often calendar monthly and at different times every month.

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working and, unless the planned resources are scheduled on an activity-by-activity basis, the comparison is impossible. 9–100 The recording and reporting against the working schedule of the expenditure of labour hours is one of the most difficult aspects of project control. Conventional time sheets are not particularly helpful. For the most part, they are designed to log an individual’s time and attendance details for costing and payroll purposes. On the other hand, project management is task driven. Here, the emphasis is on comparing actual hours spent on each activity against those budgeted to establish progress and estimated hours remaining to project completion. On the other hand, if data is stored on daily allocation data input sheets in a database against particular tasks, the data can be summarised and graphs can be produced to show actual resources used compared to those planned in relation to productivity planned and achieved and, by extrapolation, predict consequences110. 9–101 Time-control software111 can also be used to relate time sheets to tasks through a CPM schedule. Although it can be used free-standing with a chosen table of chargecodes, particular efficiencies can be gained if the time control system links directly to the scheduling software system. From the scheduling software, it pre-loads the time sheet with appropriate project activities, against which time can be logged. The schedule is then automatically updated through importing the time sheet report into the scheduling software. 9–102 The facility for comparing productivity achieved over differing resources is particularly important where repetitive activities, or sequences are planned, such as the floor construction in a tower block, or welding of pipework, or the fitting out of kitchens and bathrooms in an apartment block. The early recognition of a departure from the planned productivity and/or resources is vital if the progress of the works is to be adequately controlled. In this regard, the CIOB Guide advises112: “Trends in productivity achieved derived from the as-built productivity data should be used to verify the planned schedule for the remainder of those activities. If a discrepancy is found between what is planned to be achieved and what, by reference to the progress records, can be proved to be achievable, changes should be made to the working schedule to accommodate the discrepancy. In relation to an activity such as piling, for example, each rig’s productivity should be analysed (in order to ascertain the optimum pile-cycle achievable and the effect of any prior departures from it). The demonstrable, achieved productivity cycle can then be used to verify the activity durations planned for the remaining piling works. If it should be found that the productivity that has been achieved is insufficient to maintain the schedule, changes can then be made in good time to the planned resources and/ or to the sequence of the works in order to bring the work back on schedule. One of the advantages of this repetitive sequence review is that in the case of an occurrence which disrupts productivity, the bench-mark proven optimum productivity will be the best possible baseline from which to calculate the effects of the disruptive event.”

9–103 Accordingly, the facility for comparing productivity achieved over differing resources is particularly useful where C alleges it has suffered additional costs as a 110 For worked examples and case studies see K Pickavance, “The Use of Forensic Animations in the Resolution of Complex Disruption Claims – A Case Study” PMICOS Annual Conference, Chicago, 2008. 111 Time Control 6 by HMS Software Inc, for example http://timecontrol.com (accessed 2 August 2010). 112 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), paras 4.2.4.4 to 4.2.4.6.

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result of disruption to progress, or when it alleges that it has accelerated the progress of the work. Changes in the resources applied to the project in relation to differences in achievement are a primary consideration. It is then important to be able to demonstrate that, in the event of a delaying factor, C’s resources, or lack of them, were not a cause, or principal cause, of the delay to progress and, secondly, where acceleration has been alleged, it must be demonstrated that the reasonable resources have been increased beyond the resources planned at the time of tender to achieve enhanced productivity. 9–104 However, although resource monitoring can help to identify what has caused a departure from required progress, as with other monitoring techniques (other than CPM target schedule monitoring), resource monitoring alone will not assist in the detection of the effect upon the critical path, or paths, or what can reasonably be done to recover from a predicted delay to the date for completion.

Cash flow monitoring “This method of progress monitoring relies entirely on financial values. Essentially, the method requires a planned cumulative cash-flow forecast and the cumulative certified value and/or costs to date. Monitoring is achieved by a comparison between the two, usually by cumulative graph against valuation dates. The departure between the lines of the graph, if any, will indicate by reference to the valuation dates, approximately when the departure occurred (but not the cause of it) and, by extrapolation to the predicted total value at a predicted expenditure rate, can give an indication of when completion is likely to be achieved and the works’ ultimate value.”113

9–105 As a balancing check, it is very useful to monitor cash flow in arrears. The Department of Health114 (and others) have analysed a large number of building projects and concluded that payment and progress are in fact very closely linked and that, by monitoring payment carefully, reasonably accurate predictions of both final cost and/or final duration can be made115. GC/Works/1, for example, contains a table of “S” curve values for projects of value over £5.5m at the end of the conditions of contract. Simple computer schedules are available that forecast costs and duration using this technique. However, all projects are different and care must be taken in applying the data. 9–106 In effect, what has been demonstrated is that cash flow on virtually all construction projects follows an “S” curve. The steepness or flatness of the “S” curve will depend to a great extent on the nature of the project and the time over which it is to be executed, but the weekly cash flow at the beginning and end of the project will be significantly lower proportionately than in the middle phases of a project. This is principally because the works at the beginning (typically comprising ground works) and the works at the end (typically comprising decoration and finishings in building projects, or testing and commissioning on engineering projects) involve less material cost and fewer trades, whereas the middle of a project tends to involve expensive materials and equipment and several different trades working in parallel with each other.

113 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), para.4.9.6.2. 114 The UK government department which is responsible for the procurement of public hospital buildings. 115 The Central Unit on Purchasing Guidance No 7, Project Sponsorship: Planning and Progress Monitoring (1996, Central Unit on Purchasing, HM Treasury).

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9–107 Cash flow monitoring can be a useful indicator of whether a contractor’s alleged delay has in fact occurred and what or when a significant change occurred to its earning capacity, or cash flow. For example, in a simple project, in which, from the beginning, there had been many changes to the tendered design, all of which were alleged by C to have caused it delay to the works, an examination of C’s planned cash flow against its actual cash flow demonstrated that many of the changes at the beginning of the project had improved C’s progress, rather than delayed it in relation to what it had intended to achieve. It also showed that a significant change in performance in cash flow occurred, not when the works were in the ground as alleged, but when the roof trusses failed to arrive on time. [Please refer to Figure 9.6] 9–108 In Figure 9.6, the grey line indicates C’s cash flow, retrospectively calculated from its bar chart schedule and priced schedule of works; the black line represents C’s actual cash flow based on certified values backdated to the time of valuation. From this, it can be seen that C’s actual income was far greater than it expected until week 13, when its certified value reduced below the norm. It can also be seen from this that, as soon as the roof trusses arrived, C’s certified value picked up again, but by then its cash flow had dropped to well below its intended target116. 9–109 There has been some enthusiasm from the UK construction industry for the stage payment chart adopted in GC/Works/1117. However, whilst a predetermined “S” curve valuation certainly simplifies payment valuation, that simplification also carries with it the risk to D of excessive, or to C of inadequate, reimbursement and also, apparently, the commencement of the limitation period for actions on unpaid amounts118. Several construction commentators have remarked upon the inaccuracy of this approach to modelling cash flow and it would be imprudent to contract on the basis of an “S” curve without first comparing the tender–schedule related expenditure and anticipated value, with the contract provisions119. 9–110 Notwithstanding the problems of a predetermined cash-related “S” curve, it is of value in simple projects in that it gives the analyst a retrospective point of reference for a closer and deeper investigation into an area of relevance. This can be a useful technique and helps to avoid the time and cost of an overall investigation into many issues that are unlikely to be relevant to delaying factors. However, as with other monitoring techniques (other than CPM target schedule monitoring), cash flow monitoring cannot be used in complex projects to identify what has caused a departure from required spend, the effect upon the critical path, or paths, or what can reasonably be done to recover from a predicted delay to the date for completion or overspend.

Cost monitoring 9–111 In order to monitor cost, C must establish accurate cost-accounting and costcoding techniques that relate costs to schedule activities. C must also identify the labour 116 The lower level of payment in relation to the anticipated. 117 The PSA studied over 200 projects to produce the data given in tabulated form at the back of the form. 118 See, for example, in Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] EWCA Civ 814 per Dyson LJ at [76]. 119 P H McGowan, R Malcolm, W Horner, D Jones and P A Thompson, Allocation and Evaluation of Risk in Construction Contracts (London: Chartered Institute of Building, 1992). Occasional Paper No 52 of the Chartered Institute of Building.

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and material costs specific to any extra work, using a unique cost code for the extra work. The actual and earned costs of performing identifiable segments of the work must be tracked and defined quantitatively as they are incurred. Time sheets that identify in detail the quantity and nature of the work should be kept by the relevant workers and reviewed by their supervisors. 9–112 Given the small net profit margins within which most contractors operate, their common inability to identify, with a reasonable degree of accuracy, where, when and why cost overruns have occurred, is difficult to understand. Many contractors, by comparing actual costs against those in the tender, are able to identify that the project cost more than they tendered for. However, they are much less successful at identifying specific events that may have led to that increase, and accurately establishing specific costs for particular events. This cause–effect link between cause and loss must be shown if the losses, or expenses are to be accurately calculated and recovered. 9–113 It is one thing for the work to be absorbing more labour than was anticipated and to be costing more than it was calculated it should, but if the content of the work does not vary as with the cost and resource, it is more likely to be the result of contractor culpability than any externally imposed disrupting event. So, for example, it is entirely foreseeable that, if the work done proves defective and has to be taken down and done again, or if the workforce does not put in the working hours planned120, then the costs will rise and the resources to complete will increase, whilst the work content remains virtually unchanged. 9–114 Of course, it is fair to say that, in many cases of claims based on actual costs, as opposed to tender costs, C is not merely trying to recover the damages that have accrued as a result of compensable change, but also the deleterious effect on its financial stability of bad management or a poor tender. It has been fairly common in times of economic depression for contractors to “buy” their work by tendering at or below cost and then to try to recover the economically disastrous results of that, by what has come to be known as a “total cost” claim121. The essence of a total cost claim is that the contractor claims that its tender cost is £x, its costs to complete the contract (including profits) were £y, and therefore its recoverable damages for the effects of whatever it can muster by way of a claim are £y – £x. The essential fault in the logic of such a proposition is not difficult to demonstrate, because the argument fails to take account of the effects on cost of C’s own culpability, for which it is not entitled to recover its losses. 9–115 An effective cost-control system not only permits the establishment of realistic budgets for discrete work activities, but also provides for monitoring actual costs for these activities. This monitoring is accomplished by measuring actual cost and manhour expenditures against budget and identifying variances so that corrective action may be taken when required. In most contracting organisations, project scheduling and cost control systems tend to be separately prepared and maintained and are therefore seldom interrelated. A comparison of actual against budgeted costs-to-date is essentially all that these cost-control systems normally report. However, this information alone is not particularly useful and can sometimes be misleading. The accurate assessment of actual performance hinges not only on the comparison of planned with actual expenditure, but also on a comparison of planned with actual payment and planned with actual progress. However, as with other monitoring techniques (other than CPM target 120 See K Pickavance, Using advanced forensic animations to resolve complex disruption claims, (Society of Construction Law, 2007). 121 See Ch. 19, “Total time, total loss and global claim”, paras 19–021 to 19–039.

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schedule monitoring), cost monitoring alone will not identify what has caused a departure from required spend, the effect upon the critical path, or paths, or what can reasonably be done to recover from a predicted delay to the date for completion or overspend.

Earned value monitoring “Earned value management is a more sophisticated method of progress monitoring by value than cash-flow monitoring as it attributes actual rather than notional values to the activities either by reference to the financial value or the labour/plant-resource value, or both. Provided that the productivity achieved in the valuation period is as precisely calculated, this can give a useful illustration of the progress achieved against what was planned to be achieved by reference to the earned value of the comparable work As with all other project-monitoring processes, if a different work content, or sequence of working from that planned is adopted, a meaningful comparison between planned and actual will be difficult, if not impossible.”122

9–116 The introduction of a measure of work done, or productivity, into the cost monitoring model will facilitate “earned value” monitoring for ascertaining the relationship between the planned expenditure and planned work in relation to the actual work done, the costs expended and the value earned for a given period. This concept provides the basis for forecasting of costs-to-complete, along with the additional information necessary for early recognition of job-related financial problems. 9–117 Earned value requires the allocation of project costs on an activity-by-activity on the baseline schedule. The costed baseline schedule is the incremental “planned value” producing the performance measurement baseline. As work is accomplished, it is “earned” using the same selected budget term. Earned value compared with planned value provides a comparison of work accomplished and valued against work planned. A variance from the cost plan can then easily be recognised as either a time or a cost problem. A popular concept in the United States, and increasingly popular in the United Kingdom, EVA is required by some government agencies and is increasingly stipulated by employers with major construction portfolios, or managing large programmes of work as their preferred progress-monitoring technique. 9–118 However, with all other monitoring techniques (other than CPM target schedule monitoring), EVA cannot identify what has caused a departure from required progress, the effect upon the critical path, or paths, or what can reasonably be done to recover from a predicted delay to the date for completion or overspend.

Milestone monitoring 9–119 Many developers and CAs lack the ability to make qualitative assessment of the effects of a revised, updated and impacted CPM schedule, even if it were to be provided to them. Neither do they often have sufficient knowledge and judgement in order to undertake the quantitative progress analysis necessary to gauge whether or not progress on site is as it should be. For them the identification of particular events that are planned to be started or completed by defined dates provides a simple method of identifying whether the works are proceeding according to plan. Obviously, the more milestones 122 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) para.4.5.10.

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related to key dates there are, the more precise will be the possibility of monitoring progress and, conversely, the more activities to take place between milestones there are, the more difficult it will be to identify problems and take action before it is too late. It is therefore rare that a milestone progress-monitoring system is used in isolation. 9–120 On the other hand, some form of quantifiable measure of the state of completion of the work content, no matter how subjective123, is as important as a control in relation to cash flow and resource monitoring for gauging productivity. The CIOB Guide advises that124: “Milestone monitoring is usually used in conjunction with other monitoring processes to identify predicted slippage in significant events, or deliverables. Whilst it is self-evident that a milestone can never be partly achieved, unless closely defined, there may be a variety of opinion upon whether or not achievement has in fact been accomplished by a given date. In order to achieve a common understanding, milestone definitions should be established setting out what the state of the works must be in order for the milestone to be deemed completed. It should also be logically connected to the last activity to be completed before the milestone can be considered to have been achieved. Provided they are logically linked to the appropriate predecessor and successor activities, when properly reviewed, revised updated and impacted the schedule will reflect the dates upon which the milestones are likely to be achieved.”

9–121 Typically, milestones may be adopted to mark such things as: completion of user requirements and sign-offs; design stages and interfaces; applications for licences and permissions; key dates for “topping-out”, “weather-proof”, or “power-on” or other contract requirements; a payment stage; a sectional completion date; the start and finish of a subcontractor’s work or phase of work; delivery and removal of key personnel, facilities, equipment, or other important resources; handovers and interfaces with key suppliers, statutory authorities and third parties; and significant dates for receipt, or delivery of approvals and information. 9–122 Whilst, depending on the nature of the milestone, this method of monitoring might identify an effect upon the critical path, or paths, as with all other monitoring techniques (other than CPM target schedule monitoring), milestone monitoring cannot identify what has caused a departure from required progress, nor what can reasonably be done to recover from a predicted delay to the date for completion, or overspend.

Bar chart monitoring 9–123 Monitoring a bar chart schedule is usually done by blocking in the proportion of the activity bar corresponding to the portion of that activity assessed as achieved at

123 Whilst it is always advisable to quantify work done, objectively, by re-measurement, a subjective appraisal is better than nothing at all. 124 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester, Wiley Blackwell, 2010), para.4.6.8.

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the given time: see Figure 9.7. However, it is difficult to draw any conclusions from the progress of a discrete activity in relation to the progress of all the other activities and the effect on completion. 9–124 Such results must always be treated with caution, for in practice the start and completion of certain activities will have more bearing than others on the time needed to complete the schedule. Consequently, it is imperative that, where any activities are in greater delay than that shown by the overall progress assessment, they are examined in detail to determine whether their delay is critical and should take precedence. 9–125 For instance, a progress check on a typical construction bar chart schedule might show that overall progress is on time. A closer examination may reveal that all activities except two are on time. For example, “external works” (which is found to be not-critical at that point in time) is four weeks ahead, and “below ground drainage” (which is critical since its non-completion will prevent any further activity on the completion of the structure) is four weeks behind. In this case, it would be quite wrong to have reported that progress was on target because the four-week delay on the drain would be likely to have a critical bearing on the progress of the works. Any progress statement should therefore record that, although overall progress was on time, there was a four-week delay on “below ground drainage” and this delay was potentially critical to completion. [Please refer to Figure 9.7] 9–126 From such basic monitoring processes, it is also possible to prepare such other graphic devices as histograms and graphs, in order to assist in interpretation of the information. 9–127 As with all other monitoring techniques (other than CPM target schedule monitoring), bar chart monitoring cannot identify what has caused a departure from required progress, the effect it might have on the critical path, or paths, or what can reasonably be done to recover from a predicted delay to the date for completion, or overspend.

Count the squares chart monitoring 9–128 Traditional bar charts, where the timing for each activity is fixed without any apparent float, suffer the inherent weakness of often being interpreted to mean either that every activity is critical, or none other than the last to be finished on the completion date is critical. This means that, once delay is registered on any activity, irrespective of the actual effect on succeeding activities, it can be interpreted either to register a commensurate delay on the schedule completion date, or to have no effect at all, depending upon interpretation. Either may, or may not, be correct in fact. However, if such charts are monitored by the activity time unit method, otherwise known as count the squares (CTS)125 method, some of this weakness is avoided because all delays and advancements are averaged out. An extreme delay, or advancement on any one activity does not then on its own determine the overall progress of the project as a whole. 9–129 The method entails evaluating each activity in terms of the number of time units, or “squares”, taken for completion and then, based upon the simple concept of

125 The Central Unit on Purchasing Guidance No 7, Project Sponsorship: Planning and Progress (1996, Central Unit on Purchasing, HM Treasury).

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counting the number of squares occupied by each bar chart activity, the degree of completion is monitored against the target schedule. It is immaterial what each activity is describing, the only proviso is that the schedule is reproduced in the form of a bar chart and related to time. Although traditionally done by hand, this “counting” can of course be more easily done by computer. 9–130 Progress monitoring by CTS can be applied to all levels of schedule from the simplest to the most complex form of network-analysis schedule, provided the schedules are drawn as, or can be converted into, bar charts, as shown in Figure 9.8. 9–131 The CTS technique is neither unusual nor original and has been used by various project managers, management consultants, contractors and clerks of works for many years as a means of assessing progress. However126, the CIOB Guide warns that127: “The CTS method is essentially a bar chart monitoring tool in which the information provided is only a superficial indication of progress as a whole, rather than specific to a particular activity. In CTS, the work content of the activities is taken to be the same, unless subjectively ‘weighted’ and this tends to produce results which are likely to be unreliable.”

9–132 The method provides for the summation of the scheduled activities to be presented both numerically and graphically in the form of a planned progress curve, so that, at any point in time throughout the schedule period, a planned target is readily identifiable, against which the actual progress can be recorded and measured according to whether it is ahead of or behind its target. [Please refer to Figure 9.8] 9–133 In the example at Figure 9.8, given that there are 179 squares to the asplanned schedule, 76 squares have been used up to week 21 representing 42% complete, whereas by that date, 98 squares were planned to have been used and the work to have been 54% complete. It is thus possible to deduce from this that, unless there has been a substantial increase in the work content, the work is in delay and is likely to overrun if corrective action is not taken. 9–134 The CTS method is essentially a schedule-monitoring tool where the information provided is only a superficial indication of progress as a whole, rather than specific to a particular activity. As with any method of monitoring, it must be assumed, first, that a realistic and acceptable schedule has been presented and, secondly, that the regular assessments of progress on individual activities are made by experienced observers. 9–135 As with all other monitoring techniques (other than CPM target schedule monitoring), CTS chart monitoring cannot identify what has caused a departure from required progress, the effect it might have on the critical path, or paths, or what can reasonably be done to recover from a predicted delay to the date for completion or overspend.

Jagged line monitoring “[T]his method is sometimes used with static schedules in which the activity dates remain constant and progress is marked up against the original intent. In this format, it is useless for time management. In order to function as a useful tool the effect of progress achieved

126 Project Sponsorship: Planning and Progress (1986, Central Unit on Purchasing, HM Treasury). 127 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), para.4.6.6.2.

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must always be identified by re-scheduling to a data date, with all work done to the left and all work to be done, to the right of the data date.” 128

9–136 This method is similar to the target schedule, except that it compares the difference between the planned and actual progress on one schedule by drawing a vertical line that is jagged as and where progress deviates from that planned (usually commencing at the top of the page on the data date/progress date). 9–137 Some scheduling software products129 permit the user to maintain the scheduled start and finish dates for activities independent of their status at the data date by manipulating the date line around the planned dates. This is sometimes put forward by contractors as an “updated” schedule. However, whilst it may identify which activities have started, finished, or are in progress, it does not do so in relation to a data date, which enables C, D and the CA to identify the effect of progress actually achieved on the schedule. The danger of relying on such potentially misleading schedule monitoring passed off as an “update” is illustrated below. 9–138 Taking the same example as was used to illustrate the significance of progress override and retained logic130, on the basis of the progress made by week seven, a “jagged line” progress report would look like that illustrated at Figure 9.9. This demonstrates that notwithstanding that the data date is the end of week seven, the excavation (which still has two weeks’ work to complete) is scheduled to be completed by week five (sic!); the shuttering (which started early and is partially complete) is still planned to be completed as planned, by week ten; the reinforcement (which should have started, but has not) is still planned to be completed as planned, by week nine; and the concrete pour is still planned to be completed as planned, at the end of week 15. [Please refer to Figures 9.9 and 9.10] 9–139 For ease of reference, a competent update at the end of week seven, based upon the same review of progress as that for Figure 9.5, is repeated at Figure 9.10. This indicates that excavation is still in progress and still has two weeks’ work left to complete. On the other hand, shuttering did not have to wait until excavation had finished before it could be started and was in fact started one week early, at the beginning of week five and, at the end of week seven, has only two weeks’ work left to complete. However, because reinforcement cannot commence until one week has elapsed after the completion of the excavation, it cannot in fact start until week 11 (at the earliest). Because concrete pour cannot start until reinforcement is finished and, taking into account the absorption of the planned float at the end of week seven, concrete pour could not be expected to start until week 18. This update then predicts that completion is not likely to be achieved on time as shown on the jagged line progress monitoring report, but in fact, in the absence of recovery measures, is likely to be five weeks late. 9–140 As can be observed from Figures 9.9 and 9.10, the jagged line progress monitoring report of the type facilitated by such software products as PowerProjectTM, fails to illustrate the effect on completion of C’s progress and, whilst it may seem incredible, some CAs accept such progress monitoring reports as contractually compliant updates. Perhaps misleadingly, the guide to that particular software merely

128 Projects 129 130

Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex (Chichester: Wiley Blackwell, 2010), para.4.6.6.2. See, for example, PowerProject™. See para.9–074.

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observes in respect of this that “the chart report date and the progress status of segments give a visual check on the current condition of the schedule. Uncompleted segments before the report date are running late”. The software has an option to “move completed segments” and part-completed segments of the schedule but, incredibly, advises the user to: “Deselect this option if you have out of sequence progress, if segments are completed ahead of schedule and/or take longer to complete than planned. The project end date is less likely to be affected, although you may have to complete some tasks in less time than allotted on the schedule because they are running late.”131

9–141 It would perhaps have been more straightforward to say that a progress report using the jagged line progress monitoring method, which does not move the segments of the schedule consistent with progress actually achieved, gives no indication of the planned start, or completion date for future activities. Neither does it illustrate the logical effect of progress achieved in relation to planned completion nor can it be relied upon as a tool for planning the works, or for identifying the effect on the schedule of excusable events. Although C’s planner and D’s expert in Egger agreed that schedules prepared in this way were unsuitable for CPM impact analysis, Judge Wilcox concluded that this important point was not relevant132. 9–142 Because, by its nature, it does not project the effect of delayed progress, jagged line monitoring will not identify predicted delay to the date for completion. Also, as with other monitoring techniques (other than CPM target schedule monitoring), jagged line monitoring alone will not identify what has caused a departure from required progress, the effect upon the critical path, or paths, or what can reasonably be done to recover from a predicted delay to the date for completion. 9–143 Accordingly, the jagged line method of illustration serves no useful purpose within an effective time model, save to provide a visual illustration of progress achieved in relation to a target, on an activity-by-activity basis, independent of any consequential effect. The consequential effects of such progress must of course be analysed if the updated schedule is to be of any use to the project team in managing time.

Work content monitoring “[E]ven in a repetitive operation it proved difficult to control the actual performance against the plan. Variations were seemingly minor. The real difficulty, however, was in the amount of effort needed to verify the situation. By the time some idea of the progress on a particular activity was recorded and analysed, very little work remained for that activity.”133

9–144 Work content monitoring is probably the most vital area to which attention should be given by C to maintain on-site control when change occurs. Bearing in mind that very little proceeds according to plan on a building site and it is not unusual to get several hundred variations during the course of a project, identifying what has affected any given work content, and hence its cost and time effects, is an

131 ASTA Developments Ltd, PowerProject™. 132 Skanska Construction UK Ltd v Egger (Barony) Ltd [2004] EWHC 1748 (TCC) at [423]. 133 A Jaafari, “Criticisms of CPM for Project Planning Analysis” (1984) Journal of Construction Engineering and Management, Proceedings of The American Society of Civil Engineers, 110.2.222.

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area that, somewhat surprisingly, has hitherto received little attention by contractors and commentators. 9–145 The problem is essentially this: during the course of the tendering process, C takes on board the price of work packages often related to a standard method of measurement, which in turn is priceable by reference to pricing books, or internal schedules that dictate, for the purposes of competitive tendering, the cost of specifically quantifiable units of work in terms of plant, labour and materials. If any of that changes, then, in order to recover the cost and avoid time penalties, it is important that C promptly identifies the nature and extent of the difference and monitors the effects of that change on site at the time the change is put into effect. 9–146 There is a significant difference between the data necessary to record the change in time and effect of carrying out that work and that necessary to record the change in cost of a given item of work. For example, for the purpose of cost calculation, it may be sufficient merely to show that particular personnel and plant were on the site for a given period and to ascertain their charge-out rate. On the other hand, for the purpose of work content and time monitoring, it will be necessary to show: 1. 2. 3. 4. 5. 6.

where they were working; what they were working on; whether they were carrying out additional work; why the work was being carried out; what work had to be completed before the work was started; and what work could not start until the work was partially, or fully, completed.

9–147 Monitoring the effects of change on the site is much easier to say than to do because it is not always immediately obvious to the people on site that what has been measured and priced for is not entirely what they are being required to carry out. What is needed for the workforce is a source guide for the application of labour and materials referable to elements in the tender documents, so that, in the event that work or materials are put into use for an element which is not a referable element in the tender documents, it is immediately flagged as additional work, which requires a notice to the CA of the change. C can then properly recover its costs and relief from liquidated damages for the additional time it may take C to complete. 9–148 If configured to do so, such a database could conceivably cross-refer, or hyperlink electronically to CVIs134, and other contract correspondence, drawings, details, and even to clauses of the conditions of contract and their interpretation. In hypermedia databases, they could also be cross-referred to sound and vision recordings of verbal instructions and video films of samples. Once embarked upon, the only practical limitation is the imagination of the database programmer. 9–149 However, it should not be beyond the competence of a reasonable computer programmer to write a database schedule in such a way that, whatever was measured in the bills of quantities135, could appear as an elemental “pick list”, together with other relational database “pick lists” for the plant, materials and labour on site. This would easily facilitate the recording and comparison of time-and-material-related resources to work executed on the site136. Input on a daily basis in the form of time records will then immediately notify areas of change where, in order properly to log the time and 134 Confirmation of verbal instruction. 135 Or, in a plans and specifications project, in C’s take-off of quantities. 136 Business Numbers Ltd has produced, in prototype, a customised version of MS Access.

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materials of the project, it is necessary to make an addition to the pick list137. Such a data-recording process conducted via a small, hand-held computing device, which communicates by wireless technology to the company’s server, would produce not only an excellent early-warning device for contractors enabling early notice to be given to the CA, but would also facilitate the production of evidence to support claims for lost productivity and delay to progress, which should reduce the incidence of dispute.

Progress reporting 9–150 In order to follow the most effective and economic route to complete the project, C must know what progress has actually been achieved, activity by activity, and be able to identify and resolve any potential delaying factors, which might inhibit progress. For most projects, with hundreds or thousands of activities, the key to success is to identify the critical activities and to apply attention and resources to these in sufficient time to prevent their delaying the overall schedule. However, reporting on the originally planned critical path alone can be misleading. For most purposes, the CA wants to know how much, or what percentage, of the activity is complete relative to the original work content. At its simplest, the technique involves listing all activities in progress and their expected duration and, as progress is made, making an assessment of the percentage completion of the duration of each activity. Overall progress can then be estimated by taking the total completed progress as a percentage of the total duration required. 9–151 The system is simplistic in that it takes no account of the relative importance of each activity, the work content or resource productivity. In other words, the normally reported measurement is simply of time and not of content or applied resources. It has been argued that, if the activities selected are representative, and there are sufficient activities, then these caveats would not be important138. However, the limitations and other indicators need to be clearly understood if the results are to be used for the purpose of deciding on appropriate action. 9–152 To manage time effectively a realistic calculation of work in progress is necessary based upon resources and productivity. So, for example, where the period planned to be required for an activity is calculated by the formula: Duration =

Quantity of work Productivity quotient × Quantity of resource

the remaining duration can equally be calculated by the same formula, once the quantity of work done and productivity quotient have been reassessed in the light of the work done and the resources made available to date. 9–153 Notwithstanding that hard-copy reports may be required by the contract, the SCL Protocol139 and the CMS140 recommend that the data used to prepare the update and the updated schedule should both be distributed electronically, so that

137 Time Control 4. 138 The Central Unit on Purchasing Guidance No 7, Project Sponsorship: Planning and Progress Monitoring (1986, Central Unit on Purchasing, HM Treasury). 139 Society of Construction Law, Delay and Disruption Protocol (2002). 140 See App. 2 to the 4th edn.

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the recipients can prepare whatever reports they require from their own analysis of the data. 9–154 Additionally, the SCL Protocol contains guidance notes for the production of progress records, but does not require them to be prepared electronically, or distributed contemporaneously. On the other hand, the CMS recognises that it is of little use to D in managing its risks for C to collect data, which is inaccessible to D unless there is a claim, and then only accessible to the degree C permits. Thus, the CMS renders the electronic preparation and contemporaneous distribution of competent, usable progress records a condition of the contract for the breach of which liquidated damages are available. 9–155 The purpose of requiring C to prepare and to deliver them to the persons listed in the CMS first programme141 is to keep informed those who should properly be informed about progress and to facilitate contemporaneous checking of the as-built record against the as-planned schedule. It is thus important that, whatever is specified for the period of supply of historical records, is reasonable in regard to the nature and content of the work to be monitored, and the period of schedule updates anticipated. 9–156 At the fourth programme142, the CMS acknowledges that the progress records are C’s records of the resources applied, the start and finish dates and work done from time to time for each of the activities referred to in the as-planned programme, and that they are to be fully cross-referenced to the activities to which they relate. 9–157 In broad terms, C is required to submit to the risk manager, as an editable electronic file of specified software, sufficient information as may be reasonably necessary to enable it to evaluate the progress achieved in relation to planned progress from time to time, together with the name and status of the person responsible for compiling and/or disseminating the information. 9–158 From the date of commencement of the works indicated on the as-planned schedule and at the intervals indicated in the contract, C is required to publish electronically comprehensive progress records and diaries for each day of the reporting period in a form that is either a database record or capable of being imported into a database143. Whilst C is responsible for the day-to-day management and control of the project and can be expected to look at the detail of actual progress achieved, compared with the as-planned schedule, it is difficult to see how D could manage its risks effectively without contemporaneous access to data of that quality. 9–159 If D does not want to manage its risks effectively, then it will not generally require so much detail, except in the event of a change requiring action, but it will generally need to be confident in its understanding of the overall progress at any given time and of the rate of progress. These two factors will be compared against the plan and give D information to judge how realistic the forecast completion date is. 9–160 If D and the CA are to rely upon reports prepared by C, then the following checklist of criteria upon which an updating report may be considered will provide a basis for regular monitoring of C’s progress: 1. the figures in the charts should be the same as those on the graphs; 2. the figures should be consistent with the previous report; 3. differences should be explained;

141 See App. 2 of the 4th edn. 142 See App. 2 of the 4th edn. 143 See App. 2 of the 4th edn.

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4. items discussed in one month should be followed through and no questions should be left unanswered; 5. explanations of delay, or progress gained should be given and explained logically; 6. the report should be comprehensive; 7. it should give adequate information on all aspects of the plan and the progress; 8. the plan logic should appear practical; 9. the timings for D’s activities should be clearly spelt out and realistic; 10. the report should not be full of complex bar charts, or networks which are meaningful only to the expert144; 11. the terms should be absolutely clear and understood by all parties145; 12. charts should be supported by tabular data; and finally 13. there should be a single page with the key facts summarised in a few lines.

Visual aids 9–161 Visual aids can be classified in four different ways, in increasing degree of probative value146: descriptive; introductory; illustrative; and evidential. 9–162 Descriptive visualisations do not rely upon facts, but upon a “story” based upon the facts. To that extent, they can reasonably be conceived as the visual equivalent of a written narrative. Because descriptive visualisations are not factually driven, they should always be treated with extreme caution. 9–163 Introductory visualisations can be used in order to provide a summary of the principal issues to be demonstrated by the evidence. These ought properly to be factually correct, so far as they go, but may legitimately omit those parts of the facts that cannot be illustrated, or are perhaps inconvenient to the party putting them forward. Generally, they comprise comparative illustrations used to set the scene of the actual evidence to follow. 9–164 Illustrative visualisations are used to describe something that could not normally be seen, such as the effect of a design/construction defect, or the outbreak of a fire, or a collapse. As these events cannot normally be seen, they may be met with competitive visualisations, which appear equally plausible, but are different. 9–165 An evidential visualisation simply provides a different way of looking at evidence already available from primary documentation. It has to be factually accurate and be developed by audit trail from primary evidence. This is a useful technique for illustrating the effect of primary data and, when animated, can usefully be used to analyse complex delay and disruption scenarios147. 144 This may be a warning that the report is trying to confuse, or that it does not fully meet D’s requirements. 145 If in doubt, ask the construction manager to prepare a definition of the key terms specifically for the project. 146 A Burr and K Pickavance, “The use of visualisations in case presentation and evidence” (2010) 26 Const LJ 1, 3–17. 147 K Pickavance, “The Use of Forensic Animations in the Resolution of Complex Disruption Claims – A Case Study. PMICOS Annual Conference, Chicago, 2008; and see also K Pickavance,

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9–166 The type of progress reports required should also be stated in the scheduling clauses. Narratives, trend reports, float reports, progress “S” curves showing planned early start, planned late start and actual progress, resource curves, photographs, identification of problem areas, and so on, are all items normally included in monthly progress reports. 9–167 Where a computer has been used to produce the schedule, the print-outs, especially when produced in a convenient A4 size, can be used directly for monitoring purposes. The activity lists can have additional columns added so that, for each progress review, the targets and achievements can be recorded thereon. Where a cascade diagram has been produced, this can be used in a similar way and may obviate the need for separate tables and graphs. 9–168 An effective and important accessory to the graphical presentation is a set of assessment tables recording schedule activities and their durations. Typically, the report should record work achieved, resources used and activity time unit values relative to planned and achieved. Since schedule charts are usually large, these tables are useful both for recording the progress on site before transfer to the schedule chart and for providing a record of the work done and resources used on each activity. 9–169 Histograms are charts based upon vertical bars, where the height of the bar is relative to the quantity of resources it represents. They are a useful adjunct to bar charts and can be used to illustrate the build-up of labour resources per period, or the expected value of work performed. 9–170 Figure 9.11 illustrates a simple bar chart in which the squares occupied by the bars are assumed to carry equally proportionate resources or value. By the simple technique of adding up the squares occupied by the bars in each vertical column, the total resources or value per period can be represented by a histogram, as illustrated in Figure 9.12. [Please refer to Figures 9.11 and 9.12] 9–171 This can be computer generated from a spreadsheet program, as in Figure 9.5, or cumulative totals per period can be represented by graph for the as-planned and the as-built schedule. The result can be useful in giving an indication of the comparative resourcing of the project. 9–172 Technically, a graph is simply an illustration of the way in which one quantity varies in relation to another. A common use in construction is to measure the value of work certified in relation to the period of time expired. Prior to the advancement of electronically prepared graphs from spreadsheets, graphs were essentially twodimensional, with a vertical and horizontal axis. However, it is now not difficult to generate graphs with three and four dimensions. The point at which the variables intersect in a Cartesian graph is referred to as the “origin”. Typically, in a construction project, the origin would be marked zero in time and value and would represent the commencement of the project. 9–173 Graphs of the sort shown above are generally used to illustrate the cumulative value, or quantity, as opposed to the unit period value, or quantity depicted by a histogram. The histograms illustrated above and below could equally well be illustrated as a graph of this type, as in Figure 9.13. 9–174 Graphs can be very useful in identifying where in a sequence of work actual progress by value of work done differs from the planned progress. Comparing this with

Using advanced forensic animations to resolve complex disruption claims (Society of Construction Law, 2007).

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the resources applied can give some indication as to whether the labour applied bears the same proportionate relationship to the value of work done as it was intended to do at tender stage. An increase in labour without a proportionate increase in value may indicate a loss in productivity and give an indication as to the period that should be looked at in more detail through other methods. [Please refer to Figure 9.2] 9–175 As a result of the advances made in the use of electronic spreadsheets over the last ten years or so, the production of automatic illustrations in various formats of the relationship of data has become commonplace.

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CHAPTER 10

Project control

Introduction Forecasting delay The SCL Protocol The Change Management Supplements The management information structure Definitions The programme Electronic submittals Progress records Key dates Roles and relationships Managing the effect of change First step – programme update Second step – programme review for better information Third step – recovery Potential fourth step – event impacting Potential fifth step – acceleration Calculating time-related compensation Identifying the cost of project controls Redress for a failure to comply

10–001 10–005 10–014 10–045 10–048 10–049 10–050 10–056 10–058 10–059 10–061 10–071 10–080 10–081 10–082 10–084 10–085 10–089 10–090 10–091

Introduction “‘Would you tell me, please, which way I ought to go from here?’ ‘That depends a good deal on where you want to get to,’ said the Cat.‘I don’t much care where – ’ said Alice.‘Then it doesn’t matter which way you go,’ said the Cat. ‘ – so long as I get somewhere,’ Alice added as an explanation. ‘Oh, you are sure to do that,’ said the Cat, ‘if you only walk long enough’.”1

10–001 In its widest sense, project control involves everything to do with the construction process from preparing the contract documents, through document and information flow, quality control, valuation, cash flow and certification, progress, delay, recovery and acceleration. However, in connection with delay and disruption, project 1 L Carroll, Alice’s Adventures in Wonderland (London: Macmillan, 1897), Ch.6, “Pig and Pepper”.

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control centres on those last four subjects: progress, delay, recovery and acceleration and, in its widest sense, the management of the risk of change2. 10–002 Time and change are inseparable. It is fatuous to suggest that change over time can be avoided, or that it is unnecessary, or uneconomic, or unwieldy to facilitate the management of the risk of change within the contractual framework. It has been rightly observed3 that, in some contracts, D tries to have the best of both worlds by “placing all the usual time obligations on [C] yet dictating and monopolising the management of its schedule”. However, it is because D cannot transfer the risks of expressly instructed, or implied change at any price, and cannot transfer most of the other risks at a commercially realistic price, that projects entered into in such a mindset are often doomed from the start4. It is also clear that, without adequate controls and sanctions for failure to comply with requirements for the provision of records, provision of a competent schedule and for the revision and updating of the schedule as a result of slippage and other changes, the limited role played by the CA, D, or C on D’s behalf, in the management of the effects of change is unlikely to be successful. We now live in a different society from that envisaged by the administrative structure of the standard forms of contract currently available5. Improvements in technology, moreover, have now made it both possible and eminently sensible for contractors to manage the construction process more scientifically than they have ever been able to before, and for developers to take a structured and disciplined approach to the management of their own risks of change6. 10–003 Essentially, the choices available for effective project control and risk management are twofold: transfer D’s risk to C so that the risk resides with the party with the tools to manage it, or give access to D of C’s management information so that D then has the tools to manage the risk it retains. The former can never work, simply because it is commercially unrealistic. The latter is considered to be the only realistic method of achieving effective project control in construction projects. 10–004 In Mirant v Ove Arup, the late HH Judge Toulmin CMG QC reflected upon the benefits of effective project control by reference to a CPM network, saying7: “The critical path can be defined as ‘the sequence of activities through a project network from start to finish, the sum of whose durations determine the overall project duration’. Duration is only the shortest time if activities on the critical path are carried out in the shortest time. There may be more than one critical path. It is important to look at activities at or near the critical path to understand their potential impact on the Project. Windows analysis, reviewing the course of a project month by month, provides an excellent form of analysis to inform those controlling the project what action they need to take to prevent delay to the project.

2 For an example of project control, recovery and acceleration in practice, see JW Delaney and RR Ott, “A case study in the effective use of schedule control techniques – recovery schedules” (2004) CM E-Journal, Construction Management Association of America. 3 See, for example, J Dorter, “Delay and Disruption” (2001) 17 BCL 372, 373. 4 See, for example, Masons v W D King [2003] EWHC 3124 (TCC). 5 See Ch.7, “Planning and programming”, at para.7–179. 6 See K Pickavance, “Renaissance” (2003) 19 Const LJ 131. 7 Mirant Asia-Pacific Construction (Hong Kong) Ltd v Ove Arup & Partners International Ltd [2007] EWHC 918 (TCC), [565]–[570].

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Without such analysis those controlling the project may think they know what activities are on the critical path but it may well appear after a critical path analysis that they were mistaken.”

Forecasting delay 10–005 Whilst it is recognised by the SCL Protocol that it is to everyone’s benefit that computerised updated CPM networks are used to forecast the impact of change on completion, many developers, CAs and project managers have difficulty in interpreting CPM schedules and prefer something more simplistic, even if less accurate. The use of monitoring techniques such as: cash flow8, cost9, earned value10 and CTS11 that produce data, which can be translated into cumulative graphs and which, by extrapolation of the past into the future, can be used to illustrate trends are all useful for this purpose. 10–006 Without CPM-scheduling techniques, the forecast of delay is based on the concept that, if only half as much work as planned has been achieved, the whole task will take twice as long. This productivity ratio is true for any straight-line progression. By applying this concept and multiplying by the original schedule length on an “S”curve progression, the extrapolation will give a lengthened completion time reflecting the tailing-off of the “S”-curve. 10–007 The line of actual progress can be projected forward to indicate the approximate completion date, assuming that the current performance to date is maintained. It is unwise, however, to make too early a projection, until such time as a consistent trend can be depicted and any irregularities between progress periods have been averaged out. It is sometimes thought that unless 20% of the work has been carried out, it is not possible to make a meaningful forecast12. 10–008 However, whichever method of non-CPM project monitoring is used, in practice it must be remembered that forecasting the future based on current performance is always going to be an approximation, simply because, amongst other things, non-CPM methods cannot take account of criticality. Notwithstanding that the activities being progressed may be in float, any sharp fluctuations in the average rate of progress will nonetheless affect the predicted completion in non-CPM based monitoring methods. Consequently, such predictions should be recalculated after each review of progress and modified appropriately to reflect any special circumstances, which have had, or will have, a significant bearing on the baseline being used as the target and the average rate of progress. 10–009 The dynamic CPM time model13, on the other hand, takes account of progress and changes in the critical path, and is the method most likely to produce an output, which bears some resemblance to reality. In particular, by using such a model it is often possible to demonstrate potential changes in construction logic that, if put into effect, could reduce, or eradicate the likely effects of delay to progress in critical activities. 8 See Ch.9, “Revising, updating, monitoring and reporting”, at para.9–105. 9 See Ch.9 at para.9–111. 10 See Ch.9 at para.9–116. 11 See Ch.9 at para.9–128. 12 Consider, also, the effect of acceleration and voluntary re-sequencing. See Ch.11, “Mitigation, recovery and acceleration”, throughout. 13 See Ch.7, “Planning and programming”, at para.7–025.

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10–010 The effective use of CPM scheduling, as a tool to minimise the effect of delaying events, depends upon the existence of a reasonable baseline, regularly revised and updated, against which to compare progress achieved14. 10–011 The working schedule should be used as a tool to project and forecast the consequences of changes to the works, thereby providing management with the tool for control of the works. By impacting the intervening events on the CPM working schedule as and when they arise, the parties can see the likely effect of them on the future conduct of the works, notify the CA of the likely consequences of the event at that time and take corrective action. On the other hand, a failure to do this will often mean that the works fall out of control and will often result in delayed completion, the need for a retrospective delay analysis and dispute. 10–012 It is on the basis of the results of this analysis that C can support its notice of delay15, if any, and predict the effect, if any, on completion. The narrative in the notice of delay can demonstrate the schedule as planned before the event, the schedule “A” that would result if the new activities took no time at all to complete and the new working schedule, which demonstrates the effect of the new activity on short-term progress and logically calculates the likely effects on completion of the new activity. 10–013 Such revision, impacting and updating requires the continuous attention of a scheduler, the commitment and full understanding of the planning team and the availability of a computer to provide a schedule update after each progress revision. However, once done, even if there has not been appropriate recognition of the rights and liabilities of the parties during the course of the works, it is very easy for an analyst to take that set of schedules and produce, at very little cost, a composite reasoned claim for an extension of time and compensation based on the master schedules, together with audit trails for supporting information. In the US case of Sollitt v US16, the court observed: “When delays are entered into a CPM schedule, even without deserved time extensions, this court can analyze the effect of the delays on the critical path of the project.”

From this it can be seen how important it is to update and revise the schedule regularly throughout the course of a project and to produce good quality documentary evidence to support it. The SCL Protocol and the CMS require C not only to update its schedule at minimum regular calendar periods, but also to review and revise the schedule and impact the effect of D’s time risk events upon the updated and revised schedule as they occur17.

The SCL Protocol “The Protocol came into being because there was widespread dissatisfaction from all interest groups with how delay and disruption was being treated both during the course of the works and after the contract was completed, if there was a dispute. The Protocol purports to provide a scheme for the management of change which is fair and balanced as between the differing interests of the parties to the contract and which is clear and comprehensive.”18 14 See Ch.9, “Revising, updating, monitoring and reporting”, at paras 9–091 to 9–096. 15 See Ch.5, “Notices, claims and early warnings”. 16 George Sollitt Construction Co v The United States, No 99–979 C (2005), 26. 17 See Ch.9, “Revising, updating, monitoring and reporting”, throughout. 18 See “SCL Delay and Disruption Protocol: A Curate’s Egg”, http://www.rics.org.uk (accessed July 2010).

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10–014 At a meeting of the Society of Construction Law, in London, a group of members got together to discuss the way delay issues were handled by both the parties and the courts, with a view to making the resolution of delay-related disputes more predictable. About two years later, in October 2002, the Delay and Disruption Protocol19 was published: the thesis propounded was that, if the impact of events could be impacted upon a CPM network schedule, which was up to date at that time, the effect could be calculated and measured instead of guessed; further, this would be greatly to the advantage of everyone concerned with delay in construction contracts. 10–015 On its face, the Protocol is a guidance note for a transparent procedure for dealing with the award of additional time and/or money to the party not at risk for the effects of change. However, it is much more than that. It is also a guidance note for project control and the management of the effects of change. At once, through recognition that the schedule is a dynamic tool for the management of time, it advises that the likely effect of a delay to progress, or disruption arising out of both voluntary and unplanned change, can be calculated and, once the likely effects are recognised, the risk of subsequent delay to key dates can be minimised (or overcome entirely) by revisiting the planning and resource assumptions and re-scheduling to overcome the effects of that change. 10–016 Although, initially, it was drafted with a view to simplifying delay-related disputes and retrospective delay analysis, the SCL Protocol is primarily a guide to the way the drafters think that projects should be controlled and delay and disruption ought to be managed, contemporaneously. The purpose of managing the effects of delay to progress contemporaneously in this regard is to: 1. 2. 3. 4. 5. 6. 7. 8. 9.

give D advance notice of the likelihood of delay to the date for completion; provide speedy, contemporaneous resolution of issues of delay and extensions of time; remove the guesswork in certifying extensions of time; provide speedy, contemporaneous resolution of compensation for loss and expense; remove the guesswork in identifying periods of reimbursable time loss; improve C’s cash flow during the construction period; create a structure and discipline by which the implementation of efforts to avoid delay to progress and to completion can be monitored; avoid the retrospective production of claims; and reduce the likelihood of disputes.

10–017 It is not always appreciated that, conceptually, there are three distinct aspects to the Protocol. That which appears to be most commonly referred to is the guidance in section four. This concerns methods of retrospective analysis available to the parties if the recommendations of the Protocol for contemporaneous analysis of cause and effect have not been followed during the course of the work. That section is intended to be applicable to every form of contract, whether bespoke, or standard, in all jurisdictions. Accordingly, that section does not deal with contracts, or the law, it simply deals with methods of retrospective analysis of cause and effect available to the parties when the recommendations of the Protocol (as to contemporaneous analysis) either have not been followed or have failed20. 19 The Society of Construction Law, “Delay and Disruption Protocol” (October 2002). 20 The fact that that is the part that has received most attention is a sad reflection upon the state of the construction industry. See K Pickavance, Managing the Risk of Delayed Completion in the 21st Century: The CIOB Research (Society of Construction Law, 2009).

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10–018 The second aspect of risk management dealt with by the Protocol is the measurement of interim extensions of time during the course of the works. For this, the Protocol recommends the use of time impact analysis21 to monitor the effects of progress and to demonstrate contemporaneously entitlement to an extension of time22. That guidance is relevant to any form of contract, which provides for relief from liquidated damages for the likely effect of an excusable event on completion. It applies to most of the JCT forms and several other forms available in the United Kingdom and some available in other countries (but not all the standard forms), and is applicable to all interim calculations of extensions of time. However, in order to put this part into practice under the standard forms of contract currently available, C has actively to wish to do it; it cannot be controlled by D, or the CA under the standard forms of contract as they currently stand. 10–019 Finally, the Protocol contains guidance and makes recommendations for contemporaneous project control. That part of the Protocol is not on all fours with the provisions of any of the standard forms of contract currently available23, and it cannot be put into practice without substantial amendments being made to standard forms by the use of the CMS, or amendments of a similar scope and like kind24. The provisions of the CMS are an essential prerequisite of the process of contemporaneous change management under the 1998 series of JCT contracts and provide for D to have the information and power to manage the consequences of its own risks. 10–020 The Protocol recognises that C’s schedule is the key to change management25. That is underlined by Core Guidance Note 1 which, under the heading of “schedule and records”, states: “To reduce the number of disputes relating to delay, [C] should prepare and the CA should accept a properly prepared schedule showing the manner and sequence in which [C] plans to carry out the works. The schedule should be updated to record actual progress and any extensions of time granted. If this is done, then the schedule can be used as a tool for managing change, determining extensions of time and periods of time for which compensation may be due. Contracting parties should also reach a clear agreement on the type of records that should be kept (see Guidance Section 2).”

The Protocol requires C to prepare a schedule, using the critical path method, showing the manner and sequence in which it plans to carry out the works, on computerised planning software, which will react dynamically to change, and submit this to the CA,

21 Also referred to as a “modelled/additive/multiple base” analysis, see American Association of Cost Engineers International, Forensic Schedule Analysis, Recommended Practice No 29R-03 (2009) and see Ch.15, “Forensic programme analysis” at paras 15–149 to 15–163. 22 See also, Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) which, at Pt 4, also recommends this as the method of keeping control of change. In Forensic Schedule Analysis, AACE International Recommended Practice No 29R-03, (2009) the method is referred to as an “additive/modelled/multiple base” analysis. 23 See Ch.6, “Extensions of time and time at large”, at paras 6–044 to 6–068. 24 The provisions of the ECC2 and ECC3 forms of contract are consistent with the recommendations of the Society of Construction Law, Delay and Disruption Protocol (2002), as far as they go. They provide for C to warn D, from time to time, of what its risk is but, they fail to require C to provide a competent CPM network, or progress records, to be delivered to the CA electronically and contemporaneously and, although calling for updates, and inviting revision, they do not provide redress if the provisions are not followed. It also omits to provide D with any significant control over the management of its risks. 25 Guidance Section 2.

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in electronic format, for acceptance26. The details of how this is to be achieved in practice is now the subject of Pt 3 of the CIOB Guide27. 10–021 The Protocol recognises that, because it is impossible, at the outset, to get all the information necessary to plan the whole of the works to an adequate level, the schedule must be prepared in differing degrees of density and regularly reviewed and updated28. 10–022 It is expressly recommended that the schedule should be a CPM network designed to react dynamically to change and the Protocol recommends that the schedule should avoid the use of total float constraints, open ends, negative lags, or mandatory constraints which are likely to prevent the critical path from being accurately identified and inhibit the schedule from adequately reflecting the effect of progress (or lack of it) on the likely completion date29. The reason for this is the underlying assumption that, unless both parties to the contract can identify relatively accurately what progress C has actually achieved in relation to the progress it planned to achieve at any given moment, it is not possible to take appropriate decisions as to what steps can reasonably be taken to effect recovery from delay to progress. 10–023 The Protocol advises that C’s schedule should be prepared as a critical path network on industry-standard commercially available software30. Much has been done to advance project-planning software in the last decade or so. But, even now, the best project management software is by no means perfect. All have their foibles and deal with particular situations in different ways and much development work is still to be done31. As a result of the progress made since the times when hand-drawn bar charts were considered appropriate for monitoring progress, the Protocol advises that, although illustration of a network as a bar chart may be acceptable, except in the simplest of projects, bar charts alone are no longer an acceptable way of preparing schedules32, and that, instead, schedules should be prepared as a properly worked out CPM network, preferably resource loaded33 and supported by a method statement34. 10–024 The guidance notes state that the activities on C’s schedule must be identified as precisely as possible in the light of the information available at the time it is prepared35. Each activity and its relationship with each other activity is to be set out 26 Para.2.2. This is not called for by any of the current standard forms of contract, although it is common in bespoke form; see DB Giegerich, “Early warning signs of troubled projects”, CDR.02, 2002 AACE International Transactions. 27 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010). 28 Paras 2.2.3–2.2.4. See also Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), throughout. 29 Para.2.2.8. See also Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) at Pt 3. 30 Para.2.4. 31 See Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), para.3.6 and App.2 for a commentary on the suitability of much of the currently available scheduling software. 32 Para.2.2.1.1. 33 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) takes the view that it is unacceptable for the duration of activities and sequence at high density, short-term part of the schedule not to be calculated by reference to the resources to execute the work and the productivity they are expected to achieve. 34 See also Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), throughout. 35 See also Ch.7, “Planning and programming” for a description of how this is to be accomplished in practice.

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in a method statement, which explains the sequence of activities on the schedule and both the schedule and the method statement are to be fully cross-referenced36 and passed to the CA, in electronic format37, for acceptance38. 10–025 The Protocol adopts the position that the approved schedule should not be contractually binding upon C, or D; it is a dynamic management tool, which will model C’s intended timescale of the contract scope of work and produce a prediction of the sequence of activities to completion, based upon the best information available at the time it is prepared39. The Protocol recognises that information will improve as the project goes forward, and as better information becomes available, so the schedule is to be reviewed and revised with better information40. Each “approval” is therefore not so much a shift in liability as an acknowledgment by the CA that, at the time it is approved, the schedule is as good as it can be and it can safely be used as a baseline from which to measure the likely effect of change on C’s intent for the future conduct of the work41. 10–026 Record-keeping is the second area covered by the principal recommendations of the Protocol. At Guidance Note 1.2.3, it advises that: “If the good practice promoted elsewhere in the guidance notes with regard to keeping of records and preparation, acceptance and updating of schedules is followed, then the scope for factual disagreement about a claimed entitlement to an extension of time will be reduced”.

Furthermore, at Guidance Note 1.14.2, it states: “If [C] has made and maintained accurate and complete records, [C] should be able to establish the causal link between the [D’s cost risk event] and the resultant loss and/or expense suffered, without the need to make a global claim. The failure to maintain such records does not justify [C] in making a global claim. The Protocol’s guidance as to the keeping of records is set out in guidance section 2.”

Notwithstanding this good advice, six years later the CIOB research found that the standard of record keeping in the construction industry was below an acceptable standard for project control. The executive summary to the report, records that42: “Less than a tenth of those familiar with the keeping of records had experience of them being kept by automated, or manual input into a relational database that would produce virtually instantaneous reports of trends and effects of progress and productivity. More than half of respondents to the records part of the survey had experience of records being kept only on paper. This renders such records virtually useless for promptly detecting trends, managing the effects of lack of progress, and identifying the factual data relative to loss-causing events. When it came to relating the records of the resources used to the planned activity, only half the respondents to the records part of the survey reported that the task and the area on the schedule to which the labour had been applied were identified. Around one fifth were familiar with the records being related to a task, or area description contained in a different document, while slightly fewer kept records describing tasks and areas that could not be related to the schedule at all.

36 Para.2.2.1.2. 37 Paras 2.2.1.5 and 2.2.3. 38 Paras 2.2.1.3 and 2.2.1.4. 39 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) refers to this as the “Time Model”. 40 Para.2.2.3. 41 Para.2.2.2. 42 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008), Executive Summary, at para.21.

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A quarter of the respondents to the records part of the survey reported that labour records failed to note details of the date, or day of the week on which the data was recorded. More than a third reported that the name of the labour resource was not noted. To put this into context, less than a fifth experienced a failure to keep basic details of plant and equipment resources. Without adequate labour records it is impossible to know when a resource was used. More than one-third of respondents to the records part of the survey identified a failure to keep the necessary progress records that would aid the detection of trends in labour resources and productivity, or to relate the labour used to the activity timed on the master, or short-term schedule. Approximately half had experienced a failure in keeping the necessary plant and equipment records. Without such information it is impossible to detect the symptoms of disruption and the resultant lost productivity, or to predict with any certainty the effects of progress made in relation to progress planned.”

10–027 The key to good record-keeping is an awareness of what the records are going to be used for and the provision of a storage system, which renders the information easily retrievable. The Protocol advises that records that do not keep the right information, or systems of record management, which render information irretrievable except over a long period and at a high cost, are inaccurate, or are simply not available to the party charged with the risk, are not acceptable43. The Protocol contains detailed recommendations for the drafting of contract clauses for the keeping of construction progress records. In principle, under this clause, D and C agree that there shall be regular records kept by C identifying generally the activities, labour, plant, subcontractor work on site, delivery of material to the site, list of any instructions given, weather conditions and any delays encountered. These records are to be submitted regularly to the CA or D on a weekly or monthly basis and summarised in a report format44. 10–028 Next, the Protocol covers the update of C’s schedule. This process always involves taking account of progress actually achieved and may also involve a review and amendment of the schedule depending on the circumstances prevalent at the time. The Protocol advises that updates should be carried out at regular intervals, probably no less frequently than monthly and, on some projects, more often45. 10–029 Updating the schedule can be a time-consuming operation during periods of intense activity and, if it is to be effective, it requires good quality progress information. But this is the key to change management. Without good quality information about that which has happened in relation to that which was planned to happen, nothing can safely be decided about what to do about it in the future. 10–030 The recommendation that C should update its schedule regularly and hand it over in electronic format has not found a great deal of support from some parts of the legal profession, or from some contractors. From the legal point of view, the policy of the Protocol has been said to be contrary to what is sometimes thought to be a good idea in making the schedule a fixed and static diary of events that C is bound by

43 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) Pt 4 requires that all records are to be kept electronically on a database and recommends the use of a relational database. 44 A detailed description of what records should be kept and how they should be recorded and retrieved is set out in Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) at Pt 4. 45 Para.2.2.1.5. See also Ch.9, “Revising, updating, monitoring and reporting”.

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contract to perform46. So, for example, in relation to the Australian standard forms of contract, it has been said that: “Construction professionals were of great assistance with the increasing emphasis on the schedule. Rapidly did it rise from a management tool to a contract document.”47

To the contrary, the Protocol recognises that the schedule should not be contractually enforceable and that a schedule cannot be used as a management tool unless it functions dynamically to take into consideration the effects upon it of progress achieved, events as they occur and better information as it becomes available. It is a matter of common experience in the industry that a static schedule cannot be used as a management tool and historically has never been used for that purpose. Indeed much of the criticism of the schedule in the past has been based upon its failure to function in the light of change! It is apparent that fixing a tender schedule (which can rarely be more than an inspired guess) as a contract document with performance standards as to timing, which can only be enforced by the power of termination, is not in the interests of either party48. 10–031 The reasons given for objection to D having electronic access to C’s schedule and updates are many: 1. 2. 3. 4. 5. 6.

doubt about the reasonableness, or otherwise of the schedule and the competence of the planning; reluctance to indicate that completion on time is unlikely to be met without some form of recovery, or acceleration; absence of sufficient, or sufficiently competent planning engineers to reassess the schedule; the cost of the management process of updating and re-sequencing; the desire to hide the likelihood of culpable delay until it can be identified in association with delay caused by a risk for which D is responsible49; and doubts about the way the scheduling software works; and many more.

Doubts about the competence of planners and their work product can obviously be dealt with in time by improved training and education50. Reluctance to be open and straightforward in the reporting of the current state of the work requires a change in mindset of contractors, which probably must be matched by a change in mindset of developers and CAs in dealing promptly with C’s entitlement when it has any. 10–032 It is a mistake to think of the cost of effective project control as an additional cost. The comparison usually made to support such an argument is the gross tendered cost without the project controls against the gross tendered cost with project controls. 46 See, for example, AS2124, AS4000 and consider also the status of the time schedules in ACA98 and PPC2000. 47 J Dorter, “The effect of contract clauses on claims for delay and disruption” [2002] LCRL 312, 314. 48 See also Ch.7, “Planning and programming”, at paras 7–222 to 7–228. 49 See, for example, Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008), at Chart 48 for the reasons given for not promptly notifying delay to progress; and see also Great Eastern Hotel Co Ltd v John Laing Construction Ltd [2005] EWHC 181 (TCC) in which C was found to have deliberately falsified its schedule updates with a view to concealing its culpability. 50 In this regard, amongst other things, the CIOB has set up a working group under the chairmanship of David Tyerman to set standards of education and training with a view to establishing a respected qualification in time management. Further, the objectives of the Project Management Institute’s College of Scheduling are to encourage and facilitate education, certification, and professionalism in project planning, programming and project management.

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This superficial but false comparison between project cost without control and that with control is made on the basis of the mistaken assumption that the projects are directly comparable and that the project that is not controlled will complete on the same date and at the same cost as that which is project controlled. Research51 and experience both tell us that the likelihood of that occurring is very small indeed in anything other than the simplest of projects. Research in the United States has shown this to be a false comparison when project out-turn is taken into consideration: “The application of modern scheduling techniques appears to pay off in better project performance. The analysis found that the application of four specific project scheduling practices early in the project life cycle have a positive and significant relationship with the ultimate success of the project. The study also presented a single measure of schedule definition, which is significantly correlated with all four measures of project success. The results from this study clearly support the assertion that using project scheduling techniques early in the project life cycle improves the chances of project success. In terms of the potential value added, the data show a significant improvement in outcome performance to justify the additional investment. Projects that reached the highest level of schedule definition at the time of authorization had, on average, 8 percent lower cost and 13 percent faster schedules than the projects with only milestone schedules at authorization. In addition, the projects with well defined schedules also were more predictable than the projects with only milestone schedules. They averaged 6 percent less cost growth and 23 percent less schedule slip. These benefits easily outweigh the cost of competent scheduling support, which should amount to less than one percent of the project cost.”52

A reasonable comparison of cost can be made by taking into consideration the project risks and the likely prolongation costs, which will have to be paid in respect of a project not properly controlled against one that is. In most complex projects, that comparison will demonstrate that the costs of adequate project controls are not only not an additional cost, but actually represent a substantial saving over what is otherwise likely to have to be paid out. 10–033 In a recent example of the author’s experience, concerning a complex road scheme, adequate project controls would have added about $5m to the tendered cost of around $150m where the delay analysis revealed that the unavoidable delay to completion would then have been about three months at a cost of approximately $30m in prolongation costs53. Properly controlled, this would have represented an additional cost to tender of about $35m. On the other hand, the absence of effective project controls resulted in a delay to completion of 18 months, a claim of $160m and dispute resolution costs of approximately a further $35m, an additional cost to tender of $195m. In this case, the cost of adequate project control would not have been an additional cost, but would have saved $160m, and not having adequate project control was more than five times the cost of having it. In the author’s experience, those statistics are not unusual but are probably modest in relation to the difference that could have been made to the outcome of the Wembley Stadium54 project and the Scottish Parliament building55. 51 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century, June 2008. 52 Dr AF Griffith, “Scheduling practices and project success” 2005, AACE International Transactions. 53 The cost of unavoidable but unforeseen changes in, amongst other things: scope, variations arising from ground conditions and subsurface services, etc. 54 See Ch.2, “The risk of development”, at para.2–087. 55 See Ch.3, “Project procurement”, at para.3–046.

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10–034 It should be recognised that some cost of some project control is always required to be included in C’s preliminaries, but it is not always easy to identify, not always expended and the amount included is not always sufficient to cover the specified scheduling and record-keeping tasks. If the costs can be clearly identified, it gives the CA control over what is done and ensures that D is not required to pay for something that is not ultimately provided. Doubts about the way some scheduling software works, and the facilities provided, which enable a lazy planner to produce something superficially convincing but useless, can be answered only by competent specification of standards, appropriate contracts and quality control. 10–035 It is not usually feasible to progress from a minimum standard of acceptability in scheduling to the highest standards reasonably possible in a single leap56. In the end, sensible progress can be made only by constantly striving for improvement in practices, whilst coping with the effects of changing standards as they are developed57. To those who doubt the wisdom or practicality of improving standards of planning there are only philosophical answers58. 10–036 For the purpose of calculating its entitlement to an extension of time, the Protocol recommends that C should be required to update and review its schedule and impact upon it the sub-network describing D’s time risk event before recalculating the completion date. It is this recalculation that determines what is the effect (if any) of D’s time risk event on progress, what is likely to be the effect on future progress and what is likely to be the effect on the completion date (if any)59. If the calculated impact of the event demonstrates a likely adverse effect on the completion date, C must give notice of delay as the contract requires it60. If these new activities are in float, they will not affect the completion date and, in so far as the contract specifies that C is entitled to an extension of time only for those events, which are likely to affect the completion date, no extension of time will be due61. In relation to float62, the Protocol recommends, that: 1. 2.

the ownership of float should be specified in the contract63; float can only be accurately calculated by reference to a CPM network, competently updated64;

56 In the report Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008), The CIOB said “The continuous pursuit of excellence in construction management is key to greater effective collaboration, the continued satisfaction of the industry’s client requirements, and the sustained delivery of successful projects in the 21st century. With a view to reducing the incidence of delayed projects, The CIOB will provide standards in effective time control by facilitating education and accreditation. We will promote an increased awareness of the importance of project planning and scheduling in the industry. We will also provide: A career structure for project planners and schedulers, standards, education and qualifications in project scheduling and training in effective time control for other professionals in the industry.” The first stage of that process was accomplished by the publication in 2010 of the Chartered Institute of Building’s, Guide to Good Practice in the Management of Time in Complex Projects. However, notwithstanding that the CIOB has already set up a working group to develop it, it may well be five years or more before suitable education, training and accreditation delivers the first properly qualified, competent schedulers. 57 See, P Weaver, “A brief history of scheduling – back to the future” (February 2008) PM World Today, and K Pickavance, Managing the Risk of Delayed Completion in the 21st Century: The CIOB Research (Society of Construction Law, 2009). 58 Indeed, to those who would prefer not to travel at all rather than run the risk of incident on the way, there may be no answer at all. 59 Society of Construction Law, Delay and Disruption Protocol (2002), at paras 3.2.6–3.2.13. 60 See Ch.5, “Notices, claims and early warnings”. 61 See Ch.6, “Extensions of time and time at large”. 62 See Ch.16, “Float and time contingencies”, throughout. 63 Para.1.3.3. 64 Para.1.3.9.

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3. 4.

5.

C should not rely on float as an implied time contingency, but should expressly identify its required time contingencies in its schedule65; there is an important distinction to be made between the way float affects entitlement to extensions of time and the way it affects entitlement to compensation66; and the time aspect of residual float in the schedule (whether free float, or total float), should be available to C or D as is required by them67.

10–037 The Protocol’s position on float has been strongly criticised by many. The criticisms have largely been directed at the fifth point, above, in relation to the current standard forms of contract in the United Kingdom and without reference to the other recommendations in the Protocol, and perhaps forgetting that the Protocol is intended to be prescriptive of the way the standard forms should work in the future, rather than descriptive of the way they work at the moment. 10–038 However, no matter what the contract says, it seems that most contractors would prefer to be entitled to an extension of time for the shift in timing of any activity, whether, or not it was likely to cause delay to completion, if only because that is easier to demonstrate than the effect of a delay to progress on completion. However, that is not the way HH Judge Hicks QC thought float should be treated in Ascon68, and it is not the recommendation of the SCL Protocol69. 10–039 The Protocol recommends that contracts should provide that, if the recalculation of the critical path (and hence the completion date) shows that any part of the added sub-network is on the critical path at any point, then the planned completion date is likely to be adversely affected and an extension of time should then be awarded to the extent of that calculated effect. 10–040 The additional time required to accommodate that event as calculated by the CPM software is added on to the contract period consistent with the recommendations of Colman J in Chestermount70. By making sure that any sequential slippage caused by matters at C’s risk are first accounted for, the possible consequences anticipated by the dispute in Malmaison71 are avoided. In the circumstances in which two concurrent events, that is one at the risk of D and the other at the risk of C, both occur to drive the completion date at the same time, then the guidance given by the Protocol72 is the same as the position adopted by agreement between the parties in Malmaison: “if there are two concurrent causes of delay, one of which is a [D’s time risk event], and the other is not, then [C] is entitled to an extension of time for the period of delay caused by the [D’s time risk event] notwithstanding the concurrent effect of the other event.”73

65 Para.1.3.8. 66 Core Principles 7 and 8. 67 Para.1.3.1. 68 Ascon Contracting Ltd v Alfred McAlpine Construction Isle of Man Ltd (2000) 16 Const LJ 316, 338–339. 69 Para. 1.3.1. 70 Balfour Beatty Building Ltd v Chestermount Properties Ltd [1993] 62 BLR 1, 32–34. 71 Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 Con LR 32, 8–9. 72 Para.1.4. 73 Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 Con LR 32, 8–9.

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10–041 The Protocol advises that, once the sub-network has been introduced into the schedule, the actual cost of any disruption or delay to progress can then be monitored against the progress of the sub-network to ensure that C is immediately and adequately compensated for the knock-on costs of the change74. 10–042 Finally, the Protocol recognises that complex scheduling and record-keeping requirements cost money and, if left to competitive tender, these requirements are likely to be omitted, or under-priced. It also recognises that such provisions are useless unless they can be enforced and it provides guidance for setting costs for the provision of management information in the contract and on the sort of redress that might reasonably be contemplated for a failure to produce the information required75. 10–043 The SCL Protocol is published as a best-practice guide for the way entitlement to extensions of time and compensation for delay and disruption should be calculated, but it is also a public health guide for managing change on site and securing effective project control. Through the implementation of a rigorous approach to the keeping of records, updating of calculations and the dissemination of information previously held only by the contractor, by the application of the principles of the Protocol the CA will now be able to assist D to manage its risks76. 10–044 It follows that, if the CA can read, understand and use the information that will then be available, it can also help D to manage the effects of any changes, or acts of interference imposed on C. That management function can then be used productively, so that difficulties can be overcome, or their potential knock-on effects reduced during the course of the works by re-planning, rather than being left to take their own course and then the effects resolved in adjudication, arbitration, or the courts, after it is all over, by compensation77.

The Change Management Supplements “it is far better to have no standard form than a bad standard form. Equally, it is far better to have a good standard form of unilateral provenance than a bad standard form of joint, or agreed provenance.”78

10–045 In the absence of any significant movement on the part of any of the drafting bodies of the standard forms of contract, in 2004 the CMS79 was published as an amendment to each of the 1998 series of JCT standard forms of contract to enable

74 Para.1.6. 75 Para.2.2.1.4. 76 In this regard, Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) at Pt 3, recommends extensive internal quality control and external third party audit. 77 The proposals contained in the Society of Construction Law, Delay and Disruption Protocol (2002), are consistent with the thrust of The Latham Report: Constructing the Team (London: HMSO, 1994), Final Report of the Government/Industry Review of Procurement and Contractual Arrangements in the Construction Industry and with the Egan Report: Rethinking Construction (July 1998), the report of the Construction Task Force to the Deputy Prime Minister, John Prescott, on the scope for improving the quality and efficiency of UK construction, although both devised different solutions to the problem they both identified. 78 I Duncan Wallace, QC, “A criticism of the RIBA Joint Contracts Tribunal contracts” (1973) The Institute of Quantity Surveyors Journal. 79 That for use with JCT98 appears at App.2 to the 4th edn hereof.

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that series of standard forms to perform to the standards recommended by the SCL Protocol80. 10–046 In the same way that other supplements to the standard forms (such as “sectional completion” and “contractor’s design”) are not suitable for all projects, the CMS may not always be appropriate. On the other hand, it seems that for those departments of the state and local government that spend public money, those responsible for the use of trust funds, and those private developers such as the defendant in Masons v W D King 81, where completion on time is far more important than the choice between a “horse-deal” and retrospective litigation, the CMS may produce a more acceptable way of managing D’s risks under a construction contract. 10–047 Each CMS contains different conditions according to the contract it is intended to amend, but there are some common themes: 1. 2. 3. 4. 5. 6. 7. 8. 9.

the management information structure; changed definitions; new definitions; the role for the risk manager; change management; schedule preparation; schedule update; additions to the appendix to the contract; and schedules of project-specific requirements.

The management information structure 10–048 For the CMS to give effect to the recommendations of the SCL Protocol, it is generally the case that some significantly different arrangements from those contemplated by the standard forms must be made for construction scheduling, record keeping, provisions for extension of time and compensation. The CMS also introduces some new concepts relating to information gathering and electronic exchange and acceleration and the linking of the scheduling provisions to the extension of time provisions. The provisions of the CMS replace, augment, or amend some obligations, or impose new obligations in addition to those in the 1998 series of JCT standard forms.

Definitions 10–049 The standard forms are inconsistent in the way they define the date by which C is to complete the works and do not recognise that C could plan to complete by any other date. For example, JCT98 defines the “completion date” as: “the date for completion as stated in the appendix, or any date fixed under the provisions for an extension of time, or in a confirmed acceptance of a collateral agreement”.

This is unsatisfactorily circuitous and does not provide for a planned completion date independently of a contractual obligation. In contrast, the CMS defines the 80 In the light of the recurring criticism of the Society of Construction Law, Delay and Disruption Protocol (2002), on the theme of its guidance being inapplicable to current contracts, there has been surprisingly little comment from the industry in relation to the publication of the Change Management Supplements. See, however, M Hanson, “Keep taking the supplements” (30 January 2004) Building magazine, 48 and A Helmsley, “Protocol’s progress” (13 August 2004) Building magazine, 41. 81 Masons v W D King [2003] EWHC 3124 (TCC).

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“completion date” as being the date set down in the appendix as that by which the works are to be completed, or a variation of that date fixed by means of an extension of time, or by collateral agreement, whilst the “date for completion” is identified as that indicated on any schedule by which C plans the work to be finished. In other words, the “date for completion” is what C’s schedule indicates will be the date on which the works are likely to be finished, irrespective of the date by which C is contractually obliged to complete the works.

The programme 10–050 Consistent with the usage in the contract, the CMS uses the word “programme” for the programme, but defines it as a CPM network, together with a method statement, the two of which are to be read together. This principle is also reflected in the CIOB Guide, which advises: “Consultation and effective communication are pre-requisites of a meaningful and effective schedule and planning method statement. The purpose of the planning method statement is to facilitate the understanding and cooperation of the participants. It should make clear what constraints have been identified, what assumptions have been made in the process of risk management, planning, scheduling, review and update of the schedule and the reasoning underpinning those constraints and choices. Because it will have a life independent of those who, from time to time, may be required to work upon it, it is important that the planning method statement is designed for use by those independent of the project. The content of the planning method statement will change during the development of the project and must be designed to accommodate change in subject-matter, content and source, without compromising transparency between the planning method statement and other time-related information. Any amendments made to the underlying assumptions contained in the planning method statement will also need to be carefully recorded in a clear and concise manner.”82

The requirements for the CPM network and the method statement are set down in appended schedules. Initially, the network and method statement are together referred to as the “draft schedule”. Once accepted, they together become the working schedule, referred to in the CMS as the “master programme”. 10–051 The CMS recognises that the schedule is to be prepared in stages and regularly reviewed and updated, and because it is impossible, at the outset, to get all the information necessary to plan the whole of the works to an adequate level, the schedule is to be prepared in differing levels of density and regularly reviewed and revised as a rolling schedule. The CIOB Guide follows the same principle, but envisages the working schedule as being in different densities dependent upon the proximity of work and the standard of information available83. 10–052 The activities on the critical path network must be identified as precisely as possible in the light of the information available at the time it is prepared. Each activity and its relationship with each other activity is to be set out in a method statement, which explains the sequence of activities on the critical path network. 10–053 The CMS requires that the draft schedule be accepted before it becomes the “master programme” and that any subsequent update of it be similarly accepted as 82 Chartered Institute Projects (Chichester: Wiley 83 Chartered Institute Projects (Chichester: Wiley

of Building, Guide to Good Practice in the Management of Time in Complex Blackwell, 2010) at Pt 2. of Building, Guide to Good Practice in the Management of Time in Complex Blackwell, 2010) at Pt 3.

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being in conformity with the contract. The CIOB Guide advises that, if any submittal is made, it must be accepted, or rejected promptly and should be accepted unless a submittal constitutes, or will lead to: an illegal operation; a breach of contract; a hazard to health and/or safety in the process of construction; a hazard to the safety and/or stability of the permanent work; or a method, or sequence, which is not conducive to effective time control. It is further advised that “any positive control of revision to the schedule should encourage safety, contract and legal compliance and effective time control”84. 10–054 The purpose of requiring contractual acceptance in the CMS is to enable D to be sure that C has complied with the contract and that the parties have an agreed baseline in place for calculating the time effect of a D’s time, or cost risk event when it occurs. However, the CMS makes it clear that acceptance does not require that the works are to be constructed in accordance with the accepted schedule, that such acceptance does not relieve C from any of their obligations under the contract and that C is not entitled to rely upon acceptance as indicating that the schedule is feasible. 10–055 The CMS ties the programme requirements to those clauses concerning an extension of time and specify85 that the accepted schedule is to be used for: 1. 2.

3.

4.

5.

6. 7. 8.

planning the intended periods of activity and sequence of those matters identified in the schedule; identifying the dates and logic by which the information described in the information release schedule, or any other request for information required is to be supplied in relation to the activity, or activities to which any such requirement relates; identifying the intended dates and logic by which plant, materials, or goods are to be supplied, or work to be carried out by D, or those engaged, or employed by it in relation to the corresponding activity, or activities; identifying any time contingency required by C, any nominated subcontractor and/or nominated supplier in relation to all activities and any one or more key date or dates; identifying free float and total float, which is available to be used by C and/ or D for managing the expenditure of C’s time contingencies, or the effect of D’s time risk events; calculating the likely effect of delay to progress on the completion date, if any, caused by a D’s time risk event for the purposes of extensions of time; calculating the effect on progress and/or the date for completion, if any, caused by a D’s cost risk event for the purposes of compensation; and recording the degree of progress actually achieved from time to time.

Electronic submittals 10–056 Generally the standard forms of building contract require that schedules, if required to be provided at all, are only required to be issued in the form of hard copy. 84 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) at Pt 3. 85 See App.2 to the 4th edn.

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None of the standard forms of contract currently require the schedule to be distributed electronically in editable format. The SCL Protocol recognises that that is not satisfactory and that management information must be provided electronically in a form in which it can be interrogated and from which calculations can be made. Accordingly, the process of issuing electronic copies of the schedules is defined in the CMS as “to publish” and those to whom the electronic files are to be published are to be set out in a schedule to the CMS. It is intended that those who prefer to work with hard copies can then print their own, in the format in which they require to see them, rather than having the format predetermined by others. 10–057 The CIOB Guide86 goes one stage further and sets out what is to be done with submittals by way of quality control and auditing, setting out standards by which it can be considered suitable for competent project control, under such headings as: buildability, schedule content and schedule integrity.

Progress records 10–058 The CIOB research found that the standard of record keeping in the industry was generally poor and inadequate for competent project control87. In this regard, the CIOB Guide88 sets out a detailed performance specification for record keeping and makes the point that: “Records that cannot be retrieved are useless. Accordingly, the process of record keeping is inseparable from the process of record retrieval. It follows that in order to identify an adequate means of keeping records in the first place, consideration must be given to how they can be retrieved and used. The increasing speed and sophistication of databases and spreadsheets has provided the industry with the facilities for sorting and filtering data into specific reports at the press of a button and it is now no longer acceptable to proceed to keep records on paper alone. It follows that unless records are kept as database records in the first place, they must be rekeyed as database records before they can be retrieved and used.”

The progress records, which are required to be supplied, are those that are to be described in a schedule to the CMS. The purpose of requiring C to prepare and to deliver them to the persons prescribed is to keep informed those who should properly be informed about progress and to facilitate contemporaneous checking of the as-built record against the working schedule. It is thus important that whatever is specified for the period of supply of historical records is reasonable in regard to the nature and content of the work to be monitored and the period of schedule updates anticipated.

Key dates 10–059 Until the publication of ECC389 in July 2005, none of the standard forms made provision for D to be able to monitor, or control the progress of the work in any way. Whilst they do make provision occasionally for C to manage and to monitor its progress, how that is generally to be accomplished is left for C to determine. 86 See Ch.8, “Presentation and approval of programmes”, at paras 8–054 to 8–091. 87 See below, Ch.13, “Construction records”, throughout. 88 Managing the Risk of Delayed Completion in the 21st Century (Chartered Institute of Building, 2008), at Pt 4. 89 Cl.31.2.

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10–060 Whilst it is common to think of monitoring the effect of change by reference to the completion date, or one or more sectional completion dates, the CMS recognises that it is also often desirable to monitor, independently of sectional or overall completion, the start, or completion of individual activities or chains of activities. A “key date” that is not necessarily a sectional or overall completion date against which liquidated damages and extensions of time apply may be monitored in such a manner90.

Roles and relationships 10–061 In 1823, when the CIOB and the RIBA were inaugurated, the first railway line had just been opened, the postage stamp had yet to be invented and the job of the “measurer” was to quantify the building work carried out to establish what the finished article had probably cost. Little could be done in those days to control the construction process proactively. 10–062 By the mid-nineteenth century, the construction industry in the United Kingdom had begun to think about developing some form of proactive cost control: the “quantity surveyor” was born and became increasingly important over the next 100 years. However, by the middle of the twentieth century it had become evident that managing cost alone could not achieve certainty of delivery and performance. Indeed, it became universally recognised that, if time could not be managed, cost never could. 10–063 By the 1970s , the trend was to think that effective time management lay in the hands of a new professional: the project manager. In those days it was thought that the project manager, by defining relationships and managing people and information, could achieve what cost management alone could not. However, by the turn of the twenty-first century it had become clear that, without competent project control and contracts that permit effective process management, managing people and information could not secure timely completion either. 10–064 The management of the construction process so as to deal with the risks of change, consequent disruption and delay to progress and to manage them so as to minimise, or avoid entirely, their effects on the completion date, requires the ability to use techniques, which may not always be found among staff normally employed91. That is not to say that the design team, CA, project manager, or clerk of works in any particular case will not have the skills to conduct the tasks anticipated by the CMS. Much will depend upon each individual case. Whether it is considered to be necessary to appoint a separate individual to carry out these tasks, or to allocate the tasks to a member of the design team experienced in the techniques required, is a matter of commercial policy for D to determine. The CMS specifies that, by default, the role is played by a separate individual, who is referred to as the risk manager. The role of the risk manager is to look after D’s interests as to extensions of time, time-related compensation periods and recovery from the effects of delay to progress. By analogy, the risk manager’s role as to time is akin to the role of D’s quantity surveyor as to construction economics, interim valuation and final account. In relation to recovery measures, the risk manager’s task is to provide a structure and discipline to the performance of C’s overriding obligation to complete the works by the completion date.

90 See also Ch.9, “Revising, updating, monitoring and reporting”, at paras 9–119 to 9–121. 91 See above, Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008).

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10–065 The CMS recommends that the strategic management of time should commence during the latter part of the design stage in identifying, in conjunction with D and its advisers, those significant features of the project design in relation to the intended method of procurement that are likely to be important in the management of time during the course of the construction process. 10–066 The risk manager will advise D and its design team on the techniques to be used to prepare the schedule, the software to be used and the general shape and feel of the management information, which will be required from C. 10–067 Once C has been appointed and the schedule has been prepared and is submitted for acceptance, it is the risk manager’s task to examine C’s submittal and to advise the CA as to whether it complies with the contract. The purpose of this is to secure quality control of the product. The CIOB Guide92 advises that quality control should be a two-stage process involving an internal quality assurance process and external third-party audit; at Pt 3, the Guide advises: “Quality assurance audits are best performed by an independent party, unassociated with the project, or any of its participants; the absence of any implied knowledge ensures that the right questions are asked and appropriate and understandable answers are given. The first validation should be carried out at inception. The assurance of quality and integrity in the schedule is achieved by both an initial validation of the development schedule and continuing checks against review and revision schedule updates, which audit the contemporaneous database for accuracy and completeness against work content and actual performance. Subsequent and more detailed audits should then be carried out on the working schedule prior to any work stage commencing. It should be borne in mind that the longer the period between audits, the longer the examination will take and the more serious are likely to be the consequences of any errors found. Accordingly, detailed audits should be carried out against revisions and updates at intervals no greater than two to three times the reporting period, depending on the nature of the work being carried out. Typically, the scope of validation will include examination of: schedule content schedule integrity buildability.”

10–068 Once the works have commenced on site, C is required to produce progress information in conformity with the schedule to the CMS. It is then the risk manager’s task to examine the progress information submitted and to advise on whether it complies with the contract requirements for the proper monitoring of the progress of the works by means of updating the master schedule. 10–069 With the provisions of the CMS in place, D is also able to control the risk, not only of a delay to the date for completion, or sectional completion, but also of delay to a key date. Simply put, the project does not have to run late merely because C has been awarded an extension of time. The provisions for delay management in the CMS require the risk manager and C to work together to investigate whether and, if so, how, the future schedule of work can be re-sequenced, or re-scheduled, or the resources modified, or the works otherwise re-organised so as in whole, or in part to overcome, or avoid the delay, which was likely to occur as a result of the change. In effect, the task of the risk manager under these circumstances is to provide D and his 92 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010).

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advisers with the information they need in order for the CA to be able to give appropriate instructions to C to overcome or reduce the effects of those D’s time risk events for which D takes the risk of time and/or cost. 10–070 Once the works have been completed, then it is the risk manager’s task to check C’s final calculations of delay to progress, disruption, prolongation and concurrency and to advise the CA and/or the quantity surveyor of those time periods for which C may properly be reimbursed for loss, or expense, if applicable.

Managing the effect of change “If every activity is a problem, then nothing is really a problem. It all blends into the overall morass of project difficulties, and the most appropriate target of management attention and available resources fades into the mist.”93

10–071 There is an unnatural reluctance on the part of developers to select a contractor and negotiate a mutually satisfactory price, even though this is probably the most effective way of reducing the risk of delay owing to change. It is self-evident that, when in competition for the contract at the lowest price, the lowest tendering of contractor is also the one faced with the highest danger of loss unless they can encourage instructed changes that will provide a channel for making a profit. Only the very naive developer can be unaware of how much time is spent by the lowest tendering contractor in search of ways to reduce losses and redress the balance after the contract has been let. 10–072 In general terms, a variation is likely to entail one or more of the following: additions to, or omission from, the quantity of described work; changes in the method of execution of the described work; changes in the materials or goods to be used in the described work; changes in the sequence in which construction activities are to be performed; restrictions or other changes in the permitted working hours; changes in the kind, quantity, timing, sequence or method of work to be carried out by others; changes in the timing of supply or quantity or quality of goods or equipment to be supplied by others; and/or changes in key dates. Unless the work is subsequently re-sequenced, or the resources, or their productivity outputs, are changed, work that absorbs more labour or plant than was anticipated by the tender rates, will take longer to carry out than anticipated. Whether the extended period of performance also brings with it an extension of the contract period for performance depends entirely upon whether the activity in question is, at the time it is carried out, critical to completion of the works in the way it is being built. If it is not, then, simply because, at its lowest, it is not likely to affect completion at the time that it is instructed, or impliedly required, C is not usually entitled to an extension of time94. Compensation for loss and expense arising out of additional work, if it is to be made, 93 M Hatfield, “Got float?” (December 2001) PM Network. 94 But see the Australian standard form C21/03 referred to in Ch.4, “Standard form provisions for time and cost”, at para.4–006.

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will depend upon proof that loss or expense has flowed from the additional work for which reimbursement is not included in a revaluation of the work according to the contract rules governing the valuation of change. 10–073 Accordingly, the significance of change must be considered in relation to whether the effect of change: is discrete to the change itself; has consequences beyond itself; and requires action to minimise its effect; and also: whether there are choices available and, if so, which one is appropriate; and who needs to know about it. 10–074 Some changes can be accommodated without affecting C’s construction schedule at all95. However, it may not be sufficient simply to attend to discrete changes. Construction activities normally follow logical sequences and, whilst it is true that some changes do not cause delay to progress on the site and can (in the case of omissions that reduce the content of work) sometimes actually accelerate progress96, the consequential advances in one part of a schedule may be counterbalanced by disruption to another, even in the case of omissions. On the other hand, all changes cause some disruption, which may in turn cause a quantifiable loss, even if it is only in relation to the additional work that has to be done by administrative staff in accommodating the change. 10–075 A 1980s report of the National Economic Development Office97found that the most significant cause of delay to completion in construction projects was not in fact the extent of the work carried out as a result of the change, but the delay to progress arising as a result of the need for instructions to effect a change. Typically, in a case in which delay to progress in the refurbishment of hotel bedrooms occurred, one of the most significant delays to progress resulted from instructions required in respect of the wall finishes when the existing wallpaper was stripped from the walls to reveal defective plaster. Although the work involved in the additional task of taking off defective plaster, patch plastering and cross-lining added, in fact, no more than a few days to the total contract period, the delay in providing instructions while D and the CA decided what to do about it took several months98! 10–076 It has often been recommended that, if the cost and time of a building project are effectively to be controlled, the design of a project should be “frozen” before construction detail drawings and specifications or bills of quantities are produced. However, this rarely happens in practice, and it is not unusual to find that, even under lump-sum contracts99, in which C is required to construct only that which is specifically described in the contract documents, the design continues to be developed as the building work

95 A change of manufacturer for a particular fitting of like type will not of itself change the time taken to procure, deliver and fit it. 96 For example, the consequence of change in foundations based on deep stepped strip footings for a domestic swimming pool, to deep trench fill, whilst costing more to produce, may be found to save time in the construction of the substructure. 97 The National Economic Development Office, Faster Building for Industry (London: HMSO, 1983). The Report of the Building and Civil Engineering Economic Development Committees’ Joint Working Party. 98 John Barker Construction Ltd v London Portman Hotel Ltd [1996] 83 BLR 31. 99 For example, JCT80, JCT98 and JCT05, IFC84, IFC98 and IFC05, MWA80, MWA98, MWA05.

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proceeds. Indeed, contracts are often made on the basis of incomplete design information, for which allowance is made in the specification and bill of quantities by the incorporation of provisional sums and contingency items. However, the rationale ought to be that the design be frozen at a time when it does not inhibit change which is likely to have an adverse effect on subsequent progress. There is no reason, for example, why changes in internal arrangements that do not affect the services or structural envelope of a building should not be made during the early stages of construction. On the other hand, tenants’ “fitting-out” schedules can cause considerable delay to construction if D responds too readily to demands for fundamental changes from prospective tenants during the installation of secondary and tertiary elements of a project. If delay, disruption and compensation claims are to be avoided, then incompatible fit-out should be carried out as an entirely separate contract or after the principal construction works have been “sectionally completed”100. 10–077 The NEDO report recommended that, in order to avoid claims, the effect of variations should be negotiated with C before they are put into effect, very much along the lines of the “change order” procedure used in the AIA standard form of contract, A201/97 and A201/07101, and common in US government contracts and has been replicated as an option in a number of other standard forms102. In practice, however, whilst that is sometimes a practical proposition, it requires that: 1. 2. 3.

the CA should be able to say exactly what is required; C should have the staff time available fully to investigate the likely consequences; and D and the CA should have the management information available to be able to assess the acceptability of C’s predicted effects on time and cost.

10–078 Some changes just have to be made ad hoc, simply because the total picture is not available103. It is also apparent that contractors are rarely interested in committing themselves to the time consequences of change during the progress of the works when they do not have the appropriate scheduling, record-keeping and project-control techniques in place to enable them to produce the data on which to base the forecast104. 10–079 The CMS envisages that the schedule update and revision process will always have three steps to it and may have four, or five, depending upon the circumstances prevalent at the time.

First step – programme update 10–080 The first step concerns only that part of the programme to the left of the data date. This step in the updating process is to identify what has actually happened since the programme was last compiled. Then the data gathered must be used to update the programme. Those activities, which have started, must be changed from planned activities to activities with actual start dates. Where activities relating to the contract works (but not intervening events), which had been overlooked, have started, they must 100 101 102 103 104

George Sollitt Construction Co v The United States, No 99–979 C (2005), 26. Cl.7.2. See, for example, JCT05 Cl.5.3 and Sch.2 and ECC3 Cll.61.1 and 61.2. For example, adverse ground conditions. See Ch.10, “Project control”.

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be incorporated into the programme with appropriate logic105. Where planned activities have started in an order, or sequence different from that planned, they must be corrected to illustrate the sequence actually followed. Those activities in progress must have their degree of completion estimated. Those activities that have finished must have their planned finish date changed to an actual finish date. Where contingency periods have not been absorbed entirely, they must be reallocated in whole, or in part, or discarded.

Second step – programme review for better information 10–081 The second step in the updating process is a review of the information upon which the planned schedule was produced and concerns only that part of the schedule to the right of the data date. The purpose of this is to see if there was any error in the working schedule for the future conduct of the works, or whether, because of information now available, which was not available earlier, there should be additions, or changes to the planned sequence, resources, or productivity, going forward. For example, amongst other things, the schedule should be reviewed to see whether there is now any better information than before about how subcontractors, statutory undertakings, or utilities are likely to perform. When that review has been completed, the critical path (and hence the likely date for completion in the light of that update) must be recalculated. This is usually referred to as revising the schedule. At that point, the risk manager, C, D and any other persons identified in Sch.1 to the CMS will know where C is in relation to where they planned to be.

Third step – recovery 10–082 The third step in the updating procedure is that in which the first phase of the project-control process can be applied (at this point there has not yet been any consideration of the occurrence of a D’s time risk event, or instructed, or implied change). This is where C must consider what to do concerning the progress actually achieved in regard to the working schedule. If the schedule illustrates that the works are ahead of time, C should ask themselves whether all successive activities have been allotted sufficient durations. If so, will the design team have to produce information more quickly to keep up? And can they do that? If so, at what cost? Alternatively, should additional time be allowed for the provision of information? What other contractor’s contingency periods could usefully be adjusted? If the recalculated date for completion illustrates that work is behind schedule, have any activities and their sequences been overestimated? Can they be executed any more quickly with the same resources106? Can the resources sensibly be increased to achieve faster progress than 105 If the recommendations of the CIOB Guide are followed to programme in detail, with resources and productivity, the short-term, high density programme for the three-month future of the project, this should be a rare occurrence. 106 Recovery should not contemplate the reduction in duration of activities the durations of which are not calculated by reference to resources and productivity. For example a reduction of the available medium or low density commissioning period can result in disaster when, shortly before the due completion date, the high density resourced commissioning period is found to require an even longer duration than originally planned. At that stage, there may be no contingency left on which any recovery can be planned and C is left with weekend working and overtime, both of which lose productivity and cause costs to escalate.

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was planned? Can areas of work be taken off the critical path by re-sequencing? Or can the allotted contractor’s contingency periods safely be used to absorb the lost time? And so on. 10–083 The object of this reassessment must be to reorganise the schedule where it can be changed, to identify what needs to be done to achieve completion on time and to set the train in motion by re-scheduling the work. This is a step that is called for by most standard forms of contract. Sometimes it is called mitigation. Sometimes it is referred to as “the contractor’s overriding duty to overcome or avoid delay”. Nowhere, in any standard form of contract, is there any guidance, or structure for doing it. However, the CMS calls for this to be done regularly during the update process and requires that whatever decisions are taken, they must be recorded in an updated critical path network and method statement and be accepted by the risk manager107. In other words, the CMS requires structure and discipline to be given to the mitigation process and, at Pt 4, the CIOB Guide108 now also sets out how such structure and discipline is to be achieved, in practice.

Potential fourth step – event impacting 10–084 The fourth step in the updating process arises only in connection with the occurrence of one or more of D’s time risk events. In this step, C must identify what has happened to change the works in a way that is at D’s risk as to time or cost. C must identify in a sub-network the new activities and/or durations comprised in D’s time risk events, what sequence they must follow and the interface between each subnetwork and the revised, updated schedule. Having done that, C must again recalculate the date for completion. It is the recalculation of the critical path in the light of those additions that determines what is the effect (if any) of D’s time risk event on progress, what is likely to be the effect on future progress and what is likely to be the effect on the date for completion and/or the completion date. If the calculated impact of D’s time risk event demonstrates a likely adverse effect on the date for completion after the completion date, C will usually be entitled to an extension of time109. The CIOB Guide110 sets out the procedure for carrying out this stage as being a time impact analysis that complies with the SCL Protocol111.

Potential fifth step – acceleration 10–085 The fifth and final step in the project-control process is the management of the effect of D’s time risk events on the future conduct of the work. It is the review 107 For the danger of not recording the reason for the changes in a method statement and having it accepted or approved, see Great Eastern Hotel Co Ltd v John Laing Construction Ltd [2005] EWHC 181 (TCC), in which the court found that the creation of recovery schedules had been a deliberate attempt on the part of C to conceal its liability. 108 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010). 109 Depending upon the contract provisions and any conditions precedent to entitlement that may have to be met; see Ch.6, “Extensions of time and time at large”. 110 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010). 111 The time impact analysis is referred to as a “modelled/additative/multiple base” analysis in American Association of Cost Engineers International, Forensic Schedule Analysis, Recommended Practice No 29R-03 (2009). See also Ch.15, “Forensic programme analysis”, at paras 15–149 to 15–163.

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of C’s impacted, revised and updated schedule and consideration of what must be done to overcome the likely effect of change. This step is closely allied in its process to the third step, although the consequences are radically different. D, the CA, or the risk manager will generally instigate this step but, if success is to be achieved other than by adjustment of D’s contingencies, it will depend upon C’s willing co-operation and participation. 10–086 In the third step, the schedule was to be reviewed to overcome C’s likely culpable delay to the date for completion, and hence any changes made to the schedule were made at C’s discretion and expense. However, this cannot be so for the fifth step. In the fifth step of the change-management process, the review of C’s activities, durations, sequence and resources is made to overcome the effect of a change, which is at D’s risk. Reasonably, C cannot be expected to carry the cost of this, and it should not do so. That does not mean that there will necessarily be a significant cost attached to it but, whatever it is, D should bear it, as it will arise out of D’s liability for change in the schedule. 10–087 The sort of change that may be instructed could be re-sequencing activities, which were sequential, to be carried out in parallel, increasing resources where practicable, or the omission of time allowed for work associated with provisional, or prime cost sums, the omission of parts of the measured works, or the apportionment, or reallocation of contingency time. Acceleration should not contemplate the reduction in duration of activities the durations of which are not calculated by reference to resources and productivity. 10–088 The fifth stage of the update process is a collaborative process to manage change. It requires active participation of the risk manager, the design team, the CA and D and C, working together to manage change in the construction process. It is truly partnering.

Calculating time-related compensation 10–089 For the purposes of calculating the period of prolongation caused by a D’s cost event and the period during which that cause arose, C is required to convert its final updated schedule into a dynamic, simulated as-built schedule, which can be used for an analysis based upon that known as the “collapsed as-built” method112 and to publish the results of its calculations. On receipt of that, it is the risk manager’s job to check the calculations and to confirm to the CA and quantity surveyor the periods of time caused by a D’s cost risk event for which C is entitled to compensation for any loss and/or expense, which has been incurred as a result of prolongation of the works. On the basis of that, the CA can then ascertain, or instruct the quantity surveyor to ascertain, the loss and/or expense that has actually been incurred thereby, if any.

Identifying the cost of project controls 10–090 Leaving the cost of project-control information to be buried in head office or site related overheads and then competitively tendered is a recipe for disaster. Whilst 112 Also referred to as an “observational/deductive analysis”, see American Association of Cost Engineers International, Forensic Schedule Analysis, Recommended Practice No 29R-03 (2009). It can be single or multiple base depending upon the facts and what has to be proved. See also Ch.15, “Forensic programme analysis”.

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it may be appropriate for it to be a separately priced item, which can be identified, the CMS requires the CA to include a provisional sum in the tender documents for the provision of the project-control information to D. The provisional sum must provide for the costs of the preparation of: 1. 2. 3. 4.

the first critical path network for the construction of the works; the first method statement describing the network; the number of updates of the schedule required by the CMS within the contract period; and the number of progress records required by Sch.4 as necessary to fulfil the requirements of the CMS within the contract period.

Whilst, in practice, there is no reason why a contingency sum should not also be provided for them, under the provisions of the CMS, the provisional sum is not required to include the costs of: 1. 2.

the correction of any part of any submittal, which fails to comply with Schs 1–4; and the re-sequencing, or re-planning, or the taking of any other steps to manage the delay to progress, or the predicted effects thereof, whether such delay is caused by C or by D.

Redress for a failure to comply 10–091 The CMS recognises that, no matter how well specified the project-control information might be, if C fails to provide it, the specification alone will be of little use to D in managing its exposure to the risk of delay. There are three aspects to the power to manage D’s risks as to time113: the power to require the project-control information to be provided in a useable form; the power to instruct recovery when in culpable delay; the power to instruct acceleration when in excusable delay; and redress for failure to comply with such instructions. Whilst there are many ways that such redress might reasonably be implemented114, the CMS provides for liquidated damages for failure to provide project-control information. This provides new powers to recover any losses as liquidated damages if they arise as a result of C’s failing to supply D with the information they need to manage their risks. The principle for the deduction of liquidated damages is broadly similar to that for the deduction of liquidated damages for delay. 10–092 The losses, which can be expected to flow from a failure to provide the information necessary to enable D to follow the progress of the work and to manage their risks are those costs that will be expended in the event of a dispute about a claim for reimbursement of loss and/or expense, or for an extension of time which, because of the absence of contemporaneous information, then has to be calculated retrospectively. The CMS provides for a graduated liquidated damages provision over six periods, but there is no intrinsic reasoning why there should not be more, or fewer, periods, or 113 See generally, Ch.11, “Mitigation, recovery and acceleration”. 114 See, for example, some of the more obvious alternatives set out in Ch.8, “Presentation and approval of programmes”, throughout.

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for that matter, why the liquidated damages could not be formulated according to a “bell curve” graph demonstrating little foreseeable loss at the beginning and end of a contract, but maximum in the middle. 10–093 Whenever the exercise of the power to instruct acceleration is contemplated, there is a consultative process requiring the co-operation of C. If it is to recover the potential consequences of slippage, C bears the costs, but if it is to overcome the consequential effects of an event at D’s risk as to time, it is a variation for which D is to bear the costs. 10–094 Taking account of the decision in Masons v WD King115, the CMS provides that, if C fails to comply with instructions to accelerate, which have been properly given, then it will be liable in damages to D for the loss, which is actually suffered by any delay to completion, over and above the liquidated damages specified in the contract.

115 Masons v W D King [2003] EWHC 3124 (TCC), [62]–[68].

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Mitigation, recovery and acceleration

Introduction Standard form provisions Constructive acceleration Constructive acceleration as a legal doctrine Initiation of grounds for constructive acceleration Conduct requiring acceleration The mechanics of constructive acceleration Methods of recovery and acceleration Omissions Changing the sequence of activities Other logic changes Using a different method of working Increasing motivation Increasing resources Increasing the working time Failure to recover, or to accelerate

11–001 11–021 11–093 11–095 11–104 11–110 11–122 11–137 11–146 11–151 11–158 11–164 11–166 11–167 11–170 11–189

Introduction “Nothing bothers the trier-of-fact more than an otherwise valid damages proof which has been inflated by the failure of the entitled party to mitigate the event of the damage. In most construction situations, damages can be mitigated. Therefore, mitigation is a third major proof role for the construction process/damages expert.Was there demonstrable effort? Actual success of mitigation is not essential, but can reduce necessary additional proof of mitigation effort. Generally a recognition of the need to mitigate and demonstrable follow through can be sufficient. Failure to see reasonably obvious mitigation options, even with other effort, may be held the responsible party.The expert can demonstrate such effort from the factual evidence available. . . .”1

11–001 Mitigation is a term used to describe the act of avoiding a primary, or reducing a secondary, effect on cost, or time, but acceleration and recovery are terms more usually associated with overcoming, in whole or in part, a tertiary effect2. 1 K Nielsen and P Galloway, Journal of Trial Advocacy (1984). 2 For the distinction between primary, secondary and tertiary causation, see Ch.14, “Cause and effect”, at paras 14–020 to 14–130.

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11–002 Whilst there is no general common law duty upon a claimant to mitigate its loss, C cannot recover from D losses that it could reasonably have avoided, nor will it be entitled to additional time which, with reasonable diligence, would not have been necessary. This position was enunciated most authoritatively by Viscount Haldane LC in British Westinghouse3 and his comments form the basis for the modern law relating to loss mitigation. In that case, the Lord Chancellor stated that: “I think that there are certain broad principles which are quite well settled. The first is that as far as possible, he who has proved a breach of a bargain to supply what he contracted to get is to be placed, as far as money can do it, in as good a situation as if the contract had been performed. The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach, but this first principle is qualified by a second, which imposes on [C] the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps.”4

11–003 It is axiomatic that C cannot owe a duty to himself. This was made quite clear by Donaldson MR in The Solholt5, when he stated that: “[C] is under no duty to mitigate his loss, despite the habitual use by lawyers of the phrase ‘duty to mitigate’. He is completely free to act as he judges to be in his best interests. On the other hand, [D] is not liable for all loss suffered by [C] in consequence of his so acting. [D] is only liable for such part of the [C’s] loss as is properly caused by the [D’s] breach of duty.”6

11–004 On the authority of Payzu v Saunders7, the then Master of the Rolls also made it clear that mitigation is a question of fact, not of law, and so it is highly unlikely that an appellate court would come to a different conclusion, as to mitigation, from that arrived at by a lower court. 11–005 Thus, the right to compensation for events at D’s risk as to cost is qualified by the requirement on C to take reasonable steps to mitigate the loss. This requirement is subject to the limitation that C is not required to embark on a course of action that is risky, or might cause loss of reputation8. But if C incurs loss or expense by taking reasonable steps to mitigate the effects of D’s risks, it is also entitled to recover its consequential loss or expense arising out of the mitigation9. The onus of proving failure to mitigate rests upon D10. 11–006 If C is likely to suffer loss and/or expense as a result of a D’s cost risk event, it will be able to recover those costs from D, irrespective of the effect on the completion date11. The question then to be posed is, if it takes steps to mitigate the delay caused by D’s cost risk event, whether C is entitled to recover compensation, and, if so, whether its claim for loss and expense arises out of the cost of the mitigating action or out of the event or the circumstances in which the work is performed. The general 3 British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd (No 2) [1912] AC 673. 4 British Westinghouse [1912] AC 673 at 688. 5 Sotiros Shipping Inc v Sameiet Solholt (The Solholt) [1983] 1 Lloyd’s Rep 605. 6 The Solholt [1983] 1 Lloyd’s Rep 605 at 608. 7 Payzu v Saunders [1919] 2 KB 581. 8 Dunkirk Colliery v Lever (1878) LR 9 Ch D 20. 9 Wilson v United Counties Bank [1920] AC 102. 10 Roper v Johnson (1873) LR 8 CP 167, confirmed by the House of Lords in Garnac Grain Co v Faure and Fairclough [1968] AC 1130. 11 See for example, JCT05, Cl.4.23.

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rule is that, if C takes reasonable steps in mitigation of damage suffered and thereby incurs additional cost instead of saving, it is entitled to recover its actual loss. But where savings are made through mitigatory efforts, C’s recovery is limited to its actual loss, regardless of whether or not it was obliged to make such efforts. This is subject to a further rule that mitigation measures are to be taken into account only in so far as they arise out of the consequences of D’s risks and are in the ordinary course of business. In Hussey v Eels12, Mustill LJ (as he then was) quoted a passage which, he said, epitomised the law: “When once the Court has arrived at the conclusion that the measure of damages is x, which in that particular class of case was the cost of putting the premises into repair, no outside circumstances will be taken into consideration for the purposes of reducing x to x – a. But here the measure of damages never was x, but was x – a, that is to say, the price of the new machines less the value of the additional advantages derived from their use.”13

11–007 In Wallace14, the US Federal Court of Claims applied these rules to the facts and identified that, where a delay to progress is caused by something it deemed C could have avoided by mitigatory action, the delay caused is not at D’s risk and is therefore neither excusable nor compensable. 11–008 Acceleration and recovery are opposite sides of the same coin; the words are used to describe the circumstances of reducing the likely effect upon completion of a delaying event. “Recovery” is used to describe the act of C, in overcoming the effect of events at its own risk, for which it is not entitled to compensation, whereas “acceleration” is used to describe the act of C, in overcoming the effect of events at D’s risk, for which it is entitled to compensation. As with “delay”, acceleration and recovery have no intrinsic quality; they are comparative terms which cannot have an existence independently of the baseline from which they are measured. 11–009 In essence, recovery is the obverse of dilatoriness, where, for a given work content, recovery will bring about an improvement upon the intent as to timing of an activity, or a completion date. So, for example, where C has had to remove and do again work found to be defective, or has had to work longer hours, or bring on additional resources in order to overcome the effects of, for example, poor planning, plant breakdown, or absenteeism, the improvement on performance is a recovery rather than an acceleration, simply because the problems it is designed to overcome are at C’s risk and expense. 11–010 Whilst in any case it is to be implied, many standard forms of contract contain the express obligation to proceed regularly and diligently with the works and to complete by the completion date15 and that obligation is fundamental to C’s obligation to implement recovery measures when it is in delay as a result of its own culpability. 11–011 The meaning of those words “regularly” and “diligently” was considered by the Court of Appeal in West Faulkner v Newham16. In this case, D engaged C under JCT63 to modernise and refurbish blocks of houses and flats on one of its estates, at a cost of £3.5m. C’s progress was inordinately slow. Schedule dates were not met and delays and disruption occurred and continued. The overruns on each block were enormous. D’s loss was estimated at around £1.5m. The court said that the intention of Cl.25 of JCT63 12 13 14 15 16

Hussey v Eels [1990] 2 Q B 227. Hussey v Eels [1990] 2 QB 227 at 234. RP Wallace Inc v The United States, COFC No 96–222 C (2004), (2005) 21 Const LJ 378. See, for example, JCT05, Cl.2.4. West Faulkner Associates v The London Borough of Newham (1994) 71 BLR 1.

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was to require C to proceed regularly and diligently, not regularly or diligently, and thought that this was spelt out in Cl.21. Thus, a breach of either obligation could properly give rise to the issue of a notice of determination. As Simon Brown LJ put it: “Commercial logic and common sense likewise dictate that [C] must proceed both regularly and diligently and can, in appropriate circumstances, be dismissed from the site if he fails to do either.”17

11–012 In arriving at an interpretation of the phrase “regularly and diligently”, the court stated that there was a measure of overlap between the words and it was therefore unhelpful to try to divide them into separate and discrete obligations. The word “regularly” ought to be seen as a requirement to attend for work on a regular daily basis with sufficient men, materials and plant to have the physical capacity to progress the works substantially in accordance with the obligations set out in the contract. The word “diligently” was, in effect, the need to apply that physical capacity industriously and efficiently towards that end: “Taken together the obligation upon [C] is essentially to proceed continuously, industriously and efficiently with appropriate physical resources so as to progress the works steadily towards completion substantially in accordance with the contractual requirements as to time, sequence and quality of work.”18

11–013 His Lordship added that these were plain English words and, in reality, the sort of failure described in Cl.25(1)(b) was, rather like an elephant, far easier to recognise than to describe. However, by raising the standard from “regularly and diligently” to “continuously, industriously and with appropriate physical resources”, the animal should indeed be easier to recognise. On the other hand, it is not clear why it was thought that actively proceeding “substantially in accordance with the contract requirements” would be sufficient; there is little point in beavering away at anything that is not exactly in accordance with the contract requirements.

Illustration Facts: A dispute arose between Morris Homes (MH) and the Keays in relation to the construction of a medical centre, when MH slowed down the works and “mothballed” the project. As landlord, MH was obliged by clauses 3.1 and 4 of the contract to “as soon as reasonably practicable commence and thereafter diligently to carry out the Works in accordance with the planning permission and all other relevant permissions consents and the documents . . . in a good and workmanlike manner with good quality materials . . .” and to “. . . use all reasonable endeavours to ensure that the Works are completed as soon as reasonably practicable as part of the development unless prevented or delayed by any cause or circumstance not within the reasonable control of the landlord, in which case the landlord shall be entitled to an extension of time equal to the period of such delay”. The Keays claimed that MH was in breach of cl.3.1 (in that it had failed to proceed diligently with the works) and/or had breached cl.4. MH relied upon cl.4 and claimed that, as a result of the financial crisis, it risked commercial suicide if it had continued with the development. The dispute was arbitrated and the arbitrator decided that the clauses were independent of each other. He found that MH was in breach of its obligation under cl.3.1 diligently to carry out the works once they had commenced, irrespective of their separate obligations under cl.4. MH sought permission from the court to appeal the 17 West Faulkner Associates (1994) 71 BLR 1 at 153. 18 West Faulkner Associates (1994) 71 BLR 1 at 154.

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arbitrator’s decision. Held, by HH Judge Grant, that the approach taken by the arbitrator in his interpretation of cl.3.1 was consistent with the statement of Brown LJ in West Faulkner Associates v Newham LBC19, in which he said that, “taken together, the obligation to proceed regularly and diligently placed upon the contractor is essentially to proceed continuously, industriously and efficiently, with appropriate physical resources being applied, so as to progress the works steadily towards completion, substantially in accordance with the contractual requirements as to time, sequence and quality of works”; that a party in MH’s position might well be able to comply with that obligation by making reasonable efforts to ensure that it had sufficient capital and other management resources and yet be in breach of an independent obligation to carry out the works diligently: Morris Homes (West Midlands) Ltd v Antony Paul Keay 20.

11–014 The implementation of recovery to overcome the likely effects of a culpable delay to progress can affect the start and/or finish of: a trade, or subcontract; a key date; a sectional completion date, or the completion date for the works; or other activities that are not critical to the start or finish of a trade or subcontract, key date or sectional completion date or completion date for the works. 11–015 Unfortunately, in the construction industry, words are rarely used with much precision, and “acceleration” seems often to be used to describe the act of overcoming the likely effect of lost time, whether or not it is at D’s risk. As was succinctly observed by HH Judge Hicks QC, in Ascon: “‘Acceleration’ tends to be bandied about as if it were a term of art with a precise technical meaning, but I have found nothing to persuade me that that is the case. The root concept behind the metaphor is no doubt that of increasing speed and therefore, in the context of a construction contract, of finishing earlier. On that basis ‘accelerative measures’ are steps taken, it is assumed at increased expense, with a view to achieving that end. If the other party is to be charged with that expense, however, that description gives no reason, so far, for such a charge. At least two further questions are relevant to any such issue. The first, implicit in the description itself, is ‘earlier than what?’ The second asks ‘by whose decision the relevant steps were taken?’”21

11–016 Acceleration is defined in the SCL Protocol 22 as: “the execution of the planned scope of work in a shorter time than anticipated, or the execution of an increased scope of work within the originally planned duration.”

11–017 In this, the Protocol perhaps confuses a result with a measure which nonexclusively brings about that result. However, in the context of a construction contract, one might reasonably adopt a wider definition of acceleration as any measure bringing about a time gain, which is intended to overcome the effect of an event at D’s risk as to time. Dictionaries will indicate that to accelerate means “to cause to move more quickly”, or “to increase in rate, amount, or extent”, “to move faster”, or “to happen 19 (1994) 77 BLR 1 at 154. 20 [2013] EWHC 932 (TCC). 21 Ascon Contracting Ltd v Alfred McAlpine Construction Isle of Man Ltd (1999) 66 Con LR 119; (2000) 16 Const LJ 316, at para.50 per Judge Hicks at para.50. 22 The Society of Construction Law, “Delay and Disruption Protocol” (2002), App.1. See also Ch.10, “Project control”, at paras 10–085 to 10–088.

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faster”. The word is derived from the Latin words accelerare meaning “hasten”, and celer meaning “swift”. 11–018 There are two common applications of the term “acceleration”. On the one hand, it tends to be used to describe the act of completing the works in a shorter time than that anticipated by C at the time of tender in light of the resources planned, in the degree, disposition and circumstances anticipated by the contract documents. On the other hand, perhaps the more common use of the term acceleration, is in connection with the act of overcoming the likely effect of an event at D’s risk as to time. In most standard forms of contract, C will be entitled to an extension of time following the occurrence of D’s time risk events, which are likely to delay completion. However, notwithstanding that the cause of delay is contractually D’s risk, it is not unusual for D to be unenthusiastic about the project taking longer to complete and, rather than see the CA award C more time to complete, which C will then go on to use, there may be circumstances in which D would rather pay C to overcome the effect of those events, in whole or in part, and finish earlier. Whilst it is unusual, but not unknown, for a standard form to provide expressly for such instruction to be given under the contract, it is more common for such acceleration to be the subject of a collateral agreement, setting out in advance the cost implications. 11–019 As with recovery, acceleration to overcome the likely effect of a D’s time risk event can affect the start and/or finish of: a trade, or subcontract; a key date; a sectional completion date, or the completion date for the works; or other activities that are not critical to the start or finish of a trade or subcontract, key date, or sectional completion date, or completion date for the works. 11–020 In practice, recovery and accelerative measures of some sort are put into effect at some time, in most contracts. This is usually achieved either by varying the sequence and timing of the works, or by varying the labour and plant available so as to overcome, in whole or in part, what would otherwise be the knock-on effects of a delay to progress. Whenever such changes in sequence, timing, or resources are made, unless they are thoroughly documented, they can render monitoring against a fixed baseline meaningless23 and subsequent tracing and analysis of the effects of D’s time risk events difficult.

Illustration Facts: Cleveland Bridge UK Ltd (C) was engaged by Severfield-Rowen Structures Ltd (D) to supply the steelwork for the Shard in London. Delays occurred in the provision of that steelwork by C, which impacted progress on other work by D, with both parties claiming and counterclaiming damages, inter alia, in respect of acceleration. Held, by Akenhead J that: (1) C’s culpable delay caused 42 days of delay (although other factors were also attributable), so that C was entitled to £929,477.55 plus VAT; (2) against this sum, D was entitled to damages for delayed and defective work completed in the sum of £824,478.49; and (3) there were other, as yet unquantified, findings of liability against C: Cleveland Bridge UK Ltd v Severfield-Rowen Structures Ltd 24. 23 See Ch.9, “Revising, updating, monitoring and reporting”, at paras 9–089 to 9–149. 24 [2012] EWHC 3652 (TCC).

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Standard form provisions 11–021 There is little consistency between the standard forms of contract on the subject of C’s obligations to overcome or moderate the effects of delay. MTC89, of course, contains no provisions for a contract completion date or extensions of time, simply because the time provisions in that form relate only to the period over which the rates will subsist and not the period of time for the work. MWA80, MWA98 and MWA05, although making provision for extensions of time for any cause beyond C’s control, contain no provision requiring C to mitigate any delay, or lack of progress within its control. Similarly, there are no provisions to that effect in A201/97, A201/07, ACA82, ACA98, ECC2, ECC3, or NEC/SF99. 11–022 Some forms of contract require C to prevent or avoid delay to the progress of the works, as well as delay to completion of the works beyond the completion date. Most forms also contain some provision requiring C to proceed diligently and to inform the CA of any likelihood of delay. Whether, in those forms, anything significant is implied by the additional requirement to avoid, or prevent delay to progress is doubtful. On the face of it, there appears to be little else C could practically do to avoid delay to progress other than proceed regularly and diligently. 11–023 JCT63 and PCC92, PCC9825, IFC84, IFC9826, IFC05 and IFWCD/0527 merely require C to “prevent delay”. However, JCT80, JCT9828, JCT0529, WCD8l, WCD9830 and DB0531, and WC87 and WC9832, WC/0833 and TC0834 of the JCT family of contracts require C not only to “prevent delay”, but also to “prevent the completion of the works being delayed”. These forms impose two obligations whilst using the word “delay” to describe both. On the one hand, C is required to prevent delay in the course of the works, ie to prevent a delay to progress caused by the work falling behind schedule and, on the other, to prevent delay to completion of the works beyond the completion date caused by the period of work continuing beyond the contractual completion date. 11–024 MC87 and MC9835 require the management contractor, not to “prevent”, but to “avoid, or reduce” delay, without being specific as to which type of delay. On the other hand, the 2009 edition of the Irish government standard forms only requires that C should avoid or minimise a delay to completion of the works beyond the completion date36. In relation to the possibility of delay on the part of nominated subcontractors, JCT63, JCT80 and JCT98 require similar action. Here, C is required to “take all practical steps to avoid or reduce delay”. It is not merely an obligation to

25 26 27 28 29 30 31 32 33 34 35 36

Cl.2.5.4. Cl.2.3. Cl.2.19.4.1. Cl.25.3.4.1. Cl.2.28.6.1. Cl.25.3.4. Cl.2.25.6.1. C.2.8. Cl.2.18.6.1. Cl.2.27.6.1. Cl.2.12.1. See, for example, IGBW/09 Cl.9.3.2(2).

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avoid delay occurring, but also to recover the effects of delay (presumably to progress) that have already occurred. 11–025 The obligations generally imposed by the standard forms as to mitigation are not absolute. ICE/MW, for example, requires C to “take all reasonable steps”. The New South Wales Government form C21/0337 also requires C to have “taken all reasonable steps to avoid and minimise the delay and its consequences”. 11–026 C21/09 specifically differentiates between recovery at C’s expense and acceleration at D’s expense. As to recovery, at Cl.25, it states: “Whenever requested, [C] must demonstrate to [D] that it is achieving scheduled progress. If [C] is not achieving scheduled progress, [D] may instruct [C] to take all reasonable steps to achieve scheduled progress, at [C]’s cost. The parties acknowledge that an instruction under clause 25.4 is not an acceleration notice.”

MPF38 and MP0539 require C to “use its reasonable endeavours to prevent, or reduce delay to progress of the project, or completion of the project”. In so far as they require anything along these lines, the remainder of the 2005 and later series of JCT contracts, that is JCT0540, JCTsub/0541, DB0542, PCC0643, and WC/0844, do not call for C to reduce delay, but use the expression: “[C] shall constantly use his best endeavours to prevent delay in the progress of the works, or any section, however caused, and to prevent the completion of the works, or section being delayed, or further delayed beyond the relevant completion date.”

11–027 TC0845 uses a similar expression. A composite of these requirements is imposed under GC/Works/1, GC/Works/1/9846, and ICEMW/247, which require that C should “prevent delays” and “minimise unavoidable delays”, again without being specific as to whether either refers to delay to progress only, or also delay to completion. GC/ Works/2 and GC/Works/2/9848 similarly do not distinguish between delays to progress and delays to completion and also, simplistically, require C to “prevent” and “minimise” any delay. PPC2000 requires that C “shall use its best endeavours at all times to minimise any delay or increased cost in the project”49. 11–028 HK05, requires that C should: “continually use his best endeavours to prevent, or mitigate delay to the progress of the works, howsoever caused, and to prevent the completion of the works being delayed, or further delayed beyond the completion date.”50

37 38 39 40 41 42 43 44 45 46 47 48 49 50

Cl.43.3. Cl.9.3. Cl.15.3. Cl.2.28.6.1. Cl.2.19.6.1. Cl.2.25.6.1. Cl.2.20.6.1. Cl.2.18.6.1. Cl.2.27.6.1. Cl.36(6) of both the lump sum and design and build form. Cl.4.4. Cl.36(6) of both the lump sum and design and build form. Cl.18.3. Cl.25.1(4)(a).

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11–029 However, it then goes on to make clear that: “the words ‘best endeavours’ shall not be construed to mean that [C] is obliged to spend money without reimbursement under clause 26, to accelerate the carrying out of the works to recover delay [C] did not cause.”51

11–030 It is generally the case that conformity with such express obligations is made a condition precedent to entitlement to an extension of time, or compensation under these forms. For example, the 2009 edition of the Irish government standard forms provides that C is entitled to an extension of time, provided that C “cannot avoid the delay and makes all reasonable efforts to minimise the delay”52. Similarly, the JCT forms commence the right to an extension of time with the obligation to reduce, avoid, prevent, and so on, using the expression “provided always that”. PPC2000 provides that C is entitled to an extension of time “if and to the extent that, despite [C’s] best endeavours” a D’s time risk event has an adverse effect on completion53. However, in the Australian form AS400054, it expressly states that any assessment of entitlement to an extension of time is to disregard any question of whether C can accelerate, “but shall have regard to what prevention and mitigation of the delay has not been affected by [C]”. So, whilst the drafters distinguish recovery from acceleration, the basis upon which such distinction is made is unclear. Unusually, AS2124 similarly provides that: “In determining whether [C] is, or will be delayed in reaching practical completion regard shall not be had to whether [C] can, by committing extra resources, or incurring extra expenditure, make up lost time.” (emphasis added)

11–031 However, it goes on to provide that: “In determining a reasonable extension of time for an event causing delay, the [CA] shall have regard to whether [C] has taken all reasonable steps to preclude the occurrence of the cause and minimise the consequences of delay.”

11–032 It thus seems that, whereas C is not required to expend money or resources to overcome, at its own cost, the effect of an event at D’s risk as to time or cost, where it is possible to avoid a delay to progress, or to minimise or avoid the knock-on effect of a delay to progress on completion, and C fails so to do, it will not be able to recover from D for the effects of those events it could reasonably have avoided. 11–033 In Wallace55, under a contract in which C was entitled to an extension of time for any cause beyond its control, or beyond the control and without the fault, or negligence of both C and the subcontractors, or suppliers, it was C’s evidence that, once it had taken the first submittal from the supplier of windows and found the specification defective (an event beyond C’s control), whatever time the supplier subsequently took to deliver the windows was also at D’s risk. The court rejected this supposition, saying: “The factual flaw of this argument, however, is that [C] produced no evidence, beyond the self-serving statements of its officers, that, once the defective specifications were corrected, it had no reasonable choice, but to subcontract with [the supplier]. The lack of proof on

51 52 53 54 55

Cl.25.1(4)(a). See, for example, IGBW/09 Cl.9.3.2(2). Cl.18.3. Cl.34.4. RP Wallace Inc v The United States, COFC No 96–222 C (2004), (2005) 21 Const LJ 378.

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this point is all the more startling as trial revealed that [C] apparently knew, at, or around the time it initially authorized [the supplier] to proceed, that the latter would need 22 weeks to complete a job that [C] had originally estimated and represented would take, at most, eight. Yet, there is no indication that [C] even considered going elsewhere. As such, for the fabrication period, [C] plainly has neither shown that the delay in completing the work was ‘beyond [its] control,’ nor that the ‘delays’ experienced by [its supplier] in delivering the windows were ‘from unforeseeable causes beyond the control and without the fault, or negligence of both [C] and the subcontractors, or suppliers Rather, donning rose-colored glasses, [C] seems to operate now, as it did then, on the assumption that once the original design of the windows was found to be defective, both it and [D] were ‘stuck’ with whatever schedule [the supplier] could provide. That sticky assumption is counterfactual, particularly given the apportionment rule, discussed above, under which [D’s] initial delay did not absolve [C] from having to obtain the windows in a timely manner, so as to minimize further delay in the completion of the contract.”

11–034 Another example of this principle might be that, if C has to construct ten pad foundations and it intends to proceed from pads 1 to 10 in that order, but finds a soft spot on pad 1, provided it is practical to do so, it must move on to construct the other pads whilst clearing the soft spot and cannot hold everything up for no better reason than the preferred order in which the pads were first planned to be constructed. 11–035 In terms of its costs, C should also consider whether economies of plant can be effected by taking off hire, or removing from site, those items of plant that, with reason, would otherwise stand idle. Items such as dumpers, fork-lift trucks, small mixers, and so on, may easily be released. However, if the costs involved in removing large items of plant would outweigh the hire charges if they were allowed to remain on site, then their removal would not be mitigatory. For the avoidance of doubt, it is thus advisable for C to discuss these matters with the CA and agree, if possible, which items of plant might usefully be removed in the furtherance of mitigation of loss and/or expense56.

Illustration Facts: A contractor (C) claimed that the agency’s (G’s) post-award redesign of a water tank resulted in utility trench work and tank construction having to occur at the same time. C asserted that it was entitled to additional compensation for delays to its work, which were allegedly caused when G changed the design of the tank. G countered that C’s schedules had unrealistically contemplated that the trenching and installation of the tank would occur simultaneously. According to G, G’s redesign of the tank was at most a delay concurrent with C’s failure to provide an adequate geotechnical report. Because C did not comply with the geotechnical report requirement. Held, that C could not have begun to dig the foundation for the tank until the same date that G approved the only change to the design of the tank which impacted the foundation. Based upon its own delays in completing the geotechnical report, C was not prepared to proceed with the tank construction. To the extent that the concurrent delay caused by G’s redesign of the tank entitled C to more time to build the tank, C received that time. C had failed to demonstrate that the increase in contract time was insufficient to compensate for the excusable portion of the delay arising from G’s

56 K L Scott, “The management of contractual claims” (1992) Studies in Contractual Claims 14, The Chartered Institute of Building.

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actions. C’s own delays and decisions concerning the manner of work and use of time caused overlapping work on the tank and utility trench. C did not prove that it was entitled to an equitable adjustment for constructive acceleration: United Constructors LLL v United States57.

11–036 As regards recovery, the JCT forms require C to work out for itself whether it is suffering, or likely to suffer, delay and C’s obligation is then qualified in that it is not required to do more than “use constantly his best endeavours” to achieve the objective. In this regard, GC/Works/2 refers to “best endeavour”. Similarly, in JCT63 and MC87, C is required to “use his best endeavours”, while FIDIC4 simply requires C to “endeavour” to achieve the objective. 11–037 The expression “best endeavours” was interpreted in the case of IBM v Rockware Glass58 in regard to an agreement to sell some land by a contract that included a condition that IBM would use its best endeavours to obtain planning permission. Permission was initially refused and IBM did not appeal to the Secretary of State. It was held that, even though making an appeal would cost a significant amount, the parties would have considered that an initial refusal at local level would not be the end of the matter. The test of “best endeavours” in that case was that purchasers of land: “are bound to take all those steps in their power which are capable of producing the desired results, namely the obtaining of planning permission, being steps which a prudent, determined and reasonable [D], acting in his own interests and desiring to achieve that result, would take.”

11–038 It was further stated that the criterion was not that of someone under a contractual obligation, but someone who was considering his own interests. In Sheffield v Great Central 59, the court said the words did not mean second-best endeavours, nor did they require that the limits of what is reasonable must be overstepped with regard to the cost of the service, but that C must, broadly speaking, “leave no stone unturned”. 11–039 The 2009 edition of the Irish government standard forms60 and the JCT family of contracts require C to “proceed regularly and diligently” with the works so as to achieve completion by the completion date, and a similar expression appears in HK05. The engineering forms FIDIC461, ICE6 and ICE762 require that C should “proceed with due expedition and without delay”, and GC/Works/1 and GC/ Works/1/9863 require that C should “proceed with diligence”. FIDIC/DB95 and FIDIC/Build99 require C to “proceed with due expedition and without delay”64. FIDIC/M&E87, FIDIC/SF98 and the NEC forms do not contain any requirements at all regarding the progress of the works. On the other hand, ECC2 and ECC3 leave the facility for D to set down any duty to proceed regularly and diligently and/or in accordance with the schedule in the works information. 11–040 In regard to delay to progress caused by C’s own malfeasance, if the CA should form the opinion that work is going so slowly that the contract is unlikely to

57 58 59 60 61 62 63 64

95 Fed Cl.26, 2010 US Claims LEXIS 811 (2010). International Business Machines (UK) Ltd v Rockware Glass Ltd (1980) FSR 335. Sheffield District Railway Co v Great Central Railway Co (1911) 27 TLR 451. See, for example, IGBW/09 Cl.9.1.3. Cl.8.1. Cl.41(2). Cl.34(1). Cl.8.1.

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be completed on time, then on the issue to C of a notice to that effect, C must: “take such steps as are necessary, and to which the [CA] may consent, to expedite progress so as to substantially complete the works” by the contract completion date65. FIDIC/ DB95 only requires C to re-schedule the work to “take account of the prevailing circumstances”66. IChemE is similar in effect, but provides for the CA to give a notice to C where the CA determines that, as a result of default on C’s part, completion is likely to be delayed and thereafter C “shall use his best endeavours to remedy the potential delay at his own cost”. 11–041 On the other hand, the 2009 edition of the Irish government standard forms67 and FIDIC/Build99 go much further and require C to demonstrate what steps are to be taken and how they are to be implemented. FIDIC/Build9968 requires C to present a “revised schedule and supporting report describing the revised methods which [C] proposes to adopt in order to expedite progress and comply with the contract”. In contrast to these forms, HK05 states that if the CA forms the opinion that the progress of the work is too slow to ensure the completion of the works by the completion date, the CA may give a notice to C to that effect. However, sub-cl.(2) of this clause contains the extraordinary provision that C need do nothing as a result of that notice unless it so wishes69. ECC2 and ECC370, similarly, provide for C to indicate on a revised schedule how it plans to deal with any delays to progress of its own making, if it so wishes. However, the failure to include in these contracts the CA’s power to instruct C to reschedule its work and resources so as to improve its performance in order to recover culpable delay, at its own cost, is a strange omission. 11–042 ICE6, ICE7 and the FIDIC forms make it clear that the CA is to consider the rate of progress in relation to any section of the works, as well as the works, as a whole, and, in forming the opinion that the rate of progress is too slow to ensure “substantial completion” by the contract completion date, it may issue a notice to that effect to C, who “shall thereupon take such steps as are necessary and to which the [CA] may consent to expedite the progress so as substantially to complete the works, or such section by that prescribed time, or extended time”71. 11–043 IChemE72 provides that C is to revise its schedule and use its “best endeavours to remedy the potential delay”. At Cl.13.5 it states: “If at any time the performance of the contract falls behind the approved [schedule], or it becomes clear that it will so fall behind, then the [CA] may require [C] either to take such steps as may be practicable in order to achieve the approved [schedule], or to revise the approved [schedule] in the light of the circumstances and to re-submit it to him for his approval. If the [CA] approves the revised [schedule] it shall thereafter be the approved [schedule]. Without prejudice to sub-clause 13.5, if the [CA] decides that the rate of progress by [C] in carrying out the works is likely to prejudice [C’s] ability to complete the construction of the plant, or any specified section thereof, in accordance with the provisions of subclause 13.1, and that this is due to a cause for which [C] is responsible, the [CA] may give notice to that effect to [C]. Following such notice [C] shall use his best endeavours to

65 66 67 68 69 70 71 72

Cl.46.1. Cl.8.5. See, for example, IGBW/09 Cl.4.9.3. Cl.8.6. Cl.25.5. See Cll.32.1, 31.2 and 31.3. See, for example, ICE7 Cl.46(1). Cl.13.5.

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remedy the potential delay at his own cost. If when the [CA] requires [C] to revise the approved [schedule], [C] fails to submit such revised [schedule] within a reasonable time, or if [C] submits a revised [schedule] which the [CA] is unable to approve for good reason, the [CA] may instruct [C] in writing to make reasonable revisions to the [schedule], and [C] shall forthwith make such revisions and the revised [schedule] shall thereafter be the approved [schedule].”

11–044 The way in which this obligation and that in FIDIC/Build99 are expressed seems to be more in line with the recommendations for change management contained in the SCL Protocol than the sort of mitigatory action required as a condition precedent to entitlement in the forms referred to above73. 11–045 Although it does not say as much, the phraseology of C’s obligation in FIDIC/ Build99 seems to imply that the sections referred to are not merely ad hoc activities or tasks, but parts of the contract that have defined and enforceable sectional completion dates. Significantly, C’s obligation to take mitigating action under FIDIC4, FIDIC/ Build99, ICE6 and ICE7 is limited to occasions when the progress is affected by inexcusable delay and the CA has issued a notice to that effect. It is also an absolute obligation. 11–046 Delay to progress (as opposed to delay to completion) can only be gauged by reference to a schedule indicating C’s contemporaneous intentions. However, even if the working schedule is kept up to date, it can still be extremely difficult to recognise. There are three reasons for this: 1.

2.

3.

The original working schedule by which failure to perform is sometimes gauged is no more than a model. No matter how well thought out it is, at best it is based on assumptions as to activity durations and methodology, which may, through no fault of C, bear little relation to reality. It is too easily and too often forgotten that the precision with which the original working schedule is illustrated is rarely related to the quality of factual information upon which it is based. Unless reviewed, revised and updated regularly, the difference between the working schedule and what is actually happening on site will become distorted to the extent that they are incomparable74. The state of the works, or any particular activity in the works, is, at any one time, transitory. Work may speed up or slow down in relation to the progress predicted by the schedule for many different reasons. Diminished productivity may be experienced as a result of familiarisation with the work at the beginning, or slowing down at the end, of a trade or element, or the project as a whole, and forthcoming holidays may temporarily slow productivity in particular activities below the average level of productivity expected by the schedule.

11–047 In GLC v Cleveland Bridge75, the court indicated that, in general, C was entitled to pace the performance of the contract as it pleased, provided the specified deadlines were complied with, and there could be no want of due diligence, or expedition if that completion date were met. It is perhaps significant that the court gauged

73 See Ch.10, “Project control”, at paras 10–071 to 10–088. 74 See Ch.9, “Revising, updating, monitoring and reporting”, at paras 9–061 to 9–088. 75 Greater London Council v The Cleveland Bridge and Engineering Co Ltd (1986) 34 BLR 50.

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the want of expedition by reference to the contract completion date, rather than a schedule of future intentions. 11–048 Unless performance under the schedule to which it is working is contractually enforceable76, control of the method and speed of working in the interim stages of the project is entirely in the hands of C. It is up to C, for example, to marshal its resources in whatever way it sees fit and, if that means some parts, phases, or other sections of the work go faster, or slower than D would like, in the absence of express terms giving D some power over progress, there appears little that D can do about it save to terminate C’s employment for breach of the obligation to proceed regularly and diligently. It will readily be appreciated that such measures are unlikely to achieve completion any faster; indeed, in most cases, such a procedure is likely to delay completion by more than it would otherwise have been delayed. 11–049 In this regard, the CMS77 introduces the power to control the progress of the works not only by reference to completion or sections carrying liquidated damages, but also by reference to key dates that can be referable to virtually anything that is project specific and identifiable. Whilst it is common to think of monitoring the effect of change upon the completion date or one or more of the sectional completion dates, it is often desirable to monitor independently of the completion of the works, or a defined section of the works, the start or completion of other activities or chains of activities. Under these recommended amendments to the UK standard forms, a key date is the date by which the start or finish of any defined process, delivery, activity, work package, section or part of the works defined in a schedule to CMS78 is to be monitored. A key date, for example, could be represented by a milestone, logically linked to the activity or activities, preceding and/or succeeding it, called “power-on”, or “watertight”, or describing the start, or finish, or a point in the duration of the work of one or more particular specialist contractors or direct works contractors. 11–050 The provisions for monitoring a key date do not translate it into a sectional completion date or the completion date for which liquidated damages may be deducted and for which extensions of time may be awarded. Whereas both a sectional completion date and the completion date are key dates, a key date is not necessarily a completion date; it is simply a date of something that D, or C particularly wishes to monitor. 11–051 The structure of the standard forms varies, some requiring that C must put into operation recovery measures in respect of culpable delay as a condition precedent to its entitlement to an extension of time79; others require the CA to issue instructions for such recovery. On the other hand, many of the standard forms of engineering contract and some of the standard forms of building contract expressly require C voluntarily to put recovery measures into operation when it is in culpable delay. For example, the New South Wales government’s standard form of contract C21/0380 and C21/0981, under the heading “time management”, states simply that “if [C] is not achieving scheduled progress, [D] may instruct [C] to take all reasonable steps to achieve scheduled progress, at [C’s] cost”.

76 For example under AS2124 and AS4000 and possibly under GC/Works/1. 77 See App.2 to the 4th edn. 78 CMS, App.2, Sch.2. 79 See para.11–030 above. See also, Ch 5, “Notices, claims and early warnings”, at paras 5–110 to 5–150. 80 Cl.11.3. 81 Cl.25.4.

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11–052 Typically, however, the clauses that provide for recovery of lost time under these circumstances are not called “culpable delay”, “power to accelerate”, or anything equally explicit, but are usually entitled something reasonably innocuous such as “rate of progress”. By way of example, under the heading “rate of progress”, FIDIC/Build99, FIDIC/PD+B99 and FIDIC/DB9982 contain the following provisions: “If at any time (a) (b)

actual progress is too slow to complete within the time for completion and/or progress has fallen (or will fall) behind the current schedule

other than as a result of a (D’s time risk event), then the [CA] may instruct [C] to submit a revised schedule and supporting report describing the revised methods which [C] proposes to adopt in order to expedite progress and complete within the time for completion.”

11–053 In FIDIC/PD+B99 and FIDIC/DB99, which are both design and build contracts and, in the case of the latter, a “turnkey” contract83, to find the power to instruct C to submit plans for recovery of lost time is unusual; by comparison, the JCT intermediate forms, the DB05 design and build forms, MPF and WCD98 do not even require C to prepare a schedule. 11–054 Some forms do not specifically require that C should re-schedule the work, or revise its method statement, requiring simply that C should take whatever steps are necessary to get back on schedule. 11–055 For example, under the heading of “rate of progress”, ICE784 provides that: “If for any reason which does not entitle [C] to an extension of time the rate of progress of the works, or any section is at any time in the opinion of the [CA] too slow to ensure substantial completion by the time, or extended time for completion prescribed by clauses 43 and 44 as appropriate, or the revised time for completion [as a result of an interim award of an extension of time] the [CA] shall notify [C] in writing and [C] shall thereupon take such steps as are necessary and to which the [CA] may consent to expedite the progress so as substantially to complete the works, or such section by that prescribed time, or extended time. [C] shall not be entitled to any additional payment for taking such steps.”

11–056 In addition, under the heading of “revision of schedule”, ICE785 also requires specifically that the schedule should be revised for the CA’s approval: “Should it appear to the [CA] at any time that the actual progress of the work does not conform with the accepted schedule referred to in sub-clause (1) of this clause the [CA] shall be entitled to require [C] to produce a revised schedule showing such modifications to the original schedule as may be necessary to ensure completion of the works, or any section within the time for completion as defined in clause 43, or extended time granted pursuant to clause 44. In such event [C] shall submit his revised schedule within 21 days, or within such further period as the [CA] may allow.”

11–057 Generally, the standard forms require C to carry the costs of devising a schedule and/or method statement and of putting it into practice to recover C’s lost time. The new FIDIC forms also require C to pay D’s costs in regard to any losses it

82 83 84 85

Cl.8.6. In which C is required to design, procure, install and commission ready for use. Cl.46. Cl.14(4).

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may suffer as a result of putting into effect the recovery methodology. For example, FIDIC/Build99, FIDIC/DB99 and FIDIC/PD+B99 provide that: “If these revised methods cause [D] to incur additional costs, [C] shall pay these costs to [D], in addition to liquidated and ascertained damages for delay, if any.”86

11–058 IChemE87 provides that C is to revise its schedule and use its “best endeavours to remedy the potential delay”. At Cl.13.5, it states: “If at any time the performance of the contract falls behind the approved schedule, or it becomes clear that it will so fall behind, then the [CA] may require [C] either to take such steps as may be practicable in order to achieve the approved schedule, or to revise the approved schedule in the light of the circumstances and to re-submit it to him for his approval. If the [CA] approves the revised schedule it shall thereafter be the approved schedule. Without prejudice to sub-clause 13.5, if the [CA] decides that the rate of progress by [C] in carrying out the works is likely to prejudice [C’s] ability to complete the construction of the plant, or any specified section thereof, in accordance with the provisions of sub-clause 13.1, and that this is due to a cause for which [C] is responsible, the [CA] may give notice to that effect to [C]. Following such notice [C] shall use his best endeavours to remedy the potential delay at his own cost. If when the [CA] requires [C] to revise the approved schedule, [C] fails to submit such revised schedule within a reasonable time, or if [C] submits a revised schedule which the [CA] is unable to approve for good reason, the [CA] may instruct [C] in writing to make reasonable revisions to the schedule, and [C] shall forthwith make such revisions and the revised schedule shall thereafter be the approved schedule.”

11–059 It is not unusual to find bespoke clauses added to the standard forms to provide for recovery of culpable delay in more forceful terms. Typically, such bespoke clauses may be along the lines of that used in Masons v WD King88: “In the event that the [CA] is of the opinion that [C’s] rate of progress in carrying out the works is likely to prejudice completion of the works, or any section by its completion date, and to the extent that in the opinion of the [CA] this is due to a cause which is not a [D’s time risk event] the [CA], acting reasonably, and taking account of [C’s] representations, may instruct [C] as to the measures he requires [C] to take to retrieve the position and [C] shall comply with the same at no cost to [D]. Without prejudice to the foregoing, such instructions may include the requirement to re-sequence work, to accelerate completion of a part of the works and/or require [C] to increase its on and off site resources. The [CA] shall give [C] notice in writing of an intention to issue an acceleration instruction no later than 5 working days before such instruction is intended to be issued, and [C] may submit to the [CA] representations in relation to the proposed instruction no later than 4 working days thereafter. In taking account of the [C’s] representations, and making a decision to issue an acceleration instruction the [CA] shall have regard to the progress of the works against the completion date for the works and each section thereof current at the relevant time.”

11–060 Apart from the provisions for bringing forward the contract completion date, GC/Works/1 and GC/Works/1DB also provide for C to attend progress meetings five days prior to which C is required, amongst other things, to: “set out any [rescheduling] proposals to ensure that completion of the works, or any section will be achieved by the relevant date for completion.”89

86 87 88 89

Cl.8.6. Cl.13.5. Masons v WD King [2003] EWHC 3124 (TCC) at [3]. Cl.35(3)(e).

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11–061 Within seven days of the progress meeting, the CA is then required to “give [C] a written statement” setting out, among other things: “the steps which the [CA] has agreed with [C] to reduce, or eliminate the effects of any such delay, or to reduce, or eliminate any estimated increase in the cost to [D] of the works, or a section.”90

11–062 Whilst this clause does not attempt to differentiate between C’s obligations in regard to culpable and excusable delay, the reference in the CA’s obligations to reducing, or eliminating increase in costs would seem to imply that this has more to do with overcoming the effects of culpable delay to progress than the effects of any D’s time risk event. As with the GC/Works series of UK government contracts, the 2009 edition of the Irish government standard forms also requires C to produce progress reports, identifying, amongst other things: “details of anything that might have an adverse effect on the execution of the works, the steps [C] is taking, or proposes to take to reduce those risks, and any steps that [C] proposes that [D], or [D’s] personnel take to reduce those risks.”91

11–063 In the absence of express words to that effect, there is generally no obligation upon C to overcome the effects of a delay caused by an excusable event. In Ascon92, the subcontractor alleged that seawater ingress below ground (for which it was agreed that C was liable) had caused the subcontractor the delay it had suffered in constructing the concrete substructure. In attempting to demonstrate, by way of counterclaim, that culpable delay by the subcontractor had caused C to delay completion, C had argued that, whatever was the initial delay caused by the ingress of seawater, the subcontractor nevertheless had had plenty of time to overcome it. In rejecting this argument, Judge Hicks said: “It is difficult to see how there can be any room for the doctrine of mitigation in relation to damage suffered by reason of the employer’s culpable delay in the face of express contractual machinery for dealing with the situation by extension of time and reimbursement of loss and expense.”93

11–064 Where there is reasonable opportunity to take steps to expedite the works to avoid a potential delay to completion, and the contract provides for compensation for costs incurred as a result of such an event, there appears to be no reason why such steps should not be taken and paid for as part of the costs of the event. 11–065 Take, for example, the simple circumstances of a D’s time risk event causing suspension of the whole of the works for one week. The extension of time C must receive is one week (T1) and, without more, the works will finish one week later than originally intended. It may be calculated that C is likely to suffer £x loss and expense for the week of prolonged working for which it will be entitled to be reimbursed. Thus, in total, prima facie it is entitled to T1 + £x. Now, if by taking reasonable steps to reduce, or minimise the delay, C is able to reduce, or prevent the delay to completion, and in doing so it incurs £y, the question arises as to its revised entitlement. Primarily, its extension of time entitlement, T1, is not affected,

90 91 92 93

Cl.35(4)(c). See, for example, IGBW/09 Cl.4.10.2(10). Ascon Contracting Ltd (1999) 66 Con LR 119; (2000) 16 Const LJ 316. Ascon Contracting Ltd (1999) 66 Con LR 119; (2000) 16 Const LJ 316, at para.56.

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although the relief from liquidated damages is no longer of any use because, by completing on time, there is no exposure to liquidated damages. However, if it is to be compensated £y for its efforts to overcome the delaying effect it cannot also have relief in respect of the predicted costs of the prolonged working had the contract term overrun ( £x + £y), since that would represent a double recovery. Neither, it would seem, could it recover T1 + £y for the same reason. C cannot be entitled to £x, because it has never suffered those losses. The result would therefore appear to be that, by avoiding the delay, C should be entitled to £y, being the costs incurred in mitigating the delaying event. This appears also to be the conclusion reached in the Ascon case by Judge Hicks, who said: “what is plain is that there cannot be both an extension to the full extent of [D’s time risk] delay, with damages on that basis, and also damages in the form of expense incurred by way of mitigation, unless it is alleged and established that the attempt at mitigation, although reasonable, was wholly ineffective.”94

11–066 The question that now has to be faced is whether, in the absence of instructions constituting a variation, or the failure to grant an extension of time, or other breach by D, C is entitled to choose which relief it prefers to take. The answer, it would seem, is that whichever course of action it actually takes, C is entitled only to its provable loss of £y, ie the costs that flow directly from D’s liability. The conclusion that can thus be drawn from the primary obligation to minimise, avoid, or prevent delay is that, in the event that D does not grant an extension of time to which C is entitled and C overcomes the delay, it will be entitled to the costs of that acceleration95. 11–067 Whilst the effects of D’s acts of delay may be avoided, prevented, or reduced by C, it can be assumed that there is likely to be a cost involved in such action. Whether D would prefer to pay those costs, or receive the building completed at a later date is a matter upon which only D can decide. Its obligation in regard to the delay it has caused to completion is to extend C’s time for performance. In so far as it would rather receive the building on time and pay C to overcome the delay to progress, ordinarily this is a matter upon which express instructions must be given if there is such a power in the contract, or by a collateral contract, if there is not. In Barker96, for instance, the acceleration of a JCT80 contract to achieve the completion date was achieved by a collateral ad hoc “acceleration agreement”. 11–068 It has been expressly stated by the Court of Appeal that the imposition of a contract date for completion means that C has a positive right to have the stipulated period in which to complete97 and, where there is no provision in any of the standard forms for the CA to have the power to instruct acceleration, no such term can ever be implied out of some generalised provision for work to be done under the CA’s directions, or to the CA’s satisfaction, or giving the CA power to order, or control the methods of working. It follows from this that, in these circumstances, any instruction for acceleration must emanate from D and any agreement for acceleration must be concluded between C and D if D is to be liable for the

94 Ascon Contracting Ltd (1999) 66 Con LR 119; (2000) 16 Const LJ 316, at para.56. 95 This is the essence of the American concept of “constructive acceleration”. See paras 11–093 to 11–136. 96 John Barker Construction Ltd v London Portman Hotel Ltd (1996) 83 BLR 31. 97 Wells v Army and Navy Co-operative Society (1902) 86 LT 764 (CA).

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ensuing costs98. For example, whilst FIDIC/M&E87 provides for a collateral agreement for acceleration, under this form, the CA has no part to play in the instruction, or the agreement. 11–069 Not all the standard forms provide for acceleration; JCT80 and JCT9899, JCT05100, ACA82, and ACA98101 provide for the costs of acceleration to be agreed in a collateral agreement. ICE6 and ICE7102, ECC2 and ECC3103, GC/Works/1, and GC/Works/1/98104 provide expressly that the CA can instruct acceleration and that C may negotiate a collateral agreement for the costs involved before being obliged to comply. 11–070 The standard form provisions for the power to instruct acceleration must be considered according to whether the acceleration is intended to: achieve a completion date earlier than that by which C is obliged to complete under the contract; or achieve a completion date earlier than that by which C is entitled to complete as a result of any extension of time to which it is entitled. 11–071 Instructed acceleration for an early completion is probably the easiest to get to grips with, as the date that is intended to be improved upon is that which is encapsulated in the contract documents. It is an identifiable date, it is certain and fixed and, if it is improved upon, the acceleration is self-evident. 11–072 ACA82 and ACA98105 are unusual in providing that the CA can instruct that any of the dates in the schedule for taking over the works may be “brought forward” and that C “shall immediately take such measures as are necessary to comply with such instruction”; it also makes provision for a payment of any damage, or direct loss, or expense arising out of that acceleration. 11–073 If D wishes to achieve an earlier completion date than that to which C is entitled to complete, then it may also do so under the NEC forms106, JCT98107 and JCT05108. For example, JCT98 makes reference to a collateral agreement under Cl.13A.2.2, which states that a quotation provided under that clause shall include: “Any adjustment to the time required for completion of the works (including where relevant stating an earlier completion date than the date for completion given in the appendix).”

11–074 GC/Works/1109 and its family of UK government contracts also provide for C to offer to bring forward the completion date and that D may require C to provide its proposals to do so. It does not, however, require D to adopt any such proposals, whether instructed, or voluntarily provided, nor does it provide for any specific redress 98 I Duncan Wallace, QC (ed), Hudson’s Building and Engineering Contracts, 11th edn (London: Sweet & Maxwell, 1995) at p.908 but see also “Constructive acceleration” at paras 11–093 to 11–136, below. 99 Cl.13A.2.2. 100 Sch.2, Cl.2, et seq. 101 Cl.17. 102 Cl.46(3). 103 Cl.36.1. 104 Cl.38. 105 Cl.11.8. 106 Cl.36.1. 107 Cl.13A.2.2. 108 See Sch.2 Cl.2.1. 109 Cl.38.

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in the event that, whilst it may have been entirely practicable to achieve an early completion, C fails to comply with the CA’s direction to plan to bring forward the completion date, or if planned for and accepted, to carry out the agreed proposals. Under the heading of “acceleration and cost savings”, so far as concerns directed acceleration, this form is similar in phraseology to Sch.2 to JCT05 and provides that: “1. If [D] wishes to achieve completion of the works, or any relevant section before the (completion date), he shall direct [C] to submit to him within the period specified in the direction – (a) (b)

[C’s] priced proposals for achieving the accelerated completion date, together with any consequential amendments to the schedule, or [C’s] explanation why he is unable to achieve the accelerated completion date.”

11–075 Other forms require C, on invitation, to provide an estimate of costs of acceleration, which upon acceptance will become a term of a collateral contract. So, for example, ECC2 and ECC3110 state: “The [CA] may instruct [C] to submit a quotation for acceleration to achieve completion before the completion date. A quotation for acceleration comprises changes to the prices and the completion date and a revised schedule.”

11–076 ICE6, ICE7 and the FIDIC forms carry no obligation that can be interpreted to require moderation of the effects of excusable delay. 11–077 Instructed acceleration when in excusable delay is potentially the most difficult area of acceleration to deal with and this is particularly so when C has not updated its schedule competently, so as to identify what it has actually achieved in relation to what was planned, and what its intentions are for the future of the project, at the time the event occurred. Bearing in mind that the first thing to establish, in regard to acceleration, is the date upon which C would be likely to finish in the absence of such acceleration, the absence of a schedule by which that can be established, prior to the nature of the acceleration required being considered and instructed, can render D’s position extremely precarious. 11–078 It is rare to find in any standard form of contract, for use with building, express provisions entitling D to manage the consequences of delay to progress, caused by a D’s time risk event. PPC2000, for example, whilst permitting the CA to issue any instruction that is consistent with any partnering document111, and providing for the risks as to time to be D’s liability, states, at Cl.18.2, that subject to any risk-sharing agreement set out in the partnering documents, C is to manage all risks associated with the project and the site. It provides nothing by way of information or power of instruction that would enable D to manage its own risks, but it does provide for C to receive more time and more money through the extension of time and compensation provisions if it fails to manage D’s risks. 11–079 The JCT forms of contract do not contain any power of instruction in regard to the revision of the sequence of activities, resources to be applied, or methodology and, under IFC05 and DB05, whilst providing that the CA may, among other things, vary the order of execution of the works by variation instruction, C does not have to comply therewith if it has “reasonable objection”. The only

110 Cl.36. 111 Cl.5.3.

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provision available to D under JCT98, if it wishes to achieve a completion date earlier than that at which C is entitled to complete is a collateral agreement under Cl.13A.2.2, which states that a quotation provided under that clause shall include any adjustment to the time required for completion of the works. How such acceleration (if any) is to be achieved under those provisions, and at what cost, is then entirely for C to decide. Again, there is nothing in the contract that provides for D to have access to the information it would need or the powers of instruction necessary to manage its own risks. 11–080 Although it appears in the clause entitled “rate of progress”, which, in other forms, is reserved for instructions requiring the recovery of culpable delay, AS2124112 provides: “The [CA] may direct in what order and at what time the various stages, or parts of the work under the contract shall be performed. If [C] can reasonably comply with the direction, [C] shall do so. If [C] cannot reasonably comply, [C] shall notify the [CA] in writing, giving reasons. If compliance with the direction causes [C] to incur more, or less cost than otherwise would have been incurred had [C] not been given the direction, the difference shall be valued as (a variation).”

Although there is no reference to liability for the cause for which the direction is required, in the light of the requirement for cost adjustment, it can reasonably be inferred that this is intended to be used for managing D’s risks, rather than C’s. 11–081 There is a comparable provision under AS4000113, which, under the heading of “scheduling”, expressly provides for power to manage D’s risks, rather than C’s default. This provides that: “The [CA] may direct in what order and at what time the various stages, or parts of the work shall be carried out. If [C] can reasonably comply with the direction, [C] shall do so. If [C] cannot reasonably comply, [C] shall notify the [CA] in writing, giving reasons. If compliance with any such directions under this clause, except those pursuant to [C’s] default, causes [C] to incur more, or less cost than otherwise would have been incurred had [C] not been given the direction, the difference shall be assessed by the [CA] and added to, or deducted from the contract sum.”

11–082 Similarly, C21/09 provides for D to instruct C to accelerate progress, at D’s expense, stating114: “[D] may instruct [C] to accelerate progress of the carrying out of the works. The instruction must be in the form of an acceleration notice, and [C] must comply unless, before taking any steps to accelerate, it demonstrates to the satisfaction of [D] that the acceleration as instructed cannot be reasonably achieved. [C] is not entitled to payment under this clause 56 if no acceleration notice is issued. Whenever possible, the parties must agree on the steps to be taken and basis for payment for acceleration before [C] takes those steps, or failing agreement [D] must determine a reasonable value. [D] must pay [C] for acceleration (as an addition to the contract price) if it achieves the acceleration instructed by [D], but the value must take into account any relevant extensions of time which may be granted under clauses 41, 52 or 54 for delay during the period of acceleration.”

112 Cl.3.1. 113 Cl.32. 114 Cl.56.

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11–083 Some UK engineering forms also contain provisions that will, if implemented, enable D to manage its risks. For example, MF/1115 provides that: “In all cases where [C] has given notice [of a D’s time risk event] that is likely to cause delay to completion, [C] shall consult with the [CA] in order to determine the steps (if any) which can be taken to overcome, or minimise the actual, or anticipated delay. The [CA] shall thereafter comply with all reasonable instructions which the [CA] shall give in order to overcome, or minimise such delay. If compliance with any such instruction shall cause [C] to incur additional cost and [C] is entitled to an extension of time, the amount thereof shall be added to the contract price.”

11–084 The 2009 edition of the Irish government standard forms of contract provides116 that C may provide D with its proposals for value engineering that will accelerate the execution of the works although, since it is also a condition that any such proposals should not increase (and are intended to reduce) the contract sum, it is not immediately apparent why C should wish to make any such proposal. 11–085 HK05117 contains the most complex standard form provisions for instructed acceleration, providing that, where the CA is of the opinion that it may be possible to extinguish or significantly reduce the likely delay to completion of the works beyond the completion date caused by a D’s time risk event, the CA may instruct C to provide delay recovery proposals to achieve a defined saving on time. In contrast to the requirements of the CMS written for use with the 1998 series of JCT contracts, in which the risk manager is to determine how the aim is to be achieved, here it is up to C to elect the method and cost of achieving the specified result. Bearing in mind the differences in effectiveness and cost of re-sequencing, additional resources or extended working hours for the same resources, this is not a satisfactory arrangement from D’s point of view. C’s recovery proposals are to include118: a description of the method and measures necessary to achieve the CA’s requirements; C’s own estimate of the saving on time that could be achieved by adopting the measures proposed; any reservations C may have as to the measures and effect proposed; and details of the terms and conditions required by C in consideration of agreeing to carry out the measures. 11–086 The CA is required to respond within 14 days to accept, reject, or state that he wishes to negotiate revisions to the proposals119. However, if the CA accepts C’s proposals, then C is to be paid irrespective of whether they are successful and if, notwithstanding that C has been paid for such acceleration, it is not successful in overcoming the likely delay to completion of the works beyond the completion date, then it is nevertheless entitled to an extension of time for the duration of the likely delay to completion not extinguished120. Apart from the fact that here the agreement appears to be contemplated between C and the CA as agent for D, rather than with D itself as it is with the JCT forms, the payment of money against a collateral agreement

115 116 117 118 119 120

Cl.33.3. For example, IGBW/09, Cl.4.8.1(2). Cl.26. Cl.26.1. Cl.26.2. Cl.26.4.

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requires that some additional burden is taken on by C in order to overcome or avoid the delay to completion that would otherwise entitle it to an extension of time. The quid pro quo for the payment must surely be the shift of risk of non-completion from D to C, but Cl.26.4 says that that is not so. 11–087 Accordingly, before taking any steps under these clauses, the CA would be well advised to obtain its instructions in writing from D121, since a failure to do so may well result in the CA being sued in negligence for advising D to pay to C additional money for no benefit whatsoever. 11–088 Although the power to instruct acceleration may be provided, apart from the circumstances contemplated by HK05 in which decisions on the manner, effectiveness and cost of acceleration are left with C, but the risk of failure left with D, effective acceleration cannot reasonably be exercised without the CA and D having access to C’s schedule, method statement and progress records in order to ascertain what might reasonably be achievable and hence what might reasonably be instructed. It must also be borne in mind that it is C who is in control of the site and its resources and, irrespective of the contract conditions and the information available, acceleration cannot reasonably be achieved in fact without the active co-operation of C and its subcontractors. 11–089 This problem is recognised by the CMS, which takes account of these issues and provides the risk manager with the information he needs and with the powers necessary to give effect to the third and fifth stages of the schedule update process, which are to give both C and D the power and machinery to control their risks122. The provisions deal separately with: the power to instruct acceleration when in culpable delay; and the power to instruct acceleration when in excusable delay. 11–090 Wherever the power to instruct acceleration is contemplated, the CMS provides for a consultative process requiring C’s co-operation. Where acceleration is required to overcome the effects of delay to progress not caused by a D’s time risk event, C bears the costs, but where it is required to overcome the effects of a D’s time risk event, the instruction is a variation for which D is to bear the costs of preparing any proposals and of putting them into effect. For example, Cll.25A and 25B of the CMS provides the following powers123: “Acceleration when in Culpable Delay If in accordance with [the clause requiring the schedule to be updated], as a result of delay to progress caused by events other than [D’s time risk events], C publishes a schedule indicating that any part, or parts of the works are likely to be completed later than a key date, or dates, or the completion date, the risk manager shall consult with [C] as to possible means to overcome, or avoid the envisaged delay to the key date, or dates, or the completion date. The risk manager shall [using his discretion, but having regard to the consultation] deliver to the [CA] written proposals and state whether in his opinion [C] may reasonably be instructed to: 1. 2. 3.

reschedule one or more specific activities, or sequence of activities, or parts of the schedule; change the resources to be applied to one or more specific activities; or take any other action necessary properly to re-sequence the schedule so as to illustrate [C’s] revised intentions.

121 As is anticipated by Cl.26.1. 122 See App.2 to the 4th edn. 123 See App.2 to the 4th edn.

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Provided always that the risk manager is reasonably of the opinion that it is practicable for [C] to comply therewith (though, for the avoidance of doubt, compliance shall not be regarded as impracticable solely by reason of the cost likely to be incurred by compliance) and the [CA] is of the opinion that it is reasonable to do so, within 7 days of receipt of the risk manager’s proposals he shall instruct [C] to publish the proposals in a revised working schedule and the [C] shall comply therewith at no cost to [D]. Acceleration when Entitled to an Extension of Time If, as a result of any delay to progress caused by [a D’s time risk event], [C] publishes a schedule indicating that any part of the works is likely to be completed later than a key date, or dates, or the completion date then, at any time thereafter, the [CA] may instruct [C] to consult with the risk manager to assist the risk manager in drafting proposals to overcome, or avoid the likely delay, in whole, or in part, to the key date, or dates, or the completion date. The risk manager shall (using his discretion, but having regard to the consultation) deliver to the CA written proposals to overcome, or avoid the envisaged delay and state whether in his opinion [C] may reasonably be instructed to: 1. 2. 3.

reschedule one or more specific activities, or sequence of activities, or parts of the schedule; change the resources to be applied to one or more specific activities; or take any other action necessary properly to re-sequence the schedule so as to illustrate [C’s] revised intentions.

Provided always that the risk manager is reasonably of the opinion that it is practicable for [C] to comply therewith and [the CA] is of the opinion that it is reasonable to do so, within 7 days of receipt of the risk manager’s proposals the [CA] shall instruct [C] to publish the proposals in a revised working schedule. Any instruction given under [this clause] is a variation instruction. [C] shall keep such records as are reasonably necessary to substantiate the costs of preparing any proposals required by the [CA] under [this clause] and of complying with any instruction issued by the [CA] to implement such proposals.”

11–091 In some contracts, bespoke clauses will be inserted that provide for the CA to give instructions to overcome both C’s culpable delay to progress and to overcome delay to progress arising as a result of D’s time risk event. Typically, such clauses differentiate only in regard to liability for costs of the resultant effort. For example: “[C] shall upon the written instruction of the [CA] accelerate the progress of the works, or any part thereof in such a manner as the [CA] may consider necessary. [C] shall be entitled to be paid the net extra cost (if any) incurred in giving effect to the [CA’s] instruction hereunder, provided always that, should, in the opinion of the [CA], the acceleration be necessary as the result of [C’s] failure to meet any of its obligations under the contract, all additional costs of the required action, including, but not limited to, the working of overtime, employment of additional labour and/or the use of additional construction equipment, or other resources, shall be borne by [C].”

11–092 In so far as such a clause does not require the CA expressly to differentiate between its power of instruction when C is entitled to an extension of time and that when C is not so entitled, the result is often that liability for the delay to progress and the consequential costs of recovery are left to be disputed after the contract has been completed.

Constructive acceleration 11–093 Whereas the previous section dealt with the problem of ensuring that C carries out an instruction properly given to accelerate progress, this section deals with those circumstances in which, not only is there no instruction to accelerate expressly

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given, but C nevertheless does accelerate its performance and incurs costs for which it requires compensation. The basis for the claim is that, whilst C is entitled to more time to complete, C claims that it was impliedly instructed to accelerate as a result of D’s conduct (or, as a result of the CA’s conduct as agent for D). In the United States, this is known as “constructive acceleration”. 11–094 Constructive acceleration is defined by the US Army Corps of Engineers as: “An act, or failure to act by [D] which does not recognise that [C] has encountered excusable delay for which he is entitled to an extension of time and which required [C] to accelerate his schedule in order to complete the contract requirements by the existing contract completion date. This situation may be brought about by [D’s] denial of a valid request for a contract time extension, or by [D’s] untimely granting of a time extension.”124

Constructive acceleration as a legal doctrine 11–095 As with other “constructive” changes, the doctrine of constructive acceleration is a legal convenience rather than a necessity. Although it is recognised by both US and Canadian courts, this is criticised by Hudson125 as: “a development of what, in any event, is a largely jurisdictional and fictitious doctrine of ‘constructive change orders’ developed by the Boards of Contract Appeals, and is not founded on any consensual, or quasi-contractual basis which would be acceptable in English, or Commonwealth Courts.”126

11–096 However, with respect to the late learned editor, this seems to go too far. In the Canadian case of Morrison-Knudsen v BCHPA127, where D interfered with a CA’s power to certify extensions of time and directed C to overcome the lost time, the Canadian Court of Appeal overruled the lower court’s decision that C was entitled to a quantum meruit for the breach and expressly held that redress should be under the contract for the constructive acceleration. Similarly, in Stevenson v Metro Canada128, the Canadian court held that, by stating that in no circumstances would C receive an extension of time for completion, D had deliberately breached the contract and it awarded damages calculated by reference to C’s consequential acceleration129. 11–097 Whilst in the United States it has been judicially accepted130 that the CA’s wrongful rejection of C’s requested extension of time amounted to an instruction to accelerate, in the US case of Peterson v Container131 damages based on the effects of forced acceleration were recovered as breach of contract without reference to constructive acceleration at all. Thus, whilst US courts generally recognise the concept of constructive acceleration, decisions outside the Boards or Claims Court do not always consider the phenomenon in those terms. 124 Office of the Chief of Engineers, Department of the Army, Modifications and Claim Guide, EP–415 1–2 (July 1987) at B–1. 125 I Duncan Wallace, QC (ed), Hudson’s Building and Engineering Contracts, 11th edn (London: Sweet & Maxwell, 1995) p.909. 126 Ibid. 127 Morrison-Knudsen Co v British Columbia Hydro & Power Authority (No 2) (1978) 85 DLR (3d) 186 (BC Ct App). 128 W Stevenson (Western) Ltd v Metro Canada Ltd (1987) 27 Const LR 113 (BCS Ct). 129 See also, Perini Pacific v Commonwealth of Australia [1969] 2 NSWR 530; (1969) 12 BLR 82. 130 See Inforex v United States, 216 Ct C1484 (1978) and 223 Ct C1 633 (1980); Norair Engineering Corp v United States, 666 F(2d) 546 (1981). 131 Peterson Co v Container Corporation (1985) 172 Cal App 3d 62, 218 Cal Rptr 592.

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11–098 Whilst criticism of the terminology may be understandable, the fact remains that the claim for reparation as a result of enforced acceleration can be founded equally successfully on basic principles of contract law as on the US judiciary’s concept of constructive acceleration. This appears to be recognised by Hudson132 where, amongst discussion of the effect of a late extension of time, the late learned editor said: “express refusal, or continued failure to deal promptly with an extension of time application on the part of the [CA] as in all matters requiring certification, can absolve the party concerned from the necessity of obtaining the certificate, or extensions as well as constituting a breach of contract sounding in damages.”133

11–099 The preference among English lawyers to proceed for damages for breach of contract instead of compensation under the contract appears to be based upon an assumption that greater damages can be had for the breach than for the constructive acceleration134, or that, unless there is an express power in the contract to accelerate, there can be no implied instruction to accelerate. 11–100 Hudson takes the latter view, on the premise that as there is no express power in the contract to instruct acceleration, there can be no case to answer that C has suffered loss by complying with an implied instruction to accelerate135. However, this seems to ignore the fact that the implied instruction to accelerate, which leaves D liable in costs, is not one for which the CA needs an express power under the contract, if it can be construed to have come from D itself, which it must do if it is to found liability. Where there is an implied instruction to accelerate, the urging to complete must be made either by the CA acting as D’s agent, or actually, or impliedly by D itself. Under such circumstances, it is submitted that the powers of the CA under the contract are irrelevant. 11–101 There is a logical leap in saying that, whilst D is only liable for the costs of instructing that which is expressly in the CA’s power, D is not liable for the effects of its own actions. There is nothing, it is submitted, in JCT80, JCT98, JCT05, or any of the similarly phrased forms that prevents D, or an agent acting on its behalf, from issuing any instructions of any consequence. The only point is that, if it is not expressly empowered, D cannot enforce C’s compliance. On the other hand, if C complies in any event with D’s implied requirements, then there is no reason why C should not be properly compensated for its efforts136. 11–102 Apart from this, and contrary to the views expressed in Hudson137, ACA82 and ACA98138, ICE6 and ICE7139 and ECC2 and ECC3140 provide expressly that the CA can instruct acceleration and that C may negotiate a collateral agreement for the costs

132 See I Duncan Wallace, QC (ed), Hudson’s Building and Engineering Contracts, 11th edn (London: Sweet & Maxwell 1995) at pp.908–909. 133 See Perini Corporation v Commonwealth of Australia [1969] 2 NSWR 530; (1969) 12 BLR 82. 134 A proposition expressly denied by the Canadian Court of Appeal in Morrison-Knudsen Co v British Columbia Hydro & Power Authority (No 2) (1978) 85 DLR (3d) 186. 135 I Duncan Wallace QC (ed), Hudson’s Building and Engineering Contracts, 11th edn (London: Sweet & Maxwell 1995) pp.908–909. 136 See also Ch.21, Damages, at paras 21–193 to 21–223. 137 I Duncan Wallace, QC (ed), Hudson’s Building and Engineering Contracts, 11th edn (London: Sweet & Maxwell 1995), p.909. 138 Cl.11.8. 139 Cl.46(3). 140 Cl.36.1.

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involved before being obliged to comply. JCT80, JCT98141, JCT05142, and GC/Works/1 and GC/Works/1DB also provide for a collateral agreement for acceleration143. 11–103 The question of whether constructive acceleration is construed as arising out of an implied variation to an existing contract, or out of an independent collateral agreement, is not just a question of semantics. If constructive acceleration arises out of an implied variation to an existing contract, then all C is entitled to, by way of payment, is its provable loss and expense valued under the terms of the contract. On the other hand, if it arises out of an independent collateral contract, then, unless C has agreed its costs, it is entitled to a valuation of its work by a quantum meruit144. This point was expressly argued in Morrison-Knudsen145, where it seems that the Canadian Court of Appeal came to the most natural conclusion in finding that constructive acceleration should be treated as merely a different way of conducting work C was anyway required to do anyway under the existing contract, rather than the subject of a different contract entirely.

Initiation of grounds for construction acceleration 11–104 In so far as it is expected that the CA, even if provided with all the information it needs, may not necessarily make its decision straight away, the point must be considered as to when, if C is to recover its costs for implied acceleration, C may, in the absence of an extension of time, reasonably proceed to accelerate. 11–105 The standard forms make a variety of provisions for the CA’s decision in this respect. JCT80, JCT98146 and JCT05147 require the CA to decide on an interim notice of delay within 12 weeks of receipt and to review its decisions within 12 weeks of completion148. GC/Works/1 and GC/Works/1/98 provide for the decision on an interim notice to be made within 42 days and reviewed within 42 days of completion149. ICE6 and ICE7 require an interim notice to be determined “forthwith”150 and reviewed (but not by reduction)151 within 14 days of completion. FIDIC4 requires the CA to deal with notices of delay “without undue delay”152 and makes no provision for postcompletion review. ACA82 and ACA98153 require the CA to deal with extensions of time “so soon as may be practicable”, or, alternatively, within a specified number of days and, after completion, to be reviewed “within a reasonable time”. In ECC2 and ECC3, the “time for reply” is set down specifically in the “contract data”. In the latest versions of FIDIC, a structure for dealing with what are referred to as claims is set 141 Cl.13A.2.2. 142 Sch.2, Cl.2. 143 Cl.38. 144 In the latter case, its actual costs, or loss and expense may well be persuasive as to quantum meruit, but they are not conclusive. In an independent contract it is always open to C to demonstrate that its reasonable remuneration for acceleration is greater than its actual costs. See also Ch.21, “Damages”, at paras 21–188 to 21–208. 145 Morrison-Knudsen Co, Inc v British Columbia Hydro and Power Authority (No 2) (1978) 85 DLR (3d) 186. 146 Cl.25.3.1.4. 147 Cl.2.28.2. 148 JCT 98, Cl.25.3.3 and JCT 2005 Cl.2.28.5. 149 Cl.36. 150 Cl.44(3). 151 Cl.44(5). 152 Cl.44.3. 153 Cl.11.6.

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down in Cl.20.1. By this clause, C is to give notice within 28 days and must provide full particulars within a further 14 days of the date upon which C “became aware, or should have become aware, of the event or circumstance”154 with final particulars within 28 days of the cessation of the event. The CA is then bound to respond within 42 days of C’s compliance unless the period is extended by agreement. 11–106 In the ordinary course of events, under the standard forms of building contract, where the position of the CA, in certifying an extension of time, is independent and free of the influence of either party and provided that the CA acts bona fide and with appropriate skill and care, both parties take the risk of the CA getting it wrong. Because the contract forms generally provide that, in the event of dispute as to entitlement, the CA’s certificate can be opened up and reviewed, in order to become entitled to recover the costs of accelerated progress to overcome, what would otherwise cause a delay to completion, must require more than simply a delayed, or inadequate grant of an extension of time, by a CA acting independently and in good faith. 11–107 If, for example, D should bring undue pressure to bear on the CA, so that, under duress, it is no longer independent, then, in such case, it is arguable that the CA is acting more in the nature of D’s agent in accordance with D’s interests, than as an independent certifier. If, as a result, C is constrained to vary its method of performance and incurs loss, there is, in principle, no reason why that should not be considered on the basis that the CA is acting on D’s behalf and that, accordingly, C may thereby recover its loss from D. 11–108 If, whilst not acting under D’s direction, the CA nevertheless, for its own purposes, does not act bona fide by failing to certify a fair and reasonable extension of time, the question then arises as to whether it can truly be said that C must take that risk and, on a contract that does not empower acceleration, neither D nor the CA is responsible for any loss that C incurs as a result of its acceleration to overcome the delay. 11–109 The circumstances commonly giving rise to a claim for constructive acceleration costs are where C is in default and the CA presses C to complete by the original contract completion date, C incurs loss as a result of enhanced performance, and it is subsequently found that C had been entitled to an extension of time. The important additional ingredient here is the pressure put on C to complete on time.

Conduct requiring acceleration 11–110 The failure to grant an extension of time, after a D’s time risk event has been shown to be likely to cause delay to completion and acceptable notice has been given, is, per se, insufficient to constitute an implied instruction to accelerate. For example, in Teer v WMATA155, it was held that there had not been an implied instruction to accelerate where the request for an extension of time was met by a reciprocal request for additional information and a threat to withhold further progress payments until an updated CPM schedule was submitted. Thus, it seems that, even after a request for an extension of time has been rejected, something more is required before acceleration is implied to have been instructed. The US courts have construed this “something

154 See the commentary on this provision in Ch 5, “Notices, claims and early warnings”, at paras 5–110 to 5–150. 155 Nello L Teer Co v Washington Metropolitan Area Transit Authority, F Supp 583 (DC Cir, 1988).

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more” as an express, or implied demand to accelerate. However, the implied demand for acceleration need not be phrased “in explicitly mandatory terms”. For example, putting pressure on C to employ more labour and more equipment, together with communications with C’s bonding company in an effort to force C to accelerate, have been recognised as constructive instructions to accelerate156. The delay to be overcome must, of course, be excusable delay if C is to recover its costs. 11–111 The following six elements of a constructive acceleration claim have been used by the US courts: 1.

2. 3. 4.

5. 6.

there must have been a D’s time risk event, which has caused delay to progress which, absent acceleration, is likely to cause delay to completion of the works beyond the completion date; notice must have been given of the occurrence of the event in conformity with the contract conditions; the extension of time must have either been refused or not been given within a reasonable time; D157 (or the CA on its behalf, if it has power under the contract, or by agency) must act by coercion, direction, or in some other manner that can be reasonably construed as an instruction to complete within the unextended contract period; C must actually accelerate its performance; and C must actually incur loss as a result of acceleration that has not been recovered158.

11–112 Some authors and some US cases have indicated that fewer elements may be sufficient. In Norair v US159, for example, the Court of Claims recognised four elements as being necessary: 1.

2. 3. 4.

D’s time risk event, which had caused delay to progress that, absent acceleration, was likely to cause delay to completion of the works beyond the completion date, had occurred; C was ordered to accelerate; actual acceleration occurred; and extra costs were incurred.

In the UK courts, the problem of implied instructions to accelerate has been dealt with in different terms. In Ascon160, for example, where the subcontractor was claiming its acceleration costs against the contractor for the time it would have taken had acceleration not been undertaken, Judge Hicks rejected C’s claim that the subcontractor

156 Although C claimed that it had been required “to accelerate”, in Titan Pacific Construction Corporation (1987) ASBCA Nos 24,148, 24,616, 26,692, 87–1 BCA (CCH) p.19,626, C’s acceleration claim failed because there were no excusable delays to be overcome by acceleration. Thus, in effect, the instruction was for “recovery”, rather than “acceleration”. 157 In contractor and subcontractor disputes the position and the powers of the CA are irrelevant and the demand for increased speed is generally issued directly by the contractor to the subcontractor. 158 McNutt Constr. Co (1985) EBCA No 4,724, 85–3 BCA (CCH) p.18,397, citing Firmont Div, Dynamics Corp of America, (1975) ASBCA No 15,806, 75–1 BCA (CCH) p.11,139, affirmed, (1978) 578 F 2d 1389 (Ct Cl), Envirotech Corp v Tennessee Valley Authority (1988) 715 F Supp 190 (WD Ky) and Girardeau Contractors, Inc (1988) EBCA No 5,034, 88–1 BCA (CCH) p.20,391. 159 Norair Engineering Corp v The United States (1981) 666 F 2d 546. 160 Ascon Contracting Ltd (1999) 66 Con LR 119; (2000) 16 Const LJ 316.

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was, in any event, only doing what it was obliged to do under the contract, that is to “overcome or avoid delay, howsoever caused”. 11–113 In Micafil 161 the subcontractor claimed for the cost of working a night-shift from 19 June 1998 to 11 September 1998 in order to try to keep the work up to schedule as a result of being required to do substantial additional work owing to C’s changes in design over what was originally envisaged in the contract. The subcontractor alleged that, since it incurred costs in attempting to comply with C’s wish for the contract to be kept to time and against the background of C’s refusal to grant appropriate extensions of time, it was entitled to be paid for the work that it did in trying to accelerate the work to keep up with the schedule. In response, C alleged unsuccessfully that: the additional work referred to had already been accounted for in the cost of variations agreed; and the subcontractor’s progress was affected by manufacturing defects, fabricating on site rather than off site at its own initiative and poor planning and management. 11–114 The late HH Judge Toulmin CMG QC set out the issues as follows162: “By May 1998 [the subcontractor] had made a number of complaints about problems which they say were caused by [C] and/or [D] and which resulted in the work being behind [programme]. By a letter dated 11 May 1998 [the subcontractor’s deputy project manager] wrote to [C] complaining about problems which delayed the start of work on the erection of the timetable on site. He noted a critical path delay of three weeks for which he asked for an extension of time. He said that by working additional hours two of the three weeks of delay could be made up. The letter was shown to [the subcontractor’s operations director] before it was sent. In a letter dated 25 June 1998 [C’s purchase manager] in a follow up letter to the meeting between [C] and [the subcontractor] which had recently taken place complained that [the subcontractor] had still not increased their personnel resources on site. In its claim for additional costs of 7 July 1998 [the subcontractor’s project manager], in detailing additional claims, said: ‘[the subcontractor] proposes accelerating the original contract [programme] by increasing labour and plant resources and additional working shift patterns in order to absorb the additional works resulting in the increase in weight of the autoclave. Should this not be acceptable we would require an extension to autoclave “ready for reception test” until (week 47)’. The letter went on at paragraph 1.20 to set out the actual and projected costs as a result of their starting a night shift on 19 June 1998 and in incurring the cost of premium day shift working. This working was not within the costs for which [the subcontractor] could reasonably have been expected to estimate when it tendered for the contract. I am satisfied that they were incurred by [the subcontractor] in an attempt to recover time lost in completing the work in circumstances where [the subcontractor] were subject to significant penalties for delay if they failed to complete the work on time. The causes were in particular the restrictions which [the subcontractor] encountered when they entered on site and the very substantially increased scope of work”.

11–115 It is notable that, in contrast to the clarity of reasoning in the US cases, the UK courts seem to be content to skate around the underlying legal principles upon which judgment is given. Typically, in this case, it is not at all clear whether the court

161 Motherwell Bridge Construction Ltd v Micafil Vacuumtechnik (2002) 81 Con LR 44; (2002) CILL 1913. 162 Motherwell Bridge Construction Ltd (2002) 81 Con LR 44; (2002) CILL 1913 at [546]–[548].

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accepts that there was a variation in methodology instructed by C, which can be inferred from the expression: “This working was not within the costs for which [the subcontractor] could reasonably have been expected to estimate when it tendered for the contract”,

or constructive acceleration at the option of the subcontractor, which can be inferred from the expression: “I am satisfied that [the costs claimed] were incurred by [the subcontractor] in an attempt to recover time lost in completing the work in circumstances where [the subcontractor] were subject to significant penalties for delay if they failed to complete the work on time.”

11–116 Bearing in mind that Judge Toulmin had already found that the subcontractor was entitled to an extension of time to a date later than that on which it actually completed and was not thereby liable for liquidated damages, the expression “in completing the work in circumstances where [the subcontractor] were subject to significant penalties for delay if they failed to complete the work on time” is not entirely clear. 11–117 Where C claims compensation for acceleration, it can only recover for acceleration put in place to recover time that is at D’s risk. For example, in Titan Pacific163, C sought compensation for acceleration it claimed occurred as a result of steps it had taken to accelerate its earthwork operation in response to instructions and pressure put on it by D and the latter’s failure to grant an extension of time for excusable delays. 11–118 As a result of the CPM analysis put in evidence, the Board of Contract Appeals was able to determine that, whilst there was some coercion to complete on the part of D’s agent, this had occurred in 1978 and during that period no acceleration was in fact evident from the records. On the other hand, whilst C had in fact accelerated performance in 1979, it had done so to correct poor workmanship and make up for lost progress caused by its subcontractors and not as a result of D’s coercion. In holding that C’s claim failed, the Board said: “For a successful acceleration claim based upon [D’s] failure to grant time extensions for excusable delays as we stated in Firmont164 the following conditions must exist: existence of a given period of excusable delay; and [C’s] notice to [D] of the excusable delay, and request for an extension of time, together with supporting information sufficient to allow [D] to make a reasonable determination; and failure, or refusal to grant the requested extension of time within a reasonable time; and [D’s] order either expressed, or implied from the circumstances to take steps to: overcome the excusable delay, or complete the work at the earliest possible date, or complete the work by a given date earlier than that to which [C] is entitled by reason of the excusable delay. Circumstances from which such an order may be implied include expressions of urgency by [D], especially if coupled with: a threat of default, or liquidated damages for not meeting a given accelerated schedule, or actual assessment of liquidated damages for not meeting a given accelerated schedule, and reasonable efforts by [C] to accelerate the work, resulting in added costs, even if the efforts are not actually successful.” 163 Titan Pacific Construction Corporation (1987) ASBCA Nos 24,148, 24,616, 26,692 87–1 BCA (CCH) p.19,626. 164 Firmont Divisions Dynamics Corporation of America (1975) ASBCA No 15,806, 75–1 BCA (CCH) p.11,139, affirmed, (1978) 578 F 2d 1389 (Ct Cl).

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11–119 Similarly, in Earth Tech Industries165, the Board of Contract Appeals declined to overturn the CA’s decision to reject C’s claim for damages for constructive acceleration where, notwithstanding that it found C entitled to an extension of time and the CA had pressured C to accelerate, there was no evidence provided to demonstrate that it had accelerated as a result of CA’s demands. In this case, on 19 March 1990, the CA had rejected an updated construction schedule submitted by C, which showed a completion date one month later than the contract completion date, insisting that the work be completed by the original completion date under the contract. C claimed that, as of 19 March 1990, it was entitled to time extensions totalling 66 days. On that basis, it contended that the CA’s insistence on the original completion date was a constructive acceleration order and sought $197,684.00 for the costs of its efforts to comply with that demand. In rejecting the claim, the Board found that: “As of 19 March 1990, [C] was entitled to extension of the original completion date for several causes. First, completion of the contract had been delayed pending resolution of the differing site condition. The [CA] knew of that delay on 19 March 1990. He had been informed in [C’s] letter of 12 March 1990 that the situation was delaying ‘all other progress’. As of that date, also, [C] had completed the additional work resulting from the differing site condition, so that all of the facts needed for measuring the delay effect thereof were then available. Upon receipt of the letter of 12 March 1990, the [CA] could have investigated the claim of delay and determined that the condition had increased the time needed for completion of the contract. [C] was then entitled to 18 days of completion time extension. Of that amount, 12 days were due as the result of the differing site condition. The remaining six days of time extension were owed to [C] for other causes, consisting of one day of unusually severe weather in excess of the allowed quantity; one day for Air Force exercises that interrupted work; and four days pursuant to (variation order). In these circumstances, the [CA’s] letter of 19 March 1990 insisting on the original completion date when he knew, or should have known, that [C] was entitled to time extensions amounted to a constructive order to accelerate the contract work. [C] was thereby eligible for an equitable adjustment under the ‘changes’ clause for any increased costs resulting from the order166. [C], however, cannot recover for increased costs of accelerating the work because it has failed to prove that any of the additional measures taken resulted from the [CA’s] order of 19 March 1990. The actions, beginning on 22 February 1990, to more rapidly import material for the contract preceded the order and could not have resulted therefrom. Moreover, those actions were voluntary on the part of [C] and, for that reason alone, were not additionally compensable167. As to the actions taken after 19 March 1990, there is no evidence in the record that they were devised with the objective of meeting the completion date of 26 April 1990, or that they afforded any reasonable possibility of meeting that date, when planned. Indeed, only non-excusable delay was made up through those actions. Beneficial occupancy was taken by [D] on 17 May 1990 subsequent to the extended completion date of 14 May 1990 resulting from 18 days of completion time extension to which [C] was entitled. Establishing a causal connection between the order of 19 March 1990 and the acceleration effort was a prerequisite to recovery of the added costs thereof168. Costs incurred without regard to an acceleration order, as the result of an independent decision to attempt to make up delay – which is the only conclusion allowed by the evidence here – are not additionally compensable169. For these reasons, the contracting officer’s denial of the acceleration claim was correct.”

165 Earth Tech Industries Ltd (1999) ASBCA No 46450. 166 See also, Fermont Div Dynamics Corp of America (1975) ASBCA No 15,806, 75–1 BCA (CCH) p.11,139, affirmed, (1978) 578 F 2d 1389 (Ct Cl). 167 See also Peter Kiewit Sons Co (1969) ASBCA Nos 9921, 10440, 69–1 BCA p.7510 at 34,820. 168 See also Solar Foam Insulation (1994) ASBCA No 46278, 94–1 BCA p.26,288. 169 See also Yukon Construction Co, Ltd (1967) ASBCA No 10859, 67–1 BCA p.6334.

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11–120 Irrespective of any period of time the contract may allow for the CA’s decision, it seems that, even if an extension of time may properly be granted after the contract completion, this will not invalidate an acceleration claim170. Such contract terms may excuse the lack of a prompt response from the CA before contract completion, but, apparently, it will not avoid a claim that, in the absence of an extension of time for an excusable delay, C was still obliged to meet a contract completion date. 11–121 Thus, notwithstanding the criticisms by the late learned editor of Hudson referred to above, it seems that the doctrine of constructive acceleration provides a more realistic formula for applying the terms of a contract to the demands of the site and the conditions under which the construction industry is forced to work. All in all, it forces contractual interpretation to concentrate on the business efficacy of a commercial arrangement, instead of relying upon the courts’ ability to interpolate traditional doctrines of classical contract theory.

The mechanics of constructive acceleration 11–122 The mechanics of a constructive acceleration claim can probably best be described by reference to diagrams. [Please refer to Figures 11.1 to 11.4 inclusive] 11–123 Take, for example, Figure 11.1. This illustrates a contract of 30 months, in which D has caused a delay to progress on the critical path of six months between months six and 12. In the ordinary course of events, C is entitled to an extension of time of six months for months 30 to 36 to enable it to complete. For the sake of this example, the event is one within D’s control so that, prima facie, C is entitled to recoup its losses arising out of the delay to progress and the prolongation arising out of the event. The symptoms of this are illustrated at Figure 11.2. 11–124 Now, supposing that the CA does not recognise that an excusable delay has occurred and fails to grant an extension of time, then, instead of muddling along and wrongly incurring liquidated damages, C accelerates. The effect on completion is now such that completion has been achieved on time (see Figure 11.3). The argument against constructive acceleration is then sometimes run that, since the primary purpose of an extension of time is to maintain D’s entitlement to damages in the event of late completion caused by D’s interference and, since liquidated damages are not in such circumstances deductible because the work has been completed on time, therefore the CA no longer has a power to grant an extension of time because there has been no delay to completion of the works beyond the completion date to be excused171. 11–125 If this were correct, then it would follow that a change, which would normally extend the contract period, could be achieved free of cost to D and at C’s expense by the simple device of not giving an extension of time when it was due. This cannot be right because it is axiomatic in law that no one should profit from his own breach. Because it is only as a result of recognition of its entitlement to time, which it has not hitherto been granted, that C’s entitlement to compensation arises, it would seem to be correct that, notwithstanding timely completion, C should nevertheless be recognised as having accelerated by the recognition of entitlement to an extension of time to

170 For example, in Rosehaugh Stanhope v Redpath Dorman Long Ltd (1990) 50 BLR 69, the management contractor was required to issue an extension of time “as soon as he is able”. 171 Perhaps this is the construction industry’s version of “Catch 22”.

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complete at a later date172. The delay damages for prolongation, which, but for the acceleration, would have been incurred between months 30 and 36, are now incurred as damages for losses occurring between months 21 and 30 under the heading of unproductive working and increased overheads for acceleration: see Figure 11.3. 11–126 Unfortunately, what tends to occur is that C increases its resources to overcome delay, but still fails to finish on time owing to the loss in productivity caused by the acceleration. C is then in a worse position. C not only incurs the acceleration costs but, because it does not finish on time anyway, it also incurs the deduction of liquidated damages. In Figure 11.4, C has accelerated performance between months 21 and 32 but, because the contract completion date was the end of month 30, liquidated damages are deducted for months 31 and 32. 11–127 The implied instruction to accelerate is probably the most difficult to deal with. In so far as work has expanded as a result of imposed change, or delay to progress has been caused by neutral causes and no extension of time has been given, C is in a dilemma. Should it accelerate and avoid a wrongful deduction of liquidated damages, or continue in the best way it can, minimising its additional costs, but suffering the deduction of liquidated damages that it will have to take proceedings to recover? 11–128 The primary considerations in respect of constructive acceleration are that: 1.

2.

3.

there must be a date by which C must complete: if there is no completion date to which to work, there is nothing by which accelerated completion can be gauged; there must be provisions for an extension of time for the effect of D’s time risk events: if C is not entitled to an extension of time, then there is nothing by which D’s failure to perform can be gauged173; and there must be a risk that D will claim substantial damages from C in the event of non-completion: if the liquidated damages are in a small amount, or none are specified, C cannot be seen to be reducing its risks by acceleration.

11–129 So, for example, simply because the time provisions relate only to the duration over which the rates are operable and not the period of time for the work, MTC89 and MTC08 naturally contain no provisions for a contract completion date or extensions of time. Accordingly, under this type of form there can never be any claim for constructive acceleration. This point is illustrated by the Board of Contract Appeals case of Sawadi174. In this case, C was contracted for maintenances services at a local flood protection project in New York State. The basis of the contract was re-measurement on the basis of rates agreed for estimated quantities and fixed for four years, so that C was paid the agreed rate for whatever maintenance work it did. 11–130 In late August 1999, the CA came to the conclusion that all contract work funded by the relevant allocation had to be completed and invoiced by not later than

172 Motherwell Bridge Construction Ltd v Micafil Vacuumtechnik (2002) 81 Con LR 44; (2002) CILL 1913. 173 In the US case of Murdock & Sons Const Inc v Goheen General Const Inc 461 F 3d 837 (7th Cir, 2006) it was held that the slow progress of the masonry subcontractor, which was described by C as a labour dispute beyond its control (for which it was entitled to an extension of time), was in fact no more than a failure to achieve the productivity required, a fault that was not beyond C’s control. Accordingly, the criticism of C’s slow pace and demand that he accelerate to recover the time lost was not an instruction for which C was entitled to compensation and thus did not amount to constructive acceleration. 174 Sawadi Corporation (2001) ASBCA No 53073.

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30 September that year. Accordingly, the CA urged C to complete all work, the subject of the funding allocation, by that date. Subsequently, the CA agreed a number of change orders with C, but C did not assert any difficulty with completing work prior to 30 September 1999, except for concrete work and on account of an auger breakdown. In fact, all relevant work was completed and invoiced by 21 September 1999. 11–131 Subsequently, C claimed that, by threatening that, in default, C’s contract would be terminated and work would be awarded to other contractors, the CA had impliedly instructed accelerated work under the contract. In its decision, the Board found that: “Constructive acceleration requires proof, among other things, of an excusable delay giving rise to an acceleration order and extra costs175. No contemporaneous evidence of delay, or even any timely notice of delay has been shown by [C]. In general, the claim fails for lack of proof. Addressing the claim more specifically, time was not of the essence concerning performance of the contract as a whole. None of the [orders] specified a completion date. We conclude that [C] was entitled to a reasonable time within which to complete work under each [order]. Concomitantly, [C] was obliged to complete work under each [order] within a reasonable time. This claim is not for acceleration in the usual sense. As we understand the claim, [C] is asserting that the [orders] were not spread over the entire base year, but were compressed into an abbreviated time period and rushed to completion by the [CA]. Indeed, the [CA] may have been incorrect that all work funded (under the relevant allocation) had to be completed and invoiced by 30 September 1999. However, [C] was obliged to start work when directed by [an order] and complete the work within a reasonable time. In late Augustearly September 1999, [C] was able to perform the directed work, was seeking more work, agreed to complete all relevant work by 30 September 1999, and did complete the work, to the extent practicable, by 21 September 1999 [C] rented additional equipment when its equipment needed repair. New employees were hired and trained when required. No extraordinary labour costs were proved. New equipment was purchased as needed. Supervision was provided by [C] to the extent necessary. None of this activity was shown to be unusual in a general sense, in relation to the contract terms, or by comparison with efforts under earlier contracts for the same, or similar work. Such expenses are the normal ongoing costs of doing business and/or were required by the contract and the [orders]. Quantities of services were estimated and became firm only when [orders] were issued. The contract guaranteed neither a certain amount of work nor any particular timing of the work ordered. [C] has failed to prove that the [D] is liable for improperly compressing the performance period.”

11–132 In Fru-Con176, where the Board found that there was insufficient evidence of exceptionally hot weather having caused delay to progress, which was likely to cause delay to completion, in support of C’s claimed acceleration, the Board said: “Given the fulsome rendition of the ravages caused by heat on the workers and progress on site, it is inexplicable that [C] waited until August 22, 1995, to alert [the CA] of how the heat had impacted productivity. Even assuming that the August 22, 1995 letter provided adequate notice, the record remains deficient. In the absence of notice and supporting documentation, [C] is unable to demonstrate an excusable delay and therefore unable to prove acceleration.”177 175 See also Norair Engineering Corp v United States (1981) 666 F 2d 546, 548 (Ct Cl); DANAC, Inc (1997) ASBCA No 33394, 97–2 BCA p.29,184, affirmed (1998), 98–1 BCA p.29,454. 176 Fru-Con Construction Corporation v The United States (1999) 43 Fed Cl.306. 177 See also Broome Construction Inc v United States (1974) 203 Ct Cl.521 at 531–32, 492 F 2d 829 at 834–835; Park Construction (1995) 95–2 BCA p.138,529; McNutt Construction (1985) 85–3 BCA p.92,279 and see also Electronic & Missile Inc (1964) ASBCA 9031 64 BCA (CCH) p.4338 (where C made 30 unanswered written requests for extensions of time due to adverse weather, it was entitled to recover for constructive acceleration).

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11–133 Some commentators have suggested that it is highly unlikely that C would in fact accelerate its work so as to avoid liquidated damages when it knows it is entitled to an extension of time. So, it has been said that: “it is highly improbable from the standpoint of contract practice in the industry that an English contractor, or for that matter, most contractors would actually contemplate acceleration of works merely because a decision has not been reached by the [CA] on a time extension claim. This might be different, of course, if the contract is one which carries a very heavy liquidated damages clause.”178

11–134 Whether the CA’s failure to come to a decision would ever be sufficient to found a claim for constructive acceleration is doubtful. Clearly, there has to be much more than that. Jones179 has expressed the view that, to be entitled to recover the costs of acceleration against C, a subcontractor would have to show that: 1. 2.

3.

it was reasonable in all circumstances to accelerate; C was responsible for loss sustained and the conduct of the subcontractor in expending extra money was an appropriate step by the subcontractor to mitigate damages; and the subcontractor was entitled to claim an extension of time which, if not granted, was not reasonable, and as a result of the subcontract compressed its work into a shorter time span than it would otherwise have had available to do the work.

11–135 Here it was the expressed view that “reasonable in all the circumstances” could be demonstrated by a comparison of the extra cost of acceleration with the liquidated damages for delay for the same period. Such a comparison, except after the fact, however, would be difficult if not impossible to perform. Apart from the fact that the subcontractor would not know the period over which it might be charged liquidated damages until it had finished the work, the exigencies of cost in acceleration are notoriously difficult to calculate, even retrospectively, let alone prospectively. It is hardly helpful to the subcontractor to be left in doubt, until it is too late to do anything about it, and it is thought that, in this regard, bearing in mind that it is a breach on the part of C that brings the circumstances into being, the reasonableness of the subcontractor’s conduct should not be a primary issue. The second condition appears to presume that the costs of acceleration are greater than those that would presumably be C’s losses. Again, this appears to be an unnecessary and impossible-to-perform precondition in the circumstances contemplated. The third condition is obviously necessary and appropriate, but missing from this list are probably three of the most important preconditions to entitlement, namely that: 1. 2.

3.

the subcontractor must have complied with the contract regarding notices and/ or warnings; the subcontractor must have provided C with all the information it could reasonably need in order to ascertain the subcontractor’s entitlement at the time; and C has brought unfair and unreasonable pressure to bear upon the subcontractor to complete by a date earlier than that by which it was entitled to complete.

178 C Fong, Construction Contract Claims 190 (1988) 19 AIA Document A201–1997. 179 D Jones, “Subcontractor’s remedies and liabilities for delay” (1989) 5 BCL 16, p.25.

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11–136 Under ordinary circumstances, it seems that, if C just struggles on and argues about its rights afterwards, eventually its right to redress will be gauged as to whether, or to what extent, any time overrun is driven by the effect of a D’s time risk event. If it accelerates and overcomes the effect of the event, then, in order to recover its lost costs, it has to demonstrate not only that a delay to progress had been caused by a D’s time risk event that, if not ameliorated, would be likely to cause delay to completion, but also that, without such acceleration, it would have been in delay through no fault of its own and, as a result of the acceleration, it has suffered quantifiable loss180. However, it is the common experience of most contractors that continuing in the hope of fighting for recovery of wrongfully deducted liquidated damages, with the attendant litigation costs added on after the event, has a far more deleterious effect on their cash flow than re-sequencing and increasing resources to complete on time if they can.

Methods of recovery and acceleration 11–137 In the absence of special conditions, or provisions in the specifications, contractors will tend to argue that they based their original estimates on the optimum quantity of labour from time to time and the most economical level of productivity181. The theory is that, when changes require that work be completed in a way other than that indicated in the working schedule, costs increase182. There are three problems that flow from this. In the first place, if the works are being managed and controlled effectively, recovery and acceleration should be a planned response to an expected event, rather than a knee-jerk reaction to the unforeseeable183. Secondly, the proposition that C has planned its operations to take place in the most economical time period is often false184. Thirdly, unless being managed and controlled effectively, C is usually unable to provide any cogent and consistent information concerning its assumptions as to labour and productivity at the time of tender, on the basis of which any comparison with actual achievement can be made185. 11–138 As to the recovery of C’s costs of acceleration, there are a number of routes of enquiry that must be explored. In principle, these are whether: 1. 2.

there is an express power under the contract empowering the CA to instruct C to accelerate progress; there is no express power under the contract for the CA to instruct C to accelerate, but — C is expressly instructed by D; or — C is impliedly instructed by D; or

180 In Rosehaugh Stanhope Development (Broadgate Phase 6) Ltd v Redpath Dorman Long Ltd (1990) 50 BLR 69, the works contractor under a management contract actually continued without acceleration after the management contractor refused to grant an extension of time and then C and D argued about D’s liquidated damages in D’s action against C, instead of about C’s acceleration costs in C’s action against D. 181 I Duncan Wallace, QC (ed), Hudson’s Building and Engineering Contracts, 11th edn (London: Sweet & Maxwell 1995), p.908. 182 See, for example, AMEC Process and Energy Ltd v Stork Engineers & Contractors BV (No 1) [1999] EWHC 238 (TCC). See also M Anderson, “Recovery schedules”, Project Controls on line (May 2006), for other guidance to contractors on compensation for recovery. 183 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010). 184 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008). 185 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008).

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— C is instructed to accelerate by the CA as agent for D; — C is impliedly instructed by the CA. 11–139 These possibilities can be graphically illustrated as a flow chart as shown in Figure 11.5. [Please refer to Figure 11.5] 11–140 The CIOB Guide186 recommends that, for effective time management, there should be a strategy put in place for dealing with the recovery and acceleration necessary to overcome the effects of intervening events. It states: “Whilst there cannot be a time-effective planning strategy unless the risks which are likely to affect the future conduct of the work are allowed for, without a planning strategy for the future conduct of the work, it is impossible properly to appraise the risks likely to affect it. It thus follows that the development of an effective delay-risk management strategy is inseparable from a time-effective planning strategy. In relation to those risks which cannot be avoided entirely, the purpose of a change-risk management strategy must be to facilitate the recovery of lost time economically and effectively. This is usually achieved when carried out as a result of strategically identifying time contingency buffers against the foreseeable risk of delay to progress in critical zones.”

11–141 Under the CIOB Guide, C is also required to schedule its work by reference to a fully networked CPM working schedule, in differing densities, dependent upon the proximity in time to the execution of the work, but fully resource calculated at the highest density. 11–142 Essentially, the purpose of acceleration must be to save time and money. There are a number of such measures, all of which may be described as acceleration, in which C can reduce the effects of potentially delaying events187. Of these, some may, however, increase C’s costs, some will certainly increase C’s costs and some, whilst taking some administrative time to implement, may not directly affect C’s costs at all. It is generally the case that, the earlier recovery processes are put in place, the more options for recovery there will be, the more efficient they are likely to be and the less they are likely to cost. On the other hand, many contractors who are behind schedule tend not to report that they will have difficulty in recovering that lost time until it is too late to do much about it except increase working hours, which is the most expensive and least efficient of all methods available. In broad principle, the ratio of likelihood of a delay to progress in relation to the possibility of successful recovery against the likely cost is illustrated at Figure 11.6 [Please refer to Figure 11.6] 11–143 In this figure, the dotted arched line represents the likelihood of an event occurring to affect adversely the progress of the works. This reflects the chance of delay occurring at the beginning and end of the work at about 25% and in the most intensive stages at about 90%. The light diagonal line indicates the probability of recovery measures being successful at about 95% at the beginning and 5% at the end. The relative cost of recovery measures is indicated by the dark diagonal line. This reflects the fact that costs of recovery can be expected to be very low at the beginning of a project when re-sequencing is most likely to be successful, and very high at the end when the only option left is usually to work extended hours. 186 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) at paras 2.5.6 to 2.5.7. 187 See also, K Pickavance, “Regaining lost momentum” (16 February 2007) Construction Journal.

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11–144 Generally, in descending order of the usual ratio of cost to benefit, the following are potential methods of accelerating progress: omitting work; changing the sequencing of the activities, or increasing the overlap between activities; other logic changes to the method of working, using a different process to carry out the activity from that originally envisaged; increasing the motivation of the workforce to achieve higher production levels; increasing the resources allocated to an activity or group of activities on or near the critical path; and increasing the hours worked above the level originally assigned to the activity. 11–145 The strategy for successful management of the risk of delay should thus be to secure accelerative measures by re-sequencing in the first half of the contract period with a view to maintaining all time contingencies still in place when the second half commences. In the next 30% the contract period (lightly shaded), there will be less chance of re-sequencing to recover lost time and it is then more likely that any acceleration then possible will be achieved through the addition of more resources or absorption of time contingency. However, if at all possible, time contingencies should be saved for use in the last 20% of the contract period (dark shaded) when it is virtually impossible to re-sequence the work, less likely to be possible to increase resources and when the only way acceleration of any sort can usually be achieved is by working longer hours, with the attendant risk of lost productivity reducing the efficacy of the increased hours, which can be avoided by the absorption of time contingency.

Omissions 11–146 The JCT family of forms provides for the fixing of an earlier completion date consequent upon an instruction requiring the omission of work, which has been made following the grant of an extension of time188. Similar provisions appear in HK05, where such instructions can be given when C is in culpable delay after the completion date has passed189. In both the JCT and HK05 forms, the effect of omission of work can only be taken into account in regard to extensions of the contract period and not in relation to the contract period before being extended. In other words, omissions cannot be used to shorten the contract period ab initio. 11–147 The CIOB Guide recommends that contingency periods be provided in the working schedule for the likely time effect of C’s and D’s foreseeable risks190. Where such contingency periods have been allowed, by reducing or omitting entirely those contingency periods, the effect of intervening events on the completion date, sectional completion dates, or key dates can be modified, or overcome entirely, depending upon the nature and degree of the risk that has matured in relation to the contingencies available. ECC2 and ECC3 include a reference to “time risk allowances” in Cl.31.2, but provide no information upon what is required by way of such time risk allowances, or how they are to be used. On the other hand, the 2009 edition of the

188 For example, JCT98 Cl.25.3.2 and JCT05 Cl.2.28.4. 189 Cl.25.1(7). 190 See also, Ch.10, “Project control” and Ch.16, “Float and time contingencies”.

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Irish government forms provides nothing by way of contingencies for C’s risk, but in regard to D’s risks requires that: “[C] has included in the initial contract sum and shall include in its [schedule] a contingency for delays to the date for substantial completion of the works caused by compensation events.”

11–148 The compensation events are set out in a schedule to the contract, which indicates which risks are to be borne by C and D and whether they give rise to an extension of time only, or to both time and compensation. Contingencies are in two bands, referred to as “thresholds” and the contract provides detailed provisions on how and when they are to be expended. 11–149 Unless the duration of an activity, or contingency to be reduced, or omitted is actually the single first activity to take place, or the single last activity to take place, the effect of omissions upon the completion date can only be demonstrated by a CPM analysis. Such effect is generally demonstrated by shortening, or deleting the duration of the affected activities and re-scheduling to determine the effect on the critical path and hence, the completion date. The working schedule must first be brought up to date and then copied to the revised schedule with the reduced or omitted activities. In order to avoid the necessity of reviewing the construction logic, it is often most practical simply to redefine those activities to be omitted as activities with zero duration, rather than remove them from the schedule. The critical path can then be recalculated and a revised completion date ascertained. 11–150 The difference between the completion date indicated on the original working schedule and that on the revised working schedule is the effect of the omissions to be taken into account. In the absence of instructions to modify a contingency, or accelerate performance, depending upon the form of contract and the circumstances of the case, there may be a variety of actions that D might otherwise be able to take in order to reduce the effect of its own time and/or cost risk events, such as omissions from the work, changes in the design, or advancement of other work or supplies under D’s control. However, it should be recognised that, in the absence of omission of work, adjustment of contingencies, re-sequencing, or other methods of acceleration, in most cases D is unlikely to be able to achieve much.

Changing the sequence of activities 11–151 Much will depend upon how the work has been designed and, if designed to be time effective, as the CIOB Guide recommends, a change of sequence may be the most effective and efficient method of securing a recovery, or acceleration to overcome the effect of an intervening event191. Changing the sequencing of the activities, or the method of working may include reassessing the principles underlying the way in which the work is to be carried out. However, a change in construction logic, whilst it may increase costs, may also prove more efficient and actually save costs. 11–152 In Canon192, for example, the layout of roads was to precede the construction of buildings, but the design of the roads was changed, delaying the works by over three months. C claimed compensation for accelerating the work to avoid an anticipated 191 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects, (Chichester: Wiley Blackwell, 2010), para.4.6. 192 Canon Construction Corporation (1972) ASBCA LEXIS 183, 72–1 BCA (CCH) 9404.

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rainy season. The claim for extended overheads and costs was measured according to the difference between the actual date of completion and the date the contract would have been completed without D’s fault and performance of changed work. C was held to be entitled to the compensation claimed, which arose out of increased subcontract prices and overtime costs incurred in an effort to avoid the rainy season. The Armed Services Board of Contract Appeals stated as follows: “as related in the findings of fact, [C] ordered Saturday overtime operations in paving work. This work was delayed by [D’s] causes to a point where interference therewith was threatened by an anticipated rainy season. [C] testified without contradiction that if paving were not completed before this season, the job would have been delayed by approximately an additional 3 months. Fortuitously the work was completed just before the onset of considerable rain in December 1969 and January 1970. [C’s] overtime work was successful according to its purpose. An extensive rainy season was avoided which could have increased [D’s] liability by the product of as much as 90 times. The Board considered the overtime worked to be reasonable performance under the altered circumstances of this contract and a considerable mitigation of [D’s] liability.”193

11–153 Another example of acceleration by re-sequencing is given in the Texas Department of Transportation’s guide to procurement strategies194, developed in 2003, in order to expedite the planning, delivery and construction of highways, so as to minimise disruption to traffic. 11–154 The planned schedule at Figure 11.7195 illustrates a roadway and bridge to be completed by the third week in June. For the purpose of this exercise, it can be assumed that there are three gangs, one working on the bridge and two on the roads – one to carry out excavation and embankment work (ground works) and the other to lay the asphalt paving (finishes); all activities are planned with the optimum gang size and maximum productivity. As planned, the bridge work is in float and the north and south lanes are to be executed sequentially, the whole of the paving work being critical to completion. [Please refer to Figure 11.7] 11–155 If this schedule were to be accelerated by re-sequencing, priority would have to be given to re-sequencing the construction of the traffic lanes. There would be no useful purpose achieved in accelerating the bridge work as it is in float and planned not to be critical to completion. 11–156 An examination of the schedule resource logic demonstrates that significant saving can be achieved by re-sequencing the two gangs operating on the road lanes so as to reduce the down-time between operations. As planned, the ground works gang finishes the north lane (activity ID 6) and then waits four days while the finishing gang lays asphalt (activity ID 7), before starting the ground works on the south lane (activity ID 8). By re-sequencing the logic so that the ground works to the south lane commences immediately after the ground works to the north lane are complete, the asphalting to the north lane is taken off the critical path, reducing the contract period by four days. This now produces two parallel critical paths, one through the road works and

193 Canon Construction Corporation (1972) ASBCA LEXIS 183, 72–1 BCA (CCH) 9404. 194 M. Lehmann, PE, “CPM Schedule Development, Review and Analysis Guidelines”, Accelerated Construction Strategies Guideline, Texas Department of Transportation (2003), pp.1–23. 195 M. Lehmann, PE, “CPM Schedule Development, Review and Analysis Guidelines”, Accelerated Construction Strategies, Texas Department of Transportation (2003) based on an example provided by M Lehmann, PE.

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one through the bridge work, both of which would have to be re-sequenced if any further acceleration were to be achieved. See Figure 11.8. [Please refer to Figure 11.8] 11–157 It can readily be appreciated that acceleration by re-sequencing of this variety not only costs nothing, but is actually likely to be more profitable to C, as it avoids either a second visit, or four days of standing time for the ground works gang.

Other logic changes 11–158 Other logic changes, such as increasing the overlap between activities, will result in more work being carried out within the available time. Suppose, for example, in a hospital building it had been intended to complete all cabling throughout, before commencing plastering. Instructions were then given to install a special set of services that could not be fitted until after those services originally included in the contract were completed. On the face of it, the time to install the special services will take a period between completion of cabling and commencement of plaster, thereby inevitably delaying the contract. However, if C re-sequenced its work pattern so that, instead of the cabling being carried out on all floors simultaneously, it was done floor-by-floor, the following work by the plasterers could be brought forward on a floor-by-floor basis, reducing, or even eliminating, the effect on time of the additional special services. 11–159 Building works are particularly susceptible to acceleration by operating in parallel zones of operation that were planned to be sequential. This is in fact what was done in the acceleration schedule in the case of Barker196. The contractor had 11 storeys of hotel bedrooms to complete and, in order to accelerate to overcome delays to progress it had experienced, it decided to split the tower into two separate parts: eleventh storey down to sixth under one supervisor with one set of subcontractors, and fifth floor down to the ground under another supervisor and with another set of subcontractors. 11–160 The cost benefit of acceleration in relation to the time saving achieved depends to a large extent upon how the acceleration is planned to be put into effect. In most projects that have multiple zones of operation and multiple trades in progress, there can be no doubt that acceleration achieved by re-sequencing (sometimes referred to as “crashing the schedule”) is by far the most easily achieved and cost-effective method of saving time on a project. 11–161 However, not all projects are multi-zonal with multiple zones in progress. For example, a pipeline through a forest may have only two points of access, one at each end. The process of pipe-laying is linear, that is to say it must follow a regular cyclical path of clearance, pipe-stringing, welding, excavation, laying, backfill, testing and replanting. The works cannot be carried out in any other order. In projects such as this, the only way that sequential accelerative measures can be put in place is to increase the number of work fronts. For example, an additional access at, say, the midpoint between the two ends, will double the number of work fronts and reduce the non-productive travelling time to each work front. 11–162 Some cyclical trades are particularly easy to accelerate by an increase in work fronts. For example, piling, which is dependent for its progress upon the number of piling rigs in operation, may be accelerated, if the site is big enough to accommodate it, simply by increasing the number of piling rigs and zones of operation.

196 John Barker Construction Ltd (1996) 83 BLR 31.

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11–163 It is relatively easy to set up a model197 to calculate the cost/benefit of the effects of increased work fronts to cyclical processes. Typically, such a model produced to identify the cost benefit of additional access points and gangs to overcome the effects of hypothetical weather stoppages, archaeological finds, civil commotion and similar events on a pipeline in the Peruvian rainforest demonstrated that, except in extreme conditions, the cost of setting up additional work fronts was not significantly different from the costs lost in standing time and that the difference was only to be found in the benefit of an earlier completion date than originally planned as opposed to completion 120 weeks late.

Using a different method of working 11–164 Using a different process to carry out the activity from that originally envisaged could, for example, include using a pump to place concrete instead of a tower crane and skip, or the use of dehumidifiers to dry out the works more quickly than could be achieved with natural ventilation. It may well transpire that, for example, where a twin-cage passenger goods hoist has been installed primarily for economic transportation of personnel at peak times, the spare hoisting capacity at off-peak times may be utilised for work previously envisaged for a crane and result in increased service capacity. 11–165 Similarly, providing independent and external access to different zones of operation can enable parts to proceed in parallel, which otherwise would be sequential. In a tower block, for example, building the structure first and then installing mechanical and electrical and fittings, working down from top to the bottom, may sound simple and efficient enough, but, because everything is sequential, delay to completion is virtually inevitable. If, by arrangement of separate access, independent of the interior, the work can be divided into vertical zones, so that the upper construction can proceed while the lower sections are having their services and fitting out installed, the end result will be a significant saving in original contract time and less likelihood of delayed completion.

Increasing motivation 11–166 If the nature of the project lends itself to incentives, they should not be overlooked. There are potentially significant benefits to be achieved from bonuses. For example, bonuses can be attached to intermediate stages of completion as milestones. Generally, it can be perceived that attitudes fostered by the prospect of a bonus are much more positive than those induced by the threat of damages or removal. However, incentive schemes fall to the ground where contract managers make adjustment to standards to make sure that bonuses are paid in any event, perhaps out of fear that the labour force will walk off unless they receive them! In such circumstances, bonuses become just another way of calculating wages, irrespective of performance.

Increasing resources 11–167 Increasing the resources allocated to an activity, or group of activities on, or near the critical path may be achieved by increasing the number of operatives and/or the amount of plant above that originally allotted to the activity. 11–168 If the sequence of operations is to be changed, this requires re-scheduling in advance and closer management control. In the Barker198 case, C had to condense 197 The model for this was produced using systems dynamics via “I-ThinkTM”. 198 John Barker Construction Ltd (1996) 83 BLR 31.

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three months’ work in finishing the refurbishment of a tower block of hotel bedrooms into six weeks. The decorators could not work in the corridors and bedrooms if other trades were involved, so C arranged for the decoration of the corridors and bedrooms to be done at night, whilst other work went on during the day. 11–169 Generally, it can be assumed that an activity duration is inversely proportional to the level of resource attributed to it199; in other words, the more resources are applied, the shorter the activity duration. Such a simplistic view, however, is unrealistic. For all trades, there is a level at which an increase in resources ceases to be reflected in a reduction in the activity duration. The point at which that is reached will depend not only on the type of work, but also on the working area, the proximity of other trades and the degree of co-ordination required from others. If the resources exceed the optimum level, the reduction in activity duration will begin to decrease proportionately until the activity duration begins to increase again in relation to the number of parties allocated to the task. In summary: after a certain point has been reached, any further increase in resources will become decreasingly effective because of the various inefficiencies which result; and after a certain point, the time the activity takes will stop decreasing and may actually start to increase.

Increasing the working time 11–170 Although this method of acceleration is potentially the most expensive and wasteful of all methods of acceleration, when the project is not being adequately controlled and the critical activities cannot be identified, it is also, usually, the method first offered by contractors to overcome delay when progress is adversely affected as a result of a D’s time risk event. 11–171 Increasing the working hours in a given period may reasonably be expected to produce a loss of efficiency, so that the costs incurred do not bear the same relationship to the benefit achieved as was anticipated at the time of tender. The law of diminishing returns tends to apply to increasing the hours worked above the level originally assigned to the activity. When working hours are increased for long periods, productivity is likely to decrease significantly. Changing working patterns may or may not be more effective than increasing the resources, or working hours, depending on the circumstances. For instance, instead of one shift working 80 hours per week, C may use two separate teams, each working 40 hours per week or, by a triple-day shift of three separate teams, reduce the activity duration even further. However, there always remain the inherent problems of continuity, quality control and management of resources, in all but the simplest of cases. 11–172 Approval of the CA may be required for extended working hours. Apart from the possible difficulties with adjoining owners and noise, supervision and/or quality control may also pose difficulties. It is common, in construction documents, for the working hours to be restricted. Frequently, they are from 8 am to 5 pm, Monday to Friday. However, many construction and civil engineering projects necessarily require extended hours (and may even be tendered for on the basis of a triple-day work shift). 199 So, for instance, the amount of work constituted in an activity will commonly be estimated as a number of man-hours, and the duration will be accordingly determined by dividing that figure by the number of dedicated labour.

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In relation to weekend working, contracts generally provide that permission is required. For example, ICE6 and ICE7 states: “if, as a result of any notice given by the [CA] [requiring [C] to expedite the progress substantially so as to complete the works by the completion date] [C] seeks the [CA’s] permission to do any work on site at night, or on Sundays such permission shall not be unreasonably refused.”200

11–173 Similarly, FIDIC4 states: “subject to any provision to the contrary contained in the contract none of the works shall, save as hereinafter provided, be carried on during the night or on locally recognised days of rest without the consent of the [CA], except when work is unavoidable or absolutely necessary for the saving of life or property or for the safety of the works, in which case [C] shall immediately advise the [CA]. Provided that the provisions of this clause shall not be applicable in the case of any work which it is customary to carry out by multiple shifts.”201

11–174 On the other hand, there are real difficulties in monitoring the quality of work carried out outside normal working hours. Indeed, FIDIC4 deals with the problems of supervising such work as follows: “if as a result of any notice given by the [CA] [C] considers that it is necessary to do any work at night, or at locally recognised days of rest, he shall be entitled to seek the consent of the [CA] so to do. Provided that if any steps, taken by [C] in meeting his obligations under this clause, involve [D] in additional supervision costs, such costs shall be determined by the [CA] and shall be recoverable from [C] by [D] and may be deducted by [D] from any monies due to, or to become due to [C] and the [CA] shall notify [C] accordingly with a copy to [D].”202

11–175 It may be unreasonable to withhold permission for Sunday and night work, for example, on the basis that D must arrange for additional supervision. On the other hand, it might be reasonable to withhold permission if the Sunday or night work is particularly noisy and local residents may be unreasonably disturbed by the activities. Each case would have to be looked at carefully. 11–176 However, D should take care not to withhold permission except for good reason. Irrespective of whether C has received a direction to accelerate performance, D’s unreasonable refusal to grant permission for Sunday or night work may be construed as a failure to mitigate its loss. Then, in the event of delay to completion caused by C’s inability to make up lost time because of the unreasonable restriction on its extended working hours, D might find it has lost its right to liquidated damages and, in addition, may be liable to C for the cost of any acceleration C might have been constrained to adopt in lieu. Clearly, some supervision for Sunday and overnight working must be provided, otherwise it is likely to become a joy-ride. The agreement of C to meet the cost of that additional supervision might conceivably be a reasonable precondition to such an agreement to permit out of normal hours working. 11–177 The inverse relationship of cost to benefit from increased working hours can be illustrated by taking a single trade. For the sake of this example, bricklayers must lay 50,000 bricks. If they work as two bricklayers and a labourer at an average cost per man of £12 per hour, and each bricklayer can lay between 700 and 750 bricks per day each working on the basis of eight hours per day five days per week,

200 Cl.46.2. 201 Cl.45.1. 202 Cl.46.1.

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the productivity expected is, say, 1,430 bricks per day. At that rate, the work will take 35 working days, or seven weeks. 11–178 Where increased hours are concerned, costs often have to be calculated in a peculiarly complicated way because of the “working rules”. For the purpose of this example it will be assumed that every hour in excess of an eight-hour day is paid as “time and a half”, ie 1.5 times the normal rate, and Saturday and Sunday working are at “double time”, ie twice the normal rate. 11–179 Losses of productivity must additionally be considered. For the purpose of this example, no loss of productivity will be taken on the first ten hours of overtime, 5% will be taken on the next ten hours and then the loss incremented by 1% every additional ten hours, so that, for example, on the basis of a 50-hour week for three successive weeks, in the fourth week there will be an 18% loss of productivity. 11–180 In compiling estimates of acceleration costs it is often forgotten that the loss of productivity is relative to an increase in activity duration and is not accounted for simply by increasing the cost by the productivity loss coefficient. In Egger 203, for example, the court considered a claim in which the subcontractor had said: “Any instruction to [the subcontractor] to accelerate their works will have to incorporate agreement of their substantiated NPO204 costs and an agreement to reimburse their reduction in productivity based upon 25% of the outstanding working hours.”

11–181 This was held by the court to be interpreted as a mark-up of 25% on their working rates on top of the non-productive overtime, the court observing: “In my judgment [D’s expert] is in error, the uplift to reimburse their ‘reduction in productivity’ was to be ‘based upon 25% of the outstanding working hours’. This does not mean additional overtime hours, or additional overtime plus normal hours worked on the same day, it relates to all of the working hours outstanding. The uplift must be applied to all hours worked.”

11–182 It is suggested that a more logical interpretation is that the parties agreed that the overtime would cause a 25% loss of productivity during the period and in connection with the activities in which the overtime was actually worked. The effect of this would be to fix an agreed factor for lost productivity caused by acceleration at 25% and not to uplift the chargeable labour rates by 25% for whatever hours were worked, which in effect gives C double recovery. 11–183 The point can be illustrated by repeating the previous example of the bricklayers205. If there is a loss of productivity of 25% the bricklayers will lay only 133 bricks per hour. However, as they are now working a 12-hour day, six days per week (72-hour week), they will lay 1,596 bricks per day. The 50,000 bricks will then take 32 working days to complete which, in a six-day working week, will take just over five weeks to complete. 11–184 So far as costs are concerned, on the assumption that NPO is 1.5 times the standard rate for four hours per weekday and twice the standard rate for Saturdays, the cost will be: ((8 hours × £36) + (4 hours × £54)) × 27 weekdays + (12 hours × £72) × 5 Saturdays = £17,928.

203 Skanska Construction Ltd v Egger (Barony) Ltd [2004] EWHC 1748 (TCC) at [244]. 204 Non-productive overtime, ie the enhanced rate of 1.5 or 2 times the normal labour rate for overtime worked as is stipulated in the UK in the building and engineering industries by the various sets of National Working Rules legislation. 205 Above, at para.11–177.

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11–185 This figure already takes account of the fact that there has been a loss of productivity of 25%. If an uplift of 25% is then added to this labour cost, the final sum comes to £22,410. From this it can be observed that C is then compensated twice for the same work. [Please refer to Figure 11.9] 11–186 So, on the basis of normal working, the works can be expected to take 35 working days and cost £10,080. When loss of productivity is taken into account (on the basis of no loss on the first week and then 5% loss incrementally thereafter) the calculation shows that, after approximately 3.5 weeks, there is insufficient gain to justify the expenditure. If the works were carried out on this basis, the 50,000 bricks would in fact take 32.5 days to lay instead of 35, saving effectively two days and costing £13,068, an extra cost of approximately £3,000. 11–187 If a similar calculation were to be made on the basis of a working week of ten hours per day, six days per week, using loss of productivity quotients on the basis of 5% loss on the first 30 hours of overtime and then 7.5% loss per week thereafter with a ceiling of 35%, the calculation shows that it would in fact take 27 days to lay instead of 35, saving effectively one and a half weeks and costing £13,488, an extra cost of approximately £3,500. 11–188 The essential difference between the two is the lost productivity. Although a greater loss of productivity can be expected per week, with the longer working week the work can be achieved in a shorter time.

Failure to recover, or to accelerate 11–189 The purpose of instructions to accelerate to overcome the effects of poor progress, or a D’s time risk event is generally to prevent delay to a key date (including a sectional completion date or completion of the works) that would otherwise occur. The effect of such instructions, properly given, is to transfer, to the extent of the acceleration required, the risk of the consequences of a pre-existent delay to progress from D to C. Of course, as is apparent from the case of Masons v W D King206, it is one thing to have the power of instruction and another thing entirely to have some meaningful redress, if the instructions are not obeyed. 11–190 The standard forms of contract generally contain liquidated damages clauses that provide that, in the absence of a D’s time risk event having an adverse effect on completion, if C fails to complete by the contract completion date, it will pay liquidated and ascertained damages at a fixed rate (usually per day or per week) for the period during which the works remain incomplete. Liquidated damages provisions for delayed completion may be unenforceable if they substantially exceed the loss that can reasonably be estimated at the time of contract to be likely to flow from a failure to complete by the completion date207. However, provided that the estimate does not substantially exceed the objectively foreseeable loss then, in common law jurisdictions, liquidated damages will be payable208 whether, or not the estimated loss is actually suffered209. 206 Masons v W D King [2003] EWHC 3124 (TCC). 207 See Jeancharm Ltd v Barnet Football Club Ltd [2003] All ER 69 in which excessive liquidated damages were struck out as a penalty. See also Ch.21, “Damages”, paras 21–009 et seq. 208 See Alfred McAlpine Capital Projects Ltd v Tilebox Ltd [2005] EWHC 281 (TCC), in which a level of damages agreed in pre-contract negotiations between commercial parties was held enforceable because it did not substantially exceed the loss likely to be suffered. 209 However, this is not also true of those jurisdictions subject to Civil Codes, see Ch.21, “Damages” at para.21–238.

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Furthermore, it is sometimes the case that a reasonable estimate of the losses that are likely to flow from delayed completion is simply not commercially viable. In areas of high land value, for instance, the interest running on the purchase price of the land alone may be hundreds of thousands of pounds per week. 11–191 In such circumstances, the commercial risk of quantifying the losses likely to occur at a sum that properly represents D’s likely losses carries with it the attendant risk of adversely affecting the contract price or rendering the work commercially impossible to price. It is understandable that D may not then seek to recover by way of liquidated and ascertained damages its likely losses, but a sum considerably less than what is reasonably foreseeable. 11–192 Apart from recovery of foreseeable loss, there are some circumstances in which it is far more important to achieve completion on time rather than compensation for the failure. Take, for example, the opening night of a new theatre, university halls of residence (which must be completed before the beginning of an academic year), hotels (in which reservations are often taken for function rooms and bedrooms on the basis of a planned completion date), and those projects planned to be opened by dignitaries (whose time must be reserved well in advance), or to celebrate a particular date. It would not have been much use, for instance, for a project designed to be completed for the London Olympics and thus to be in use by May 2012, to be completed in 2013, no matter what the compensation. 11–193 In the circumstances envisaged by clauses giving D the power to require C to accelerate to overcome the likely effects of its own culpable delay to progress, the contemplated acceleration, if effective, will achieve no more than C’s primary underlying obligation under the contract, which is to complete the works on time. 11–194 A failure on the part of C either to plan such recovery, or to perform it in accordance with the instruction properly given, would clearly be a breach of contract, but the redress that flows from that breach, other than a right to terminate C’s employment under the contract, is unspecified under most standard forms of contract. 11–195 A failure of C to conform to instructions to accelerate to overcome what would otherwise result in a delay to completion at D’s risk (for which C would otherwise be entitled to an extension of time and/or compensation) may well have the effect of transferring the risk of the delay from D to C and C losing its entitlement to both more time and compensation. However, it can readily be appreciated that the ultimate result of a failure to accelerate or to recover from culpable delay in accordance with such instructions may well also be that the delay to completion occurs, which the instructions were given to avoid. 11–196 In regard to recovery for breach of an obligation to recover a delay for which C is ultimately liable, three difficulties flow: 1. 2. 3.

appreciation of the likelihood of a delay to completion is often a condition precedent to the right to instruct such recovery; if the recovery is not carried out, the delay to completion that was likely to result from the pre-existent delay to progress will occur; and the redress for delay to completion caused by a culpable delay is the liquidated and ascertained damages identified in the contract.

11–197 It is trite law that a party that fails to perform its obligations under a contract must compensate the wronged party for the loss it suffers as a result of the breach. The difficulty in this case is to identify the loss that flows from the breach.

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11–198 The requirement that delay to progress which is likely to cause delay to completion of the works beyond the completion date has already occurred is one of the conditions giving rise to the power to issue such instructions to recover. As the likelihood of the delay to completion is pre-existent, it cannot then be said that the failure to recover, to prevent the delay to completion from occurring, causes delay to completion. 11–199 At the point in time at which the instruction to recover is given, although delay to progress has occurred, the likely effect of that delay to completion has not materialised. A party that is properly instructed to take action to avoid the likely effect on completion of a delay to progress that has already occurred, where such action in compliance with the instruction, had it been taken, would have avoided the delay to completion, does not, simply by failing to take such action, cause the delay to completion. The object of compliance with the recovery instruction is that, if put into effect, the recovery achieved will break the chain of causation so as to prevent the delay to progress from having its likely effect on the completion date. 11–200 Thus, the first and most obvious objection to the claim that a failure to recover has caused delay would appear to be that “delay”, ie the extension of the period of construction beyond the completion date, was likely to have occurred, in any event, as a result of the delays to progress caused by C’s default. 11–201 In Masons v W D King210, the claimants were lawyers claiming recovery of unpaid fees for the drafting of specific clauses to a contract for the development of halls of residence for Bath University. At contract, relevantly, it had been decided that, for commercial reasons, D’s likely losses in the event of non-completion would be only partially recovered through liquidated damages provisions, and so a lesser rate than the estimated likely loss had been set down. The contract also contained provisions for the CA to instruct recovery to overcome the effects of culpable delay to progress, but there was no specific redress for failure to comply with such an instruction. 11–202 As it happened, C fell into culpable delay, and so the CA exercised its contractual power to instruct recovery. C, however, failed to comply with that instruction and the project was ultimately finished late. This caused D to suffer hundreds of thousands of pounds in losses in excess of that recoverable via liquidated damages. The defence to the claim for professional fees was put on the basis that the lawyers had been negligent in not having provided for specific damages in the contract for a failure to comply with the instruction to recover. Having found that, amongst other things, the lawyers had not been negligent, HH Judge LLoyd QC opined that: “In my judgment failure to meet the obligation to comply with an instruction [to recover to overcome culpable delay] does not of itself give rise to any claim for damages. The primary obligation to complete on time remains. The additional obligation created by the instruction does not supersede that primary obligation. It is created to secure its due performance. If it is not observed the consequence may (or may not) be a failure to complete on time. The obligation is therefore preliminary, ancillary, or subservient to that primary obligation. It overlaps that obligation. Failure to comply with it means only that [C] has not remedied noncompliance with its general obligation to execute the works with diligence, or with the [schedule]. The result may not be that the works are finished late. If they are, the true cause (if one need be found) lies in [C’s] failure to proceed with diligence, or to comply with the [schedule], or some other failing, or mishap for the consequences of the risk of which [C] is contractually responsible, but which [C] did not correct, or surmount and not the failure to comply with the instruction [to recover to overcome culpable delay].”

210 Masons v W D King [2003] EWHC 3124 (TCC).

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11–203 At para.83, the point was summarised by Judge LLoyd thus: “Failure to comply with the instruction given when it is probable, or likely that delay in progress will result in delay in completion merely means that the chain of causation that started with the event which has caused the delay in progress is not broken by lack of the compliance that is expected from the instruction, although it would be broken had there been compliance which averted the delay to completion.”211

11–204 Even if it were possible to rationalise circumstances in which a failure to recover did cause the delay to completion, in anticipation of which the recovery was ordered, the position then would be that D required compensation for the delay to completion that then followed. The remedy for culpable delay to completion is liquidated damages. Those liquidated damages are the very same liquidated damages as would have been suffered in any event as a result of C’s culpable delay to completion, which were likely to follow from the delay to progress, which raised the spectre of instructed recovery in the first place. In other words, the failure to recover does not interrupt the pre-existent chain of causation, and causes no identifiable and separable loss. 11–205 The question then arises as to whether in such circumstances it is possible to claim that C is liable for the losses that actually flow from delayed completion instead of, or as well as, the agreed liquidated and ascertained damages. 11–206 At common law, the effect of an agreement for liquidated damages is to place an agreed limitation on C’s liability for damages for delay to completion, no matter how that should arise. In Pigott Foundations212, HH Judge Gilliland QC said: “The effect of a provision for the payment of liquidated damages for delay in a building contract has been considered in a number of recent authorities from which it is clear that not only does such a clause have the effect of imposing a liability upon the party who is responsible for the delay to pay damages at the stated rate, but also it has the effect of precluding the other party to the contract from seeking to avoid the limitation on any amount of damages contained in a liquidated damages clause by claiming damages for delay, or disruption arising from delay in completing the works as damages for the breach of some other provision of the contract.”213

11–207 Thus, unless it is expressly provided for in the contract in unambiguous terms, D cannot recover time-related damages in excess of the liquidated and ascertained damages for delay to completion. However, it should not be open to C to choose between, on one hand, complying with an instruction to recover, which has been validly given or, on the other, paying liquidated and ascertained damages. Accordingly, provided the losses flowing from the failure to recover can be identified as other than delayrelated losses, it seems that they should be recoverable. 11–208 In Aktieselskabet Reidar214, where a charterer was obliged to pay demurrage at an agreed rate for the detention of a vessel for longer than a stipulated period, the issue was whether the charterer was also required to pay compensation for a breach of contract arising out of a defective load. In this case, the Court of Appeal decided that the provisions for demurrage provided the remedy not for all breaches of contract, but only for the loss that would normally arise from longer detention of the vessel, and 211 Masons v W D King [2003] EWHC 3124 (TCC). 212 Pigott Foundations v Shepherd Construction (1993) 67 BLR 48 at 67. 213 See also Cellulose Acetate v Widnes Foundry [1933] AC 20 (HL); Temloc v Errill Properties (1988) 39 BLR 30 (CA) at 38–39; and Surrey Heath BC v Lovell Construction (1988) 42 BLR 25 at 37. 214 Aktieselskabet Reidar v Arcos Ltd [1927] 1 KB 352.

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not for the dead freight caused by the separate breach of loading less than full cargo. The Court of Appeal essentially thought that the demurrage only applied to one form of loss, but that there were two forms of loss involved, one compensated by demurrage, the other not. Accordingly, they allowed the charterers to recover general damages for the breach of contract in failing to load the appropriate cargo quantity in addition to demurrage for the additional lay days in port215. 11–209 It would thus appear that without express provisions identifying the damages that will flow from a failure to recover, following instructions validly given under the contract, D’s only redress would be to proceed to terminate C’s employment for the breach. In the Masons case, Judge LLoyd declined to accept that, in the absence of specific damages for the failure to comply with an instruction to accelerate, such a contractual obligation to comply therewith was “mere verbiage”, as had been thought by at least one learned author216, and felt that the possibility of termination was a significant sanction, saying: “Both the ICE Conditions and GC/Works/1 (in common with many other standard forms) contain provisions for the determination of the contract, or the employment of [C] under it for non-compliance with instructions. As is apparent from an examination of such clauses (and the references in them such as to time, or progressing with diligence) the instructions include those to make up lost time (or to accelerate). Although determination is not achieved swiftly (since it is necessary to give [C] at least a last clear opportunity to comply before such [a] drastic sanction can be effectively and lawfully applied), nevertheless the threat of such a sanction is conducive to realism. The cynical, such as those who have only a jaundiced view of the performance of contractors, tend to dismiss the commercial utility of determination provisions. In my view, they do not recognise that contractors, certainly those of some standing, will do everything possible to avoid a determination. Expulsion from a site is not just bad for [C’s] finances, but affects [C’s] reputation and it can have significant consequences in terms of relationships with bankers and insurers. It will lead to a bond being called with immediately detrimental effect.”217

11–210 However, Judge LLoyd also recognised that termination was unlikely to be of any assistance to D in achieving the purpose of the instruction to recover lost time, which is to reduce or avoid entirely the likely delay to completion by the key date. Clearly, before terminating C’s employment for failure to comply with such an instruction, D would have to be certain that the works would not be finished on time which, if not being managed competently in conformance with the CIOB Guide218, might not be capable of being established until close to the completion date. The notice of termination itself would be in breach if given unreasonably or vexatiously, a point that might also be difficult to establish not only where the termination would not satisfy the object of the instruction given, but also where the termination would in fact exacerbate the difficulty that was intended to be ameliorated by the instruction.

215 See also Chandris v Isbrandtsen-Moller Co Inc [1950] 1 KB 352 and Total Transport Corporation v Amoco Trading Co [1985] 1 Lloyd’s Rep 423, which explore the reasoning underpinning the judgment in this case. 216 This was a reference to I Duncan Wallace, QC (ed), Hudson’s Building and Engineering Contracts, 11th edn (London: Sweet & Maxwell, 1995), p.127. 217 Masons v W D King [2003] EWHC 3124 (TCC) at [66]–[68]. 218 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010).

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11–211 Applying the reasoning in Jarvis v Rockdale219 and Lubenham Fidelities220 in Reinwood v Brown221, a case in which it had been alleged that a contractor’s determination of his employment under the contract had been unreasonable and vexatious, HH Judge Gilliland QC set out the following six principles by which that might be established in this case: 1. 2. 3.

4. 5.

6.

it is for D to show that C’s conduct is unreasonable or vexatious, on the balance of probabilities; vexatious means with an ulterior motive or purpose of oppressing, harassing, or annoying D; the test of what is an unreasonable determination is to be ascertained by reference to the manner in which a reasonable contractor would have acted in all the circumstances; it is not for the court to substitute its own view of what is reasonable if that is what a reasonable contractor would have done in all the circumstances; C’s motive or purpose is a relevant consideration, but whether C thought its conduct was reasonable is not conclusive, the test of what is unreasonable conduct in this context being an objective one; The effect upon D of determination by C is a relevant consideration and a determination may be unreasonable if it is disproportionately disadvantageous to D.

11–212 In the light of the reasoning given in Masons v W D King, there can be no doubt that, in those circumstances in which it is more important to D to have the project completed on time than to recover liquidated damages for non-completion, the structure of the standard forms of contract is hopelessly inadequate for the protection of D’s interests. 11–213 Whilst strict compliance with the CIOB Guide222 will give a greater chance of completing on time than any threat of contractual redress for failure223, the CMS224 takes account of the effects of the decision in the Masons case by making specific provisions for delay management, and for the recovery of D’s actual losses in the event of a failure to obey an instruction to recover or accelerate, which is reasonably given. By the terms of this amendment to the standard forms, C will be liable in damages to D for the losses that are actually suffered as a result of failure to conform to an instruction to recover or accelerate, over and above the liquidated damages specified in the contract for a failure to complete on time.

219 John Jarvis Ltd v Rockdale Housing Association Ltd (1986) 36 BLR 48. 220 Lubenham Fidelities & Investment Co Ltd v South Pembrokeshire District Council, unreported, 26 May 1983. 221 Reinwood Ltd v Brown & Sons Ltd [2007] BLR 10. 222 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010). 223 See also JW Delaney and RR Ott, “A case study in the effective use of schedule control techniques – recovery schedules” (2004) CM E-Journal, Construction Management Association of America. 224 See App.2 to the 4th edn.

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Variation and change

Introduction Standard form provisions The bill of quantities Ambiguities, discrepancies and divergences Omissions Value engineering Constructive change Constructive change of quality Constructive change of quantity Consequential changes

12–001 12–030 12–075 12–110 12–136 12–154 12–158 12–181 12–190 12–196

Introduction “Change is not made without inconvenience, even from worse to better.”1

12–001 A variation can come about because the contract makes express provision for D, or the CA on its behalf, to order it, or because, by the terms of the contract, a variation is to be inferred from particular conduct or circumstances. 12–002 Voluntary change comes about as a result of D’s or the CA’s decision on his behalf, to require C to carry out work, additional to, or in a manner different from, or at a time different from that for which it contracted. Typically, this may occur as result of a number of things, for instance: a reappraisal of D’s needs; an appraisal, or reappraisal of a future user’s needs; completion of a design, which had not been completed at contract; and integration of a design portion, which was not available at contract; and so on.

1 R Hooker, quoted in Samuel Johnson, Dictionary of the English Language (1755) preface.

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12–003 Implied, or constructive instructions for change to the works can arise either by virtue of: occurrences, or instructions specified in the contract as amounting to a change, for instance to: • correct an ambiguity, or discrepancy in D’s requirements; • correct an error in description (or quantity) in the bills, specifications, or drawings; • correct discrepancies between the contract documents; • suspend the carrying out of the works; • avoid a legal, or physical impossibility; • rectify any loss, or damage arising from any of the insured risks; • ensure conformity with any Act of Parliament or regulation; • investigate, or dispose of archaeological findings; or • uncover, or make openings in work for the purpose of investigation, where it transpires that such investigations were unnecessary because the works had, in fact, been carried out in accordance with the contract; or instructions, or conduct impliedly requiring a variation from the contract; the possibilities for this are endless, but, by way of example only, where not provided for under the contract, the: • • • • •

rejection of a compliant submittal; demand for a change in quantity, or quality as a condition of approval; urging of completion on time when entitled to an extension of time2; taking of partial possession without authority; and demand for additional testing, not required by the contract.

12–004 Where there are contractual provisions for instructed variations and change, the effect is to give to: D, a unilateral right to make changes to the contract works; the CA, authority to make those changes on D’s behalf; and both parties, a structure for establishing the time and cost effects of change. 12–005 However, D has no implied right to make changes to the contract works. In SWI v P&I3, the Court of Appeal declined to imply a power to vary a fixed price subcontract, notwithstanding an express power to instruct variations in the head contract. It is also the case that additional work that previously had been expressly omitted from the contract would not ordinarily come within the scope of an implied authority to vary, and C would not be in breach of contract if it refused to perform such work4. 12–006 The effect of an instruction to make changes that are contemplated under the terms of the contract, and that can be validly operated to adjust time and cost if those instructions are given before practical completion, can be a breach and put time at large, where the same instructions are given after practical completion, but the

2 See Ch.11 “Mitigation, recovery and acceleration”, at paras 11–009 to 11–136. 3 SWI Ltd v P&I Data Services Ltd [2007] EWCA Civ 663, [2007] BLR 430, (2009) 25 Const LJ 384. 4 Wren v Emmett Contractors Pty Ltd (1969) 43 ALJR 213 at 223, per Owen J.

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contract fails to provide for such instructions to be given at that time5. However, in Morrison-Knudsen v BCPA (No 2)6, the Canadian Court of Appeal expressly rejected the argument that C could obtain compensation by a quantum meruit on an implied collateral contract where C had not taken the changes as a repudiation, but had carried on and completed the contract. 12–007 The other side of this particular coin is that, whenever there is no power to vary and the price is fixed for work described in a specification and drawings, that fixed price will still be payable, notwithstanding that not all the work referred to in the specification and drawings may actually be required to be carried out7. 12–008 What the limits are to a particular power to vary the works (as opposed to the question of what constitutes a change and the consequences that flow from it) is not a question that properly can be answered by resorting to implication (that is, by asking what might be said to be reasonable in any particular case)8. For example, WCD989 and DB0510 take the line that D may not effect a change in D’s requirements that is, or that makes necessary, an alteration, or modification in the design of the works without C’s consent. In the absence of provision in the contract for change, C has no obligation to comply with such instructions11. 12–009 If there is no such power to instruct variations, then, rather than disentitling C to costs and time for obeying instructions for change, the additional work may be dealt with in one of two ways, depending on the facts in issue. In Serck v Drake & Scull, HH Judge Hicks QC said that the two possibilities were at opposing ends of a range of circumstances: “A quantum meruit claim may, however, arise in a wide variety of circumstances, across a spectrum which ranges at one end from an express contract to do work at an unquantified price, which expressly, or by implication must then be a reasonable one, to work (at the other extreme) done by an uninvited intruder, which nevertheless confers on the recipient a benefit which, for some reason, such as estoppel, or acquiescence, it is unjust for him to retain without making restitution to the provider. At the first end of the spectrum the measure should clearly be the reasonable remuneration of [C]; at the other it should be the value to [D]. In between there is a borderline, the position of which may be debatable.”12

12–010 Thus, a change carried out without express authority for change can be either: 1.

the subject of a collateral contract, whether express, or implied, the effect of which is independent of the original contract (which accordingly remains unaltered). The parties then have two contracts, one being subject to formal rules of valuation and the other being subject to payment on the basis of a quantum meruit or valuation; or

5 See, for example, SMK Cabinets v Hili Modern Electrics Pty Ltd [1984] VR 391, 1 Const LJ 159 (Sup Ct Vict); Balfour Beatty v Chestermount Properties (1993) 62 BLR 1, but see also the report of an arbitration in Hong Kong on the same subject at (2005) 21 Const LJ 321. 6 Morrison-Knudsen v British Columbian Power Authority (No 2) (1978) 85 DLR (3d) 186 (BC Ct App). 7 SWI Ltd v P&I Data Services Ltd [2007] EWCA Civ 663, [2007] BLR 430, (2009) 25 Const LJ 384. 8 Chadmax Plastics Proprietary Ltd v Hansen and Yuncken (SA) Pty Ltd (1984) 1 BCL 52 at 62, per Prior J. 9 Cl.12.2.1. 10 Cl.3.9.1. 11 See also I Duncan Wallace QC (ed), Hudson’s Building and Engineering Contracts, 11th edn (London: Sweet & Maxwell, 1995), p.880. 12 Serck Controls Ltd v Drake & Scull Engineering Ltd (2000) 73 Con LR 100, at 109–110

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2.

the parties abandon the original contract and resort to a new contract, the subject-matter of which may be found partly in the original contract and partly in the additional work directed to be done13. This will result in putting the cost of the original contract on a quantum meruit14 and time at large15.

12–011 An example of the second possibility is found in the Australian case of Wegan v Wodonga16, a case in which it was held that D had repudiated the contract by giving instructions that increased excavation by 60% and sewer length by 40% in a contract that empowered the CA only to make unilateral changes to the extent that all changes did not increase or decrease the sums otherwise payable under the contract by more than a reasonable amount. 12–012 Limitations of a similar kind can be found in a number of standard forms of contract, but perhaps the most severe restrictions appear in the 2009 edition of the Irish government standard forms. Under these forms, the CA does not have unfettered power to instruct changes to the works, but they provide for D to impose a limit on the value of a single change order and the value of the maximum number of change orders issued in a three-month period (presumably rolling)17. The CA also has no authority to instruct a change that has the effect of causing, or contributing to, a reduction in safety, scope, quality, or usefulness of the works, or any proposal C might make to reduce the cost of the works, or accelerate the progress of the works. At Cl.4.3.2, the forms state that: “If there are limitations on the authority of the [CA] to perform his functions, or powers under the contract, they are stated in the contract.”

12–013 But then, somewhat cryptically, the same clause goes on to say: “But any act, or instruction of the [CA] shall have effect as if within the [CA’s] authority, and [C] need not inquire into whether [D] has actually authorised it.”

12–014 Bearing in mind the subjective nature of such restrictive provisions and the fact that C has no contract with the CA, it would seem to be prudent for C to require D to confirm that the CA has D’s authority to issue a change order before conforming to it. Otherwise C can have no confidence in later being paid where D claims that the ordered change was in excess of the value for which the CA has authority or, for example, that in D’s opinion it has rendered the work of a lower quality, or less useful. 12–015 Where there is a legitimate power to instruct variations, the critical question as to whether work ultimately carried out can properly be classified as a change to the contract requirements will ordinarily be a matter of interpretation of the contract as to the extent of the work required and the circumstances under which C has undertaken to perform. However, because of the way in which changes are often introduced, identifying the difference between what C was originally contractually obliged to do and what it is later required to do is notoriously difficult. The mere fact that C carries out more work than it tendered for will not always constitute a change giving rise to D’s liability to grant more time or to pay for it. Unless ordered expressly or impliedly or 13 J Dorter, “Variations” (1991) 7 Const LJ 281. 14 Ashwell and Nesbit Ltd v Allen and Co (1912), Hudson’s Building and Engineering Contracts (4th edn) 462 (CA). 15 For the consequences of which, see Ch.6, “Extensions of time and time at large”, paras 6–106 et seq. 16 Wegan Constructions Proprietary Ltd v Wodonga Sewerage Authority (1978) VR 67. 17 See, eg Sch.1 to IGBW/09, at s A.

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accepted by conduct, the execution of work not conforming to the contract is a breach of contract for which C will be liable to D in damages18. For the avoidance of doubt as to whether D is liable for it, whenever it is clear that C is carrying out work that does not comply with the requirements of the contract, or is performing work not required by the contract, the CA should be astute to reject and/or condemn that which it does not condone19. 12–016 Some useful guidelines as to what might properly be considered to be additional work were provided by the Supreme Court of the Province of Prince Edward Island in MacEachern v Monaghan20 approving the Canadian decision in Re Chittick and Taylor21, in which it was stated: “Generally speaking, in my opinion, the following rules should apply: Rule 1. An item specifically provided for in the contract is not an extra. Rule 2. When [C] supplied material of a better quality than the minimum quality necessary for the fulfilment of the contract, without any instructions, express or implied, from [D] to do so, he is not entitled to charge the extra cost as an extra. Rule 3. When [C] did work or supplied materials not called for by the contract (plans or specifications) without instructions, express or implied, from [D], or the consent of [D], he is not entitled to charge this additional work or materials as an ‘extra’. Rule 4. When [C] did work or supplied materials not called for by the contract on the instructions, expressed or implied, of [D], he is entitled to charge for additional work or materials as an ‘extra’. What amounted to instructions from [D] is dependent on the circumstances relating to each item. If [D], without giving definite instructions, knew [C] was doing extra work or supplying extra materials and stood by and approved of what was being done and encouraged [C] to do it, that in my opinion, amounts to an implied instruction to [C] and [D] is liable.”

12–017 It is a common experience in the construction industry that a price that expressly excludes anything not specifically mentioned will be different from a price which is deemed to include everything necessary. That is so even if the prices are based on identical drawings. So, for example, a specification that instructs C to inspect the site, drawings and documents and to: “adequately acquaint himself with the local conditions, accessibility of the works and site and nature of the ground and subsoil, the supply of and conditions affecting labour, availability and supply of materials, water, electricity and telephones all in relation to the execution of the works as no claim on the ground of want of knowledge will be entertained. The drawings and specification are to be read together. [C] is to include for all materials plant labour and overheads and everything else necessary for the proper completion of the works whether or not shown on the drawings or the specification”

will impose upon C an entirely different risk from one that contains no such clause and a different risk again from that accepted by a party that qualifies its tender price with the words: “Any works not specifically mentioned on plans or quotation are strictly omitted, but additional works may be carried out to your instructions for which a fixed price can be given.”

18 See also I Duncan Wallace, QC (ed), Hudson’s Building and Engineering Contracts, 11th edn (London: Sweet & Maxwell, 1995) p.878. 19 See also “Constructive Change” at paras 12–158 to 12–195. 20 MacEachern v Monaghan (2001) PESCTD 81 at [22]. 21 Re Chittick and Taylor (1954) 12 WWR (N.S.) 653 at 654–655.

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12–018 A different risk again will be taken where C tenders on bills of quantities in which the conditions state that “the quantity and quality of the works is set out in the bill of quantities”22 and where C is not required even to look at the drawings, or other specifications for guidance on the quantity of work required. 12–019 Generally, however, when D provides design drawings to C, intending that they be relied upon, it impliedly warrants their sufficiency and any change from the drawings will be a variation. For example, in the US case of JE Dunn23, in which the CA’s drawings for curtain walling were defective because they did not allow for deflection of the building, D could not successfully argue that the drawings were merely performance specifications, from which C was to develop its own design. In this case, the Board held that the contract required C to build in accordance with the CA’s drawings and C was thus entitled to a variation in regard to changes to the design to render it practically feasible. 12–020 The case of Barker also illustrates the distinction between the responsibilities of C under a “build-only” form and those in a “design and build” form. In this case the CA rejected an application for an extension of time for the effect on time of an increase in fire stopping (measured as a series of provisional sums in a bill of quantities under JCT80, and valued from a provisional sum of £6,000 to a final cost of £35,000) on the grounds that it was required by the Building Regulations, in conformity with which C was contractually obliged to build. The court held that: “[the CA’s] rejection of [the fire stopping] as a relevant event on the ground that [C] had full knowledge of the requirement for maintaining the one hour fire integrity of the shaft wall shows an error of law in relation to the respective responsibilities of [C] and [D] (through the design team) It was for the [CA] (in conjunction with the mechanical and electrical consultants) to specify the necessary design.”24

12–021 Whether post-contract design, required by a design and construct contract, amounts to design development at C’s risk, or is a variation of D’s requirements at D’s risk, is a common form of change-related dispute. In Skanska v Egger25, it was held that, notwithstanding that, at the time of tender, D’s process plant had not been designed (and accordingly, C’s steelwork to support it could also not have been designed), additional process plant steelwork included by way of a revised drawing provided by D was classified as design development for which C took the risk and not a variation in D’s requirements for which D would have been at risk. The court accepted that, although at tender the process plant steelwork had been poorly defined, there was an indication of a requirement for such steelwork on the tender drawings and that, as such, it formed part of the risk accepted by C that D’s requirements would be perfected at a later stage. 12–022 Design development is expressly excluded from the definition of a variation under the Australian form C21, which states: “[C] acknowledges that the development of design by [C] does not constitute a variation”26. Rather unhelpfully, however, what constitutes design development is not made clear. 12–023 Where works are defined by reference to drawings and a specification in a contract that requires C to build what is described in the drawings and specification, 22 23 24 25 26

As in JCT80 and JCT98 With Quantities. JE Dunn Construction Co (2000), GSBCA 14477, 00–1 BCA, para.30806. John Barker Construction Ltd v London Portman Hotel Ltd (1996) 83 BLR 31. Skanska Construction Ltd v Egger (Barony) Ltd [2002] EWHC 773 (TCC). Cl.41.8.

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the performance of necessary work, or the supply of necessary materials is implicitly part of the obligation C undertakes and it will not generally be able to claim that the performance of those works (even where they are not specifically referred to in the specification, or shown on the drawings) constitutes a variation. In such contract specifications, it is not unusual to find a clause to the effect that: “Minor items not expressly mentioned in the contract, but which are necessary for the satisfactory completion and performance of the work under the contract shall be supplied and executed by [C] without adjustment to the contract sum.”

12–024 Alternatively, to put it perhaps more forcefully: “[C] is to include in his tender for all work necessary for the satisfactory completion of the work whether shown on the drawings, or included in the specification, or not and no claim for additional costs, or time will be entertained.”

12–025 If, on a proper construction of the contract, the work that C claims to be additional is in fact part of the works described in the specification and drawings, then C will be obliged to carry out that work without additional payment or extension of time for completion. A promise to pay for such work would not be enforceable if the only consideration to which C could point was a promise to perform the work that it was already under contract to perform27. 12–026 Perhaps because of the impossibility of expressly incorporating every minor item of work in a technical contract document, in the absence of such contractual terms indicating what is, or is not to be taken into consideration, the courts have shown a tendency to interpret a general work obligation in “drawings and specification” based contracts as obliging C also to perform works not specifically referred to in those documents. Thus, even when it is alleged that extra work has been performed by C, upon D’s express instructions, C will not be entitled to additional time or money if it can be shown that the work in question is in reality a part of the contracted scope of work to be performed for the contract price. 12–027 This fundamental principle was illustrated in the nineteenth-century case of Williams v Fitzmaurice28. In that case, C’s obligation was to build a house “to be complete and dry and fit for Major Fitzmaurice’s occupation by 1st August 1858”, to “provide the whole of the material mentioned, or otherwise in the foregoing particulars necessary for the completion of the work” and to “perform all the works of every kind mentioned and contained in the foregoing specification”. There was no mention, however, of flooring in the contract documents. The court held that the cost of the flooring could not constitute a change because it was clearly to be inferred that the flooring was part of the overall obligation. Similarly in Neodox29, 100 years later, C failed to recover its additional costs where, notwithstanding that the contract did not provide for any specific method of carrying out particular operations, the CA prevented C from machine excavating for pipelines under the provisions by which the works should be carried out in the best manner and to the CA’s satisfaction. In the Australian case of Walker v Randwick30, C contracted to “do and perform the whole of the works required

27 See, for example, Masons v WD King [2003] EWHC 3124 (TCC); but see also Simplex Concrete Piles Ltd v Borough of St Pancras (1958) 14 BLR 80. 28 Williams v Fitzmaurice (1858) 3 H & N 844; 157 All ER 709. 29 Neodox Ltd v Borough of Swinton and Pendlebury (1958) 5 BLR 38. 30 Walker v Randwick Municipal Council (1929) 30 SR (NSW) 847.

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in and about the construction of a concrete retaining wall”. However, the position in which C was required to build the wall involved removing a sandbank to clear the site. A drawing, which was not part of the contract, showed the bank to be 6ft wide, whereas in fact it was l2ft wide. A majority of the court rejected C’s argument that, notwithstanding the specification, C should be entitled to the additional costs of moving the sandbank. The court held that, because the defective drawing had not been expressly incorporated in the contract, C could not rely upon it as defining the contract works and was required to carry out “all work necessarily required for the construction whether set out in the plan, or not”31. 12–028 Furthermore, unless the contract provides for relief from the effects of hidden conditions32, the fact that extra work has been necessitated by unforeseen physical obstacles or by an impracticable design will not, of itself, override C’s obligation to perform, at its own cost, works that are indispensably necessary for the achievement of the contractual result33. 12–029 Wherever there are omissions from the specification or drawings, there is likely to be a degree of uncertainty as to the quality and quantity of work to be carried out and hence its price and the time needed to complete it. Apart from any enhancement in quality and quantity, the quality and thoroughness of the preparation of the tender documentation will inevitably have an effect upon the likelihood of change being required. Where the method of procurement is incompatible with the standards required in respect of time, quality, or cost, the risk of delay, disagreement, claims and dispute will almost certainly increase.

Standard form provisions 12–030 The starting point in consideration of whether there is a change, or variation (the consequences of which are the responsibility of D) is the necessary and implicit work that C is required to perform under the contract and the basis upon which that work can be varied. The standard forms deal with C’s obligations in different ways. The NEC forms, for example, state, rather enigmatically, that: “[C] provides the works in accordance with the works information”34 and in so far as design responsibility goes, ECC2 and ECC3 state that “[C] designs the parts of the works which the works information states he is to design”35. Although there are various references in the form as to whether certain acts, or omissions are implied changes in the works information, there appears to be no express limitation upon what changes to the works information can be imposed on C. 12–031 PPC200036, which requires only that C should carry out and complete the works within the contract period in accordance with the partnering documents, defines “change” in a rather circular fashion as: “any change in all, or any part of the project by way of addition, omission, or variation of any kind, or (subject to any other procedures stated in the price framework and the 31 Walker (1929) 30 SR (NSW) 847, per Halse Rogers J . 32 e.g. ICE6 and ICE7, Cl.12(6); ACA82 and ACA98 Cl.2.6; GC/Works/1 and GC/Works/1/98 Cl.36(2)(d); FIDIC4 Cl.12.2 and ECC Cl.60.1(2). 33 Bottoms v Lord Mayor etc. City of York (1892) HBC (4th edn) 208 (CA); Re Nuttall and Lynton and Barnstaple Railway Co (1899) HBC (4th edn) 279 (CA). 34 Cl.20.1. 35 Cl.21.1. 36 PPC2000, App.1.

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project timetable) by way of expenditure of a provisional sum identified in the price framework.”

12–032 MF/137 states simply that a variation is: “any alteration of the works whether by way of addition, modification, or omission”. Similarly, the Australian form C2138 defines a variation restrictively as: “any change to the works, including additions, increases, omissions and reductions to, or from the works” and restricts that further by identifying that: “variations instructed by [D] must be generally consistent with, or of a similar nature to the work included in the works at the date of contract”39. 12–033 The 2009 edition of the Irish government standard forms of contract defines a change order as: “an instruction of the [CA] to change (including add to or omit from) the works or to change (including impose or remove) constraints in the contract on how the works are to be executed.”40

12–034 Under these forms, a change order may only be issued up until the date of substantial completion, unless for the acceptance of defective work or in regard to work that is required to be carried out after the substantial completion date. 12–035 Under A201/97 and A201/07, the content of a “change order” must be agreed between C and D and would appear to be without limitation in scope as it is a collateral contract for whatever is the subject of the order41. A “change directive”, on the other hand, can only be issued in relation to: “changes in the work within the general scope of the contract consisting of additions, deletions, or other revisions.”42

12–036 AS2124 and AS4000 define a variation by the power given to the CA to issue instructions that constitute a variation. AS2124 states: “The [CA] may direct [C] to (a) (b) (c) (d) (e)

increase, decrease, or omit any part of the work under the contract; change the character, or quality of any material, or work; change the levels, lines, positions, or dimensions of any part of the work under the contract; execute additional work; and/or demolish, or remove material, or work no longer required by [D].”43

12–037 AS2124 also warns that C is bound only to execute a variation that is within the general scope of the contract and is not bound to execute a variation instructed after practical completion of the works, except in respect of the rectification of latent defects44. It is not made clear how an instruction to correct defective

37 38 39 40 41 42 43 44

Cl.27.1. Cl.41. Cl.41.10. See, for example, IGBW/09, Cl.1.1. Cl.7.2.1. Cl.7.3.1. Cl.40.1. Cl.40.1.

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work may amount to a variation. Similar, but not identical provisions appear in AS4000, which states: “The [CA] before the date of practical completion, may direct [C] to vary the works by any one or more of the following which is nevertheless of a character and extent contemplated by, and capable of being carried out under, the provisions of the contract: (a) (b) (c) (d) (e)

increase, decrease, or omit any part; change the character, or quality; change the levels, lines, positions, or dimensions; carry out additional work; and/or demolish, or remove material, or work no longer required by [D].”45

12–038 Under IChemE46, a variation is defined as: “any alteration to the plant, method of working, [schedule] of work, or to the type, or extent of the works, which is an amendment, omission, or addition thereto (other than an amendment, omission, or addition which is necessary for the plant to comply with the specification).”

12–039 In this form, the CA may issue instructions for variations which, subject to conditions, C is bound to follow47, but then goes on to provide that C may object to any variation ordered, or proposed upon the ground that compliance therewith would: “(a) (b) (c) (d) (e)

when combined with all variations previously ordered, increase, or decrease the contract price by more than twenty-five per cent; in the case of a variation order issued after the date of (practical completion) for all, or part of the works, increase the contract price by more than five per cent; require [C] to act in breach of any enforceable undertaking, or agreement with a third party; cause [C] to infringe any legal obligation, patent, registered design, design right, copyright, or other protected right of any third party; or require [C] to do work, or to exercise skills which are not of the kind [C] undertakes in the ordinary course of his business, unless the variation order specifies that the work shall be performed, or those skills exercised by a (nominated) sub-contractor.”48

12–040 FIDIC4 contains a detailed description of C’s obligations where, under Cll.8.1 and 8.2, it states: “[C] shall, with due care and diligence, design (to the extent provided for by the contract), execute and complete the works and remedy any defects therein in accordance with the provisions of the contract. [C] shall provide all superintendence, labour, materials, plant, [C’s] equipment and all other things, whether of a temporary, or permanent nature, required in and for such design, execution, completion and remedying of any defects, so far as the necessity for providing the same is specified in, or is reasonably to be inferred from the contract. [C] shall take full responsibility for the adequacy, stability and safety of all site operations and methods of construction. Provided that [C] shall not be responsible (except as stated hereunder, or as may be otherwise agreed) for the design, or specification of permanent works, or for the design, or specification of any temporary works not prepared by [C]. Where the contract expressly provides that part of the permanent works shall be designed by [C],

45 46 47 48

Cl.36.1. Cl.16.1. Cl.16. Cl.16.7.

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he shall be fully responsible for that part of such works, notwithstanding any approval by the [CA].”

12–041 FIDIC4 then permits the CA to issue instructions for variations to: “(a) (b) (c) (d) (e) (f)

increase, or decrease the quantity of any work included in the contract; omit any such work (but not if the omitted work is to be carried out by [D], or by another contractor); change the character, or quality, or kind of any such work; change the levels, lines, position and dimensions of any part of the works; execute additional work of any kind necessary for the completion of the works; or change any specified sequence, or timing of construction of any part of the works.”49

12–042 Similarly, FIDIC/Build98 and FIDIC/Build99 require that C should be responsible for: “the adequacy, stability and safety of all site operations and of all methods of construction. Except to the extent specified in the contract [C] (i) shall be responsible for all contractor’s documents, temporary works, and such design of each item of plant and materials as is required for the item to be in accordance with the contract.”50

12–043 These forms then go on to exclude design of the works, stating that C “shall not otherwise be responsible for the design, or specification of the permanent works”51. In these forms, a variation is defined as “any change to the works, which is instructed, or approved as a variation under clause 13”52. Amongst other things, this clause states: “Each variation may include: (a) (b) (c) (d) (e) (f )

changes to the quantities of any item of work included in the contract (however, such changes do not necessarily constitute a variation), changes to the quality and other characteristics of any item of work, changes to the levels, positions and/or dimensions of any part of the works, omission of any work unless it is to be carried out by others, any additional work, plant, materials, or services necessary for the permanent works, including any associated Tests on Completion, boreholes and other testing and exploratory work, or changes to the sequence, or timing of the execution of the works.” (emphasis added)

12–044 Since this is expressed in a permissive, rather than an exclusive sense, it is unclear as to whether C is bound to execute a variation that does not include one of the above. 12–045 ICE6 and ICE7 simply state that, subject to the provisions of the contract, C shall: “(a) (b)

49 50 51 52 53

construct and complete the works and provide all labour materials [C’s] equipment temporary works transport to and from and in, or about the site and everything whether of a temporary, or permanent nature required in and for such construction and completion so far as the necessity for providing the same is specified in, or reasonably to be inferred from the contract.”53

Cl.51.1. Cl.4.1. Cl.4.1. Cl.1.1.6.9. Cl.8.1.

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12–046 But then, as with the FIDIC forms, they go on to clarify what C is not required to do and specifically exclude design responsibility for anything other than its own design of temporary works, stating: “[C] shall not be responsible for the design, or specification of the permanent works, or any part thereof (except as may be expressly provided in the contract), or of any temporary works designed by the [CA]. – [C] shall exercise all reasonable skill care and diligence in designing any part of the permanent works for which he is responsible.” (emphasis added) “[C] shall take full responsibility for the adequacy stability and safety of all site operations and methods of construction.”54

12–047 ICE6 and ICE7 also deal with the issue of instructions for change in a form which does not appear on its face to restrict the CA’s powers. The forms state that the CA must order a variation to any part of the works which is in his opinion necessary for the completion of the works and “may order any variation that for any other reason shall in his opinion be desirable for the completion and/or improved functioning of the works”. Without express limitation, ICE6 and ICE7 say that no variation shall vitiate the contract and that variations may include: “additions, omissions, substitutions, alterations, changes in quality, form, character, kind, position, dimension, level, or line and changes in any specified sequence, method, or timing of construction required by the contract and may be ordered during the defects corrections period.”55

12–048 IFC84 and IFC98 both define a variation as: “the alteration or modification of the design or quality or quantity of the works including: the addition, omission or substitution of any work, the alteration of the kind or standard of any materials or goods to be used in the works, the removal from the site of any work executed or materials or goods brought thereon by [C] for the purposes of the works other than work materials or goods which are not in accordance with this contract56; the imposition by [D] of any obligations or restrictions or the addition to or alteration or omission of any such obligations or restrictions so imposed or imposed by [D] in the specification/schedules of work/contract bills in regard to: access to the site or use of any specific parts of the site; limitations of working space; limitations of working hours; the execution or completion of the work in any specific order.”57

12–049 IFC05 and IFWCD/05 are not quite the same, defining variations as: “the alteration, or modification of the design, or quality, or quantity of the works including: the addition, omission, or substitution of any work, the alteration of the kind or standard of any materials or goods to be used in the works, the removal from the site of any work executed or site materials, other than work, materials or goods which are not in accordance with this contract58; the imposition by [D] of any obligations, or restrictions, in regard to the matters set out in this clause 5.1.2 or the addition to, or alteration, or omission of any such 54 55 56 57 58

ICE6 and ICE7 Cll.8(2) and 8(3). Cl.51(1). Cl.3.6.1. Cl.3.6.2. Cl.5.1.1.

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obligations, or restrictions so imposed, or imposed by [D] in the contract documents in regard to: access to the site or use of any specific parts of the site; limitations of working space; limitations of working hours; or the execution, or completion of the work in any specific order.”59

12–050 These forms also render instructions in regard to: • • • •

“access to the site, or use of any specific parts of the site; limitations of working space; limitations of working hours; the execution, or completion of the work in any specific order”

to be subject to C’s “right of reasonable objection”60. Bearing in mind that C is entitled to an extension of time61 and reimbursement of loss or expense suffered62 as a result of any such instruction, it is not immediately apparent what objection to compliance therewith C reasonably could make. 12–051 ACA82 and ACA9863, with slightly more detail, specify C’s obligations in relation not only to “contract documents”, but also to bills of quantity, stating: “In consideration of the payments to be made by [D] to [C] under this agreement, [C] shall execute and complete the works in strict accordance with the contract documents and shall comply with and adhere strictly to the [CA’s] instructions issued under this agreement. Without prejudice to any express, or implied warranties, or conditions, [C] shall exercise in the performance of his obligations under this agreement all the skill, care and diligence to be expected of a properly qualified and competent contractor experienced in carrying out work of a similar scope, nature and size to the works.”

12–052 The ACA forms64 do not use the words “change” or “variation”, but in ACA82 it provides that C must immediately comply with any CA’s instruction for, amongst other things: “the addition, alteration, or omission of any obligations, or restrictions in regard to any limitations of working space, or working hours, access to the site, or use of any parts of the site; the alteration, or modification of the design, quality, or quantity of the works as described in the contract documents, including the addition, omission, or substitution of any work, the alteration of any kind, or standard of any materials, or goods to be used in the works and the removal from the site of any materials, or goods brought on to it by the [C] for the works.”

12–053 In ACA98, the requirement is expressed slightly differently as: “the alteration, or modification of design, quality, or quantity of the works, including the addition, substitution, omission of any work, alteration of kinds and standards, or the removal of any materials, or goods from site.”65

59 Cl.5.1.2. 60 A point made in IFC05 in Cl.3.11.2, repeated in Cl.3.8 and repeated again in the footnote to Cl.5.1.2.4 and in IFWCD/05 in Cl.3.8.1, 3.8.2 and the footnote to Cl.5.1.2.4. 61 Cl.2.20.1. 62 Cl.5.5. 63 Cl.1. 64 Cll.8.1(d) and (e). 65 Cl.8(1)(e).

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12–054 GC/Works/1 and GC/Works/1/98 also make provision for compliance with contract bills, which are subject to re-measurement66. The obligation in the 1998 version is not identical, but substantially the same as that in the previous edition, which provides that [C] shall execute the works: “with diligence, in accordance with the [schedule], with all proper skill and care67, and in a workmanlike manner. [C] shall use the skill and care of an experienced and competent contractor to ensure that: – the works, any things for incorporation, whether, or not [C] is required to choose, or select any of them, are of good quality for their intended purpose, and conform to the requirements of the specification, the bill of quantities and the drawings.”68

12–055 A variation instruction under GC/Works/1 and GC/Works 1/98 is defined as “any instruction which makes any alteration, or addition to, or omission from, the works, or any change in the design, quality, or quantity of the works” where the works is defined in a rather circular manner as including “all modified, or additional works to be executed under the contract”. However, the CA’s power to issue instructions is very wide, these forms stating that instructions may be given in relation to all, or any of the following matters69: “(a)

variation, or modification of all, or any of the specification, drawings, or bill of quantities, or the design, quality, or quantity of the works; (b) any discrepancy in, or between the specification, drawings and bill of quantities; (c) removal from the site of any things for incorporation and their substitution with any other things; (d) removal and/or re-execution of any work executed by C; (e) order of execution of the works, or any part of them; (f) hours of working and the extent of overtime, or night work to be adopted; (g) suspension of the execution of the works, or any part of them; (h) replacement of any person employed in connection with the contract; (i) opening up for inspection of any work covered up; (j) amending and making good of any defects; (k) cost savings in relation to acceleration; (l) execution of any emergency work; (m) use, or disposal of material obtained from excavations, demolition, or dismantling on the site; (n) actions to be taken following discovery of fossils, antiquities, or objects of interest, or value; (o) measures to avoid nuisance, or pollution; (p) quality control and C’s accreditation in regard to quality; and (q) any other matter which the CA considers necessary, or expedient.”

12–056 NZ03 defines a variation as a change in the quantity, quality, position, or instructed change of method, or the omission of work70. However, in the body of the

66 67 68 69 70

Cl.18. GC/Works/1/98 refers to “all reasonable skill and care”. Cl.31. Cl.40(2). At Cl.9.1.

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contract, it requires a default under a large number of other clauses to be treated as if they also were a variation71. However, those other clauses provide that the event in question is only to be treated as if it were a variation if: “[C] suffers delay in the completion of the works, or incurs additional cost by reason of [the event].”72

12–057 Such a definition provides real practical difficulties for both C and the CA where C is required to give notice within a limited period of the circumstances of an event having arisen73, but the event defined does not occur unless it has an effect upon completion, which, without critical path network scheduling74 and the techniques of contemporaneous change management75 (which are not expressly required by the contract in question), cannot be known until long after the event has run its course. In this context (surprisingly, as the preceding clause requires C to give notice of the effect on the schedule), NZ03 provides that the effect of unforeseen physical conditions is only to be defined as a variation if “[it] will in the [CA’s] opinion substantially increase [C’s] costs”76. 12–058 JCT80 and JCT98 set out C’s obligations in Cl.2, the general effect of which is to: 1. 2. 3. 4.

bind C to carry out and complete the works; define the documents which set out the content and terms on which C is bound to carry out and complete the works; draw attention to C’s obligations in regard to the quality of materials and the standard of workmanship; and make it clear that the standard form conditions of contract take priority over any specific requirements written into the specification, drawings, or bills.

12–059 JCT98 defines a variation both inclusively and exclusively as: “The alteration, or modification of the design, quality, or quantity of the works including 1.1 the addition, omission, or substitution of any work, 1.2 the alteration of the kind, or standard of any of the materials, or goods to be used in the works,

71 See, for example: Cl.2.2.5 (discrepancies in contract documents); Cl.2.3.2 (omissions from schedules of prices); Cl.2.3.4 (discrepancies in quantities); Cl.5.11.6 (changes in legal requirements); Cl.5.13.4 (locating utilities); Cl.5.16 (late supply of D’s goods and materials); Cl.6.7.3 (instructed postponement of work); Cl.6.7.4 (omission of postponed section of work), and Cl.12.11.2 (expenditure of contingency sums). 72 See, for example: Cl.2.8.4 (instructions to explain ambiguities); Cl.2.87 (late issuance of instructions, documents, drawings or specifications); Cl.4.2.6 (failure of a nominated subcontractor to enter into a subcontract, or repudiation by a nominated subcontractor); Cl.5.5.2 (the activity of D’s contractors); Cl.5.6.6 (loss, or damage caused by “excepted risks”); Cl.5.8.5 (defective instructions regarding setting out); Cl.5.14.2 (antiquities); Cl.6.2.4 (failure of the CA to carry out its duties); Cl.6.4.4 (failure to carry out testing); Cl.6.4.7 (investigating work found not to be defective); Cl.6.6.4 (failure promptly to issue a completion certificate) and Cl.10.7.4 (partial possession). 73 Cl.10.3.2. 74 Ch.7 “Planning and programming”, at paras 7–068 to 7–084. 75 See Ch.10, “Project control”. 76 Cl.9.5.2.

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1.3 the removal from the site of any work executed, or materials, or goods brought thereon by [C] for the purposes of the works other than work materials, or goods which are not in accordance with this contract77; the imposition by [D] of any obligations, or restrictions in regard to the matters set out in clauses 13.1.2.1 to 13.1.2.4, or the addition to, or alteration, or omission of any such obligations, or restrictions so imposed, or imposed by [D] in the contract bills in regard to: 2.1 2.2 2.3 2.4

access to the site, or use of any specific parts of the site; limitations of working space; limitations of working hours; the execution, or completion of the work in any specific order;

but excludes nomination of a sub-contractor to supply and fix materials, or goods, or to execute work of which the measured quantities have been set out and priced by [C] in the contract bills for supply and fixing, or execution by [C].”78

12–060 The CMS79 increases the ambit of the CA’s power to instruct changes under the JCT 1998 series of contracts by also categorising as a variation any instruction to alter, or modify: the master [schedule] so as to reduce, overcome, or avoid the likely effects of any delay to progress caused by one or more of D’s time risk events; the duration, sequence, or timing of any activity, or activities; any period of time whether by reference to a lead, lag, or otherwise; the date of any milestone, or key date; the resources to be used in connection with any activity, or activities; and the requirements of the schedules to the CMS which specify the requirements for electronic distribution of and content and character of the CPM network, method statement and progress records required under the contract. 12–061 JCT05 employs an extensive description of C’s obligations in Cll.2.1 to 2.3. The relevant clauses, in regard to the quantity and quality of the works, are: “[C] shall carry out and complete the works in a proper and workmanlike manner and in compliance with the contract documents, the construction phase plan and other statutory requirements.”80 “Where the works include a contractor’s designed portion [‘CDP’], [C] shall: in accordance with the contract drawings and the Contract bills (to the extent they are relevant), complete the design for the contractor’s designed portion, including the selection of any specifications for the kinds and standards of the materials, goods and workmanship to be used in the CDP works, so far as not described or stated in the [D’s] requirements or [C’s] proposals; comply with the [CA’s] directions for the integration of the design of the [CDP] with the design of the works as a whole, subject to the provisions of clause 3.10.3; and in complying with this clause 2.2, comply with regulations 11, 12 and 18 of the CDM Regulations.81

77 78 79 80 81

Cl.13.1.1. Cl.13.1.2. See App.2 to the 4th edn. Cl.2.1 Cl.2.2.

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“All materials and goods for the works, excluding any CDP works, shall, so far as procurable, be of the kinds and standards described in the contract bills. Materials and goods for any CDP works shall, so far as procurable, be of the kinds and standards described in [D’s] requirements or, if not there specifically described, as described in the [C’s] proposals or documents referred to in clause 2.9.4. [C] shall not substitute any materials or goods so described without the [CA’s] consent, which shall not be unreasonably delayed or withheld but shall not relieve [C] of his other obligations. Workmanship for the works, excluding any CDP works, shall be of the standards described in the contract bills. Workmanship for any CDP works shall be of the standards described in [D’s] requirements or, if not there specifically described, as described in [C’s] proposals. Where and to the extent that approval of the quality of materials or goods or of the standards of workmanship is a matter for the [CA’s] opinion, such quality and standards shall be to his reasonable satisfaction. To the extent that the quality of materials and goods or standards of workmanship are neither described in the manner referred to in clause 2.3.1 or 2.3.2 nor stated to be a matter for such opinion or satisfaction, they shall in the case of [CDP] be of a standard appropriate to it and shall in any other case be of a standard appropriate to the works.”82

Variations are then described in the same way as for IFC0583, as previously commented upon. 12–062 Under MPF and MP0584, C’s obligations are stated simply to be to: “execute and complete the project in accordance with the contract, including the completion of the design, the specification, or selection of materials and the execution of the construction works”85

and “change” is defined86 as: “any alteration in the requirements and/or proposals that gives rise to an alteration in the design, quality, or quantity of anything that is required to be executed in accordance with this contract; or any alteration by [D] of any restriction, or obligation set out in the requirements and/or proposals as to the manner in which [C] is to execute the project, or the imposition of additional restrictions, or obligations; or any matter that the contract requires to be treated as giving rise to a change. Provided always that the alteration, or matter referred to above is not required as a result of any negligence, or default on the part of [C].”

12–063 Variation in HK05 includes changes in sequence of carrying out of, or completing the work which does not “fundamentally change the scope, or nature of the works”87, but provides for valuation of work which is “not the same as, or similar in character to that priced in the contract bills”88. C has a right of objection to any instruction that: “imposes, or changes an obligation, or restriction on [C] regarding access to the site, use of any part of the site, or limitation of working space, or working hours.”

82 Cll.2.3.1 to 2.3.3 83 See Cl.5.1. C’s “right of reasonable objection” to those items in Cl.5.1.2 is recorded in Cll.3.10.1, 3.10.3 and the footnote to Cl.5.1.2.4. 84 MP05 Cl.7.1 85 MPF Cl.1.1 and MP05 Cl.7.1. 86 MPF Cl.39.2 and MP05 Cl.1. 87 Cl.13.1(1)(c). 88 Cl.13.4(1)(c)(iii).

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12–064 There is no power under this form to give instruction as a variation to modify C’s method, or resources, sequence, or working arrangements, or the execution of work in any specific order. This means that, under this form, the CA cannot instruct C on any particular method of recovery from delay to progress, howsoever caused. 12–065 Apart from JCT80, which deals with this in amendment 12, and JCT9889 and JCT0590 regarding performance of specified work, design is not mentioned in the other “build-only” forms and, if D requires C to carry out a part of the design, then either one of the “design forms” must be employed, or a “design supplement” adopted to incorporate C’s design responsibilities. 12–066 Under WCD98, change is defined as: “A change in [D’s] requirements which makes necessary the alteration, or modification of the design, quality, or quantity of the works, otherwise than such as may be reasonably necessary for the purposes of rectification [of defects] including: the addition, omission, or substitution of any work; the alteration of the kind or standard of any of the materials or goods to be used in the works; the removal from the site of any work executed, or materials, or goods brought thereon by the [C] for the purposes of the works other than work materials, or goods which are not in accordance with this contract91 the imposition by [D] of any obligations, or restrictions in regard to the matters set out in Cl.12.1.2.1–12.1.2.4, or the addition to, or alteration, or omission of any such obligations, or restrictions so imposed, or imposed by the [D] in the [D’s] requirements in regard to: 2.1 access 2.2 2.3 2.4

to the site, or use of any specific parts of the site, limitations of working space, limitations of working hours, the execution, or completion of the work in any specific order.”92

12–067 WCD98 restricts the scope of variations to inhibit any change: “which is, or which makes necessary, an alteration, or modification in the design of the works without the consent of [C] which consent shall not be unreasonably delayed, or withheld.”93

12–068 DB09 contains a similar inhibition94 and follows a similar description of variations, save that, in Cl.5.1.1.3, it describes that particular variation as: “the removal from the site of any work executed, or site materials other than work materials, or goods which are not in accordance with this contract.”95

12–069 The preamble to Cl.5.1.2 states: “the imposition by [D] of any obligations, or restrictions in regard to the matters set out in clause 5.1.2, or the addition to, or alteration, or omission of any such obligations, or restrictions so imposed, or imposed by the [D] in [D’s] requirements in regard to:” i) ii) iii) iv)

89 90 91 92 93 94 95

site access or use, and/or limits on working space, and/or limits on working hours, and/or execution or completion of the work in any specific order.

Cl.42. Cl.2.2 and Sch.1. Cl.12.2.1. Cl.12.2.2. Cl.12.2.1. Cl.3.9.1. Cl.5.1.1.3.

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and then, whilst maintaining the same rights to instruct alterations, omissions, or change in obligation in regard to access, working space, working hours and order of the works, makes compliance with such instructions subject to C’s “right of reasonable objection”96. Bearing in mind that such instructions are unlikely to change C’s design liability and that C is entitled to an extension of time97 and reimbursement of loss, or expense suffered98 as a result of any such instruction, it is not immediately apparent what objection to compliance therewith C reasonably could make. 12–070 The word “design” is one that is not capable of precise definition in relation to a standard form of contract. Although there are obvious examples of conceptual work that it would be difficult to describe other than as design, design also encompasses selection and, to a degree, assembly of parts and products. Walker-Smith99 gives the example of the way joinery is fitted together, or the selection of a type of screw, which could be considered within the meaning of “design”. 12–071 However, because the forms such as IFC98, JCT98 and IFC05 rehearse in the recitals that the design drawings and specification are prepared by the CA, under D’s direction, C is not responsible for the design of the works and, except in regard to those matters of selection, where the materials selected must be fit for their purpose, C is not required to build so as to be “fit for purpose”. Under these forms, C is to build that which is described in the contract documents100. 12–072 FIDIC/DB99, as with many design and build forms, makes reference to fitness for purpose and D’s requirements, stating: “[C] shall design, execute and complete the works in accordance with the contract, and shall remedy any defects in the works. When completed, the works shall be fit for the purposes for which the works are intended as defined in the contract. [C] shall provide the plant and [C’s] documents specified in the contract, and all [C’s] personnel, goods, consumables and other things and services, whether of a temporary, or permanent nature, required in and for this design, execution, completion and remedying of defects. The works shall include any work which is necessary to satisfy the [D’s] requirements, or is implied by the contract, and all works which (although not mentioned in the contract) are necessary for stability, or for the completion, or safe and proper operation, of the works.”101

12–073 FIDIC/PD+B99 contains similar obligations, but in the third paragraph brings in C’s proposals and schedules, stating that: “The works shall include any work which is necessary to satisfy the [D’s] requirements, [C’s] proposals and schedules, or is implied by the contract, and all works which (although not mentioned in the contract) are necessary for stability, or for the completion, or safe and proper operation, of the works.”102

12–074 In these two forms, variation is expressed as “any change to [D’s] requirements, or the works, which is instructed, or approved as a variation under clause 13”103. 96 Cl.3.5. 97 Cl.2.26.1. 98 Cl.4.20. 99 Rt Hon D Walker-Smith, and H Close, The Standard Forms of Building Contract (London: Charles Knight & Co Ltd, 1979). 100 Rotherham Metropolitan Borough Council v Frank Haslam and Co (1996) 12 Const LJ 333. 101 Cl.4.1. 102 Cl.4.1. 103 Cl.1.1.6.8.

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Clause 13 contains no other restriction on the scope of variation. It would thus appear that, in these forms, a variation is anything D wants it to be, without any express contractual limitation.

The bill of quantities “If we do not think much of the quantity surveyor, and entertain any doubt about him, then we take care to have the quantities put into the contract.”104

12–075 Although it is open to the criticism that it is something of a straitjacket, a contract sum based on a bill of quantities prepared under the rules of the Standard Method of Measurement105 is a much more certain basis for price than C’s own quantities produced from drawings and specifications. This is because the contract bills takes precedence over the drawings and specification and become the document by which the build-up of the tender price is proved. However, the 2009 edition of the Irish government forms adopts a contrary position by specifying that, if the works requirements include bills of quantities and these are inconsistent with any other works requirements, the other works requirements shall prevail106. The effect of the Irish government forms is thus to require C to price for everything illustrated on the drawings, or specified, irrespective of whether such elements of work have been competently measured in the bills of quantities. 12–076 The UK construction industry is unique in using the bill of quantities as a basis for valuing change. Nowhere else does it seem to be so generally accepted as having that function. It has been criticised as being unsuitable for this because it does not accurately reflect the way in which C’s costs are actually incurred. Moreover, until SMM7, bills of quantities did not expressly provide for valuing any work where the cost was not proportionate to quantity. On the other hand, “the operational bill of quantities” has been tried, but found to be either too radical, too cumbersome, or too lengthy to gain widespread acceptance and there has not been a wide acceptance of the method-related bill under CESMM107. Research has demonstrated that the bill of quantities is commonly used for purposes for which it was not intended and for which it is not suitable: “Improvements need to take account of the fact that the low-value items, whilst not strictly necessary for estimating, must be itemised somewhere in the contract. There is a need to increase the realism of estimating and to create a direct link between cost and time. In short, [what is needed is] a cost model composed of work packages related to site operations, linked to a time model composed of the identical work packages, [which] would form a direct tangible link between cost and time. A single labour and/or plant productivity would characterise the work package.”108

12–077 Notwithstanding that it may not be doing the job for which it is intended, the importance of the bill of quantities depends on whether it is a contract document 104 The evidence of a witness quoted by Stephen J in Priestly v Stone (1888) Hudson’s Building and Engineering Contracts, 4th edn (London: Sweet & Maxwell, 1914) 134, p.140. 105 From 1 May 2009, the RICS New Rules of Measurement: Order of Cost Estimating and Elemental Cost Planning (NRM) has taken effect to bring cost estimating procedures in line with the RIBA Plan of Work and the OGC Gateway project management processes. 106 Cl.1.3.4. 107 Civil Engineering Standard Method of Measurement 3rd edn (Institution of Civil Engineers, 1991). 108 H Lal, Quantifying and Managing Disruption Claims (Thomas Telford, 2002), p.50.

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and, in so far as variations are concerned, whether what is required is in fact what has been priced for. Most of the standard forms that contemplate bills of quantities make provision for them to be defined as a contract document in the recitals. Where they are incorporated as a contract document then, typically in other forms, they become the priority document for determining the content of the work contained in the tender109. The contract then provides for adjustments to be made in price and to time, if relevant, where there are discrepancies between that which has been measured and that which is, in fact, required to be built. 12–078 On the other hand, where the bill clearly does not form part of a lump sum contract then, irrespective of what is measured in the bills, C’s obligation is to perform the whole work for the lump sum and C will not be entitled to additional payment for work merely because it is not included in the bills of quantities110. In Patman and Fotheringham111, for instance, the term “according to the plans, invitations to tender specification and bills of quantities” was held to be sufficient for the quantities to define the contract sum, so that where, in order to complete, C was required to do more work than was quantified in the contract documents, it was entitled to an adjustment of the lump sum contract price. 12–079 IGBW/09 and IGCE/09 contain the possibility of a strange mixture of entitlements. At Cl.1.3.4, they state that: “If the works requirements include a bill of quantities, and the bill of quantities is inconsistent with any of the works requirements, the other works requirements prevail”

and, at Cl.1.4, that: “nothing in and no omission from the pricing document or works proposals limits the scope of the works, or [C’s] obligations.”

12–080 They also specifically preclude the possibility of an extension of time, but then, paradoxically, they provide for the possibility of allowing compensation for prolongation caused by: “A difference between the contract value of the works according to the quantities and descriptions in the bill of quantities (taking into account the method of measurement identified in Part 1B when it applies) and the contract value of the works described in the works requirements, because the bill of quantities, when compared with the works requirements: includes an incorrect quantity or includes an item that should not have been included or excludes an item that should have been included or gives an incorrect item description and the difference for an item in (or that should have been in) the bill of quantities is more than 500.”112

12–081 The re-measurement of quantities in the light of errors was the subject of a practice note in the RIBA Journal, August 1949, based on wording in Cl.10 of the

109 110 and Co 111 112

See, for example, JCT98, Private Edition, With Quantities. Re Nuttall and Lynton and Barnstaple Railway Co (1899) HBC (4th edn) 279; see also, Re Ford and Bemrose and Sons (1902) HBC (4th edn) 324. Patman and Fotheringham Ltd v Pilditch (1904) HBC (4th edn) 368. See, for example, Sch.1 to IGBW/09, Pt 1, s K, item 17.

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1939 edition of the RIBA form (similar to that of Cl.2 of JCT80). After quoting the relevant provision from Cl.10, the note said: “It was agreed therefore that both parties had the right to require the re-measurement of any items, but that, in practice, such right would be exercised reasonably. The opinion was accordingly expressed that both the quantity surveyor and [C] had the right to insist on a remeasurement of items and/or sections of a bill of quantities not marked ‘provisional’.”113

12–082 However, it appears that, in practice, unless the variation is substantial, C will not normally be entitled to have the work re-measured. In London Stone114, the words “the bill of quantities to form part of the contract, and all variations to be priced at the rate stated in the bill, and added to, or deducted from, the lump sum, as the case may be” were held not to mean that the whole of the quantities should be opened up so as to make it a re-measurement contract, but that the variations should be measured and the true value of their amount added to, or deducted from, the lump sum contract price. 12–083 Those forms of contract that incorporate bills of quantities deal with their incorporation into the contract in varying degrees of detail. Of all the forms, only FIDIC4, the Irish government forms and NEC forms make no express provision for any error in the descriptions or quantities in the bill of quantities. All other forms make express provision for the reimbursement of consequential costs and the effect on schedule and GC/Works/1 and GC/Works/1/98 make provision for all quantities to be re-measured. 12–084 The NEC forms provide by way of “main options” the facility for a bill of quantities. ECC3115, for example, identifies that, where a bill of quantities is used: “the rates are to be used to identify the prices from the quantities stated116; the bills of quantities are not works information, or site information.”117

A developer’s time and cost risk event occurs if: •

• •

there is a difference in cost caused by a change in rate where there is more than 0.5% between the final measurement of the work and the value in the bills118; there is any difference in quantities that causes a delay to a key date, or to completion119; or an instruction is given correcting the method of measurement, or inconsistencies and ambiguities120.

113 P. Povey (ed), Walker-Smith on the Standard Forms of Building Contract (London: Charles Knight, 2001 update). 114 London Steam Stone Saw Mills v Lorden (1900) HBC (4th edn) 301. 115 Option B. 116 Cl.11.2(31). 117 Cl.55.1. This would tend to imply that the bills are not a contract document and thus cannot take priority over the drawings, or any other works information. However, so far as concerns inconsistencies between the bills and works information, Cl.60.7 identifies that C is to be assumed to have based its rates and prices on the quantities given in the bills of quantities. 118 Cl.60.4. 119 Cl.60.5. 120 Cl.60.6.

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12–085 JCT80 and JCT98 are extensive in their provisions where the operative clauses121 rehearse that: the intention of the parties is that the contract bills have been prepared in accordance with the SMM7 unless, in regard to specific items, specifically stated otherwise; the quantity and quality of the work is as stated in the bill of quantities; revaluation of the works will be on the basis of the rates in the priced bill of quantities; and any departure from the requirements of SMM7, including omissions, or errors in description, or quantity, will be dealt with by requiring a correction which will rank as if it were a variation instructed by the CA. 12–086 JCT05 has the same effect, defining the standard method of measurement as being SMM7122, requiring the bills to have been prepared in accordance with that standard123 and any departure therefrom to be corrected as a variation124. 12–087 SMM7 is significant here in that it describes precisely what is to be included in the work to be priced and how it is to be included. This is in contrast to the position that subsists in contracts based on documents including bills of quantities that have not been produced under those rules125. Thus, where SMM7 is incorporated as the method of measurement, there can be no question of C having to read between the lines and to include costs for “necessary and implied” work. 12–088 Under HK05, ambiguities and inconsistencies are dealt with in two different ways under two different clauses. The CA may correct them as a variation126 and the conditions of contract provide a hierarchy of documents in which one automatically takes priority over the other127, the fifth tier of which provides for the following to rank pari passu: the drawings; the specification; and the bills of quantities. 12–089 However, for the purpose of adjusting the contract sum, the bill of quantities is to take precedence over the drawings and specification and, for the purposes of carrying out the works, the drawings and specification are to take precedence over contract bills128. In effect this means that anything included in the drawings is to be built, notwithstanding that it is not a measured item. However, because it is not a measured item, it will be an implied variation for which C is entitled to additional payment and that will rank as both a D’s time and cost risk event.

121 Cl.2. 122 Cl.1.1. 123 Cl.2.13.1. 124 Cl.2.14.3. 125 See Standard Method of Measurement of Building Works, 7th edn (Dubai: CPI Publishing, 1988). This is the standard document in the UK which governs how quantities are to be measured in building contracts that provide for valuations by reference to quantities, and is notably incorporated by reference into the JCT family of contracts of this nature. 126 Cl.2.4. 127 Cl.5.1. 128 Cl.5.1(2).

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12–090 In Rotherham v Frank Haslam129, for instance, the Court of Appeal considered the effect in the bills of quantities under JCT63 of a specification for hardcore. D’s requirements (for the specification of the hardcore set out in the bills of quantities) included unhydrated steel slag. Unbeknown to D at the time of construction, and because of its tendency to expand with the effects of water, that specification was wholly unsuitable for use below floor slabs. The expansion that inevitably followed caused heaving and cracking to the reinforced concrete ground floor slabs above. Accordingly, D brought an action against C for breach of implied terms as to fitness for purpose and merchantability. Leggatt LJ said: “As a general rule where the efficacy of a building, or other object depends upon a designer it is the designer who may be expected to bear the responsibility for ensuring the suitability of the components incorporated into it. Where the designer himself relies on those who have specialist skills his reliance may show, or suggest that he is abrogating that responsibility in relation to matters within the purview of the specialist. Here the designers of the building indisputably were [D’s] architect and engineer. The design made necessary the importation of hardcore as fill material. In the bill of quantities the types of hardcore that would be acceptable were specified, as was the grading and sulphate content of the fill material. All those stipulations were made that the [CA] thought necessary to ensure the provision of a suitable fill material. To the extent that there were no stipulations and the supplier was free to choose, the freedom was accorded not in order to enable the supplier to exercise some supposed skill and judgement, but because the [CA] believed that no further stipulations were necessary130. In my judgement the extent of [C’s] obligation was to provide hardcore answering to the description in the bill of quantities.”131

12–091 SMM7 provides that, if C is required to price the work (and hence include time for carrying it out in its schedule) then the works must be fully and accurately described. General Rule 1.1 of SMM7 states that: “bill of quantities shall fully describe and accurately represent the quantity and quality of the works to be carried out. More detailed information than is required by these rules shall be given where necessary in order to define the precise nature and extent of the required work.”.

12–092 The description can be achieved in several ways. It is provided that specific items of work can be measured or described otherwise than in accordance with SMM7, provided that that is expressly stated in relation to those items of work: “Information may be given in documents (eg drawings, or specification) separate from the bill of quantities if a precise and unique cross-reference is given in its place in the description of the item concerned.”132

12–093 It would not be sufficient to provide a general statement or warning in the bills that there were certain items not measured in accordance with SMM7133. Each item that does not conform to the rules of measurement must be specified separately. If the bills do not accurately describe the work to be carried out, then any work not so described in accordance with the rules will rank as an instructed change. So, for example, if an item for “removal of ground water” were to be included in the bill of 129 130 131 132 133

Rotherham Metropolitan Borough Council v Frank Haslam Milan & Co Ltd (1996) 12 Const LJ 333. Rotherham (1996) 12 Const LJ 333, at 341. Rotherham (1996) 12 Const LJ 333, at 342. General Rule 42. PJ Povey (ed), Walker-Smith on the Standard Forms of Building Contract, 2001.

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quantities, but there was not an item for excavating below the water table, any excavation below the water table would rank as additional work for which costs and time would have to be allowed. This would be so even if the height of the water table changed during the course of the works as a result of the seepage of ground water that had not been removed. 12–094 Thus, in summary, any work that C is bound to carry out must have either a measured description, or a unique cross-reference to a specification, or drawings conforming to the rules set down in SMM7. If there is neither, then C is not required to allow for it in its tender. If the work is described on drawings, or in a specification, but the work is not the subject of a unique cross-reference, then under JCT80 and JCT98 that is an omission, or an error in description that is to be corrected by instruction as a variation134. 12–095 General Rule 7.1(a) of SMM7 provides that work to an existing building shall be identified separately and makes reference to General Rule 13, which states that work to existing buildings shall be so described and is defined as: “work on, or in, or immediately under work existing immediately before the current project”. 12–096 Barker135 concerned a multi-storey hotel refurbishment. The bills for the project, which had been measured under SMM7, contained, inter alia, a unique crossreference to the specification for the preparation of wall finishes before wall-papering. At the time of tender, C was required to: remove the old wallpaper; wash the walls to remove all adhesive and sand; (if necessary) score the old plaster to provide a key for the wallpaper adhesive; wash the wall once more; and (where necessary) fill and rub down the old plaster surface until flat and smooth. 12–097 When completed, the walls were to be sized and the wallpaper hung. However, when the wallpaper was removed, it was found that underneath was only a very thin plaster coat that had been sprayed on. This made it impossible to achieve a truly flat and smooth finish. Parts of the plaster were also live, and in places plaster came away with the wallpaper. In the event, the CA required the C to patch the defective plaster before redecorating, but refused to give an extension of time on the basis that he thought he was asking C to do no more than to “render the old plaster surfaces flat and smooth” before decorating, which he maintained was as required by the bills description. 12–098 The court found that the CA was wrong in not finding the change in preparation of the plaster to be a relevant event, saying: “In his statement [the CA] said that the specification required the wall surfaces to be filled and rubbed down until perfectly flat and smooth, implying that there was no variation. The walls, when prepared, were not perfectly flat and smooth as the specification originally required, a point confirmed by the project manager. The discovery of the true condition of the plaster meant that [D] and the [CA] on their behalf, were faced with a choice either to instruct extra works in order to make achievement of the specification practicable, or to authorise some other solution. They chose the latter. That itself involved a variation of the contract. I am satisfied that the [CA’s] allowance of 3 days for [the work involved] bore no logical relation to the delay caused by those items, except on the false premise that because the contract provided for the walls to be filled and rubbed down until perfectly flat and smooth these items were not to be regarded as involving any significant additional work. 134 Cl.2.2.2.2. 135 John Barker Construction Ltd (1996) 83 BLR 31.

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[The CA] misapplied the contractual provisions. Because of his unfamiliarity with SMM7 he did not pay sufficient attention to the content of the bills, which was vital in the case of a JCT contract with quantities.”136

12–099 It would be very unusual for it to be possible to measure in detail every type of work. Apart from the fact that some work that is likely to be necessary, but that cannot be foreseen, is likely to be noted as “provisional”, or “approximate”, some designs can be so complex, or unusual that the ordinary rules of measurement are simply not adequate to describe accurately what is to be priced. 12–100 As is recognised by section A.5 of SMM7, on occasions the setting out of the quality and quantity of the work may be better achieved and communicated by drawings rather than by words. If that is the way the work is to be described, then the drawn information becomes as much a part of the bills as the written information. If drawings are to be used to describe the work for pricing, then the drawn information must define precisely the nature and extent of the work so that it can be accurately priced in the same way as the information given other than by drawings. 12–101 So far as provisional sums are concerned, SMM7 recognises “defined provisional sums” and “undefined provisional sums”. Both types of provisional sum require a CA’s instruction before they are expended. However, SMM7 r.10.4 states that, for provisional sums for “defined” work, C will be deemed to have made due allowance in scheduling the works, so that the execution of work under this kind of provisional sum (provided it is within the value of the provisional sum) can never provide grounds for an extension of time. If any of the information for such “defined” provisional sums required by SMM7 r.10.3 is not given in the bills, then a variation instruction to correct that omission would be needed. The omission of such information thus renders the sum an “undefined provisional sum” and then, by r.10.6, C is deemed not to have made any allowance in scheduling, planning and pricing preliminaries for that provisional sum irrespective of what it is called. 12–102 Rule 10.3 of SMM7 requires that a “defined provisional sum” must include the following information: the nature and construction of the work; a statement of how and where the work is to be fixed to the building and what other work is to be fixed thereto; a quantity, or quantities which indicate the scope and extent of the work; and any specific limitations and the like identified in section A35. 12–103 Thus, where a provisional sum was expressed as: “Provisional Work/Items: Fire stopping to riser ducts include the provisional sum of £2,000. The Work is defined as follows: Fire stopping bathroom riser ducts where they pass through floor slabs;” (emphasis added)

this was accepted, without comment, as being an undefined provisional sum falling outside the requirements of SMM7 r.10.3, and therefore an item for which no time allowance was deemed to have been included in C’s schedule137. 12–104 Approximate quantities are defined under General Rule 10.1 of SMM7 as work that is capable of being defined and described in accordance with the Rules, but

136 John Barker Construction Ltd (1996) 83 BLR 31, at 62. 137 John Barker Construction Ltd (1996) 83 BLR 31, at 56 and 57.

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the quantities of which cannot be accurately determined. In these circumstances, C is expected to make provision for time in its schedule to execute such work and, by Cl.25.4.14, is entitled to an extension of time only if completion is delayed as a result of the approximation not being “reasonably accurate”. 12–105 Additional work by way of increased quantities does not, of course, always produce an extension of time for completion, neither does it always follow that C is entitled to anything other than a pro rata adjustment of the tendered rates for the extended activity. 12–106 Assume, for example, that C has balanced its resources to ensure continuous production with minimum delays and no planned idle time to execute, say, 1,000 metres of concrete measured for external works. Subsequently, the CA orders additional concrete. Using CPM analysis, it might reasonably be demonstrated that, as to time, the additional quantity would be irrelevant because the whole of the activity was in float. On the other hand, it might be argued that, because the quantity of concrete has expanded, it is bound to increase the time to lay it with existing resources and, if no extension of time is given for that, then there must be a premium for increased short-term labour. However, this is to miss the point. C is entitled to be paid the appropriate rate for the additional materials, plant and labour according to the rules for the appropriate activity valuation laid down in the contract. If, by expanding the work, an activity that was in float is extended to the point that it becomes critical, then an extension of time must be granted for all the time taken up that extends the completion date. C is also entitled, prima facie, to any direct loss and/or expense arising out of the increased quantity of work if, and only if, it actually incurs the same138. 12–107 C is not entitled to “star rates”139, or other enhanced costs to make good inadequate rates simply because of the increase in quantity, unless the contract form under which C is working provides for it140. In the same way, D cannot avoid paying enhanced rates for varied work if the enhanced rate was agreed to for comparable work in the contract bills. Once the contract is concluded, and provided D was not aware, and taking advantage, of a patent error in accepting the erroneous tender, the rate is accepted as a risk borne by both parties. 12–108 An example of the effect of under-pricing appeared in the decision of the Court of Appeal in Dudley v Parsons141, in which C had priced the provisional quantity for excavation in rock at two shillings per cubic yard instead of two pounds per cubic yard142. The CA had valued the works at the rate of two shillings per cubic yard in the bills, but C claimed the work at what it alleged was the correct rate of two pounds per cubic yard. Pearce LJ said:

138 C may suffer loss and expense simply because its rate, for example, for preliminary items, or goods is lower than the cost of those preliminary items, or goods, but those losses will not be recoverable where the valuation rules restrict recovery to a valuation based on the tendered rates. 139 An expression commonly used in the United Kingdom to describe rates in a final account marked with an asterisk to indicate that they are not rates taken from the contract bills. 140 ECC makes provision for the value of every change to be made independently of the contract bill rates. 141 Borough of Dudley v Parsons and Morrin Ltd (1967) CA, reported in “Building and Civil Engineering Claims”, 3rd edn (London: Estates Gazette, 1985). 142 Twenty times the price in the bills.

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“Naturally one sympathises with [C] in the circumstances, but one must assume that he chose to take the risk of greatly under-pricing an item which might not arise, whereby he lowered the tender by £1,425. He may well have thought it worth while to take that risk in order to increase his chances of securing the contract.”

12–109 Where a bill of quantities is incorporated as a contract document, in the absence of indications to the contrary, there will be a presumed intention that remeasurement based on the bill of quantities is intended by the parties143. An example of D being unable to vary the works from an inflated rate in the bills was given in the case of Henry Boot v Alstom144, which illustrates that this presumption will apply even when the rate suggested by the contract documents is excessive. In that case, immediately before the contract was to be signed, the design was revised to require sheet piling in two large areas of the site. In post-tender (but pre-contract) correspondence, C faxed a price to D for that work. The price had been calculated for both areas. Despite that, however, C stated in its correspondence that it was for one area only. D (misguidedly) accepted the price and it became incorporated into the contract. C relied on the fact that, as the contract was a re-measurement contract and there had been no agreement to the contrary, that price should be combined with the quantities associated with the one area to infer a unit rate for sheet piling, and that unit rate should then be applied to reach an adjusted contract price for any additional sheet piling works (in the same way that it would be if it were a separate item in the bill of quantities). This would give C a “windfall gain”, as it would be extrapolating a price it had calculated for two areas on the basis that it applied to only one area. The first instance judgment of HH Judge LLoyd QC, that variations should be measured by the contract rates whether inflated or deflated, was confirmed as correct by the Court of Appeal145. However, in treating this as a case of unilateral rather than one of mutual mistake, it has been criticised as a case dependent on its particular facts146.

Ambiguities, discrepancies and divergences “Bad faith makes the most of every ambiguity.”147

12–110 All the standard forms contain some provision for rectifying discrepancies, divergences, or ambiguities between the contract documents and, in one form or another, contain provision for rectifying discrepancies between statutory requirements and the contract documents and for prioritising the documents themselves. There is also usually a similar provision regarding discrepancies between instructions, further information and drawings and the contract documents and statutory provisions. 12–111 Language is said to be ambiguous when it is sufficiently equivocal to permit inconsistent, but equally reasonable interpretations. Depending upon the contract, typically C is required to draw to the CA’s attention any ambiguities, discrepancies, or divergences between or among the contract and other project documents and seek instructions accordingly. Thus, C will not be relieved of the consequences of failing to

143 Patman and Fotheringham Ltd v Pilditch (1904), HBC (4th edn), vol.2, at 368. 144 Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [1999] BLR 123 (TCC). 145 Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2000] BLR 247 (CA). 146 I Duncan Wallace QC, “Valuation Variation: No Correction of Pricing Errors” (2001) 16 Const LJ 40 and (2001) 8 ICLR 221. 147 M Cooley, “Sixth Selection”, City Aphorisms (1989).

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seek instructions to correct patently obvious deficiencies. On the other hand, C will typically be relieved of the effects of latent deficiencies. 12–112 Generally, in attempting to rationalise deficient documentation, the courts will turn first to the terms of the contract, and consider, amongst other things, the whole agreement, trade practice and any course of dealing between the parties, evidence of the way in which the documents were interpreted by the parties during performance, and the apparent principal purpose of the contract. When the ambiguity cannot be resolved by applying these principles, the ambiguous language may simply be construed against the party who drafted the contract148. 12–113 Paradoxically, there is little consistency between the standard forms as to how they deal with inconsistencies. IChemE149, MTC89150, FIDIC151, FIDIC/ M&E87152, FIDIC/DB95, FIDIC/Build98153 and GC/Works/2154 require C to conform to local laws, but do not deal with discrepancies between local laws and the contract documents, and ECC2155 and ECC3156 require C to notify the CA if the works information requires it to do anything illegal so that the CA may issue instructions to correct it. 12–114 The 2009 edition of the Irish government standard forms of contract provides that C is to comply with all legal requirements. At Cl.4.6.2 these forms state that C’s proposals are subservient to D’s requirements and to legal and practical requirements, stating in regard to IGBW/09, for example: “If any works proposals do not comply with the contract, or the works requirements or legal requirements or are physically impossible to comply with, [C] shall propose a change to the works proposals as necessary. (There shall be no extension of time, or adjustment of the contract sum for this.) If the works proposals need to be changed because of a change to the works requirements, [C] shall propose a change. [C] shall submit any change to the works proposals to the [CA].”

12–115 At Cl.4.5.4, they further provide as follows: “If, in the [CA’s] opinion, it is contrary to legal requirements to complete the works in accordance with the works requirements, the [CA] shall give a change order.”

12–116 Should this delay completion, it ranks for both an extension of time and compensation. However, if C should fail to identify anything contrary to legal requirements and seek the necessary change order, and the works are subsequently affected by: “the order, or other act of a court, or other public authority exercising authority under law, that did not arise as a result of, or in relation to an act, omission, or breach of legal requirements of [C], or [C’s] personnel, or a breach of the contract by [C]”,

148 149 150 151 152 153 154 155 156

This is referred to as the contra proferentem rule. Cl.3.2. Cl.1.5. Cl.26.1. Cl.15.2. Cl.1.13. Cl.9. Cl.19.1. Cl.18.1.

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it then provides157 that C is entitled to an extension of time, but not to compensation for prolongation. Similar provisions apply to the design and build forms158. 12–117 MF/1 requires that C should be responsible for any errors, omissions, or discrepancies in any of its documents unless due to errors in information provided by D159 and then goes on to confirm that D is responsible for any errors, omissions, or discrepancies in drawings and written information supplied by D or the CA160. Whilst there is a provision requiring D to assist with the ascertaining and complying with law where the works are to be performed outside C’s home jurisdiction161, there appears to be no corresponding obligation where the works are carried out in C’s home jurisdiction, neither is there a provision regarding inconsistencies between C or D’s information and the law of the jurisdiction in which the works are to be undertaken. 12–118 FIDIC/Build98 and FIDIC/Build99, FIDIC/DB99 and FIDIC/PD+B99 require C to conform to applicable laws “unless otherwise stated in the particular conditions”162. Under MPF, where a discrepancy is identified between D’s requirements, C’s proposals and/or statutory requirements, D is required to instruct C as to which of the discrepant provisions it wishes C to adopt, but unless the discrepancy has arisen as a result of a change in the law no variation is involved163. On the other hand, MP05 provides more fully that: “Where a discrepancy is identified within the requirements, [C] shall notify [D] which of the discrepant provisions he intends to adopt and proceed accordingly. If [D] wishes [C] to proceed otherwise, he shall so instruct [C] and that instruction will be treated as giving rise to a change. Where a discrepancy is identified within the proposals [D] shall instruct [C] which of the discrepant provisions he wishes [C] to adopt and that instruction will not be treated as giving rise to a change. Where a discrepancy is identified between the requirements, the proposals and/or the statutory requirements [D] shall instruct which of the discrepant provisions he wishes [C] to adopt and that instruction will not [unless arising from a change in the law after contract], be treated as giving rise to a change. No instruction shall require [C] to act otherwise than in accordance with the statutory requirements.”164

12–119 WCD98, with slightly different phraseology, requires the same as DB05, which states that: “Where the discrepancy is within the [D’s] requirements (including any [instructed] change to them..) [C’s] proposals shall prevail (subject to compliance with statutory requirements), without any adjustment of the contract sum. Where [C’s] proposals do not deal with such a discrepancy, [C] shall notify [D] of his proposed amendment to deal with it and [D] shall either agree the proposed amendment or decide how the discrepancy shall be dealt with; that agreement or decision shall be notified to [C] and treated as a change”165,

providing that C’s proposals take priority and any default and any change is an excusable and reimbursable event. IFWCD/05 does not deal directly with the consequences

157 158 159 160 161 162 163 164 165

See, for example, the Schedule to IGBW/09, Pt 1, s K, item 15. Although worded slightly differently. See, e.g. IGDB/09, at Cl.4.6.2. Cl.16.1. Cl.16.2. Cl.12.1. Cl.1.13. Cl.4.4. Cll.10.2–10.4. Cl.2.14.2.

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of an inconsistency between D’s requirements arising other than out of an inconsistency in D’s requirements, saying simply: “Where an inconsistency within [D’s] requirements is dealt with in the [C’s] proposals in a manner consistent with statutory requirements, [C’s] proposals shall prevail.”166

12–120 Generally, the standard forms of contract require C to inform the CA and seek instructions immediately upon finding any ambiguities, or inconsistencies in, or between, the contract documents. For example, IChemE specifies that C is to correct any error, discrepancy, or omission in its own documents at its own cost, unless caused by “any incomplete, or inaccurate data, documentation, or information provided by D, or the CA upon which C was entitled to and did reasonably rely”167. C21/03 provides that D is to resolve any discrepancies or ambiguities, but that such resolution is a variation for which D takes the time and cost risk, provided that the variation is necessary to overcome a defect in D’s documents forming part of the contract documents. Otherwise, if D is to bear the risk: “[C], in addition to any responsibility to check [D’s] documents under clause 33, must check the contract documents and notify [D] of any ambiguities, inconsistencies, or discrepancies at least 21 days before [C] proposes to use them for construction (including procurement, manufacture, or fabrication of any part of the works), or for other contract purposes.”168

12–121 Similar provisions appear in C21/09, which at Cl.42, requires that: “[C], in addition to any responsibility to check [D’s] documents under clause 44 (if applicable) [requiring C to adopt D’s design as its own], must check the contract documents and notify [D] of any ambiguities, inconsistencies or discrepancies at least 21 days before [C] proposes to use them for design or construction (including procurement, manufacture or fabrication of any part of the works) or for other contract purposes. [D] must resolve any ambiguities, inconsistencies or discrepancies in the contract documents which are notified by [C] to [D] for resolution. If the resolution results in [C] incurring increased or reduced costs than [C] should reasonably have anticipated at the time of tender, the contract price must be adjusted by the difference in costs agreed or valued. In the assessment of what [C] should reasonably have anticipated (as referred to above) regard must be had to the provisions of the contract, and to whether the ambiguity, inconsistency or discrepancy was (or should have been) reasonably apparent to [C] at the time of tender. If [C] fails to take the steps required [above], and a variation is instructed by [D] due to any ambiguity, inconsistency or discrepancy: [C] will not be entitled to costs for delay or the cost of any aborted work (including design) resulting from the variation; except that if clause 44 is not applicable, [requiring C to adopt D’s design, C] will be entitled to the reasonable and unavoidable cost of any aborted work (including design) if the ambiguity, inconsistency or discrepancy is included in [D’s] documents forming part of the contract documents.”

12–122 CE06 states that: “If [C] identifies any ambiguities or discrepancies in any information provided by [D] or any other member of the project team, [D] shall agree how to resolve them after

166 Cl.2.13.4. 167 Cl.21.12. 168 Cl.31.2.

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consultation, if appropriate, with the project team. If no agreement is reached, [D] shall issue an instruction.”

12–123 Under HK05169, JCT80 and JCT98170, JCT05171, JCTsub/05172, ECC2 and ECC3173, ACA82 and ACA98174, AS2124175 and AS4000176, C is required immediately to notify the CA and seek instructions as soon as any discrepancy, or ambiguity is found. IFC05 and IFWCD/05 require C to notify the CA of any discrepancy, or inconsistency but instead of requiring C to seek instructions, impose upon the CA the obligation of giving instructions177. ICE6, ICE7178 and FIDIC4179 assume discrepancies and ambiguities will be found and require the CA to explain them and issue instructions in writing. 12–124 GC/Works/1DB98180 has detailed provisions dealing with both hierarchical priorities and instructions for rationalisation of discrepancies and ambiguities, which C is obliged to draw to the attention of the CA immediately upon discovery. In regard to ambiguities and discrepancies: between the contract conditions and other documents forming part of the contract, the contract conditions take priority; between D’s requirements and C’s proposals, D’s requirements take priority at C’s risk; within D’s requirements, or any discrepancy between D’s requirements and any statutory requirement, building regulation, or planning consent, the CA is to issue instructions for a variation to resolve the discrepancy at D’s risk; and within C’s proposals, the CA may choose between discrepant items, or agree any proposal from C to resolve the discrepancy at C’s risk. 12–125 Some standard forms deal with the resolution of discrepancies by providing an order of priority to be given to the respective contract documents181. For example, GC/Works/1 and GC/Works/1/98 require C to notify the CA of any discrepancies between the documents182, but there is no absolute requirement that the CA should issue instructions to rationalise any discrepancies that, by default, are to be dealt with by priorities where183: the supplementary conditions and annexes prescribed by the abstract of particulars take priority over the conditions of contract;

169 170 171 172 173 174 175 176 177 178 179 180 181 correct 182 183

Cl.2.4(1). Cl.2.3. Cl.2.15. Cl.2.10. Cl.17.1 Cl.1.5. Cl.8.1. Cl.8.1. Cll.2.13 and (5).15. Cl.5. Cl.5.2. Cl.2. HK05 is unusual in providing both for a priority of documents in Cl.5.1 and also power to by instruction under Cl.2.4. Cl.2(5). Cl.40(2)(b).

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the conditions of contract take priority over other documents forming part of the contract; and the specification, or that part of the bill of quantities that serves as the specification, takes priority over the specification content of the drawings. 12–126 The 2009 edition of the Irish government standard forms of contract similarly provides184: “Except when the contract states otherwise, the documents in the contract are to be taken as mutually explanatory of each other, where possible; and if there is an inconsistency between the documents, they take precedence as follows: First, the agreement even if it is not been executed Second, the letter of acceptance and any tender clarifications included in it Third, the schedule Fourth, these conditions Fifth, the works requirements Sixth, the pricing document Seventh, the works proposals, if there are any Eighth, any other documents in the contract.”

12–127 They also provide for figured dimensions to take precedence over scaled dimensions, and any other works requirements to take precedence over a bill of quantities contained within the works requirements. 12–128 MF/1 also deals with discrepancies by prioritising the documents, stating: “unless otherwise provided in the contract, the conditions as amended by the letter of acceptance shall prevail over any other document forming part of the contract and, in the case of conflict between the general conditions and the special conditions, the special conditions shall prevail. Subject thereto, the specification shall prevail over any other document forming part of the contract.”

12–129 PPC2000 states that everyone should work together to resolve ambiguities and discrepancies so as not to cause increased costs, or delay to completion185 but, if all else fails, then the documents are to be construed in the following descending order of priority: i. ii. iii. iv. v. vi. vii. viii. ix. x. xi. xii. xiii. xiv.

the commencement agreement the project partnering agreement; the partnering terms; the project timetable; the partnering timetable; the consultant services schedules and consultant payment terms; the project brief incorporating [C’s] services schedule; the project proposals; the price framework; any joining agreement; any pre-construction agreement; any risk register; the KPIs and targets; any other partnering documents.

184 See, for example, IGBW/09 Cl.1.3.1. 185 Cl.2.6.

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12–130 FIDIC/Build99, FIDIC/DB99 and FIDIC/PD+B99, whilst providing a hierarchy for the resolution of discrepancies and ambiguities, require in Cl.1.5 that: “If an ambiguity, or discrepancy is found in the documents, the [CA] shall issue any necessary clarification or instruction.”

12–131 Whilst they do not expressly indicate that such instructions are variations, by the terms of Cl.13.1, it would appear that such instructions may be a variation. If that is so, then it appears odd that these forms should also provide a hierarchy which, presumably, is intended to avoid such a position. Clause 1.5 states that: “The documents forming the contract are to be taken as mutually explanatory of one another. For the purposes of interpretation, the priority of the documents shall be in accordance with the following sequence: (a) (b) (c) (d) (e) (f ) (g) (h)

the the the the the the the the

contract agreement (if any), letter of acceptance, letter of tender, particular conditions, general conditions, specification, drawings, and schedules and any other documents forming part of the contract.

If an ambiguity, or discrepancy is found in the documents, the Engineer shall issue any necessary clarification, or instruction.”

12–132 Unusually, whilst not providing an order of priority of documents, AS4000 stipulates what is often contained in bills of quantity, or specifications: namely, that figured dimensions shall take priority over scaled dimensions186. 12–133 When there is no hierarchy among contract documents dictated by the contract conditions and there are two conflicting requirements between documents of equal status, such as a drawing and specification, which of the two C has allowed for in its tender for the purpose of construing whether a change requiring valuation has occurred will be a question of fact. 12–134 For example, where there was a contract based on drawings and specification of unspecified hierarchy for 600 houses, and the drawings required cast-iron baths, but the specification referred to plastic baths, on being required to install plastic baths, C claimed additional costs on the basis that those were more expensive and there would be more wastage. When its tender was examined, it was found that he had allowed for plastic baths in the first place. C was thus entitled to an instruction to remove the discrepancy, but that did not result in a change entitling it to increased costs. Had the drawings been specified to have taken precedence over the specification, it would have resulted in a change because C would have been deemed to have included costs for cast-iron baths and would thus have been entitled to recover the difference in cost between the two. 12–135 In all cases, instructions to rectify deficiencies in the documents rank as instructions requiring a variation, for which C may be compensated if it causes loss, or expense, or damage, and for which it will be entitled to an extension of time if it causes a delay to completion of the works beyond the completion date.

186 Cl.8.1.

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Omissions 12–136 Although normally associated with the omission of work, omissions clauses in contracts generally permit instructions to make omissions affecting not only work, but also obligations, or restrictions and the expenditure of provisional sums. 12–137 As is the case with instructions for additional work, C will be under no obligation to accept instructions for a reduction in work unless the contract provides for it. In the case of lump sum contracts, it has been suggested that the power cannot be used to delete work from the contract for the purpose of having that work performed by another contractor. 12–138 This principle was emphasised in AMEC v Cadmus187. The case concerned a cross-appeal by both parties against the award of an arbitrator concerning, amongst other things, the question of whether D (via the CA) can omit work awarded by way of provisional sums from the contract and then engage a third party to carry out the works. 12–139 This case concerned a contract for the construction of a shopping centre including a food hall. The fitting out of the food hall was covered by certain provisional sums included within the original contract sum. However, by way of variation, the food hall was omitted from the contract by the CA and subsequently the work was let to another contractor. C had not consented to the omission. 12–140 The court considered that it was a question of good faith. C was entitled to damages for lost profits by virtue of the fact that it was an unreasonable exercise of the CA’s powers to instruct the omission of the work that C had originally contracted to do and to award it to another party, without C’s consent. 12–141 In the Australian case of CMR v Reed and Stuart188, a contract provided that C was to obtain additional topsoil from beyond the site if the quantity at the site proved inadequate. Instead of instructing C, however, D instructed a third party to import the additional topsoil and spread it on the site. The judge said that the omissions clause in the relevant contract was: “A common enough provision to be found in engineering contracts and permits of the omission from time to time by [D] of a portion of the contract works. What it clearly does not permit is the taking away of a portion of the contract work from [C] so that [D] may have it performed by some other contractor.”189

12–142 Similarly, in a US building contract where there was a power to order omissions from the contract, it was held by the New York Appellate Division that the word “omission” contemplated things being left out of the contract altogether, but not being taken out of the contract and given to another contractor190. 12–143 Thus, C is normally entitled to perform all the contract work, so that a provision giving D or its CA a power to make omissions only contemplates genuine omissions, that is work that it is intended should not be carried out at all. However, modern construction methods, involving separate trade contracting and subcontractors,

187 AMEC Building Co Ltd v Cadmus Investments Co Ltd (1997) 13 Const LJ 50. 188 Commissioner for Main Roads v Reed and Stuart Pty Ltd (1974) 131 CLR 378. See also Carr v JA Berriman Property Ltd (1953) 89 CLR 327. 189 Per Stephen J at 383. 190 Gallagher v Hirsch (1899) NY 45 App Div 467.

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may result in that rule now being less rigidly applicable than it may have been in the past191. 12–144 Whilst FIDIC4192, FIDIC/Build98193, FIDIC/Build99194, FIDIC/DB99195 and FIDIC/PD+B99, ICE6 and ICE7196 actually forbid the CA from reducing an extension of time for the effect of omissions, GC/Works/1197, JCT80, JCT98198 and JCT05199 contemplate that the CA will consider the effect of omissions on extensions of time. HK05 permits a reduction of an extension of time for the effect of omissions only during a period of culpable delay after the completion date has passed200. MPF and MP05201 state that, except by agreement with C in relation to collateral agreements for acceleration, or savings and value improvements, no adjustment to the completion date shall give rise to an earlier completion date than one that has already been notified and the 2009 edition of the Irish government standard forms of contract makes a similar provision at Cl.9.5. 12–145 GC/Works/1 makes no special procedure for the effect of omissions other than at C’s instigation and with its agreement. It therefore appears that the JCT forms are unusual in setting down the terms upon which the CA may make reductions in the award of extensions of time for the effect of omissions from the contract works. JCT05 provides that: “no decision [fixing an earlier completion date as a result of the omission of work] shall alter the length of any pre-agreed adjustment except in the case of a variation quotation where the relevant variation is itself the subject of a relevant omission.”202

12–146 JCT80 and JCT98203 require the CA, in granting an extension of time, to state: “the extent, if any, to which he has had regard to any instruction under clause 13.2 requiring as a variation the omission of any work issued since the fixing of the previous completion date.”204

Here, as it is with JCT05, the CA can only take account of instructions omitting work where those instructions were issued since the CA’s last grant of an extension of time. Thus, in a contract notice of delay, the CA will have only a limited opportunity to make reductions in respect of instructions omitting work. 12–147 Some authors have suggested that the provisions of JCT80 and JCT98 permit the CA to take account of omissions from the beginning, irrespective of whether an extension of time has already been granted. The argument goes that, since the CA is

191 See I Duncan Wallace QC (ed), Hudson’s Building and Engineering Contracts, 11th edn (London: Sweet & Maxwell, 1995) pp.610 and 908. 192 Cl.44.3. 193 Cl.8.4. 194 Cl.8.4. 195 Cl.8.4. 196 Cl.44(5). 197 Cl.36(4). 198 Cl.25.3.1. 199 Cl.2.28.3.2. 200 Cl.25.3(7). 201 Cl.18.8. 202 Cl.2.28.6.4. 203 Cl.25.3.1. 204 Cl.25.3.4.

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empowered to take account of instructions for omissions issued since “the fixing of the previous completion date”, and the completion date is defined as the date for completion “fixed and stated in the appendix”205, it follows that even on the first application for an extension there is a “previously fixed completion date” for the purposes of Cl.23.3.1.4206. 12–148 However, the purpose of this provision is not to provide the CA with a power, in effect, to change the contract period that the parties have agreed upon in the contract. It is to enable the CA to respond to and reduce the effect of delays eligible for an extension of time. This is really no more than a contractual power given to D, exercised through the CA, to ameliorate in so far as it can the effects of those delaying factors for which, as to time at least, D has adopted the risk. Apart from this, as WalkerSmith207 observes, Cl.25.3.1.4 does not authorise the reduction of a previous extension of time; it merely requires the CA to identify whether such considerations have been taken into account. The authority for the CA to fix an earlier completion is contained in the relatively unambiguous wording at the beginning of the clause, which empowers the CA to reduce in whole or in part all previous extensions of time as a result of the effects of omissions208. 12–149 In so far as the CA’s powers in this regard were at all uncertain in JCT80 and JCT98, JCT05 makes the position clear by stating: “After the first fixing of a later completion date in respect of the works or a section, either under clause 2.28.1 or by a pre-agreed adjustment, but subject to clauses 2.28.6.3 and 2.28.6.4, the [CA] may by notice to [C], giving the details referred to in clause 2.28.3, fix a completion date for the works or that section earlier than that previously so fixed if in his opinion the fixing of such earlier completion date is fair and reasonable, having regard to any relevant omissions for which instructions have been issued after the last occasion on which a new completion date was fixed for the works or for that section.”209

12–150 Whether or not a previous extension of time is to be reduced as a result of the effect of an omission will depend on what the CA considers fair and reasonable in the circumstances. In the absence of a CPM schedule indicating the critical path at the time the instruction is issued, it would be difficult if not impossible for the CA unilaterally to come to any reasonable conclusion as to the effect on the completion date of an omission of work in a complex project in which sequence, timing and content have changed since the contract started on site. The CA simply does not have enough information. 12–151 It has been suggested in Walker-Smith210 that some indication will be available to the CA from any schedule that has been provided by C in accordance with the contract conditions211. However, with respect to the learned authors, that is extremely unlikely unless it is based on CPM and nothing has happened during the course of a project to change the durations or construction logic from what was anticipated at the outset.

205 206 207 208 209 210 211

Cl.1.3. PJ Povey (ed), Walker-Smith on the Standard Forms of Building Contract (2001). PJ Povey (ed), Walker-Smith on the Standard Forms of Building Contract (2001). Cl.25.3.2. Cl.2.28.4. Notes on amendment 12 at p.157/115. Cl.3.3.1.2.

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12–152 In this regard, the way in which C’s schedule has been affected by the CA’s failure to give instructions for the expenditure of defined provisional sums may be a significant consideration in regard to the relevance of C’s defined critical path. C must include time in its schedule for work anticipated by a defined provisional sum, which, if not expended, will reduce the time period for that activity to zero. The effect of that may be to change the critical path significantly and introduce float, which may negate what otherwise would be a delay to progress caused by a D’s risk event affecting the critical path and giving an entitlement to an extension of time. 12–153 Thus it would seem that, unless a regularly updated CPM schedule is required by the contract, the only way the CA could come to a fair and reasonable decision on the effect of such an omission would be with the active participation of C in the provision of its intended construction logic for the future construction of the project. This is what is anticipated by the method required by the CMS for the management of D’s risks under the contract212.

Value engineering 12–154 Some standard forms of contract make express provision for C to propose variations and stipulate the resultant consequences that flow therefrom. For example, IChemE provides that C may at any time during its performance of the contract submit a written proposal for a variation to the CA and that, if accepted, the CA’s decision renders it a variation under the contract213. That decision cannot be opened up and reviewed unless C has: “stated in his proposals that the object of the variation is to eliminate a potential defect in the works, or a specific hazard to any person, or property in the performance of the works, or in the operation, or use of the plant (including any breach of a duty imposed by any applicable health and safety legislation).”

12–155 In such a case, the decision of the CA can indeed be opened up and reviewed, or revised through the dispute resolution procedures in the contract214. AS2124215 and AS4000216 similarly provide for C to request a variation for its convenience, but state that, by default, and subject to the CA’s direction that it should be otherwise, even if incorporated in the works, C is not entitled to an extension of time, or reimbursement of costs in respect of the effects of a contractor’s variation. 12–156 The corresponding clause in MF/1217 takes the stance that: “nothing in this clause shall prevent [C] from making proposals to the [CA] for variations to the works, but no variation so proposed shall be carried out by [C] except as directed in writing by the [CA].”

Although it does not expressly state as such, the implication is that any such direction in writing will then constitute a variation, which is at D’s time and cost risk. 12–157 The 2009 edition of the Irish government standard forms also makes provision for C to suggest variations by way of value engineering that either shorten the 212 213 214 215 216 217

See App.2 to the 4th edn. Cl.17.1. Cl.17.2. Cl.40.4. Cl.36.3. Cl.27.2.

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contract period, or reduce the contract value and provide that, if the proposals affect the design, C also takes responsibility for the design it proposes218. Accordingly, it is not at all clear as to why, under such conditions, C should ever contemplate making such proposals.

Constructive change 12–158 Before 1978, the position in the United States in relation to disputes arising out of government procurement contracts depended on whether D disputed that: the facts in question constituted a change under the contract; and where such was essential to recovery, that any such instruction was ever given; or contrary to the contract terms, the instruction was not given in writing. 12–159 In such circumstances, that dispute could not be considered by the Government Board of Contract Appeals (which only had jurisdiction to consider claims under the contract) and had to be referred to the US Court of Claims. Not unnaturally, this was considered inefficient and, in order to give the Boards jurisdiction to consider claims under and in accordance with the rules of the contract, rather than for a breach of contract, government contracts were rewritten to encompass the concept of “constructive change”. This provided C with the right to have a claim adjudicated under the contract by the Boards of Contract Appeals rather than by the Federal Courts for its breach, even if based on a change not recorded by instruction in writing. 12–160 However, as a specific head of claim, the concept of “constructive change” became unnecessary in 1978 when the US legislature passed the Contracts Disputes Act, widening the jurisdiction of the Boards of Contract Appeals to enable them to consider breaches of contract. By then the idea had been crystallised and pigeon-holed, which is the way it has remained, and, whilst there may be an understandable reluctance among English lawyers to use Americanisms to describe a phenomenon for which there is no English historic equivalent, there is no good reason why legal rights arising out of constructive change should not be recognised. Indeed, there is current case law to demonstrate that they can be219. 12–161 Howsoever it comes about, the essence of the constructive change claim is that, because of an instruction, act, or default of D or the CA outside the terms of the contract, the work C is required to carry out, its method of working, its risk, or its schedule of work has changed and as a result C has incurred costs, or suffered delay to progress and/or completion, or has otherwise suffered quantifiable loss. 12–162 Thus, “constructive” in this sense means nothing more than construed as such, as a result of judicial interpretation. It is an adjective used to describe an act to which the law implies a right or liability arising out of the construed intentions of the parties. Where an employee is treated so badly by its employer that the employee feels forced to resign, whether the parties intended it or not, the law will say that he or she has been “constructively dismissed”. In the same way, a constructive change is a variation that, whilst not recognised as such by the parties, is implied by law to have had that effect.

218 See, for example IGBW/09 Cl.4.8. 219 John Barker Construction Ltd (1996) 83 BLR 31 at 55–57.

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12–163 In effect, constructive change is the obverse of “necessary and implied work”. On the one hand, the courts have held that, where the scope is not defined exclusively by the contract documents, for example where C’s obligation is to build a house “completed and dry and fit”220, C will be obliged to perform all the work “indispensably necessary for completion”. On the other hand, where the contract documents are deemed to describe exclusively what is included in the contract works, then any addition to or change from that will rank for additional payment or time to complete. If the facts giving rise to that variation are not expressly ordered in writing according to the requirements of the contract, in so far as the facts are judicially recognised as constituting a change, it will be a constructive or implied change. 12–164 There are numerous examples of implied changes in English construction law where the word “constructive” is never used and indeed not pleaded221. However, the essence of constructive change is an act or omission by D which, whilst not recorded as a formal variation of the contract, has the effect of requiring C to perform in a manner different from the terms of the contract222. Constructive changes may be confirmed in writing and, in those circumstances, the confirmation tends to be described as “for information”, “for clarification only”, “at no extra cost” or, and this seems to be a common practice between C and subcontractor, “to be valued in accordance with the contract”. Although the latter phrase seems innocuous enough, in practice it tends to mean that the instructing party: instructs the work to be carried out; refuses to agree to the valuation of it at the time; does not think it is a variation; and in the end, will attempt to value it at nil. 12–165 Constructive changes can also occur because the contract requires some action by D or the CA on its behalf, and nobody does anything at all, or – and this is perhaps the most common situation – because nothing is reduced to writing as required by the contract. 12–166 All the standard forms require C to obtain instructions in writing as a precondition to payment for the effects of change. Indeed, in the early Australian case of Bedford v Cudgegong223, Owen J went so far as to hold that the fact that C had obtained an instruction in writing to carry out the disputed work may in itself be evidence that the work was additional to the contract224. 12–167 Provision that instructions ranking as variations must be in writing before being recognised for cost or time adjustment are, prima facie, enforceable and the absence of written confirmation will prevent recovery unless C can show that the condition does not apply in the circumstances. As Lord Blackburn observed in Tharsis225: “it is common enough to have provisions, as these are here, more, or less stringent, saying that no extra work shall be paid for unless it is ordered in writing by the [CA]; and if such

220 Williams v Fitzmaurice (1858) 3 H. & N. 844; 157 All ER 709. 221 In John Barker Construction Ltd (1996) 83 BLR 31, the facts were replete with constructive changes, but “constructive change” was neither pleaded nor argued. 222 Mechanical Contractors Association of America, Change Orders, Overtime and Productivity (1994). 223 Bedford v Borough of Cudgegong (1900) 16 WN (NSW) 142. 224 Bedford v Borough of Cudgegong (1900) 16 WN (NSW) 142 at 143. 225 Tharsis Sulphur and Copper Co v McElroy and Sons [1878] LR 3 App Cas 1040 (HL) at 1050, 1051.

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conditions are properly made, and there is nothing fraudulent, or iniquitous in the way they are carried out, those conditions would be quite sufficient and effectual.”

12–168 On the other hand, the principle that C may be able to recover payment for variations on an implied promise by D has been endorsed by both the High Court of Australia and the Privy Council. In the case of Liebe v Molloy226, where the contract provided that no works beyond those included in the contract should be allowed, or paid for without an order in writing, the court held that: “When a man does work for another without any express contract relating to the matter an implied contract arises to pay for it at its fair value. Such an implication of course arises from an express request to do work made under such circumstances as to exclude the idea that the work was covered by a written contract. So it would arise from [D] standing by and seeing the work done by the other party, knowing that the other party, in this case [C], was doing the work in the belief that he would be paid for it as extra work. If the umpire was of opinion that any of this work was done under such circumstances that [D] knew, or understood that [C] was doing the work in the belief that he would be paid for it as extra work, then the umpire might, and probably would, infer that there was an implied promise to pay for it. That is one instance. Again, the [CA] might have been expressly authorised by [D] to order extra work. Under such circumstances it would not be understood by either party that it was included in the lump sum specified in the contract.”227

12–169 Liebe v Molloy was followed in another Australian case, Michael v Andrews228, where it was held that, since D had requested the extras during the course of the contract works, D must be taken to have implied to agree to pay a reasonable price for the extras by reason of its request for them. 12–170 In the absence of written instructions required as a contractual precondition to payment, where D proceeds as though it does not intend to rely upon such a contractual requirement, it is always open to C to argue that D has waived this precondition. However, in the subsequent case of Bysouth v Blackburn and Mitcham229, the question before the court was whether D had waived its right to insist on instructions being in writing and was thus estopped from denying liability to pay rather than that the additional work was the subject of a separate agreement (as was the case in Liebe v Molloy). The court was asked to consider the following facts: the CA orally requested C to do the works; D paid for part of the extras done without a written order; D stood by and saw C doing these extras without written order and took the benefit thereof; and C was induced by these acts and conduct to believe that D would not require written orders and therefore acted to its detriment upon that belief. 12–171 The court held that, even if the allegations were proved, they did not establish either waiver or estoppel. The view was expressed in these terms: “It was argued that these facts established either waiver, or estoppel. In my opinion they establish neither. They are, at most, representations as to a present intention. Such representations may possibly in some cases form a foundation for estoppel, and in other cases amount to an election, but where, as in this case, they are pleaded merely as presentations

226 227 228 229

Liebe v Molloy (1906) 4 CLR 347. Liebe (1906) 4 CLR 347 at 354 per Griffith CJ. Michael v Andrews (1925) 2 QJPR 30. Bysouth v Shire of Blackburn and Mitcham (1928) VLR 562 (CA).

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of a party’s present intention not to rely upon a condition of its liability in future, unless they amount to a promise, they have no legal effect.”230

12–172 In Thorner v Majors, the House of Lords overturned the decision of the Court of Appeal231 on the questions of to what extent and in what circumstances oblique assurances could constitute a sufficiently clear and unequivocal representation to establish proprietary estoppel. In approving the dictum from the CA decision of Lloyd LJ that: “in order to work as an estoppel, the representation must be clear and unequivocal, it must be intended to be acted on, and in fact acted on.”

12–173 Lord Walker added that what amounted to clarity was: “hugely dependent upon context” and “it [was] a necessary element of proprietary estoppel that the assurances given to [C] (expressly, or impliedly, or, standing-by cases, tacitly) should relate to property owned (or, perhaps, about to be owned) by [D]”.

12–174 On the other hand, the New Zealand Supreme Court in Meyer v Gilmer232 accepted that D had waived its right to refuse payment for extras not ordered in writing where it had: ordered them personally; was also present when the CA orally ordered extras; and part of the amount claimed for extras was paid for by D upon the CA’s certificate for payment. 12–175 Depending upon what is expressed in the contract, some of the most common constructive changes come about as a result of the effect upon resources, methods and timing of: correction of an ambiguity, or discrepancy in D’s requirements; correction of an error in description (or quantity) in the bills of quantity, specifications, or drawings; correction of an inconsistency between D’s requirements and the definition of the site boundary; legal, or physical impossibility; uncovering, or making openings in work where the works are found to have been carried out in accordance with the contract; wrongly rejecting submittals that conform to the contract requirements; a failure to give, or deferment of possession of, or access to, or egress from any part of the site; a failure to obtain any third-party consents necessary for the development; a failure to make prompt payment; non-disclosure of relevant information; disclosure of proprietary information; pressure to complete the works; and wrongful exclusion from the site of labour, plant, or materials.

230 Bysouth (1928) VLR 562 (CA) per Irvine CJ. 231 Thorner v Majors [2009] UKHL 18; [2009] WLR (D) 111. 232 Meyer v Gilmer (1899) NZLR 129.

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12–176 Many contracts have some provision for dealing with the above in one form, or another and any contract provision requiring C to carry out any act that will be “deemed to be a variation” can be said to be one with a “constructive change” clause. Consider for example, NZ03 in which the following are “to be treated as if they were a variation”: discrepancies in contract documents233; omissions from schedules of prices234; discrepancies in quantities235; changes in legal requirements236; locating utilities237; late supply of D’s goods and materials238; instructed postponement of work239; omission of postponed section of work240; and expenditure of contingency sums241. 12–177 In most contracts, any discrepancy between the contract documents and the legislative requirements applying to the work in question is a constructive change because in default and, irrespective of whether it has received instructions, C is required to build according to the applicable legislation. If to do so incurs additional cost, or takes additional time, then C is entitled to relief from liquidated damages and compensation for the effects of any such change, irrespective of whether it was instructed242. Similarly, where SMM7 is incorporated as the method of measurement under JCT80, JCT98 and JCT05, any departure from SMM7 ranks as a constructive change entitling C to an adjustment of cost and, if appropriate, an extension of time for completion243. 12–178 Necessarily, in constructive change claims, there is no recognition by D that these conditions constitute a variation. Probably the most common constructive change is that of quality or quantity. Although not exclusively so, in this constructive change, the common dispute scenario will be where: C claims that what D is expecting from it is not what it priced for; D feels that the job is taking long enough and it is paying more than enough already and does not want to give any more time or pay any more; the CA, who is responsible for describing what C was to price, does not wish to have to confront D with the unpalatable fact that what C has priced for is insufficient (and thus what is required in fact will cost more money and/or time than is contracted for). The CA disagrees with C that it is a variation and refuses to sanction an extension of time and increased costs; and the CA continues to insist on performance of the disputed work. 233 234 235 236 237 238 239 240 241 242 243

Cl.2.2.5. Cl.2.3.2. Cl.2.3.4. Cl.5.11.6. Cl.5.13.4. Cl.5.16. Cl.6.7.3. Cl.6.7.4. Cl.12.11.2. See Ch 4, “Standard form provisions for time and cost”, at paras 4–081 to 4–102 above. For example, see “Constructive change of quality”, at paras 12–181 to 12–195 below.

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12–179 Because constructive change is D-originated and C is the only party to suffer the adverse effects (if any) of a constructive change, it must be managed by C if C is to minimise its loss. Thus, when told to proceed with work under dispute and to minimise the adverse effects of constructive change, C should immediately take steps to make it possible to recover the impact of the change on its profits. To do this, C should follow the contract provisions as to notices precisely and, in particular: research the contract documents thoroughly to confirm that a change condition actually exists; prepare and submit a request for formal instructions, giving the CA a clear and detailed description of the change; provide notice of any likely effect on progress and on completion; provide notice of any likely effect on preliminaries; give notice of intention to proceed to adjudication, or arbitration244 if the instruction for variation is refused; carefully put together a “disputes file”, documenting the factual background and all responses (or lack of them); inform the CA of the timetable for responses; respond promptly to any final decision; and update any notice as to the effects on time, or cost as the work proceeds. 12–180 From D’s point of view, the only way to avoid the inconvenience of constructive change disputes is to: give the design team sufficient time to carry out adequate research and to prepare complete designs before tender; and accept that, no matter how well the design is thought out, designers do not have the foresight of a prophet and some things that, with the benefit of hindsight, may seem to have been avoidable, will slip through. In those circumstances, D should accept the reality and recognise C’s entitlement because, if it had been thought of in the first place, D would still have had to pay for it.

Constructive change of quality “Where the contract documents do not specify any particular quality, or standard, C’s obligation in respect of materials (and goods), which would be implied at common law, is to supply and fix materials and goods which are of merchantable quality and to carry out work in a good and workmanlike manner.”245

12–181 There are three possibilities. If the quality of materials is specifically described in the contract documents, C must use materials of that quality and, if the standard of workmanship is described, C must work to that objective standard. In these circumstances there is no question of C having to achieve the “reasonable satisfaction” of the CA.

244 The form of contract under which the work is executed will describe the dispute procedure. However, in default, Pt II of the Housing Grants, Construction and Regeneration Act 1996 (as amended) provides a statutory right to adjudication in construction contracts affecting anything other than dwellings, see chapter 23 below. 245 PJ Povey (ed), Walker-Smith on the Standard Forms of Building Contract (2001).

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If the contract documents provide that the approval of the quality of materials or workmanship is a matter for the opinion of the CA, then C must use materials and workmanship of such quality as will be to the reasonable satisfaction of the CA. If the contract documents are silent on the quality of materials, or the standard of workmanship, the law will imply an obligation that C use materials of “merchantable quality” and “fit for their intended purpose” and to do the work in a “good and workmanlike manner”. 12–182 In so far as “reasonable satisfaction” is concerned, it has been held that the term means no more than would ordinarily be implied; that is that the CA must consider objectively whether it ought to be satisfied and not “act capriciously according to its own taste, or desire for perfection”246. This was illustrated in Cotton v Wallis247, a case in which the Court of Appeal had to consider the CA’s conduct where he sued for his fees when D refused to pay on the grounds that the CA had failed to exercise due care and skill in approving work which, under the 1952 RIBA standard form, was described as: “to be carried out to the reasonable satisfaction of the [CA]”. 12–183 The court at first instance found that, whilst the plastering and paintwork were not carried out to a high standard and that tiles in the hall and dining room were stained, this was nevertheless a standard of work quality that was commensurate with the contract price. On appeal, the first instance decision was upheld. Morris LJ stated: “the evidence satisfied the learned County Court judge that it was a low price and I think he did not err in taking the view that when measuring the finish of the work, it was proper to have in mind the kind of house that was being built and the price of the house. It seems only natural that, if one house is being built at great expense, and another at a very moderate price different quality in the work would be expected. Of course everything must depend on the exact contract made. If someone contracts to give the best possible workmanship for the lowest possible price, the contract must be carried out.”

12–184 A constructive change in quality occurs whenever a standard of performance is sought from C on site which is in excess of the standard of performance that was tendered for. Thus, if the bills of quantity, or the specification require “all work to conform to the appropriate British Standard”, this will bind C to conform to those standards for tolerance comprised in the British Standard, whereas if the CA requires on site a higher standard of tolerance than that provided for, it will be a variation of or change in the contract. 12–185 In the Barker248 case, for instance, the CA pressed C to comply with a higher standard than that suggested by the contract documents, without recognising any variation. The court then held that the CA’s decision to refuse to grant an extension of time for the effects of working to the higher standard than that specified was fundamentally flawed. 12–186 Similarly, in the US case of Freeman-Darling Inc249, it was specified that an acoustic fence around the site required a maximum moisture content of 19% when dressed and 15% after treatment with water-borne preservatives. The CA condemned the fencing on site because on installation it did not have a 13% moisture content. The Board held that the specification did not require a 13% maximum moisture content at installation and held D responsible for delay arising out of this restriction. 246 247 248 249

PJ Povey (ed), Walker-Smith on the Standard Forms of Building Contract (2001). Cotton v Wallis [1955] 3 All ER 373. John Barker Construction Ltd (1996) 83 BLR 31. Freeman-Darling Inc (1989) PSBCA No 7,112 89–2 BCA (CCH), at 21,882.

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12–187 In another US case, Fischbach and Moore250, the specification for steel tower legs required that the surfaces and edges of welds should be “smooth, uniform and free from fins, tears, cracks and other defects which would adversely affect the quality, or strength of the weld”. On installation, the surface of the steel bars in the tower legs was found to contain deep seams, which D contended would adversely affect the strength of the weld. The supplier denied that the bars, where the surface seams were not in excess of 2%, were defective, but agreed to replace the bars with the seams in excess of 2% without charge. It was subsequently held that not only was the 2% not a standard adopted by the steel industry at that time, but that the 2% standard applied by the supplier was not a contract specification and the steel bars which had been delivered actually met the contract specification. In the circumstances, the court concluded that D acted out of an abundance of caution, having in mind the security of the towers, and that C was entitled to increased costs because the requirement to condition the surface of the steel tower legs constituted a constructive change. 12–188 Specifications frequently reserve to the CA a right to approve the use of alternative materials as opposed to C’s power to select a product of equal quality. In those circumstances, where the CA has reserved to itself a power to approve an alternative, rather than C having a right to select a product of equal quality, a failure to exercise the power and an insistence by the CA on the use of the precise materials specified, will not amount to a constructive change and entitle C to recover additional costs, even if the specified materials are more expensive than the alternative that C suggests251. This principle may equally be applied, in appropriate cases, to directions to employ a particular working method252. 12–189 If C offers to carry out work to a different specification from that in the contract documents, unless the CA expresses its approval with the appropriate caveat, its acceptance may bind D to pay for the additional cost of the changes253, and that is so even, it seems, where the change arises directly as a consequence of C’s breach of contract. Thus, in Simplex v St Pancras254, where C was responsible for the foundation design and a test pile to support a nine-storey block of flats, which failed because the piles could not carry the working loads, C proposed to the CA that another company should be employed to install a different type of pile at an extra cost of approximately £3,000 and asked the CA for its instructions and views “as to the extra costs which will be involved”. The CA replied in a letter saying that D was prepared to accept “[C’s] proposal that piles supporting Block ‘A’ should be of the same bored type in accordance with the quotations submitted by Cementation Co Ltd”. Whilst D argued that the CA’s letter was no more than a concession enabling C to perform its obligations under the contract in a manner different from that specified and created no liability on D’s part, the court held that the CA’s letter was an instruction involving a change in the design, or quality of the works that the CA was empowered to authorise and was thus a change for which D was liable.

250 Fischbach and Moore International Corporation (1971) ASBCA No 14,216. 251 Leedsford Ltd v City of Bradford (1956) 24 BLR 45. 252 J Dorter, “Variations” (1991) 7 Const LJ 281. 253 But see also the contractual restrictions on the CA’s power to instruct changes in, for example, the Irish government standard forms of contract, referred to above at paras 12–012 to 12–102. 254 Simplex Concrete Piles Ltd v Borough of St Pancras (1958) 14 BLR 80.

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Constructive change of quantity 12–190 The distinction between variations in quality and variations in quantities was at the heart of the decision of the Privy Council in Mitsui v AG Hong Kong255. An item for lining had gone up eight times and an item for the provision of temporary support steel ribs was 73 times more expensive. Although essentially a decision on its own facts and contract interpretation, it provides a graphic, modern illustration of the willingness of courts to conclude that, under such contracts, C has assumed the risk of dramatically increased quantities compared with those in the contract documents256. 12–191 Where the contract documents are based on bills of quantities under the standard forms, and incorporate the standard method of measurement, then changes between what is required and what is measured will constitute an “error, or omission” in the bills which, by most of the standard forms, is required to be corrected and therefore ranks as a change257. Where approximate quantities are used, the quantity specified must be a reasonable approximation and a substantial change in quantity may justify a change in C’s rate for the provisional item. 12–192 In the US case of John Murphy258, it was argued that the change resulted from site conditions and was within the percentage provided for in the contract, referring to quantity variations, for which C was to bear the risk. In reviewing the evidence, the Board found that the CA had admitted that, at design stage, it was intended that the foundation excavations be set at a shallow, upper level and quantities had been based on that. However, at a later date, but before the start on site, the design had been revised to show the foundations deeper and at the lower level, but the quantities had not been revised. In fact, the excavation was carried out to the lower level. In an action for increased costs and delay caused by the excessive excavations, D argued that C should have known that the quantities were inaccurate. The Board said: “[C] acted in a reasonable manner in relying on the estimated quantities in the tender [schedule] and was misled by [D’s] failure to tell bidders of the oversight error. The law is clear that a bidder may rely on information in the tender package unless the deficiencies are patent. An estimate as to a material matter in a tender invitation is an expedient. Ordinarily it is only used where there is a recognised need for guidance to bidders on a particular point when specific information is reasonably available. Intrinsically, the estimate which is made in such circumstances must be the product of such relevant underlying information as is available to the author of the invitation. If the bidder were not entitled to so regard it, its inclusion in the invitation would be surplusage at best, or deception at worst. Assuming that the bidder acts reasonably he is entitled to rely on [D’s] estimates as representing honest and informed conclusions.”

12–193 There are numerous examples from the US where, although it is C’s responsibility to prepare its own quantities generally, under a performance specification or, as it is referred to, a “requirements contract”, D prepares quantities for the purposes of tender. In Integrity Management259, the Board held that: “the cases are attempted to refine and set forth various factors to be considered in determining what standards of care should be used in preparing estimates. Since a requirements

255 256 257 258 259

Mitsui Construction Co Ltd v Attorney General of Hong Kong (1986) 33 BLR 1. J Dorter, “Variations” (1991) 7 Const LJ 281. See “The bill of quantities” at paras 12–075 to 12–109 above. John Murphy Construction Co (1979) AGBCA No 418, 79–1 BCA (CCH) at 13,836. Integrity Management International Inc (1975) ASBCA No 18,289, 75–1 BCA, at 11,235.

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contract is used specifically because of uncertainty as to actual requirements under the contract, [C] entering into such a contract assumes most risks of an underrun, or overrun. However, [C] does not assume all risks under these circumstances.”

12–194 In Carney260, it was also confirmed that, if the contract had a standard variations clause, a substantial error in the estimated quantity of base course for a road might warrant relief under the theory of constructive change where the government could be shown to have failed to exercise due care in estimating quantities. The Board found that, whilst a change between the estimated and actual quantities did not, of itself, establish negligence on D’s part, or provide C with any ground for relief, the use of the term “estimate” did not transfer the responsibility for D’s substantial miscalculation to C. 12–195 Thus, it appears that, where a negligently prepared estimate of quantities results in additional costs to a contractor, C should be entitled to reimbursement for such costs. In these circumstances, in advancing an estimate of quantities for tender invitation purposes, D is not required to be clairvoyant, but D is obliged to base that estimate on all relevant information that is reasonably available to it.

Consequential changes 12–196 Consequential changes are really just another form of constructive change, although they are often more difficult to identify. Consequential changes represent additional work, or costs that come about as a direct consequence of some other more obvious change. The cost and time effects of a consequential change include all those that can occur as a result of any other change (ie direct costs, delay to progress and completion and associated prolongation costs and disruption costs). 12–197 Whilst, in the best of all worlds, C will include all consequential effects of change in its notice to the CA following any directed change, unfortunately consequential impact is often not foreseeable until after the original variation has been instructed. Under the provisions in the NEC and JCT forms for the agreement of the effect on time and cost of a directed change, it will be difficult to recover for the effects of consequential change which C has failed to foresee in its agreement. However, whenever the facts of a consequential change become apparent, C should immediately notify the CA and follow the procedures for monitoring constructive change.

260 BJ Carney and Co (1977) ASBCA No 76,114, 77–1 BCA, at 12,285.

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CHAPTER 13

Construction records

Introduction Record keeping Progress records Change control Record retrieval Electronic data exchange Building Information Modelling The acronym Definition What’s involved and how does it differ from “conventional” practice? Levels of BIM maturity What is arguably not BIM? Perceived benefits of working in a BIM environment Perceived barriers against BIM adoption Collaboration Legal, contractual and insurance issues Use and management of information Investment Overcoming the barriers Key documents Case studies Standard forms of contract What does BIM mean for claims and disputes? Retrieval of information Communication of information Case law Conclusion Independent information management Standard form provisions Presentation of evidence Oral evidence Documentary evidence Database records Computer-generated evidence Factors influencing the evidentiary strength of records Getting at the facts of delay Retrospective assembly of evidence Manual sorting of evidence

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13–001 13–003 13–015 13–026 13–042 13–051 13–067 13–071 13–072 13–074 13–078 13–080 13–081 13–083 13–084 13–086 13–087 13–090 13–092 13–093 13–094 13–101 13–107 13–111 13–113 13–115 13–117 13–120 13–135 13–160 13–161 13–168 13–172 13–185 13–192 13–193 13–196 13–204

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Multi-volume collections Single-volume tagged collections Sorting evidence on databases Discovery, disclosure and inspection Disclosure of electronic documents Disclosure of experts’ documents Disclosure of privileged communications

13–208 13–210 13–217 13–236 13–254 13–264 13–266

Introduction “When you believe you have a claim under a construction contract, thorough and comprehensive records are needed for proving that you are entitled to damages, and the amount of damages you should recover. Too often, contractors are able to show that something went wrong on a project, but because they lack records are unable to identify the exact causes of the problem, or prove that claimed costs are attributable to the problem.”1

13–001 A study carried out by NEDO identified unclear, or missing, information as a serious cause not only of construction defects, but also as a recurring cause of disputes in themselves2 and, perhaps predictably, poor management has often been the cause of poor record-keeping3. However, effective project and change control cannot be achieved without good records of what has been achieved, where, when, by whom and with what resources. A little experience in construction disputes will also soon demonstrate that the earlier good quality facts are established, the earlier the claim is likely to be settled, which, in turn, results in lower litigation costs and more successful settlements. 13–002 Whatever facts there are in support of a claim for an extension of time, or additional costs arising out of a change of circumstances, they must first be presented to the CA. If the CA does not accept them, they must be presented to C’s lawyer or claims consultant for attempted negotiation and representation before proceedings. If they are not accepted at that stage, they must then be presented to an adjudicator, arbitrator, mediator, or court. Although it beggars belief, it has been estimated that arbitrators spend as much as 90% of their time simply trying to establish the facts in a construction dispute4. If the facts cannot be demonstrated clearly and unambiguously, at each hurdle, not only will it be impossible effectively to control the works, but the claim can also be expected to fail. The burden of proof rests on the claimant: “he who asserts must prove” is the burden of proof in all civilised legal systems, and it is a sad reflection on the construction industry that many claims, which might otherwise be accepted, fail simply because of the absence of corroborating evidence5.

Record keeping 13–003 Essentially, there are five classes of information that, in any construction project, must be recorded in order properly to control the work and the risk associated with it. They are the data associated with: 1 “Construction Project Records Basic Principles and Guidelines”, Federal Publications No 79–6, November 1979. 2 The National Economic Development Office, Achieving Quality on Building Sites (London: HMSO, 1987). The Report of the Building and Civil Engineering Economic Development Committees’ Joint Working Party. 3 I Ndekugri, “Computer-aided Resolution of Construction Contract Claims and Disputes” [1996] Arbitration Journal 62.1, 57. 4 D T Simmonds, “Evaluating Contractors’ Claims: Presentation of Claims by Contractors” (1979) The Chartered Quantity Surveyor. 5 V Powell-Smith and J Sims, Building Contract Claims, 2nd edn (Blackwell Scientific Publications, 1988).

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contract; quality control; document control; project progress; and change control. 13–004 Whilst all are important to successful risk management, in relation to delay analysis, it is largely the information concerning project progress and change control that are likely to be in issue. In relation to progress records, the CIOB Guide6 identifies that: “Records of progress actually achieved will be used for identifying the start and completion dates of activities, the degree of progress achieved from time to time and for identifying the productivity actually achieved by particular resources. They can also be used for verifying productivity trends, the timing of the constituent parts of intervening events and identifying lost productivity as a result of disruption. In other words, progress records are the lifeblood of effective time management.”

13–005 For D, good quality progress and change management records are the antithesis of an unprovable global or total loss claim7. From C’s point of view, provided it can be mounted, the beauty of a global or total loss claim is self-evident – it is very simple, quick and cheap to produce. It simply says: “you have done all this to me and have caused me all this loss. I do not have the factual records to separate the loss caused by one event from that caused by another but as you have caused everything, I do not have to separate them; please pay up.”

13–006 From D’s point of view, the inconvenience of a global claim is self-evident. On the one hand, D does not accept C’s claim is a total loss claim, but, by showing that a not insubstantial part of the loss has been caused by events for which C does not allege that D is liable and is thus a global claim, D will also go to prove (by default) the amount for which C is truly entitled. Not only that, but in doing so, D as defendant will have all the costs of putting together a detailed case that C (as claimant) would ordinarily have had to bear8. 13–007 From D’s point of view then, it should be reasonably apparent that the single most effective defence to a global claim or modified total loss claim is good factual records of what was planned from time to time and what actually happened from time to time. Without facts, all C can put up is argument and insinuation. This in turn can only be met by D with counter-argument and insinuation: a notoriously fragile platform upon which to go to war in a formal dispute resolution forum. Not only will it cost a lot of money to prepare the claim and counterclaim, and to hear the witnesses and the arguments, but also the outcome may often be no better than the roll of a dice, or the toss of a coin. The Canadian case of Foundation v United Grain Growers9 demonstrates particularly well how the cost of defending a dispute can be adversely affected by poor documentation. The trial in the Supreme Court of British Columbia lasted 132 days, including legal argument. Of those 132 days, only five days were taken up by examination-in-chief, cross-examination and re-examination of the two expert witnesses. The majority of the remaining 127 days of trial were taken up by hearing ordinary witnesses testify as to what had actually happened on the project. 6 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) at para.4.3.5.1. 7 See Ch.19, “Total time, total loss and global claim”. 8 See Ch.19, “Total time, total loss and global claim”. See also, K Pickavance, “A case for the defence” (September 2006) RICS Construction Journal. 9 The Foundation Co of Canada Ltd v United Grain Growers Ltd (1995) 25 CLR (2d) 1 (BCSC); (1996) 62 ACWS 3d 29.

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13–008 If the CA’s determination of entitlement is to be anything better than an inspired guess, claims for additional time during the course of the works, should reasonably have to be accompanied by the factual data records to show: what was C’s planned timing of the works in the absence of the occurrence of any event at D’s risk; by reference to what has already been achieved, the planned timing for the future conduct of the work was realistic and practically achievable at the time of the event; the nature and timing of the time risk event which actually occurred; D’s time risk event is (at its lowest) likely to have an adverse effect on the timing of one or more planned activities; One or more affected planned activities were, at the time, on the critical path to one or more completion dates; and the calculated effect on the planned timing of the affected activities and on completion. 13–009 Similarly, claims for loss or expense should reasonably be accompanied by the factual data records to show: what were C’s costs likely to be in the absence of the occurrence of any event at D’s risk; the planned costs are factually supportable by a tender cost breakdown and were realistic and practically achievable at the time of the event; the nature and timing of the cost risk that actually occurred; D’s cost risk event caused C to suffer a loss, or additional cost, in the absence of which C would not have suffered such loss or cost; the quantified loss, or additional cost, actually suffered as a result of D’s cost risk event. 13–010 If the evidence in point is no better than argument and insinuation, the claim ought to be dismissed. Three apposite examples of a reluctance of US tribunals to accept C’s claims, in the absence of such substantiation, come from the US Boards of Contract Appeals. In Fru-Con10, the Board found that there was insufficient evidence of exceptionally hot weather having caused delay which C alleged it had overcome by acceleration, but the Board rejected the claim, saying: “the record remains deficient. In the absence of notice and supporting documentation, [C] is unable to demonstrate an excusable delay and therefore unable to prove acceleration.”11

13–011 In Earth Tech Industries, whilst accepting that C had proved it had accelerated progress, the Board said that C: “cannot recover for increased costs of accelerating the work because it has failed to prove that any of the additional measures taken resulted from the [CA’s] order.”

13–012 In L & C Europa Contracting, in the absence of records proving the resources used, the Board declined to infer that any work had been carried out at all. In this 10 Fru-Con Construction Corporation v The United States (1999) 43 Fed Cl 306. 11 See also, Broome Construction Inc v The United States (1974) 203 Ct Cl 521, 531–32, 492 F 2d 829, 834–35, Park Construction (1995) 95–2 BCA 138,529; McNutt Construction (1985) 85–3 BCA 92,279; and Electronic & Missile Inc (1964) ASBCA 9031 64 BCA (CCH) 4338 (where C made 30 unanswered written requests for extensions of time due to adverse weather, it was entitled to recover for constructive acceleration).

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case, the Board observed that the daily reports indicated that C performed intermittently from February to September 1997. During that time, there were no site records, no proof that work was performed, and no evidence establishing that C was affected by any of D’s time risk events. The Board found that: “there is no evidence detailing precisely when the alleged delaying events transpired, or their specific impact on overall completion of the contract. To the extent that daily reports are available, they are cursory, generalised and inconclusive at best. In no instance, has [C] attempted to identify and track the allegedly delayed work in the daily reports and account for the delay period. Only the [pre-construction schedule] is in evidence. There are no updated schedules in the record that might demonstrate the relationship of the alleged delays to other work at the site, or the timing and impact of alleged delays on overall completion of the contract. The record does not permit segregation of any delays attributable to [D’s] fault from other non-compensable delays including delays caused by [C] and/or delays extending over unexplained gaps in [C’s] on-site performance. With respect to the nature of the proof offered by [C] generally, [C] for the most part relies on general, unspecific and conclusory testimony that was not credible.”12

13–013 Similarly, in Bay Construction13, in which C claimed compensation for lost productivity, the Board observed: “[C] has the fundamental responsibility to prove by a preponderance of the evidence that [D’s] action caused its [labour resource] to be less efficient than planned as well as the extent of that impact14. [C] wholly failed to present probative evidence of lost productivity. [C’s] lack of contemporaneous project documentation of the impact of the delays and its failure to proffer credible testimony, impeached the overall reliability of its evidence. While [C’s expert] was very willing to assume [D]-caused delay and interference, there was very little evidence in the record to back up his assumptions. Given the size and complexity of this project, the number and nature of changes reflected in the [variation instructions] were not so momentous as to impact the project in the significant and serious ways that [C] claims. As we recently stated in Clark Construction Group, Inc15, ‘[t] he after-the-fact, conclusory assessments of the [CA], or the opinions of its experts are not sufficient substitutes for [C’s] underlying obligation to contemporaneously document the severe adverse impact on [labour] efficiency it now claims resulted from the changes and RFIs.’ We conclude that [C’s] evidence failed to provide proof of change to working conditions or loss of productivity. To the extent that [C], or [D] raised other issues of arguments related to these appeals, we have fully reviewed and considered them and found them unpersuasive.”

13–014 Accordingly, it can readily be appreciated that the need to establish clear and well-thought-out schemes for documenting and retrieving project information cannot be overemphasised. The project documentation should provide the information needed effectively to tender, plan, manage and construct the work, and an accurate and complete record of on-site conditions, problems encountered and their effect on progress. If the project is delayed, or disrupted, this information will be needed to evaluate, support, and successfully resolve the claim for more time, more money, or both.

12 L & C Europa Contracting (2004) ASBCA No 52848. 13 Bay Construction Co (2002) VABCA Nos 5594, 5625–5626, 5628, 5831. 14 See also, Centex Bateson Construction Co Inc (1999) VABCA Nos 4613, et al, 99–1 BCA 20,153, Dawson (1993) 93–3 BCA 26,177, Triple “A” South (1994) ASBCA No 46866, 94–3 BCA 27,194, Bechtel National Inc (1990) NASA BCA No 1186–7, 90–1 BCA 22,549. 15 Clark Construction Group Inc (2000) VABCA No 5674, citing Fru-Con Construction Corporation v The United States (1999) 43 Fed Cl 306, affirmed (2000) 250 F 3d 762 (Fed Cir); Centex Bateson (1999) 99–1 BCA 20,153; Triple “A” South (1949) 94–3 BCA 27,194.

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Progress records 13–015 Good progress records help avoid confusion and assist in reaching agreements by defining facts, roles and responsibilities during the progress of the work. They also help co-ordination of activities during the progress of the work and, in the process, help to reduce the incidence of disputed claims16. A detailed listing of the types of records that should be maintained during the currency of a project appears at App.2. 13–016 Effective records management will usually require an holistic approach to discussion and agreement on the type, form, and timing of records to be kept by C, C’s subcontractors and suppliers, the CA, the design team, D, D’s separate contractors, subcontractors and suppliers and so on. In doing so, the questions of who will need to access the records, how they will be retrieved, for what the records will be used, and how they will be applied should be at the forefront of agreement on form, content and timing and submittal. 13–017 Despite the importance of progress records to time management and proof of claims, research carried out by the CIOB into the way time had been managed on nearly 2,000 projects, over a three-year period17 showed that there was little understanding in the construction industry as to what progress records were needed, or how they should be kept. Figure 13.118 indicates the percentage of respondents who kept, or were familiar with the keeping of the necessary basic data, in relation to labour resource records. 13–018 Those who are concerned with dispute resolution may not be particularly surprised by this, but anyone employed in proactive project control and project management should be seriously concerned at the evidence of the failure of the industry to keep even the basic data about the resources employed. When asked about the data kept on the work carried out, barely two-thirds identified the work being carried out by reference to a description on a schedule (see Figure 13.2)19. For the one-third that did not, the work recorded as having been carried out would be impossible to identify in relation to what was planned to be carried out. [Please refer to Figures 13.1 and 13.2] 13–019 The CIOB report identified that: “It is apparent from the response to this question that approximately one third of respondents are familiar with a failure to keep the necessary progress records that could enable them to detect trends in labour resources or to relate the labour used to the activity timed on the master programme or short-term programme. Without such information it is impossible to detect the symptoms of disruption and the resultant lost productivity or to predict with any certainty the effects of progress made in relation to progress planned.”

13–020 The report found that slightly more attention was given to the basic data for plant records, where approximately 80% of the respondents to the questionnaire were found to keep adequate basic plant data, but only a little over 50% recorded adequately the work upon which the plant was engaged20. 16 The Kellogg Corporation, Avoidance and/or Mitigation of Construction Claims (Kellogg Corporation, 1993). A seminar paper given to The Colorado Department of Transport. 17 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century, June 2008. 18 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008), at chart 35. 19 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008), at chart 36. 20 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008), at charts 37 and 38.

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13–021 In relation to project control records, the CIOB Guide advises21 that: “The records to be kept are those which will help in the management of the works going forward and the establishment of the facts surrounding the work, which has gone before. Unless the correct information is kept in relation to the purpose for which it is to be used, no matter how accurate it is, or how well it is presented, it will be ineffective and of little use. It follows that the purpose for which the records are to be used will be the overriding factor as to their content. However, there are some types of data which are essential to any record, no matter for what purpose it is to be put. These are: coordinating code activity description date of record resource used start and finish dates the author of the record. progress data.”

13–022 However, more specifically, in relation to work carried out, the Guide advises22 that data should be kept on such matters as the answers to the following questions: What and how much work was done (on an activity-by-activity basis)? How much duration is remaining to complete the activity worked upon? Who did it – the labour resource? With what was it done – the plant and material resource? When was it done – the date and timing of the activity? Where was it done – the location in which it was carried out? and How was it done – the process adopted? 13–023 In regard to progress of an activity, the CIOB Guide advises23: “If an activity is started and completed in its entirety in a reporting period, the work done will be self-explanatory. However, if it is not, then the quantity of work achieved in the reporting period, together with the date upon which the record was made, must be identified. Without a degree of progress identified by a certain date, for some purposes, the record will be useless.”

13–024 Apart from the necessity of keeping such records in order to substantiate C’s position at the time an event occurred, the CIOB Guide points out that the value of such information to C, in the forward planning of its work, is in connection with the management and control of repetitive tasks and improvement of its scheduling on future projects. In relation to repetitive tasks, the Guide advises24: “Trends in productivity achieved, derived from the as-built productivity data, should be used to verify the planned schedule for the remainder of those activities. If a discrepancy is found between what is planned to be achieved and what, by reference to the progress records, can be proved to be achievable, changes should be made to the schedule to accommodate the discrepancy. In relation to an activity such as piling, for example, each rig’s productivity should be analysed (in order to ascertain the optimum pile-cycle achievable and the effect 21 Chartered Institute of Building, Guide to Good Practice Projects (Chichester: Wiley Blackwell, 2010), para.4.3.6. 22 Chartered Institute of Building, Guide to Good Practice Projects (Chichester: Wiley Blackwell, 2010), para.4.3.13.5. 23 Chartered Institute of Building, Guide to Good Practice Projects (2010), para.4.3.13.1. 24 Chartered Institute of Building, Guide to Good Practice Projects (2010), paras 4.2.4.4–4.2.4.6.

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of any prior departures from it). The demonstrable, achieved productivity cycle can then be used to verify the activity durations planned for the remaining piling works. If it should be found that the productivity which has been achieved, is insufficient to maintain the schedule, changes can then be made in good time to the planned resources and/or to the sequence of the works in order to bring the work back on schedule. One of the advantages of this repetitive-sequence review is that in the case of an occurrence which disrupts productivity, the bench-mark proven optimum productivity will be the best possible baseline from which to calculate the effects of the disruptive event.”

13–025 As to using as-built data for benchmarking for the purposes of better proactive scheduling of future projects, the CIOB Guide advises that25: “If the principles of this Guide are followed, every project will provide a plethora of data from which many uses can be made in the improvement of performance in future projects. The data will have been captured throughout the life of a project by reference to the progress-records database, the updated working schedule and the impacted schedules, and these can be used effectively to identify any departure between the investigated state and the desired standard in any particular case. There are two aspects to benchmarking. On the one hand, the process will establish achieved norms of productivity and activity durations for common and project-specific working conditions, work types, trades, resource and so on and, on the other hand, for common data it will provide some degree of comparison between the time model performance and industry best practices, or standards.”

Change control 13–026 Notwithstanding the clarity and eloquence of the many judicial expositions on the rationality of causation26, there is no doubt that those at the work-face, particularly, it seems, in the construction industry, have some difficulty understanding issues of causation and demonstrating the link between a loss suffered and its cause. Construction projects necessarily involve complex factual matrices, frequently complicated by questions of parallelism, pacing and concurrency27, multiple issues, a shifting timeframe, and several parties with differing contractual obligations, and so on, which together, go to produce hugely complex problems. 13–027 In earlier times, the impracticality of proving C’s actual costs suffered as a result of D’s liabilities may have been relatively easy to argue. However, with the forms of computers, communications, record-keeping, accountancy and database facilities commonly available at the beginning of the twenty-first century, it ought to be a formidable hurdle to clear. The more so for major contractors who boast the high quality of their management expertise. 13–028 Good records of the events leading to and supporting a contention that a change in quality, quantity, timing, circumstances, or process occurred and had a quantifiable effect, can mean the difference between settling a claim for an extension

25 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (2010), paras 5.4.1 to 5.4.3. 26 See Ch.14, “Cause and effect”, throughout. 27 See Ch.18, “Concurrency, parallelism and pacing”, throughout.

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of time and/or a financial claim there and then, and waiting some years to represent the arguments before an adjudicator, judge, or arbitrator. 13–029 Apart from feedback for management purposes during the course of the project, thorough documentation of change is important because, if the project is delayed, or disrupted, the contemporaneous project documentation will become the source for evaluating, supporting, and successfully defining the issues of cause and effect in a delaying event. Records of project activities are of particular importance as a source of facts for evaluation of issues in proactive project control and as evidence of events in case of dispute. 13–030 In HMAGFI v Gordon Forbes28, it was held that the expression “contemporaneous records” meant original, or primary documents, or copies thereof produced, or prepared at, or about the time giving rise to the claim; it did not mean witness statements or other anecdotal evidence. In this case, it was held that, in the absence of such contemporary records as was required by the contract in question, the claim for reimbursement of alleged losses would fail. 13–031 Accordingly, it should be the job of all those concerned to ensure that project records are: made contemporaneously with the event; made by, or based upon, information from persons with knowledge of the event; kept as a matter of company practice; and sufficiently detailed to permit a third person to reconstruct from them the sequence and timing of the affected activities. 13–032 In their commentary on the effects of Wharf Properties29 (a case before the Privy Council, in which the claim was struck out because the pleadings did not show the necessary link between cause and effect), the editors of Building Law Reports said: “it seems that it will in future be necessary for [C] to be quite specific as to the delay which it is alleged was caused by an event such as a breach of contract, or an instruction giving rise to a variation it will mean that proper records will need to be kept, or good use will have to be made of existing records to provide the necessary detail. It will no longer be possible to call in an outsider who will simply list all the possible causes of complaint and then by use of a series of chosen ‘weasel’ words try to avoid having to give details of the consequences of those events.”

13–033 Clear factual evidence is crucial to a successful claim for an extension of time and/or reimbursement of loss and/or expense. A typical example of the effect on costs of the records available is demonstrated by a case in which C had been caused delay by multiple changes of design and structural difficulties on a £4m conversion of an existing building in London, England. The contract period had extended from 72 weeks to 106 weeks, costing C nearly £2m more than it had been paid on the value of certificates. Had the records been kept adequately, even if only on paper, it could reasonably have taken six weeks to analyse the daily site records30 and to determine the nature of any case to be put forward. However, in order to find out what work had been carried out and where it had been carried 28 Her Majesty’s Attorney General for the Falkland Islands v Gordon Forbes (Falklands) Construction Ltd (2003) 19 Const LJ 149. 29 Wharf Properties Ltd v Eric Cumine Associates (1991) 52 BLR 1. 30 Say, one site diary page per day for 104 weeks at, say, 15 minutes per page.

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out, it first took three months to examine over 12,000 records in 4,000 documents. After that, C’s staff of four took a further six months to find out what had happened in the periods when no satisfactory records were kept, in identifying the logical flow of work that had actually taken place, and in separating the contract work from the changed work. [Please refer to Figure 13.3] 13–034 The CIOB research31 found that, when asked about the data kept in support of claims, 22% of all respondents replying to the question said that they were not cognisant of any records at all being kept of compensation-related or delay-related events. Figure 13.3 illustrates the results of the questionnaire, in this regard, which shows that only 14% of respondents were familiar with additional work being identified by relation to an activity ID on the schedule and 3% or fewer related that logically to the programme to be able contemporaneously to gauge its likely effect on completion. 61% experienced details of the source of the change being recorded and 39% the description of any additional tasks being recorded. 51% were familiar with the labour resource and 34% the plant and equipment resource allocated to the change being identified. Fewer than a third of respondents were familiar with materials allocation records being kept. 13–035 In light of the apparent failure to keep good progress records, it is perhaps unsurprising that, when asked to consider a delayed project with which they were familiar and invited to indicate to what extent an extension of time had been awarded, the results indicated that, in 80% to 85% of cases, C was likely to be held liable for the delay to completion32. 13–036 The CIOB Guide advises33 that, in relation to excusable or compensable events, in order to undertake any meaningful analysis of the effect thereof, most important will be: the identification of the date upon which the event itself was initiated; and the chain of causation arising therefrom. 13–037 This is because: it will clarify whether events have happened sequentially, in parallel, concurrently, or simply to keep pace with other work and assist in distinguishing the effect of one event from that of another; it will determine the calendar date after which an event can possibly have an effect; it may determine the point from which a notice under the contract may be required to be given; and it may determine the time at which statutory limitation of liability provisions commence. 13–038 Whilst the detail of what is required by way of supporting data will differ between events of different character, in principle, in relation to every intervening event,

31 Chartered Institute (2008), chart 39. 32 Chartered Institute (2008), chart 12. 33 Chartered Institute Projects (Chichester: Wiley

of Building, Managing the Risk of Delayed Completion in the 21st Century of Building, Managing the Risk of Delayed Completion in the 21st Century of Building, Guide to Good Practice in the Management of Time in Complex Blackwell, 2010), para.4.5.7.4.

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of any sort, the CIOB Guide advises34 that the points that must be addressed in data capture are: a unique event identifier; description of the event; originator and/or authoriser; relevant contract clauses providing for extension of time; relevant contract clauses providing for compensation; date the event is instructed/occurred; responsible parties; the activities added, changed, or omitted; the labour and plant resources for each added or changed activity; the date and timing of the added, or changed activities; the location in which any added work was carried out; the workflow process adopted in carrying out the change. 13–039 In relation to workflow, the Guide advises that: “The logic of the intervening event should be set out clearly, together with the activity which it affects, and the way it affects it. If, for example, a planned activity has actually started, when late, or revised information is provided, that later information cannot logically inhibit the start of the activity. That will be so, even if the logic of the sequence was planned on the basis that all information was to be provided before the activity in question could start. Under those circumstances, if the later information has any effect at all, because the activity has already started, the effect of it will be to increase the planned duration of the activity either: by the time it takes to carry out the additional work in relation to the planned finish of the activity; or as a result of the delaying effect of the disruption caused.”35

13–040 The crucial importance of keeping appropriate records of changed circumstances can be illustrated by the case of Clark Construction36, in which the Board took the view that the absence of labour allocation records in relation to its allegation that delayed response to RFIs had caused lost productivity implied that there was in fact no lost productivity at all, and rejected expert testimony to the contrary, saying: “[The subcontractor’s expert] testified that [the subcontractor’s] record keeping, primarily its tracking of labour and material being expended, was better than that of most large mechanical subcontractors. [The subcontractor’s expert] also opined that it was not practical to maintain records to track labour productivity by a specific cause. [The subcontractor] here claims that it and [its sub-subcontractor] are owed over $1.5 million for the portion of the almost 50% overrun in labour allocated to [D’s] liability. [The subcontractor] knew very early in the project that its labour costs were greatly exceeding estimates, that the entire planned construction sequence changed and that the site was wet. In the face of the alleged, pervasive, [D]-caused inefficiency, we reject the notion that [the subcontractor], a selfdescribed large, experienced and sophisticated mechanical contractor could not track or document the severe effects on its labour efficiency as they occurred.

34 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), para.4.5.3. 35 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), para.4.5.7.6. 36 Clark Construction Group Inc (2000) VABCA No 5674 at 65.

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The liability for tardy RFI responses is established by showing that the late responses somehow reflect the [D’s] failure to fulfill a contract obligation. [The subcontractor] also has to prove both that the changes and late RFI responses caused changes to working conditions beyond the parameters of the conditions the parties could reasonably anticipate and that the changes and late RFI responses lowered the productivity of its labour. The after-the-fact, conclusory assessments of the project managers or the opinion of its experts are not sufficient substitutes for PKC’s underlying obligation to contemporaneously document the severe adverse impact on labour efficiency it now claims resulted from the changes and RFIs.”

13–041 On the other hand, in Grumman, the Board thought that the workmen on site would not necessarily know whether what they were doing amounted to a change so as to come up with a calculated cost of the effect of the events at D’s liability. The Board observed: “An early awareness of potential impact is not the same as the ability to collect separately the costs. Similarly, the early engagement of experienced professionals may not guarantee the result. On the other hand, the inability of an experienced professional to come up with the data might indicate that it could not reasonably be done. We are not prepared to fully subscribe to [C’s] claim that it would have had to assign a person to every [C’s] worker on the production floor and monitor the worker’s activities each day. However, we do think there is merit to the view that any type of charging system would have required the individual [C’s] worker to know what was a change and what was not a change and to record accurately the impact of the [D’s cost risk event] changes.”

Record retrieval 13–042 The CIOB research revealed that the construction industry tended to give little thought to how the records were likely to be used and how they could be retrieved. At chart 34, the report found that: “Only 7% of those familiar with record keeping had experience of them being kept by automated or manual input into a relational database that would produce virtually instantaneous reports of trends and effects of progress and productivity. 40% had experience of the records being kept on a spreadsheet either by direct entry or by transcription from paper records, requiring some analysis to be able to detect trends and effects of progress achieved. An alarming 53% of respondents answering this part of the questionnaire were familiar with records being kept only on paper, rendering them virtually useless for contemporaneously detecting trends, managing the effects of lack of progress and identifying the factual data relative to loss-causing events.”

13–043 In relation to the retrieval of records in complex projects, the CIOB Guide advises: “Records which cannot be retrieved are useless. Accordingly, the process of record keeping is inseparable from the process of record retrieval. It follows that in order to identify an adequate means of keeping records in the first place, consideration must be given to how they can be retrieved and used.”37

13–044 Accordingly, the Guide advises that, for complex projects, record management can only properly be achieved by keeping the necessary progress and change control records in a database to which all those needing them can have access38. 37 Chartered Institute Projects (Chichester: Wiley 38 Chartered Institute Projects (Chichester: Wiley

of Building, Guide to Good Practice in the Management of Time in Complex Blackwell, 2010) para.4.3.1.1. of Building, Guide to Good Practice in the Management of Time in Complex Blackwell, 2010) para.4.3.3.1.

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13–045 Apart from the advantages of using a computerised document management system for information control, it is in the processes of sort, search and retrieve that the computerised database is at its best. The concept is simple: records are created in such a way that they can be found by looking for them in different ways. When located, they are then automatically sorted, ordered and presented in a contemporaneous report independent of the records themselves. The computer report can be displayed on the computer screen for momentary inspection, or a topical chronology can be printed in hard copy. This process can be repeated indefinitely in producing reports of differing content for different purposes or issues, although the records need only be “entered” or “created” once. 13–046 Thus, the purpose of installing data onto a computerised database is to enable any evidential issue to be quickly accessed, so that the fullest available information in relation to that issue is always at hand. 13–047 When a computerised document control system is not used, identifying hard copy documents giving evidence of the cause and effect of change in the course of a construction project is not easy. If locatable, the relevant documents should be kept in a separate “dispute file”. Correspondence fixing key project events, such as notices to proceed, strikes, release of retention, approval of submissions, or submissions that cross the contract manager’s desk and could have a bearing on an issue in contention should be tagged and copied to this file. 13–048 At the close of the project, if the dispute file has been maintained, C, its lawyers, or its experts can prepare an accurate and cost-effective reconstruction of the project history. Provided that this is done effectively, a decision as to whether a claim might fruitfully be pursued, or defended, can then be made quickly and at a fraction of the cost of those in which dispute files have not been maintained. 13–049 In the case of a construction contract where a dispute has arisen, and in the event that a quick settlement does not appear likely39, then a memorandum should be sent to all the offices and locations affected, requesting staff to deliver up all hard copy documents (including both originals and all copies of originals) for inclusion in the dispute file. Particular care should be taken to ensure that documents and files are not defaced, destroyed (either specifically or in accordance with a company practice of destruction after the lapse of a stipulated number of years), annotated, or marked in any way. 13–050 If the matter settles without going to trial, that will usually be because of the attention given to the assembly of factual information. The cost of any time taken to do that should be seen in that light.

Electronic data exchange 13–051 Two key factors have emerged in favour of the adoption of electronic data exchange systems between the parties to a construction contract and their subcontractors and suppliers: the growth of the number of systems available and the reduction in relative cost. 13–052 Electronic communication capabilities have been notable for their exponential growth in recent years. This growth has occurred in relation not only to capacity, but also to the types of technologies that are available to businesses, for example: the emergence of the internet; the widespread use of email; 39 For example, within the course of a few weeks.

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improvements in mobile telephony; the emergence of wireless technologies such as Wi-Fi; improvements in handheld and portable computing technology; digital camera technology; scanning and optical character and handwriting recognition technology; voice recognition technology; and improvements in data security, such as firewalls and electronic signatures. 13–053 However, in spite of the emergence of all of this technology, the construction industry, as many commentators have noted, has been slow to incorporate it into its usual practices. A 1999 survey commissioned by the UK Building Centre Trust, for instance, showed that, at that time, some 80% of communications on construction projects were on paper40. Anecdotal evidence suggests that this percentage has not decreased dramatically since then. Thus, a key objective of the EDI protocols is to encourage the industry to improve its use of new technology. 13–054 Since about 1995, there has been, in the United Kingdom and elsewhere, a growing recognition of the long-term advantages that can accrue when parties on a project join together in “a spirit of mutual trust and co-operation”, as the ECC2 and ECC3 contract forms put it41. This has manifested itself in new contract forms and in greater (although not universal) acceptance of the possibility of adopting “partnering” and “collaborative” project procurement arrangements. Such endeavours represent an attempted cultural shift away from what might be described as the traditional adversarial, or confrontational tendencies of parties to construction contracts. Project data exchange systems, therefore, might be considered to represent some of the technological aspects of that cultural shift. 13–055 An important consideration in the implementation of standard practices in a data exchange system will be the parties’ respective policies and rules across corporate and contractual boundaries, in relation to electronic data, software, and information technology. This tends to be embodied in a collateral agreement known as an “Electronic Data Interchange” (EDI) agreement. The standard forms of EDI agreement, which incorporate the ICC rules42 for the exchange of data in the context of international trade, are not specific to any industry and are intended to be used either bilaterally or multilaterally (that is, among two, or more parties). 13–056 NZ03, SIA80, HK86, the 2009 edition of the Irish government forms, the GC/Works series of UK government forms, ECC2, ECC3, the ICE forms and HK05 currently make no reference to an electronic exchange protocol of any sort. The current FIDIC43 forms simply say that communications shall be in writing, “or transmitted using any of the agreed systems of electronic transmission as stated in the Appendix to Tender”. Similarly, MC08 says that communications may be in electronic form, but gives no guidance as to a protocol for electronic exchange44. Although a collateral agreement, in JCT98 it is incorporated into the contract documents. For example,

40 P Goodwin, The PIX Protocol Guide and Toolkit (Building Centre Trust, 2004), p.3. 41 The Engineering and Construction Contract – Guidance Notes, 2nd edn (London: Thomas Telford, 1995), p.27. 42 Uniform Rules of Conduct for Interchange of Trade Data by Transmission, International Chamber of Commerce. 43 At Cl.1.3(a). 44 Cl.1.8.

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JCT98 specifies at Cl.1.11: “Where the Appendix so states, the ‘Supplemental Provisions for EDI’ annexed to the conditions shall apply.” 13–057 The Supplemental Provisions for EDI45 provide that: “1. 2. 3.

the parties are to enter into an EDI agreement prior to entering into the construction contract; nothing in the EDI agreement is to take precedence over the conditions of contract; whilst anything specified to be in writing can be validly made if made in compliance with the EDI agreement, that does not apply to the following which nevertheless, are to be in writing: a. determination of the employment of C; b. suspension of the work by C; c. the final certificate; d. any reference to the dispute resolution procedures; and e. any collateral agreement.”

13–058 On the other hand, JCT05, DB05, IFC05, IFWCD/05, MP05 and PCC06, provide that where information is to be transmitted that may be achieved other than by hard copy, “..any documents to be supplied may or (where so required) shall be sent or transmitted by the means (electronic or otherwise) and in such format as the parties from time to time agree in writing for the purposes of this contract.”46

13–059 By a footnote to that clause, these forms add the advice that: “The parties should agree a communications protocol before entering into the contract or as soon thereafter as is practicable. If the medium or format to be used for [C’s] design submission procedure (schedule 1) is not stated in [D’s] requirements or [C’s] proposals, that also should be covered by the protocol.”

13–060 MC08, WC/08, CM08 and TC08, on the other hand, invite D to identify what it requires by way of electronic communications in the recitals to the contract, where D is invited to specify: “the communications that may be made electronically and the format in which those are to be made (if none are identified, all communications are to be in writing, unless subsequently agreed otherwise).”47

13–061 The recognition of the benefits of efficient project data exchange systems has led to some significant progress in codifying and standardising procedures. For example, the PIX Protocol Guide and Toolkit has been created to provide a practical template and guidance document for the creation of a data exchange system on construction projects. The resultant EDI agreement following implementation of the “toolkit” is called a “PIX Protocol”; PIX being the acronym for “Project Information eXchange”48. 13–062 As far as the PIX Protocol system in particular is concerned, its key elements, according to its guidance document, are as follows: a definition of the client’s information requirements, both during and at the end of the project; 45 46 47 48

Annex 2 to JCT98. See, for example JCT05, Cl.1.7.2. See, for example MC08, Cl.1.8. P Goodwin, The PIX Protocol Guide and Toolkit (Building Centre Trust, 2004).

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agreement within the team on which information is to be exchanged electronically; common formats for exchange and agreed rules for re-use of electronic information; alignment of design management principles for the project; this means agreeing items such as drawing origins and grids and that design co-ordination processes are followed; alignment of document management principles, such as file-naming conventions and document-numbering systems; agreement on computer aided design (CAD) standards to be used; this means agreeing alignment in areas such as common software platforms, CAD modelling approaches and layering conventions within CAD models; and agreement on standards for project communications, such as minimum speeds for internet communications, how electronic files are to be transported and agreement on maximum file sizes that can be produced for each communication channel. 13–063 The “team” in this context refers to the collaborating entities on a project (D, its consultants, designers, suppliers, the CA and C and its subcontractors and so on). In order for a PIX Protocol to operate, it needs to be agreed. The guidance document recommends that the Protocol forms part of the contractual specification, to encourage higher levels of compliance and to avoid the prospect of “some team members only paying lip service to the concept”. To obtain the necessary information as to the capabilities of each party, standard questionnaires are issued by D for the other team members to complete. This process is termed the “team capabilities review” and is intended to cover all relevant technical subject-matter of the data exchange agreement. Whilst it is said that the questionnaire is designed to interrogate the minutiae of each team member’s existing practices and capabilities in the various subject areas listed, it is unfortunate that none of this is referable to management information, schedules, or progress records. 13–064 Following the questionnaire, a PIX Protocol can then be drafted and agreed taking this information into account. Typically, if it is not simply going to be a case of all parties matching the lowest common denominator (which would in any case be inconsistent with the stated aim of achieving “best practice” across the project), for some team members conformance to the PIX Protocol will mean upgrading their existing capabilities. The guidance document recognises that such upgrades are likely to need to be negotiated on a commercial basis with D. 13–065 The guidance document also recommends that implementation should ideally commence in the feasibility stage of a project – before the team has been selected. In that way, the team capability review can take place in conjunction with the tender selection process and the requirements for conformity with the Protocol can be negotiated in the same way as any other part of the specifications. 13–066 If this does not occur and the team is already appointed, the guidance document suggests that a “team leader” be appointed to conduct the team capabilities review, before publishing draft and final PIX Protocols in conjunction with the other team members. Alternatively, a meeting of all the team members can be held with the aim of agreeing a Protocol straight away. If a project data exchange system can be implemented, it can, according to the promoters of the PIX Protocol, potentially save up to 10% of project cost49. 49 P Goodwin, The PIX Protocol: A Risk Reduction Tool for Construction Projects (2004), p.13.

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Building Information Modelling 13–067 Building Information Modelling (BIM) is an “intelligent” three-dimensional computer aided design (CAD) model, although it differs from a CAD model in that a BIM is not just an illustration of the design but a simulation of it. The intelligence in the BIM comes from each component part of the model containing information about material specification, weights, thermal capacities and the like in a three-dimensional environment. A useful BIM definition is provided by the National Institute of Building Studies50 as follows: “A Building information Model, or BIM, utilises cutting edge digital technology to establish a computable representation of all the physical and functional characteristics of a facility and its related project / life-cycle information, and is intended to be a repository of information for the facility owner/operator to use and maintain throughout the life-cycle of a facility.”

13–068 The successful implementation of a BIM would help to eliminate duplication of design effort, ensure consistency across discipline interfaces, ensure consistency of communication, facilitate advanced value engineering and ensure effective project control. Theoretically, a single project-wide BIM could be used to overcome such common deficiencies in information management as51: providing a single data entry for multiple users. Traditionally, design data may be duplicated (and confused) by multiple users; a single project-wide BIM would enable the data to be entered once and to be used and analysed by many; improving design efficiency; a single project-wide BIM would eliminate the need for 2D drawings and hence design interface data requirements between different designers; minimising inconsistencies; clash detection is inherent in 3D modelling; improving estimating; as the model is “intelligent”, material take-offs may be automatically produced for estimating purposes; improving communications; value engineering options can be more readily understood; improving time control; linking the schedule to the 3D model could provide a ‘real time’ construction model, facilitating the examination of the effect of alternative construction strategies; and providing a source of recorded information; the “as-built” BIM model may be handed over to the client for effective facilities management in use. 13–069 The value of a single project-wide BIM would be in the speed and accuracy of the communication process. However, in practice, many of the potential advantages are currently lost, simply because the BIMs in use tend not to be a single project-wide model in which all data resides, but multiple models, held by various parties built for specific purposes52. Such multiple BIM models then sit in isolation from each other,

50 The National Institute of Building Science, through the building SMART alliance, is developing a National BIM Standard (USA). 51 See also, H Ashcraft, Building Information Modelling: A Framework for Collaboration (Society of Construction Law, 2009). 52 D Larson and K Goldon, “Entering the brave new world: an introduction to contracting for BIM” (January 2008) Mortenson Construction.

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with each project stakeholder having to revise its own BIM from time to time, bringing with it all the problems of duplication, miscommunication, and mis-co-ordination that are apparent in more traditional methods of data handling. Theoretically, a BIM is the glue that binds the collaborative design and construction process together, but ironically it is also the point at which the project may become unstuck53. 13–070 Since the fourth edition of this book was published, there has been a significant increase in the recognition and uptake of BIM on construction projects around the world. As BIM continues to develop, the understanding of the subject and the speed of adoption varies between different countries54. As a consequence, this has led to “BIM” meaning different things, to different people, across the globe55. So, what is BIM?

The acronym 13–071 The acronym BIM has caused confusion in the construction industry. In the published literature, there is inconsistency of the word represented by the letter “M”, with terms such as: Building Information Model, Building Information Modelling and Building Information Management emerging. In some instances, the acronym has extended to BIM(M) (Building Information Modelling and Management), which also suffers from the dual spelling of “Modeling”. Further confusion is contributed by the word “Building”, which suggests that BIM is specifically for buildings. However, it is widely accepted that BIM is applicable to non-building works, such as infrastructure projects56.

Definition 13–072 Even if the same words are used to form the acronym, a universally accepted definition of BIM does not exist57. As a result, a great deal of ambiguity exists58. 13–073 Attempting to understand this ambiguity, there appears to be a difference between theory (BIM as a process) and practice (BIM as a technology). The paragraphs concerning BIM in the fourth edition (at paragraphs 13–067 to 13–069 inclusive) focus upon BIM as an “intelligent” 3D model, which aligns the text to the term Building Information Model (a technology). Whilst the benefits of intelligent 3D models discussed in those paragraphs still remain apposite, it can also be argued that focus on the model and technology is a common misconception of BIM. Instead, the more

53 D Tyerman, Integrated Project Delivery and Project Collaboration, a Contractual Analysis, Construction Law and Arbitration LLM Dissertation (Robert Gordon University, May 2010) (unpublished). 54 SmartMarket Report, “The Business Value of BIM for Construction in Major Global Markets: How Contractors Around the World Are Driving Innovation With Building Information Modeling” (McGraw Hill, 2014). 55 NBS International BIM Report 2013 (NBS, 2014). 56 SmartMarket Report, “The Business Value of BIM for Infrastructure: Addressing America’s Infrastructure Challenges with Collaboration and Technology” (McGraw Hill, 2012); O Teall, “Building Information modelling in the highways sector: major projects of the future” (2014) 167(MP3) ICE Management, Procurement and Law 127–133; F Blanco and H Chen, “The Implementation of Building Information Modelling in the United Kingdom by the Transport Industry” (2014) 138 Procedia – Social and Behavioural Sciences 210–520. 57 “Building Information Modelling Report March 2011” (NBS, 2011). 58 B Abbasnejad and H Moud, “BIM and Basic Challenges Associated with its Definitions, Interpretations and Expectations” (2013) 3(2) International Journal of Engineering Research and Applications 287–294; D Zuppa, R Issa and P Suermann, “BIM’s Impact on the Success Measure of Construction Projects” (2013) Computing in Civil Engineering 503–512.

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widely understood terminology for BIM is Building Information Modelling, which can be defined as “a rich information model, consisting of potentially multiple data sources, elements of which can be shared across all stakeholders and be maintained across the life of a building from inception to recycling (cradle to cradle)”59.

What’s involved and how does it differ from “conventional” practice? 13–074 Regardless of the words used to form the acronym and its precise definition, BIM (in a broad sense) is becoming growingly accepted as a process of generating and sharing information (predominantly electronic) throughout the lifecycle of a built asset. This requires documentation, non-graphical data and graphical model(s)60 to be created, managed and shared in a structured manner in order to ensure that the correct information is given to the appropriate people, at the appropriate time. These outputs are to be stored in a Common Data Environment (CDE) for the lifecycle of the built asset, thereby allowing one point of access for all data and information related to the asset. 13–075 In order to achieve this, collaboration between all project team members is required, which is underpinned by tools and technology61. Collectively, this should unlock more efficient methods of design, construction and maintenance62. On the surface, this may appear not to be anything new and could arguably be characterised as “best practice”; however, where BIM differs from other approaches is in the development and use of the “information model”63. 13–076 The information model lies at the heart of BIM. Here, non-graphical data and documentation can be linked to, or embedded and generated from, a 3D virtual representation of the works, which is to be produced using object-based parametric modelling software. This software advances from “traditional” CAD based lines and places objects with rules and parameters, which determine both geometric and non-geometric properties and features64. The relationships and constraints as between objects ensure that realistic connections as between elements and, through synchronisation, a change to an object in one view will automatically update all other views and linked information. 13–077 The benefits of synchronised information can be expanded to multiple dimensions, which include 4D (time), 5D (cost), 6D (FM)65 and beyond (nD)66. If these are correctly synchronised, a change in any one of these views (or dimensions) will instantly change all of the linked information for all other dimensions and report the most upto-date information for the asset. 59 “Building Information Modelling Report March 2011” (NBS, 2011). 60 BSI, Specification for information management for the capital/delivery phase of construction projects using building information modelling (PAS1192–2, 2013). 61 Investing in BIM: A Guide for Architects (BD, 2014). 62 Building Information Modelling – Industrial strategy: government and industry in partnership (HM Government, 2012). 63 “The information model comprises three constitute parts: Documentation, non-graphical information and graphical information” Specification for information management for the capital/delivery phase of construction projects using building information modelling (PAS1192–2, 2013). 64 C Eastman, P Teicholz, R Sacks and K Liston, BIM Handbook: A Guide to Building Information Modeling for Owners, Managers, Designers, Engineers, and Contractors, 2nd edn (New Jersey: John Wiley and Sons, 2011). 65 BIM Overlay to the RIBA Outline Plan of Work (London, England: RIBA Publishing, 2012). 66 T Tse, K Wong and K Wong, “The utilisation of Building Information Modelling in nD modelling: A study of data interfacing and adoption barriers” (2005) 10 ITcon 85–100; L Ding, Y Zhou and B Akinci, “Building Information Modelling (BIM) application framework: The process of expanding form 3D to computable nD” (2014) 46 Automation in Construction 82–93.

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Levels of BIM maturity 13–078 Given the various capabilities of BIM, it is not enough for organisations, or projects, to simply to say “we do BIM”. In an attempt to take the ambiguity out of the term and to make specification easier, the United Kingdom has created a BIM “maturity wedge” (see Figure 13.4)67 to support their requirement of “fully collaborative 3D BIM (with project and asset information, documentation and data being electronic) as a minimum by 2016”68 for all centrally procured government projects in the United Kingdom. This target level of BIM is commonly referred to as “Level 2”. Information on each level is further described in Figure 13.4. [Please refer to Figure 13.4] Level 0: Poorly managed CAD (predominantly 2D), which is exchanged using paper or electronic paper. Level 1: Managed 2D and 3D CAD, with a common data environment (CDE)69 for electronic information exchange, which is the level at which the majority of UK industry is believed to be operating. Level 2: Managed 3D models produced using parametric modelling software. Each project team member develops an information model, which is brought together by a BIM co-ordinator in order to produce a “federated”70 model. Documentation, graphical and non-graphical data is embedded, or linked into the model within a CDE. This can be furthered to include multiple dimensions. Level 3 and beyond: Although not fully developed, “Level 3” is likely to be a fully open process, with one information model that is worked on by all the project team members at the same time. This truly collaborative process could be further developed so as to include interoperability for smart cities, nano-second procurement and performance, robotics and autonomous systems71. 13–079 These “levels” are distinctly different from the multiple dimensions (nD) available. It is to be anticipated that organisations will contend that they are operating at a certain “level” of BIM companywide, although this “level” might well relate to a particular project, whilst other projects within the organisation are operating at a different level.

What is arguably not BIM? 13–080 In order to provide some additional clarity with regard to what BIM is and to try to dispel certain of the inconsistent and conflicting information that has been published to date, it could be argued that BIM is not: •

Just 3D modelling – it is not CAD; BIM requires virtual models to be created using parametric modelling software and is not merely high-rendered images, used solely for tendering purposes (“Hollywood BIM”)72;

67 Building Information Modelling (BIM) Working Party Strategy Paper (GCCG, 2011), a report for the Government Construction Client Group. March 2011. 68 Government Construction Strategy (Cabinet Office, 2011). 69 A CDE is a “single source of information for any given project, or asset, used to collect, manage and disseminate all relevant approved files, documents and data for multi-disciplinary teams in a managed process” (PAS 1192–1193, 2014). Specification for information management for the operational phase of assets using building information modelling. BSI. 70 Building Information Model (BIM) Protocol (CIC, 2013) Cl.1.1.3: A model consisting of connected but distinct individual Models. 71 Built Environment 2050: A report on our Digital Future (CIC, 2014). 72 S Kia, Review of Building Information Modeling (BIM) Software Packages Based on Assets Management (Amirkabir University of Technology, 2013).

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•

•

Just technology/software – although technology and software form a significant part of BIM, BIM is generally accepted to be a process of working and it follows that you cannot simply “buy it off the shelf”; Working in isolation (“Lonely BIM”)73 – BIM inevitably requires a collaborative approach between all project team members and is not only for a small group of users involved in the project. Neither is it enough for a project team member to work in splendid isolation and not share their documentation, non-graphical data and graphical models.

Perceived benefits of working in a BIM environment 13–081 The benefits of BIM increase as one progresses up the maturity wedge, with the main benefits being realised when operating at “Level 2”. Whilst some of the benefits associated with intelligent 3D modelling (as discussed in paragraph 13–068, above) do indeed overlap with certain of the benefits of working in a BIM environment, the benefits associated with BIM as a process must also be acknowledged. [Please refer to Figure 13.5 and 13.6] 13–082 Whilst these particular benefits are not always well quantified, it is believed that benefits can be realised by each project team member74, which, in turn, will benefit the overall project/asset. These benefits are well recorded in the literature75 and can be broadly categorised as the following. • • • • • • •

better collaboration and improved team relationships; ease of access to project/asset information; easier analysis of the ongoing project/asset; concepts are easier to realise and alternatives easier to formulate; improved workflow cycle time and reduced waste (double working); reduced lifecycle cost and schedule growth, as well as improved certainty; more sustainable construction and green performance of the asset.

Perceived barriers against BIM adoption 13–083 Moving away from any conventional practice will usually engender caution and create some form of resistance. Whilst the benefits of BIM are widely acknowledged, countering this are perceived challenges, which can act as barriers to BIM adoption. The perceived barriers identified below are grouped into four categories, which have a certain degree of element of overlap and which are specific to “Level 2” BIM whilst more advanced “Levels” will probably produce additional barriers against adoption.

73 M Das, J Cheng, S Kumar, “BIMCloud: A Distributed Cloud-based Social BIM Framework for Project Collaboration” (2014) Computing in Civil and Building Engineering (McGraw Hill, 2012); SmartMarket Report, “The Business Value of BIM in North America: Multi-Year Trend Analysis and User Ratings (2007–2012)”. 74 C Eastman, P Teicholz, R Sacks and K Liston, BIM Handbook: A Guide to Building Information Modeling for Owners, Managers, Designers, Engineers, and Contractors, 2nd edn (New Jersey: John Wiley and Sons, 2011). 75 Investing in BIM: A Guide for Architects (McGraw Hill, 2014); SmartMarket Report, “The Business Value of BIM for Construction in Major Global Markets: How Contractors Around the World Are Driving Innovation With Building Information Modeling”.

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Collaboration 13–084 BIM is a collaborative way of working76; but collaboration is more than information sharing. Collaboration involves a collaborative culture; external and internal trust and mutuality; technology and tools; process integration, and strategic planning77. BIM therefore requires a shift from the “silo working”, found on many construction projects78, and a move away from entrenched resistance to the use of new tools and technologies. This could well prove to be challenging since the nature of construction involves shortterm, interdependent, multi-party teams, with differing organisational goals. This has resulted in certain individuals and project teams becoming orientated towards a conflictbased business79. Sharing power in order to support a collaborative environment may, therefore be extremely difficult for some “team members” to accept and could well generate resistance from individuals, organisations and as a whole industry80. 13–085 Furthermore, there is a perceived lack of confidence in technology. In order to obtain maximum value in a “Level 2” BIM environment, it must be possible for technologies seamlessly to interact with one another. It is estimated that inadequate interoperability costs the capital facilities industry in the United States approximately $15.8bn per year, in addition to significant inefficiency and lost opportunity costs81. Whilst attempts have been made to resolve issues of interoperability, particularly as between different parametric modelling software packages, a lack of confidence still remains within the construction industry as to whether the original file is presented as intended outside of its native file format82. This is a particular problem when a federated model is produced using differing software packages.

Legal, contractual and insurance issues 13–086 It can be argued that “Level 2” BIM alters relationships and blurs the lines of roles and responsibility of project team members. This has already generated considerable uncertainty regarding liability, insurance and ownership83. The change from conventional construction to a BIM environment opens up questions from both promoters and participants84. Common questions in this regard include the following: • •

Who owns the federated model? Who is responsible for creating, analysing and updating the federated model?

76 Building Information Modelling – Industrial strategy: government and industry in partnership (HM Government, 2012). 77 M Barratt, “Understanding the meaning of collaboration in the supply chain” (2004) 9(1) Supply Chain Management: An International Journal 30–42. 78 Egan and Latham reports. 79 S Emmitt, Managing Interdisciplinary Projects: A primer for architecture, engineering and construction (Oxford: Spon Press, 2010). 80 P Wilkinson, Construction Collaboration Technologies: The extranet revolution (Oxford: Taylor & Francis, 2005). 81 US Department of Commerce Technology Administration, Cost Analysis of Inadequate Interoperability in the U.S. Capital Facilities Industry (NIST, 2004) . 82 S Lockley, D Greenwood, J Matthews, J and C Benghi, “Constraints in Authoring BIM Components for Optimal Data Reuse and Interoperability: Results of Some Initial Tests” (2013) 2(1) International Journal of 3-D Information Modeling 29–44; R Sacks, I Kaner, C Eastman and Y Jeong, “The Rosewood experiment – Building information modelling and interoperability for architectural precast facades” (2010) 19 Automation in Construction 419–432. 83 L Currie, Building Information Modelling: Its impact on insurance, intellectual property rights and design liability (Society of Construction Law, 2014). 84 R Joyce and D Houghton, “Building Information Modelling and the Law” (2014) 167 (MP3) ICE Management, Procurement and Law 114–116.

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• • • •

When will information be delivered and how much can it be relied upon? What is the priority of documents? Which is the most suitable construction contract and what amendments are required thereto if any? Which form of insurance is appropriate and what is covered thereby?

Use and management of information 13–087 BIM changes the manner in which information is generated and utilised during the design, construction and maintenance of a built asset. Within a BIM environment, paper documentation is limited and, where possible, information should always be provided in electronic format. This allows information to move and be accessed quicker than when conventional methods are being used. Like paper-based information, the most up-to-date electronic information requires to be stored and made available so that the appropriate project team member can retrieve and use this as required. 13–088 Although there has been a gradual move towards electronic information in the construction industry, a preference for paper documentation85, particularly for site management86, remains. When electronic information is used, it is not always well managed, which can prove particularly challenging for individuals to retrieve the information for which they are looking87. A BIM environment might well exacerbate this problem because of the mass of data that can be created and the reliance upon the contribution of information from other project team members. No longer can the release of information be governed by what is deemed “reasonable” and the greater transparency of information brings about the responsibility to warn other project team members of potential changes88. 13–089 Furthermore, the manner in which information is communicated changes within a BIM environment. Trust must be given to individual(s) managing the project information and, for the majority of the construction industry, parametric models are a new method of information exchange. Organisations are, therefore, required to understand how the information model can be used to convey and retrieve information.

Investment 13–090 Although BIM is more than software, hardware and training, these aspects form a fundamental part of the process. The requirement for each of these is different to that of conventional construction projects and will therefore require investment. 13–091 The purchasing, maintenance and upgrading of software which has been developed to support BIM tends to be more expensive than conventional CAD packages89. A certain level of computing power, which may not be found on the standard 85 P Goodwin, The PIX Protocol: A risk reduction tool for construction projects (Society of Construction Law, 2004). 86 R Davies and C Harty, “Implementing ‘Site BIM’: A case study pf ICT innovation on a large hospital project” (2013) 30 Automation in Construction 15–24. 87 L Joia, “Large-scale reengineering in project documentation and workflow at engineering consultancy companies” (1998) 18(3) International Journal of Information Management 215–224. 88 D Mosey, BIM and Related Revolutions: A Review of the Cookham Wood Trial Project (Society of Construction Law, 2014). 89 K Stowe, S Zhang, J Teizer and E Jaselskis, “Capturing the return on investment of All-in Building Information Modeling: structured approach” (2014) Practice Periodical on Structural Design and Construction.

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computers of most organisations, is required in order to support these software requirements. Hardware upgrades may therefore also be required. Training will be required in order to facilitate understanding of the new software and hardware, as well as the change in the process of generation, sharing and retrieval of information. This can be a direct and indirect cost for an organisation in terms both of time and money.

Overcoming the barriers 13–092 In order to overcome the perceived barriers associated with “Level 2” BIM adoption, BIM specific information and guidance has been published, which, taken together with recommended basic principles90, may be considered as “current best practice”. In addition to this, case studies have been undertaken in an attempt to demonstrate the practical application of BIM.

Key documents 13–093 The United Kingdom government is fully committed to BIM and attempts are being made to position the United Kingdom as a world leader in the take-up of BIM91. It is suggested that, in order to facilitate “Level 2” BIM adoption, there are seven key documents, that cross-reference other documents and that need to be considered. These include the following: 1. 2. 3. 4. 5. 6. 7.

BIM Protocol92; BS1192–2007 (Capex Model Management); PAS1192–2 (Capex Information Management); PAS1192–3 (Opex Model and Information Management); BS1192–4 (COBie)93; dPOW (digital Plan of Work)94; Classification system95.

Case studies 13–094 A plethora of promotional information has been released by various organisations and projects, asserting that they have “adopted” BIM. However, it could well be argued that the majority of these projects are not operating in a true “Level 2” BIM environment. Instead, many of these projects share certain of the characteristics of “what BIM isn’t”. This is not to say that the information contained within these reports should be disregarded, since some of it is extremely valuable and lays the foundations by which to achieve “Level 2” compliance; however, caution should always be observed when drawing comparisons with a true “Level 2” BIM environment. 13–095 Understandably, the move of the industry towards “Level 2” BIM will be a gradual one and, in some cases, a natural process. The United Kingdom government recognises this and has undertaken a trial “Level 2” BIM project. 90 F Newbery, “BIM and professional risk – update” (2013) 29(6) Construction Law Journal 450–452. 91 Government Construction Strategy: OneYear On Report and Action Plan Update (Cabinet Office, 2012). 92 There are a variety of protocols available, including bespoke protocols. Those which are commonly referred to are: CIC, 2013. Building Information Modelling (BIM) Addendum. Consensus DOCS 301. 93 Collaborative production of information Part 4: Fulfilling employer’s information exchange requirements using COBie – Code of practice (BS 1192–4, 2014). 94 Not yet publicly available. 95 Not yet agreed.

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COOKHAM WOOD 13–096 The Ministry of Justice’s Cookham Wood youth offenders’ development is the first of all the UK government’s projects to test the application of BIM “Level 2”. Alongside this initiative, the project trialled Two Stage Open Book tendering96, which complements BIM by seeking to achieve efficiency gains through the early appointment of a full project team97. 13–097 The project was operated under the PPC2000 form of contract. No amendment to the contract was made in respect of BIM, nor was a BIM protocol used. This alternative approach of establishing a BIM environment was made possible by creating a set of mutual intellectual property licences, linking a series of deadlines to the contract and using standard contract provisions under PPC2000’s multi-party structure98. The successful implementation of this is thought to have been achieved by having a client who was fully committed and informed about BIM. 13–098 Despite bad weather, the project (which was valued at £20m) reported benefits of improved cost and programme certainty, increased innovation and reduced likely operating costs of the built asset99. It is reported that an overall saving of 20% was achieved on the project, most notably through collaborative working, which achieved best value solutions through client-contractor review of work packages and a reduction in the construction programme by six weeks. BIM also assisted with the understanding of clients, early design co-ordination and change management, together with maintenance benefits. 13–099 However, it is reported that the key lesson learnt from the project was the value of “early contractor involvement”. Therefore, it could also be argued that some of the benefits associated with the project would also have been realised if BIM had not been adopted. As a consequence, the trial project alone may not give much real confidence to potential “Level 2” BIM adopters.

FUTURE PROJECTS 13–100 Other trial BIM projects are now set to be undertaken and, if the perceived benefits of “Level 2” BIM are realised and reported, alongside a description of the management of challenges were overcome, it is likely to give organisations more confidence to adopt BIM.

Standard forms of contract 13–101 The majority of construction projects use a standard form of contract, although they sometimes also include specific amendments. The two most frequently used of the standard forms are the Joint Contract Tribunal (JCT) and the New Engineering Contract (NEC) suites of contracts100 and it has been concluded that little change is required to these standard forms of contract in order to facilitate “Level 2” BIM

96 One of the UK’s new alternative models of project procurement to promote ECI and collaborative working. 97 Project Procurement and Delivery Guidance: Using Two Stage Open Book and Supply Chain Collaboration (OGL, 2014). 98 D Mosey, BIM and Related Revolutions: A Review of the Cookham Wood Trial Project (Society of Construction Law, 2014). 99 Cookham Wood trial project: Two Stage Open Book under PPC2000 (HM Government, 2014). 100 Contracts in Use: A Survey of Building Contracts in Use During 2010 (RICS, 2011).

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adoption101. Despite this, it is not common for BIM to be referenced, or adopted, within them102. 13–102 In order to encourage and facilitate the incorporation of “Level 2” BIM into NEC3 contracts and to reduce the need for bespoke amendments thereto, NEC3 has published How to use BIM with NEC3 Contracts103, which focuses upon the creation of “the model”. This guide recommends that technical requirements (such as information production and timescale) are to be inserted into the Work Information/Subcontract Works Information, or Scope and rights and liabilities of the parties are to be inserted into the contract using “Z” clauses. The guide also promotes the use of a BIM protocol and proffers advice upon incorporating the CIC BIM protocol into the various NEC3 contract forms. These recommendations are appropriate for the suite of NEC3 contracts except for, in certain instances, the short versions of contract and the term service contract. 13–103 The JCT has also published a Public Sector Supplement, which suggests steps and modifications to be made when design work and information exchange is governed by a BIM protocol104. This covers a variety of main contracts and subcontracts, including the Constructing Excellence Contract, which is one of the standard forms of contract encouraging collaborative working. The BIM protocol can be included in the Preliminaries/Employer’s Requirements, or other contract documents, and contains advice on incorporation of the protocol into the contract and points to consider when doing so are published105. However, there is no existing contract clause, which requires the employer to comply with the documents106. 13–104 Despite the popularity of the NEC3 and JCT suites of contract on conventional construction projects, PPC2000 was the contract of choice for the UK government’s “Level 2” BIM trial projects. As a multi-party contract, PPC2000 was favoured, because it governs the duration of the procurement process and promotes collaboration by bringing in key project participants at the design phase of the project and could well be operated without the need for a BIM protocol107. 13–105 In addition to these established standard forms of contract, the recently released CIOB Complex Projects Contract 2013 (CPC 2013) is the first standard form of construction contract to include BIM provisions within its clauses and appendices. Like BIM, CPC 2013 was born out of an attempt to address the inefficiencies of the construction industry. As a consequence, BIM and CPC 2013 complement each other on ideas, such as: transparent electronic information; increased certainty through high value project information; front-end investment in order to reduce the likelihood of future problems and high levels of collaboration108. 13–106 Further integration of BIM into standard forms of construction contract is likely, such as the inclusion of BIM into the relaunch of the Infrastructure Conditions 101 Building Information Modelling (BIM) Working Party Strategy Paper, a report for the Government Construction Client Group (GCCG, 2011). 102 National Construction Contracts and Law Survey 2013 (NBS, 2013). 103 How to use BIM with NEC3 contracts (EC3, 2013). 104 Public Sector Supplement: Fair Payment,Transparency and Building Information Modelling (JCT, 2011). 105 S Frame “JCT/SBCC approach to building information modelling (BIM)” (2012) Construction Law Journal. 106 L Forbes, “A Model Contract” (2013) Constructive Olswang’s Construction & Development Blog. 107 D Tyerman, “Building information modelling and change management: a single version of the truth” (2013) 29 Const LJ 295. 108 D Gibbs, “BIM and CPC2013” (2013) Constructive, Olswang’s Construction and Development Blog.

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of Contract (ICC). However, it must be remembered that these contracts are perceived to be suitable for “Level 2” BIM and anything more developed than the requirements of this level may require more sophisticated contractual arrangements.

What does BIM mean for claims and disputes? 13–107 It is envisaged that the benefits of working in a “Level 2” BIM environment will “include fewer delays and disputes within the team, better management of project risk and better understanding of where costs are being incurred”109. 13–108 Claims are not an indication of failure, but can also be viewed as a natural part of any construction project because change is inevitable; claims are therefore still likely to occur on BIM projects. If a change has a negative impact upon a party and it is not their contractual risk to bear, they are entitled to submit a claim in order to return them to the position that they would otherwise have been in if the change had not occurred. However, if the claim is rejected, it can develop into a dispute, which can have a negative impact upon all the parties and the wider industry110. It is, therefore, thought that the collaborative nature of BIM should reduce the number of claims that develop into disputes. 13–109 If synchronisation as between different dimensions is achieved and best practice is followed, when claims arise then the consequential effect of the change on the project can be instantly reviewed. However, creating and updating a system that accurately reflects the effect of a change on a complex project across multiple dimensions is a feat. If such an approach is used, a detailed description of the links and rules used between different dimensions is required and requires to be vigorously checked in order to ensure that the output is correct. 13–110 By reason of the complexity of such an interrelated system, there is likely to be a lack of confidence in the output, especially whilst “Level 2” BIM and the supporting software remain unfamiliar. Instead, aspects of BIM could be used to assist with the retrieval and communication of information in order to support a claim, or a dispute111.

Retrieval of information 13–111 Conventionally, construction project records are not usually well kept112, which can make the proof of the cause and effect of a change event upon a project difficult, especially for retrospective analysis. Within a BIM environment, whenever the process is undertaken as intended, a certain level of information should be generated at different stages of the project in order to allow for its successful management. The process of contemporaneous record keeping is facilitated by certain of the software packages, which have been developed in order to support BIM and the possibility of using handheld devices to create live data113.

109 BSI, Specification for information management for the capital/delivery phase of construction projects using building information modelling (PAS1192–2, 2013). 110 P Love, P Davis, J Ellis, S Cheung, “Dispute causation: identification of pathogenic influences in construction” (2010) 17(4) Engineering, Construction and Architectural Management 404–423. 111 D Gibbs, S Emmitt, K Ruikar and W Lord, “An investigation into whether Building Information Modelling (BIM) can assist with construction delay claims” (2013) 2(1) International Journal of 3-D Information Modeling 45–52. 112 Managing the Risk of Delayed Completion in the 21st Century (CIOB, 2008). 113 S Kanh, M Olbrich, T Engelke, J Keil, P Riess, S Webel, H Graf, U Bockholt and G Picinbono, “Beyond 3D ‘As-Built’ information using AR enhancing the building lifecycle management” (2012) Cyberworlds (CW), International Conference, 25–27 September, 29–36.

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13–112 If project information is stored electronically, in a common data environment and in a structured way, the process of finding information is much easier, because it can be searched, sorted and filtered. This is not too dissimilar to recommended practice, which is undertaken on some projects that have not adopted BIM; however, where BIM differs from this best practice is in the use of the virtual model. If project information is embedded in, or linked to, the virtual model, it is possible to use the model as a central reference point in order to find all relevant information. This can create a clear audit trail and is particularly useful when trying to find information relating to a certain aspect of work.

Communication of information 13–113 Construction claims and disputes sometimes involve the presentation of information to individuals, who have not been directly involved in the project and may have limited practical construction experience. Virtual models can be useful so as visually to support a written narrative in order to help provide better understanding of what occurred on a project. 13–114 Not all construction projects use 3D models, but they are sometimes developed for the sole purpose of assisting the understanding of contentious issues. However, this can be a costly and time-consuming process and the visualisations are not always as effective as they could be. This has given rise to recommendations regarding the creation of computer-generated exhibits in order to support construction claims114. Given that virtual models are required on all “Level 2” BIM projects, it is therefore likely that there will be an increase in their use in order to support construction claims and disputes. However, direct access to the federated model may be restricted for these purposes, so that organisations may have to adapt their information model for these purposes.

Case law 13–115 There is very little published information regarding the impact of BIM on disputes. This may be attributed to the limited case law on BIM, which could well be inferred to mean that disputes are less likely upon BIM projects, or could indicate that only a small number of BIM projects are currently undertaken. 13–116 The one reported BIM dispute was settled out of court, leaving its details limited. What is known is that the dispute occurred upon the installation of a mechanical, electrical and plumbing system for a life-science building in America. Parametric modelling software was used to create an intricate design; however, a sequencing programme was not created, or communicated, and resulted in the contractor running out of space to install all of the works115. It could, however, be argued that this is not a BIM dispute, since it could also have happened on a conventional project.

Conclusion 13–117 BIM is seen by some as a panacea for the problems in the construction industry. Whilst BIM may go some way to resolve common problems that result in claims and disputes (such as on-site clashes between different work packages), it will not be possible to resolve all the problems. There could also be a shift to other forms of claims, such as

114 D Gibbs, S Emmitt, K Ruikar and W Lord, “Recommendations on the creation of computer generated exhibits for construction delay claims” (2014) 30 Const LJ 236–248. 115 Investing in BIM: A Guide for Architects (BD, 2014).

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the project team member’s requirements in a BIM environment, most notably information exchange116, or inadequate co-ordination and checking of the federated model. 13–118 Furthermore, the same people will still be working in the industry, performing the self-same tasks. If best practice, like the keeping of adequate site records to manage a construction project, is not undertaken by organisations on conventional construction projects, it is unlikely that they will be undertaken in a BIM environment. Those who already follow best practice are therefore likely to embrace and gain the benefits of BIM and, hopefully, avoid disputes. However, BIM is likely to expose those who do not follow recommended best practice. 13–119 Claims will therefore still form a part of BIM projects, but it is hoped that the process of working involved in a “Level 2” BIM environment will help to reduce the likelihood and severity of these developing into disputes. When disputes do occur, BIM will probably rely upon expert evidence. The collaborative environment may well result in the use of ‘hot-tubbing’117 and, in the future, could advance the construction dispute resolution system through the addition of new legal documents118.

Independent information management 13–120 The construction industry has always been bedevilled by difficulties in assembling information and sharing it among the various participants in the construction process. One of the most significant difficulties in the flow of information is in the number of parties involved to whom documents must be “copied” in the course of a contract. Apart from the professional team of CA, project manager, architect, electrical engineer, mechanical engineer, civil and structural engineers, quantity surveyor, landscape architects, interior designer and perhaps other specialists too, there will also be D, possibly bonding agents, financial advisers, or financiers and, of course, C, subcontractors, nominated subcontractors, nominated suppliers, and a whole host of subsubcontractors and suppliers, licensing authorities, utilities and statutory undertakings. Accordingly, on some projects, copies of any one document can finish up in many different hands. 13–121 Unless this information flow is properly controlled, this multitude of parties makes the process of contemporaneous information management and retrospective analysis of documentary evidence considerably more difficult, time-consuming and expensive. It is not unusual for a large project to produce initially, say, four million pages of documents of which at least 750,000 may be original documents, but of which only 30,000 are relevant to time or cost issues, of which, in turn, only 5,000 are critical119. Retrospectively, getting from four million to 5,000 can cost a small fortune unless the information is adequately managed from the outset120.

116 E Moore, Radar for Dispute Avoidance (Construction Law, 2013). 117 M Harris, Is BIM Winning Hearts and Minds? (Construction Law, 2012). 118 N Greenwald, A Creative proposal for dispute systems design for construction projects employing BIM (2013) 5 Journal of Legal Affairs and Dispute Resolution in Engineering and Construction 2–5. 119 This is called the “Pareto Principle”, after Vilfredo Pareto, who in 1906 devised a formula describing the distribution of wealth in Switzerland (which at that time was found to comprise 80% of the wealth in the hands of 20% of the population). It is also known as the 80/20 rule, meaning that in nearly all investigations it will be found that few of the available materials are vital (20%) and the majority are irrelevant (80%). 120 Forensic document examination is a specialist field for which there has been, since 1979, a professional body. The National Association of Document Examiners held its first conference outside

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13–122 The case of Digicel v Cable & Wireless121 illustrates that the principle is also applicable to the management of electronic documents. Morgan J recounted the facts as follows122: “In total some 1,140,000 documents were provided to [D’s] solicitors. These documents were on individual DVDs or CDs and hard drives; where those documents were not split into sub-folders, they were provided to an information management and litigation support solutions provider specialising in large scale electronic and paper based disclosure services and data recovery. Where the electronic documents provided to [D’s] solicitors were split into sub-folders, the titles of any electronic sub-folders were manually reviewed in native format (ie the hard drive or disk on which it had been provided) and irrelevant sub-folders were not provided. These processes reduced the number of potentially relevant electronic documents to about 625,000. All of these 625,000 documents were placed on a database. Creating this database involved more than simply transferring individual files to a database. It is sufficient to state that metadata was extracted to permit electronic de-duplication. The documents were then “de-duplicated”, that is, duplicates were removed. The documents were then converted into an image format so that they could be reviewed and redacted on screen. In parallel, an optical character reading file was created in relation to each document which meant one had an image that was readable. These 625,000 documents on the database were then subject to [D’s] positive search terms which reduced the number of potentially relevant electronic documents to about 370,000. Documents containing positive key words were then subjected to an automatic de-duplication process to remove copies of identical documents and this reduced the number of potentially relevant electronic documents to about 197,000. This group of documents was returned to [D’s] solicitors and placed on their database for manual review. Thus, 197,000 electronic documents were manually reviewed for relevance and this produced 5,212 documents which were disclosed. I understand these documents comprise some 28,983 pages and fill some 83 lever arch files. The exercise described above cost the Defendants some £2 million in fees together with disbursements of some £175,000. The process took some 6,700 man hours of lawyers’ time.”

13–123 Apart from the difficulties of getting at the information retrospectively, there are evidential benefits to be gained from dealing with the documents on an “open book”, contemporaneously exchanged basis. Disputes usually occur for one or more of three reasons: the parties have different facts, or a different perspective of the same facts; one or the other of them wishes to change the law; and/or one or the other of them does not want to pay. 13–124 Whilst good information management will not have any bearing on the second, or third reasons, it will usually reduce the incidence of importance of the first reason, which, experience suggests, is the most common cause of disputes. 13–125 The difficulty of the communications exercise can be minimised if the whole of the management of information and its transfer throughout a construction project is placed in the hands of an independent, third-party information manager. Everyone connected with the project from inception through to completion can then communicate via the third party. The merit of this is that the information management is thus independent of the contracting parties. An independent project document manager would enable the parties to find a history of common data for the project, leaving the parties to concentrate on the successful execution of the project. the United States in 2003, in England. 121 Digicel (St. Lucia) Ltd v Cable & Wireless Plc [2008] EWHC 252; [2009] 2 All ER 1094. 122 Digicel (St. Lucia) Ltd [2008] EWHC 252; [2009] 2 All ER 1094 at [23] to [25].

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13–126 Whilst it could always function manually, the idea is that it should, in essence, be very similar to an email process managed through a private bulletin board. The third-party computerised database and management system would then enable documents to be lodged and picked up electronically from the independent source. 13–127 To make the independent source a useful tool in the settlement of disputes, a part of the information management service should be related to the method of codifying documents and the subjects under which they are to be codified. In the event of a matter arising that requires factual analysis, all the documents relating to it could then immediately be made available to all parties. 13–128 Apart from rendering the production of factual information more certain and so much quicker, it is anticipated that such a facility would, in all but the most fractious of cases123, obviate the need for the very expensive and time-consuming disclosure with which parties to litigation and arbitration have all too frequently become acquainted. Clearly, if the parties can get their hands on all the documents they want, no matter from which source they emanate, it is entirely within the reasonable contemplation of anybody associated with construction disputes that it would be possible to put together all the documents upon which any particular party wished to rely, at the very outset of a potential dispute. 13–129 Apart from facilitating early settlement, the advantages that such a documenthandling process would present to all the parties would be such that it would effectively remove from the management of all consultants and contractors the difficulty of making sure that only the current version of any one document is used by all parties at the same time. Sadly, it is not unusual in the construction industry for, say, the mechanical engineer to have one set of drawings, the main contractor to have another, the architect to have a third and the subcontractor, who is actually working on the mechanical engineering installation, a fourth, and for none of them to bear the same reference. Obviously, in a well-managed quality assured system this should not happen, but very few members of the construction industry have taken pains to ensure that they have access to a good, quality-assured information management system. By delegating information management to a third party, such difficulties would be significantly reduced. 13–130 Brantingham has suggested that such a system of information management could include a third-party assessment of the CPM schedule as well124. The idea is that it would then also act as a dynamic model of the project, capturing time, cost and resource parameters. The philosophy underpinning his thesis finds some expression in the CMS125 drafted to put the guidance of the SCL Protocol into practice126 and it is a central theme of quality control in the CIOB Guide. This recommends that schedule quality control is best performed by an independent third party, saying: “Quality assurance audits are best performed by an independent party, unassociated with the project, or any of its participants; the absence of any implied knowledge helps to ensure that the right questions are asked and appropriate and understandable answers are given.”127 123 For example, if it were decided to go after handwritten notes and internally circulated documents. 124 L Brantingham, “Concurrent delay and global claims in construction and the substantiation of claims for delay and disruption by the use of project tracking techniques” (Centre of Construction Law and Management, King’s College, University of London, 1993). 125 App.2 to the 4th edn. 126 See Ch.10, “Project control”. 127 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), para.3.8.63.2.

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13–131 The electronic facilities that would be needed to institute the sort of information management facility proposed are no greater than the sort of facilities that are available to anybody who has access to the internet. These are: a reasonably fast computer, a high-speed broadband connection128 and a log-on security system that enables that particular party only to get access to electronic mail that is allocated to that party or syndicate. First Class Client™129 is one such email and groupware product. This will enable computers of different types to communicate with each other with text and spreadsheet files, drawings, videos, pictures and so on in such a way that all correspondence on any particular issue is automatically grouped chronologically, unread files are flagged and all documents on the system can be assessed to see who has read them. 13–132 Thus, in connection with a construction project, on accessing the private local area network, the party would be able to access any mail that was sent together with a drawing issue, brochure, pamphlet, or any other document, by viewing it on the screen, or printed as hard copy. All the parties to the project could have a say in how documents were to be codified, for whatever purpose they wish them to be codified in the course of their creation and dissemination. 13–133 To put such a system into effective operation requires the participation of all parties to the construction project, no matter from which segment of the industry they come and thus, as a whole, it would probably require the industry to rethink its current standards of communication and to question whether there is any real benefit from secrecy, in what should be a team operation. 13–134 The selection of this third-party provider is normally made by D, but D needs to consider carefully the robustness of the provider and the terms of its engagement. Points that will need to be considered in selecting a third party to provide project management tools will include service levels offered and what rights D has if the product fails. However, it is the legitimate concern of all parties using such a system as to the ability of the supplier to deliver its services and, unless the project participants have a direct relationship with the third-party provider, they are unlikely to have direct redress if things go wrong.

Standard form provisions 13–135 Apart from those that go to quality control or to financial valuation and payment, unfortunately, records are rarely required to be kept, or made available to D, or the CA on its behalf, by any of the standard forms of contract. For example, The New South Wales government contract C21/09 require records to support quality control130 and to support a financial claim131 but makes no reference at all to any records necessary to support a schedule update or other progress records. Many standard forms still contain no requirement for any records at all. Some contracts require C to provide records in support of any claim, but no requirement for the keeping of any records of anything that does not support a claim, or by which progress could be recorded, or change management could be accomplished. 128 Even with sophisticated data compression facilities, drawing files tend to be quite large and without fast communications can become unwieldy to transfer electronically. 129 See http://www.firstclass.com. 130 Cll.17.4 to 17.5. 131 Sch. 9 para.1.1.

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13–136 Under Cl.52.2 of ECC3, for example, entitled “[C] keeps these records” the form lists: “accounts of payments of defined cost, proof that the payments have been made, communications about and assessments of compensation events for subcontractors and other records as stated in the works information.”

13–137 Although the records specified to be kept are quite useless for keeping control of progress, or change132, by the last bullet point, it is always open to D to require more extensive records to be kept. Clause 52.3 also provides that C is to permit the CA to inspect at any time within working hours the accounts and records that he is required to keep, but without a power to take copies, or to receive them electronically and without redress, if he does not keep them, or fails to permit inspection. Similarly, HK05133 and GC/Works/1134 require that only those records to support a claim should be kept, but, in those forms, with an obligation to afford access and supply the information to the CA and QS. ICE7 also requires, upon the occurrence of a compensable event for C to: “keep such contemporary records as may reasonably be necessary to support any claim he may subsequently wish to make.”135

13–138 The form also provides136 for the CA to instruct C to keep such other contemporary records as are reasonable and may be material to the claim and for C to permit the CA to inspect and take copies of any such records. So far as delay is concerned, ICE7 merely requires that, in relation to any claim for an extension of time, C is to: “deliver to the [CA] full and detailed particulars in justification of the period of extension claimed in order that the claim may be investigated at the time.”137

13–139 Apart from those contract forms requiring records in support of a claim, none of the standard forms of contract discussed here require C to record its labour and plant resources used, productivity achieved, or when and where work was done, or to keep any change-related records. Neither do they anticipate that D (or the CA on its behalf ), will keep such records. 13–140 The maintenance of records is not required at all under many forms, including: JCT80, JCT98, JCT05, JCTsub/05, DB05, IFC05, IFWCD/05, MPF, MP05, MTC08, MWA05, TC08, WC/08, GC/Works/1, AS2124 (other than dayworks records), AS4000, SIA80 and HK86. 13–141 So far as concerns records of delaying events, most forms require C to give notice of a delay to progress138, but do not require specifically that C should record the data in support of such a notice. For example, JCT05 requires that, as soon as possible after a first notice asserting that a D’s risk event is likely to cause

132 133 134 135 136 137 138

Apart from adverse weather records which, by Cl.60.1(13), a record is also to be kept. Cl.28.2(1). Cl.25(1). Cl.53(2). Cl.53(3). Cl.44(1). See Ch.5, “Notices, claims and early warnings”.

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a delay to completion of the works beyond the completion date, C shall give particulars of the: expected effects; and an estimate of any expected delay in completion. 13–142 Impliedly, such particulars should be given in sufficient detail to enable the CA to determine C’s entitlement to an extension of time. 13–143 Nothing is expressly indicated in JCT05 to give the CA access to any schedule information, progress, or change management records, or guidance as to how cause and effect are to be proved, or how the length of likely delay to completion of the works beyond the completion date is to be calculated. 13–144 As to claims for loss and expense, JCT05 requires first that, if C incurs or is likely to incur direct loss and/or expense, C is to give a notice asserting that such is caused by one of D’s cost risk events. Following that notice, the CA is to “ascertain, or instruct the [QS] to ascertain”, that which “has been or is being incurred” and, in support of its claim, C is to: “upon request submit to the [CA] or to the [QS] such details of the loss and/or expense as are reasonably necessary for such ascertainment.”

13–145 This clause does not go to causation, but only to quantification. Expressly, the form merely requires C, upon request, to provide such information as will substantiate the quantum of its claimed loss, or expense. Whilst, in practice, it would not be competent of any CA merely to accept C’s assertion of cause and effect without investigation, there is nothing in the contract to provide that the information, upon which such investigation could be made, is to be kept, or made available to the CA. 13–146 PCC06139 requires C to make available all records of financial transactions in regard to the works and sets out a form of redress in default of their provision, but does not require any records to be kept of the progress of the works, or the effect of any change. CM08 requires only that the construction manager shall: “at all times keep full and accurate accounts of amounts incurred which are chargeable as reimbursable cost; and on D’s reasonable request shall make available to him all vouchers, invoices and records relating to such amounts.”

13–147 Similarly, CE06 goes into some detail in permitting D to set out what financial records are to be kept, but makes no reference to any basic time-related, resource, or productivity data. On the other hand, it requires, at Cl.6.4, that: “[C] shall keep a written record of all performance monitoring carried out under this contract in a form reasonably requested by [D] and shall supply [D] with copies of these reports without additional charge.”

13–148 MC08 goes further than any other JCT form in this respect, but makes no reference to any time-related records and only requires that the MC should: “keep and make available all necessary records in a form prescribed by or agreed with the [QS] to enable him to verify the prime cost.”140

139 Cl.4.2. 140 Cl.2.3.8.

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13–149 On the other hand, Annex B, Pt 2 whilst requiring that the MC, amongst other things, is to carry out many functions that cannot be achieved without timerelated records, does not require the records to be made available. The particular functions required of the MC include that it is to: maintain and regularly update the detailed construction schedule for the project and for all works contracts141; monitor progress of the design work and working drawings, design submission procedures including those of works contractors142; report regularly to the consultant team on progress143; assist in the preparation of financial reports in a format and with a frequency to be agreed by D on actual and projected costs, as compared with the project cost plan and estimated cost to completion144; institute and maintain in a form acceptable to the consultant team a system of documentation and records for recording the performance of all works contractors145; institute, in a format and with a frequency acceptable to the consultant team, an operational reporting system on the physical progress of works contracts146; and monitor the performance of works contractors against the detailed construction schedule to enable corrective action to be taken to prevent stoppages and delays147. 13–150 The only requirement as to records in FIDIC/M&E87 is that, in relation to any claim for an extension of time, or compensation arising out of a variation instruction: “C shall keep records of the cost of undertaking the variation and of time expended thereon. Such records shall be open to inspection by the CA at all reasonable times.”148

13–151 FIDIC/Build99 goes a little further and requires C to submit to the CA, at monthly intervals, details of “the number of each class of [C’s] personnel and of each type of [C’s] equipment on the site”149, but not what they were doing, or where they were doing it. Similarly to FIDIC/M&E87, there is also provision for the CA to specify any arrangements for the recording of costs (but not time-related records) in relation to any variation instruction150. In relation to any claim for an extension of time, or compensation, the form requires that: “[C] shall keep such contemporary records as may be necessary to substantiate any claim, either on the site or at another location acceptable to the [CA]. Without admitting [D’s] liability, the [CA] may, after receiving any notice under this sub-clause, monitor the recordkeeping and/or instruct [C] to keep further contemporary records. [C] shall permit the [CA] to inspect all these records, and shall (if instructed) submit copies to the [CA].”151

141 142 143 144 145 146 147 148 149 150 151

Annex B, Annex B, Annex B, Annex B, Annex B, Annex B, Annex B, Cl.31.5. Cl.6.10. Cl.13.3. Cl.20.1.

Pt Pt Pt Pt Pt Pt Pt

2, 2, 2, 2, 2, 2, 2,

para.2.3. para.2.10. para.2.12. para.2.13. para.2.14. para.2.15. para.2.29.

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13–152 The form also anticipates that monthly progress reports152 will be made by C which, amongst other things, are to consist of: charts and detailed descriptions of progress achieved; percentage progress and the actual or expected dates of commencement of manufacture, shipment and arrival at the site for the manufacture of each main item of plant and materials; and comparisons of actual and planned progress, with details of any events or circumstances that may jeopardise the completion in accordance with the contract. 13–153 FIDIC/Build99 does not expressly require the recording and disclosure of the data upon which such reporting is based. FIDIC/DB99 and FIDIC/PD+B99 contain similar provisions and add, at Cl.5.6, a requirement to keep as-built records of the permanent works, but not of the progress made, resources employed, or the productivity actually achieved in constructing the works. 13–154 The Irish government forms go considerably further than most other standard forms in setting out that C is to have expertise and experience in construction management and the managerial competence to maintain systems for data recording153. In particular, the forms require C to use the “most effective and compatible electronic and other methods of communicating and recording”154 and to keep: in respect of all labour resources employed by, or otherwise working for C, proper financial records, including time sheets and pay slips showing the wages and other sums paid to and the time worked and leave taken by each worker155; detailed contemporary records to substantiate any aspect of an event, or circumstance about which C has given, or is entitled to give, notice of a claim for an extension of time, or compensation, including any records the CA directs C to keep156; a schedule, which shows actual and current planned progress157; and a monthly report containing, amongst other things details of: – the progress of each stage of the works against C’s current schedule158; and – delay and compensation events that have occurred during the period or are unresolved159. 13–155 The forms also provide for the obligation to hand over the information recorded, saying that C is to give D all information, documents and records in the possession of, or available to, C or C’s personnel that the CA needs in order to perform its functions160.

152 Cl.4.21. 153 See, for example, IGBW/09 at Cl.4.13.4. 154 IGBW/09 Cl.4.1.2(3). 155 IGBW/09 Cll.5.3.3(5) and (6). These are the records which, in the United Kingdom, the Inland Revenue Service statutorily requires every employer to keep in regard to the payment of its labour force, but do not go any further. 156 IGBW/09 Cl.10.3.4. 157 IGBW/09 Cl.4.7.9. 158 IGBW/09 Cl.4.10.2(1). 159 IGBW/09 Cl.4.10.2(8). 160 IGBW/09 Cl.4.13.6.

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13–156 Whilst all this sounds useful, there are some serious omissions that go to the very root of the quality of project control and change management records; for example, although there is provision for the CA or D to ask for anything else, there is no requirement under the standard forms to keep any records concerning, in relation to contract works: when and where work was done; labour and plant resources used; and productivity achieved; or, in relation to changed work: the the the the the

activities added, changed or omitted; labour and plant resources for each added or changed activity; date and timing of the added or changed activities; location in which any added work was carried out; and workflow process adopted in carrying out the change.

13–157 Nor is there any provision for redress, if the essential information is not provided. Perhaps the fullest requirement for records in any standard form of contract is contained in the US Federal Supplementary Conditions to the latest AIA form, A201SC/07. This requires, at Cl.15.2.2, that: “[C] shall make available records, which include books, documents, accounting procedures and practices, and other data, regardless of type and regardless of whether such items are in written form, in the form of computer data or in any other form, and other supporting evidence to satisfy contract negotiation, administration and audit requirements of the contracting agencies and the comptroller general for three years after final payment or as specified below, whichever period expires first. 1. Accounts receivable invoices, adjustments to the accounts, invoice registers, carrier freight bills, shipping orders and other documents which detail the materials or services billed on the related invoices: retain four years. 2. Material, work order or service order files, consisting of purchase requisitions or purchase orders for materials or services, or orders for transfer of material or supplies: retain four years. 3. Cash advance recapitulations, prepared as posting entries to accounts receivable ledgers for amounts of expense vouchers prepared for employees’ travel and related expenses: retain four years. 4. Paid, cancelled and voided [cheques], other than those issued for the payment of salary and wages: retain four years. 5. Accounts payable records to support disbursements of funds for materials, equipment, supplies and services, containing originals or copies of the following and related documents: remittance advices and statements, vendors’ invoices, invoice audits and distribution slips, receiving and inspection reports or comparable certifications of receipt and inspection of materials or services, and debit and credit memoranda: retain four years. 6. [Labour] cost distribution cards or equivalent documents: retain two years. 7. Petty cash records showing description of expenditures, to whom paid, name of person authorizing payment and date, including copies of vouchers and other supporting documents: retain two years. 8. Payroll sheets, registers, or their equivalent, of salaries and wages paid to individual employees for each payroll period; change slips; and tax withholding statements: retain four years. 9. Clock cards or other time and attendance cards: retain two years. 10. Paid checks, receipts for wages paid in cash or other evidence of payments for services rendered by employees: retain two years.

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11. Store requisitions for materials, supplies, equipment and services: retain two years. 12. Work orders for maintenance and other services: retain four years. 13. Equipment records, consisting of equipment usage and status reports and equipment repair orders: retain four years. 14. Expendable property records, reflecting accountability for the receipt and use of materials in the performance of a contract: retain four years. 15. Receiving and inspection report records, consisting of reports reflecting receipt and inspection of supplies, equipment and materials: retain four years. 16. Purchase order files for supplies, equipment, materials or services used in the performance contract; supporting documentation and backup files including, but not limited to, invoices and memoranda – eg, memoranda of negotiations showing the principal elements of subcontract price negotiations: retain four years. 17. Production records of quality control, reliability and inspection: retain four years.”

13–158 However, in essence, these records only go to financial accountability and protection against fraud and corruption. Again, from the point of view of project and change control, there are some serious omissions that render the specification inadequate for that purpose. For example, in this contract also, there is no requirement for C to keep any records in relation to contract works concerning: number and contract week number; and the progress records are to be published using a specified software product. 13–159 For each day of the reporting period, the records are to include: a resource allocation sheet for planned activities, indicating for each activity which is planned to have been started, finished, or progressed during the reporting period, as relevant: • • • • • • • • • • •

the activity description; the activity identifier; the date the activity started; the date the activity finished; the estimated degree of completion achieved as a percentage of the whole; if not started, the reason for non-commencement; if started, but without progress during the reporting period, the reason for the absence of progress; the name and status of each item of labour allocated to an activity in progress and the hours worked by each; the name of each item of plant allocated to an activity in progress and the hours worked by each item; any goods, or materials delivered; and the subcontractor, nominated subcontractor, supplier, or nominated supplier responsible, if any;

a site diary recording: any drawings, details, information, or instructions requested, or issued and the activity, or activities start, or completion: • dependent upon their issue; • the occurrence of any developer’s time and/or cost risk events; • any standing time, or unproductive resources and the reason for such loss of productivity;

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• any visitors to the site; • any inspections, or tests carried out and the result thereof, listing deficiencies identified, together with the corrective action taken, or to be taken; and • job safety evaluations; • progress photograph records taken; and • the weather conditions, maximum and minimum temperature, inside and out, at 0800hrs, 1200hrs and 1600hrs.

Presentation of evidence 13–160 In theory, factual evidence can be provided in three ways: orally, by hard copy documentation, or by computerised presentation of electronic data.

Oral evidence 13–161 Expert evidence is not evidence of fact; it is evidence of opinion and must be based upon and supported by evidence of fact. Without facts, expert evidence is practically worthless. Whilst it is usually the case that the claimant must prove that which it asserts, in Skanska v Egger161 the court appeared to take the view that C succeeded in so far as D could not disprove what C claimed. In this case, where D advanced expert opinion based upon facts provided by D’s employees who were subsequently not called to give evidence, HH Judge Wilcox observed: “[D’s expert] produced a report of some hundreds of pages supported by 240 charts. It was a work of great industry incorporating the efforts of a team of assistants in his practice. It profits from [the expert’s] input based on his practical experience. It was evident that the report, which did not cover all aspects of [C’s project manager’s] evidence, was largely based upon factual matters digested for [D’s expert] by his assistants and in part relying upon data provided by [D’s project manager for structures] who administered the contract and [the witness] who was works manager for [D]. Neither [D’s works manager] nor [D’s project manager] gave evidence as to these matters. Both were available to do so. Both were working upon [D’s] case defending [C’s] claim and on the counterclaim made by [D]. There were times when the impression was created that [D’s expert] was not entirely familiar with the details of the report, which he signed and presented. At one time he told me that [D’s project manager] and [D’s works manager] were only consulted upon details of logic linking. He later had to concede because it was written in his own report that their role was also as to primary factual matters resolving factual inconsistencies that presented themselves. There were pressures of time upon him. This and the extent of reliance upon the untested judgment of others in selecting and characterising the data for input into the computer [schedule] however impeccable the logic of that [schedule], adversely affects the authority of the opinion based upon such an exercise.”

13–162 Similarly, in Bay Construction, the Board rejected C’s appeal, where it found that most of C’s case was premised on the opinions and estimates of unsupported oral testimony, saying: “Essentially, [C] failed to produce any witnesses who actually knew, or understood what was happening at the time Phase I work was being performed. In these circumstances, we

161 Skanska Construction Ltd [2004] EWHC 1748 (TCC) at [415].

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drew the negative inference that, if so questioned, those witnesses would not have provided testimony helpful to [C] and would not have substantiated these claims.”162

13–163 Few things could be more risky than preparing a case that depends for its success on factual evidence of time and resources, where the best evidence of the facts is nothing more than the opinion of a witness as to what they should be, or, as in Skanska v Egger, a defence mounted on the opinions of persons not advanced as witnesses163. 13–164 Oral evidence of fact, unsubstantiated by project documentation, is notoriously fragile and should be relied upon only as a last resort. There is an ever-present risk with oral evidence that, in basing a case on witnesses of fact and poorly documented projects, the artifice of the evidence may overwhelm the science of a delay analysis, with the result that the analysis becomes so subjective that it is useless164. 13–165 Relying on interviews with project personnel for primary, rather than supplementary, information to compensate for poor documentation may not greatly improve the accuracy of the cause and effect analysis for these reasons: 1. 2. 3.

people tend to be subjective in their recollection of facts; memories tend to fade; and those in the best position to say what happened are often part of the problem.

13–166 The golden rule as to statements of fact is to take them early when the witness has the best recollection and (hopefully) whilst it is still under contract and friendly. One of the most serious difficulties in bringing arbitration or litigation proceedings is that witness statements are often taken some years after the completion of the contract. By then, people who can be key witnesses, such as construction managers and CAs, have invariably moved on to other positions and are not readily available to give evidence165. In so far as it is the ordinary experience of anyone involved in the construction industry that they are likely to experience a claim at some time, it would seem expedient for employers to provide in their contracts of employment that, notwithstanding termination of employment, any employee should hand over diaries, records and any other documents in their possession on, or before termination of their employment, and that in future they should make themselves available: 1. 2.

to give full information as to their involvement in the contract, including giving statements; and to attend arbitration, or court hearings to give evidence when requested.

13–167 Such clauses may not be enforceable, but for some developers, contractors and consultants they will serve to put their employees under some sense of obligation, provided they are adequately phrased166.

Documentary evidence 13–168 Understanding the importance of documentary evidence is not new. It has been stressed by many authors in varying degrees, but always with the recognition that,

162 163 164 165 166

Bay Construction Co (2002) VABCA Nos 5594, 5625–5626, 5628, 5831. See, eg McAlpine Humberoak Ltd v McDermott International (1992) 58 BLR 1. See Skanska Construction UK Ltd [2004] EWHC 1748 (TCC). See also, D Wilman, “Robust systems key to delay analysis” (2009) 9 Const LJ 26. See Multiplex Constructions (UK) Ltd v Mott MacDonald Ltd [2007] EWHC 20 (TCC).

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without it, the claimant will face some difficulty. Obviously, the nature of the evidence required will vary from case to case. Much will depend on the type of contract and the nature of the claim to be supported. 13–169 In a complex claim, project documentation becomes the primary source material used to develop the relationship between the causes and effect of delay. Thus, the success of the proposed method of simulating, analysing and determining the effect of delay-related events is very much dependent upon the availability of adequate records. 13–170 Apart from recorded progress data, photographic and video-recorded data may also be of vital importance. For example, in the US case of Lamb Engineering167, in which C attempted to demonstrate in cut and fill operations its lost productivity caused by ground water, the Board received with approval a contemporaneous video recording of the work in progress saying: “However, we still would not have sufficient confidence in the expert’s [measured mile calculation] were it not for the record as a whole which established that groundwater had a great impact and substantially altered and slowed the cut and fill operation in ways that inevitably caused significant cost increases. Our examination of the video tape, which included extensive coverage of the cut and fill operations, including scraper operations during the sample period, convinces us that extensive remnants of the groundwater conditions slowed the scrapers substantially by forcing them to follow circuitous routes.”

13–171 But photographic and visual evidence must be properly identified in relation to both the locus in quo and the date, without which they will be of little help. In this latter respect, the remarks and advice of Arden LJ in the case of Hunte v Bottomley are in point168: “The problem is this: there are a significant number of cases which involve this court using plans, maps, diagrams and photographs, and more importantly, understanding them. These cases usually concern land. Many cases of this kind, however, and I am sorry to say that this was one of them, are prepared in a way which makes it very difficult for members of this court when reading the papers in preparation for the appeal hearing, to read the plan, map, diagram or photograph correctly, or to follow fully the submissions of the parties about those documents or the property which is the subject of the dispute. In these circumstances, the court cannot be certain about what the plan, diagram, map or photograph shows until the appeal is opened and they are fully explained. Those who prepare bundles or skeleton arguments would do well to remember that a plan, map, diagram or photograph which is clear to people who are fully familiar with the case may well not be wholly clear to a judge coming to the case for the first time. The problem is often exacerbated when the case comes to this court, and the parties very properly put into the appeal bundle some only of the maps, plans, diagrams or photographs. When that happens, this court does not have all the information which the court below had. In my judgment, it is absolutely essential in any case of this kind, where the court is going to have to grapple with plans, maps, diagrams or photographs, that there is at least one plan, photograph or map which leaves the court in no real doubt about the location of all the relevant features. The skeleton arguments should also identify that photograph, map, plan or diagram at an early point, so this court is left in no doubt when it is pre-reading its papers for the hearing. Very often, in my experience, this court is (for example) either given some only of the plans, or photocopies which do not have the colouring referred to in the original documents or by the judge in his judgment, or copies with parts cut off, or without compass points, or where appropriate, a statement of the scale. Those who prepare skeleton arguments for cases in this court or

167 Lamb Engineering & Construction Co (1997) EBCA 97–2 BCA 29207. 168 Hunte v E Bottomley and Sons Ltd [2007] EWCA Civ 1168, The Times, 21 November 2007 at [30] and [31].

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appeal bundles should please bear in mind that the court has properly and easily to understand any map, plan diagram or photograph which is material in the appeal. In this case the court did not have a full set of plans or photographs or a plan which showed all the relevant features. Ward LJ has referred to the difficulties in more detail, and I agree with what he said. When this court sat, we had to have those features of the plan explained to us. That wastes court time and increases the cost for the parties. I hope that these remarks will be taken into account for the future by litigants in this court.”

Database records 13–172 In order to overcome some of the problems of having to trace the facts retrospectively and in order to facilitate effective contemporaneous project control, for the management of records on complex projects, the CIOB Guide advises that: “The increasing speed and sophistication of databases and spreadsheets has provided the industry with the facilities for sorting and filtering data into specific reports at the press of a button and it is now no longer acceptable to proceed to keep records on paper alone. It follows that unless records are kept as database records in the first place, they must be rekeyed as database records before they can be retrieved and used.”169

13–173 The CMS not only requires records to be kept electronically, but also requires C to hand over its progress and change management records contemporaneously, as database records, identifiable by reference identifiers. The schedule to the CMS requires170 C to provide to D, the CA and the risk manager (amongst others) at regular defined intervals a comprehensive schedule of progress information, in electronic format compatible with a database recording process. 13–174 The purpose of requiring the information to be applied to individual cells related to an activity identifier is to enable the information to be put into a relational database, either at initiation by C, or subsequently by the risk manager. The key word to note here is “relational”. Relationships in the database establish links between the stored information sets to facilitate extensive review and recovery of the information. The use of a relational database has been described in relation to a supermarket171: “The principles of the relational database are simple and can be seen in the aisles of every supermarket in the land. Products are presented in a number of areas and sub-areas: food is typically displayed separately from other household goods and also in specific areas as fresh, chilled, frozen, or tinned; drinks are in their own area separated as alcoholic and non-alcoholic; household goods are in their own place and subdivided to consumables, hardware, clothing and so on. The retailer identifies each individual product line as to where it sits in the groups and sub-groups and displays it accordingly in order to make the shopper’s task simpler. We know also that the supermarkets use the barcode system to store much more information about each product and even each item they sell, holding details such as the product’s place of origin, the supplier, its sell by date and so on. All this information is stored on a relational database. Each of the many identifiers for each product item are themselves quite elementary and obvious; eg this item is food, it is frozen, it is meat, it comes from Wales, was supplied by Evans and Evans and needs to be sold pretty quickly! However, the relational database allows the identifiers for every product to be brought together and related to each other so that the whole product range can be 169 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), para.4.3.1.2. 170 See App.2 to the 4th edn at Sch. 4. 171 G Bewsey, “Record Transmittal and Keeping – Managing Records During Project Execution”, a paper given to the Masterclass in the Management, Analysis and Avoidance of Delay and Disruption in Construction Contracts, (London: CIOB and Pickavance Consulting Ltd, 20 May 2004).

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monitored, tracked and reviewed either individually, or as groups. The supermarket management can therefore review the profitability, sales levels, and costs etc that are associated with any product grouping. It is the relational database used to record and monitor products that provides the management information enabling the modern supermarkets to flourish in the way they do.”

13–175 Simply put, then, a good relational database is an information store, in which the records held are related to each other by the intrinsic attributes of each record. The main advantages of establishing the project records in such a framework are: records are stored in an accessible electronic format, providing wide access for record entry and review; every record stored is attached to appropriate identifiers, enabling targeted review and reporting; the record identifier and content are controlled to avoid casual misleading record entry; background checking can be established to prevent record errors, such as duplicate entries and excess hours for labour or plant; information needs to be entered only once, but can be grouped and reported to suit many output requirements; and the records themselves can be readily monitored to ensure that they are being maintained in the manner required. 13–176 The great advantage of maintaining records in this way is that all reports, extracts and summaries have mutual integrity as they are drawn from one unified source. 13–177 Figure 13.5 illustrates the relationship diagram of a simple database for recording project activities. This diagram illustrates a relational database that fulfils the rudimentary requirements of the CMS, facilitating a record of what was done, when it was done and what resource was used. Each of the six labelled boxes represents a table of information in the database. Each of these tables is very similar to a spreadsheet in MS Excel. 13–178 Some of the column headings in this table can be seen in Figure 13.5 as being joined to similar headings in other tables. These are the relationships in the database and are such that the information in the table “What, when and resource” is tied to the information in each of the smaller tables. These tables hold the identifiers that can be called to each record entry in the table “What, when and resource”. For example, only resources that have been recorded in the table “What resource” can be entered in the “resource” field of the table “What, when and resource”. 13–179 In this way, the relational database manages the records entered to ensure accuracy and consistency, guarding the integrity of the record. It also facilitates the review and reporting features of the database, enabling searching and grouping of data to any number of declared criteria. The database is designed to offer a user-friendly form for record entry. A simple form for making entry in the “What, when and resource” table is at Figure 13.7. 13–180 The record table “What, when and resource” in this case has been developed to include details of how much labour, or plant was set to the tasks for each scheduled activity and how many hours were spent on the task by that resource. The database can be designed to check entries as they are made to guard against duplication and errors. For example, a check can be run to ensure that the total hours assigned to each operative does not exceed 24 in any day. The database will call an error and demand correction if this rule is broken.

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13–181 Although this database is obviously very simple, it demonstrates the fundamental features and benefits of a relational database. 13–182 Whilst this simple database is primarily for the purpose of recording resources expended in relation to the schedule activities, it is possible to develop the simple model to provide a database suitable for maintaining records of all project documentation, activity start and completion dates, intermediate progress data, notices, test records, correspondence, events and event-related activity data, site issues and the like. Such a database would permit information to be aligned to a common framework of identifiers relevant to the project, making the information accessible for project management during the progress of the work and for appraisal and analysis in the event of dispute. 13–183 Where the database is network-based, it can be used by others and, on many projects, using a wide area network. However, networking is not the only means of interfacing with the database. This form may be linked directly to a server storing records from many sources. A form like this might be operated by an extranet, with special access rights to a defined user group, or could be on a company’s internet site, again with defined user rights. 13–184 If email forms are used to interface with the database, an electronic data receipt regime is required to transfer the emailed data into the database. For this, typically, a dedicated email address is established with automated procedures that are triggered by the incoming mail. The database can have all the integrity restraints of the network database and can email replies to warn of potential errors and duplications, requesting revisions and confirmations.

Computer generated evidence “The legal profession in England and Wales has generally been relatively slow to identify when and, if so, why electronic exhibits have, or have not, been admitted as evidence, or to adopt the creative use of electronically compiled evidence in court and other tribunals. However, as the profession develops a greater facility with the use of critical path analysis models and similar techniques, the authors are hopeful that 3D and 4D visualisations will be more readily used and, where appropriate, admitted in proceedings before adjudicators, arbitrators and mediators and in the Technology and Construction Court.”172

13–185 Generally, computerised presentation of electronic evidence is acceptable in adjudications and in some arbitrations but, unfortunately, is not yet encouraged by the courts in the United Kingdom in construction disputes. Hard copy documentation seems still to be preferred by the courts and by many arbitral tribunals. Notwithstanding that, where computerised CPM networks are concerned, the printed output is virtually unintelligible (and certainly inaccessible), hard copy documentation clearly tends to be given more weight by tribunals (if they can understand them), however misleading that may be. 13–186 On the other hand, in the United States, the courts and Boards seem to have been more willing to entertain electronic evidence. The standards for computerenhanced and computer-generated evidence in civil cases were set down in American

172 A Burr and K Pickavance, “The use of visualisations in case presentation and evidence”, (2010) 26 Const LJ 3.

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Oil173, in which it was established that, when admitting computer-generated evidence, an expert must be able to undergo direct examination and cross-examination on the functioning of the computer it used. In the criminal case of Connecticut v Swinton174, the Connecticut Supreme Court took the unusual step of laying down in some 54 pages of judgment an exhaustive analysis of how a proper foundation can be laid for the admissibility of evidence created, or manipulated by computers. In this case photographs of a bite mark had been computer enhanced and compared electronically with photographs of the defendant’s jaw. Citing a number of cases that have changed the nature of admissible evidence in the United States from the early days of photography and several law review articles, the court held that, for it to be admissible, there must be an opportunity to cross-examine expert witnesses about the methods used to create computer-generated evidence on the reliability of: the underlying factual data; the procedures used to enter the data into the computer; the computer hardware on which it was produced; the computer software used to produce it; the execution of the instructions which transformed the data into evidence, including any calculations; the output, such as a picture, or animated graphics; and the system security used to control access to the computer. 13–187 In this case, the court declined to delineate standards that it felt could quickly become obsolete as technology changed, but it did make it clear that, when experts use computers to generate evidence, even if that evidence is not being challenged, lawyers have to lay a proper foundation for its admissibility. 13–188 Computer-generated visual evidence can be classified in four different ways, in increasing degrees of probative value175: descriptive; introductory; illustrative; and evidential. Descriptive visualisations do not rely upon facts, but upon a “story” based upon the facts. To that extent, they can reasonably be conceived as the visual equivalent of a written narrative. Because descriptive visualisations are not factually driven, they should always be treated by their recipients with some caution. 13–189 Introductory visualisations can usefully be employed in providing a summary of the principal issues to be demonstrated by the evidence of fact and opinion. These ought properly to be factually correct, so far as they go, but may legitimately omit those parts of the facts that cannot be illustrated, or are perhaps inconvenient to the party putting them forward. Generally, they comprise comparative illustrations used to set the scene of the actual evidence to follow. 13–190 Illustrative visualisations are used to describe something that could not normally be seen, such as an aircraft, shipping, or car accident, a structural collapse, or 173 American Oil Co v Valenti 179 Conn 349, 359, 426 A 2d 305, 310 (1979). 174 State of Connecticut v Swinton Conn 847 A 2d 921 (2004). 175 For case studies and sample animations see A Burr and K Pickavance, “The use of visualisations in case presentation and evidence” (2010) 26 Const LJ 3.

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other construction failure, or the outbreak of a fire. Because these events cannot normally be seen, they may be met with competitive visualisations, which appear equally plausible, but are different. 13–191 An evidential visualisation, on the other hand, simply provides a different way of looking at primary evidence already available from primary documentation. It has to be factually accurate and be developed by audit trail from the primary evidence. Accordingly, it is thought that, all other things being equal, the computerised simulation of primary factual data ought to be admissible as primary evidence.

Factors influencing the evidentiary strength of records 13–192 Since the removal of traditional restrictions on hearsay evidence in civil proceedings in England and Wales, all site records are generally likely to be admissible as evidence in legal proceedings without having to be proved by witness evidence176. If the facts suggested by the records are in conflict with other evidence, the court, or tribunal will need to decide how much weight to ascribe to the records. Among the factors likely to influence the perceived reliability of the documents177 are: contemporaneity – records documenting events while they occur, or shortly afterwards are more likely to be accurate than those recalling events some time in the past and relying on the memory of the recorder; neutrality – records documenting events both adverse and favourable to the party recording them are likely to be perceived to be more factually reliable than those which only record facts favourable to the recorder; approval – if C can obtain signed approval, or acceptance of its records (by a putatively independent CA, for example) they are more likely to be perceived to be reliable than if not so accepted; formal and consistent process – a set of records produced as part of a formal and regular business process, by someone whose job it is to produce them, will tend to be perceived to be more reliable than those produced on an ad hoc basis; first-hand – first-hand hearsay records are more likely to be treated favourably than multiple hearsay records178; security – a recording process that minimises opportunity for subsequent manipulation and fraud will tend to render records more reliable than if they have been, or appear to have been, manipulated. For instance, in the case of handwritten paper records, it may be prudent for the diarist to sign off at the end of each section of text so as to minimise the ease with which underlying blank spaces can later be filled. Suspicions may also be aroused if the pen colour of paper diary entries changes frequently midstream179. It is also prudent to ensure security by distributing electronic copies contemporaneously, maintaining multiple copies, or backups of records, whether on paper, or electronically stored; and corroboration – the recording system should be set up so that the facts can be confirmed from multiple sources. For example, the activities that progress 176 See, for example, the Civil Evidence Act 1995. 177 A Axelson, “Materials and communications”, Construction Law Self Study Course – Module 2 (London: Informa Professional Development, 2005) p.19. 178 Records are “first-hand hearsay” if the recorder creates them from that which they see or perceive directly. Records are “multiple hearsay” if the recorder relies on the assertions of others to produce them. 179 See, eg Deangrove Pty Ltd v Commonwealth Bank of Australia [2001] FCA 173 at [118].

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photographs suggest took place at a particular time should match what is recorded by resource allocation sheets and site diaries. Anomalies should be identified and either corrected or explained.

Getting at the facts of delay “I have no data yet. It is a capital mistake to theorise before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts.”180

13–193 There is a tendency to assume that “recording” a fact is tantamount to “examining” it. That is because, in order to record a fact, some measure of preliminary investigation is very often required in order to assess whether it is relevant to a known or possible issue. But when it comes to compiling a claim, a more objective view of the situation is necessary. In the first instance, a claim is likely to be put together by those intimately connected with the project. Objectivity can therefore be difficult. Even if the person who puts the claim together is not intimately connected with the project, but is an employee of the company that stands to lose (or gain) substantial sums, it is still difficult to be objective. It is such vested interests that, in practice, can turn factual evidence into fantasy. 13–194 As the examination proceeds, C may find that its original assessment of its position changes and that it simply does not have sufficient evidence in certain areas to make it possible for it to present a sustainable case. It is not enough to know that it has suffered loss. It does not matter how sad the story its scheduling, change control, or cost records may show; if its claim is to succeed it must be able to demonstrate a causal connection between the loss it has suffered and an excusable and/or compensable event. In the case of Sawadi181, for example, C claimed that loss of efficiency and productivity had been caused as a result of instructions to carry out work in a compressed time-scale. However, finding that no evidence of lost efficiency and/or productivity as a result of D’s action, or inaction had been produced, the Board rejected C’s claim, saying, amongst other things, that “no contemporaneous evidence of delay, or even any timely notice of delay has been shown by [C]. In general, the claim fails for lack of proof”. 13–195 One way in which C might assess its objectivity is by putting itself in the place of an arbitrator, who must consider the evidence placed before it with a view to making an award. If it considers an item to have merit and to be factually supportable, it is worth including it in the claim; if not, it should either strengthen its factual support, where possible, or drop it.

Retrospective assembly of evidence 13–196 The retrospective analysis of documents frequently produces surprises for the in-house claim manager who has been involved in the project for much of its life. The items that it might have considered being primary causes of delay and disturbance often appear, after retrospective examination, to be less significant. The converse also applies: for example, in Barker182, a great deal of correspondence had been sent and effort invested in attempting to demonstrate that delay to completion had occurred as a result of additional work to screeds, fire proofing of duct penetrations and problems

180 Sir Arthur Conan Doyle, The Sign of Four. 181 Sawadi Corporation (2001) ASBCA No 53073. 182 John Barker Construction Ltd v London Portman Hotel Ltd (1996) 83 BLR 31.

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with door frames and electrical fittings in the bathrooms of the hotel. All these had necessitated work being removed and undertaken again. The CA had recognised five relevant events in connection with this and given a few days’ extension of time, which C disputed. In the retrospective analysis, it appeared not only that the CA was substantially correct in its appraisal of the extent of disruption caused by the variations, but that both the CA and C were mistaken as to the effect which those changes had had on completion. The primary cause of delay was found not to be associated with the bathrooms at all, but with a significant change in specification of work to plaster and decorations affecting the corridor areas outside the bathrooms, for which no extension of time had been granted. 13–197 For well-documented projects, the greatest challenge is in organising and digesting the available data, so as to produce serviceable information and credible analytical results within a fixed time-scale and limited budget. It is an unfortunate fact of life that, when C has suffered financial hardship as a result of contractual difficulties, its hardship is only exacerbated by the costs of retrospectively attempting to prove its entitlement to reimbursement and/or relief from liquidated damages. How much hardship, however, will depend on the quality of the gathered data and the analytical skills of the expert. 13–198 For the expert, who encounters the matter retrospectively, factual analysis is complicated by the fact that the production of documents tends to follow an unpredictable course. There will first be those which the instructing party has in its own possession, or which can without difficulty be obtained from other “sympathetic” parties connected with the project. Later on, disclosure by the opposing party, or parties will often produce many other documents, or copies of similar documents with additional notation. These may have to be taken into careful consideration and compared with other versions in order to get a picture of the chronological evolution of the matters in dispute. 13–199 The requirements and pressures of investigation, analysis and disclosure in construction-related disputes tend to be greater than those encountered in many other fields. In construction matters, experts and lawyers may have to consider not only the supporting correspondence, evidence of photographs, drawings, and written material, such as bills of quantity, certificates, instructions, invoices, letters, and so on, but also the physical evidence of the work on site. They must also consider that the importance of a document may stem not only from its content, but also from its source, the date of its creation, to whom it was sent, other parties in receipt and the date of receipt. For the expert, it is not sufficient merely to know which documents are pertinent to which subjects; the words used and the context in which they are used are equally important. 13–200 Apart from being able to gain access to the information in question, the expert must also be able to refer to it in its report (or supplementary report), either by cross-referencing, or by transcription from the documents into its report. Thus, even when good records are available, problems can arise in relation to the retrieval of evidence without adequate search and retrieval systems. 13–201 The timing of D’s time, or cost risk event is often crucial to its relevance, and the effects can more easily be determined if related to a schedule. Initially, the identification of events by dated milestones may be suitable for this purpose. When working manually, the findings are often best recorded by date first, because it is a simple and quick method of manually recording time-related information for later appraisal. It should be stressed that this is only for preliminary analysis and not by way of proof.

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13–202 So, for each element in a contractual claim, there should be a history of the circumstances and events giving rise to the change and the entitlement to relief. 13–203 There are essentially two basic methods of data analysis: 1. 2.

manual sorting; and computerised sorting.

Manual sorting of evidence 13–204 In the course of a contract, if there is not a computerised document management system in use (generally referred to as a “DMS”), files will normally be kept manually, in generic reverse date order. For these documents, typically there will be a file for correspondence with each party, a file for instructions, another for minutes of meetings, and so on, and each file will have the oldest document at the back and the latest at the front. 13–205 If a disputes file has not been kept independently, then the first step must be to produce one. The first step in any analysis is to sort the information into chronologically listed bundles. Original documents should be photocopied or scanned and copies of every type of document on all dispute issues abstracted to a single “master volume”. That bundle must then be arranged in chronological order. 13–206 By reading an assembly of documents sorted manually into date order, a view of the evolution of the problems on the project in question can usually be gained and the principal facts of the relevant issues should then become apparent. 13–207 The next stage is to separate the issues in such a way that each can be dealt with in isolation from the other. This can be achieved in one of two ways: 1. 2.

multi-volume collections, with a separate volume for each issue; or a single volume with each issue independently tabbed.

Multi-volume collections 13–208 A multi-volume collection is prepared by setting up a separate volume for each issue to be considered. The documents relevant to that issue are then re-copied from the master volume and filed chronologically in this particular issue-related volume. The relevant parts of each document to the issue in question should be highlighted, or marked for easy reference. It follows that, in multiple-volume collections, the same document may appear in different volumes merely because it covers different subjects within the body of its text. The advantage of this system over that of multiple tagging a single volume is its clarity. It is considerably more helpful to everyone who has to get to grips with the facts to have a separate volume for each issue than to have to trawl through complex cross-referencing systems. 13–209 On the other hand, the downside of this method is that it can become extremely bulky and, as new documents come to light, the workload in keeping the files up to date increases proportionately to the number of issues involved: within the body of a single page of any document may be matters appearing under different heads of claim, defence, or counterclaim. By way of example, in an international arbitration, in which over 130 issues of professional negligence were alleged against the architect, the manual multi-volume analysis produced, on average, three volumes of documents per issue, giving some 300 files, all of which had to be copied in support of the expert

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report. How much more efficient and cheaper it would have been if, instead of insisting that it be done by hand183, the instructing solicitors had been amenable to using computers to analyse the documents.

Single-volume tagged collections 13–210 Tagged files are simpler to augment and index, but there are practical limits to the number of cross-referenced tabs that can be attached to a single document. Where multiplication occurs, there can be considerable difficulty in adding bundle numbers to the expert’s previously referenced files. 13–211 The problem of a single document containing material regarding several different issues can be accommodated by means of a system of coded tagging slips indicating the tag code. These can then be arranged into events by item in chronological order. Particularly useful tags might include: documents which refer to other disclosable documents: this helps the analyst to recognise weak areas in both its own records and those of its opponent184; subject-tagging; cross-references to experts’ reports; cross-references to statements of witnesses of fact; particular documents which ought to be included in the opponent’s list on disclosure; documents to be included in the trial bundle; specific documents to be brought to counsel’s attention; and documents that may devastate either C’s, or D’s case185. 13–212 For manual sorting of evidence, it has been suggested that A4-size sheets guillotined into four narrow slips with holes punched in the top left-hand corners for treasury tags can be used to mark the beginning and end of event sections and can facilitate the shuffling of events into order and the subsequent insertion of additional events186. The event identifying slips can be pasted onto copies of the document, and referenced to the issue. If claims against different parties are being prepared simultaneously, the slips may be different colours; one colour for D, another for C, another for the subcontractor, and so on. Alternatively, each slip can be marked A, B, C, and so on, near the item number so as to avoid confusion. If the cuttings are too large to fit on single slips, they may be accommodated on continuation slips (if cuttings are three or four paragraphs long), or folded over on a single slip. 13–213 As the claim preparation proceeds it may become expedient to combine one or two items. It should be remembered, however, that it is a simple matter to combine slips, but not so simple to split them. 13–214 All this may appear to be an unnecessarily cumbersome and elaborate system. On the other hand, it should be remembered that not only is C’s credibility undermined if it claims against A for an event which is really the responsibility of B, but it wastes

183 On the pretext of saving money! 184 Consider an order for specific disclosure, interrogatories and so on. 185 Known as “the smoking gun” in the United States and sometimes referred to as “flashing red light” documents. 186 J Franks, Building Sub-Contractors’ Claims – Avoidance of Submission? (1986) Studies in Contractual Claims 10 (Chartered Institute of Building).

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a considerable amount of time and money, and may become liable for the wrongly incurred costs as well. 13–215 Manual referencing and sorting is unsatisfactory in all but the simplest of disputes, because of the amount of paperwork it generates and the resultant complexity of pinpointing issue-related information. 13–216 During the report preparation stage and the drafting of pleadings, there may very well be sufficient time available to make detailed searches. However, it is generally the case that in experts’ meetings and in examination at trial, there is rarely, if ever, adequate opportunity to deal effectively with anything that cannot be located immediately. No matter how carefully manually sorted documents are prepared, in the heat of litigation it is rarely satisfactory. One can be convinced that there is a document, somewhere, that deals with a problem; one may remember a phrase or word in such a document, but no matter how efficient or detailed the manual cross-referencing, locating such a document without computerised search facilities can be unnecessarily time-consuming and tedious and, in some cases, unfortunately, ineffective until too late.

Sorting evidence on databases 13–217 Information technology systems commonly available have been successfully applied to problem solving in contexts that bear a considerable similarity to aspects of claims management and dispute resolution. These include word processors, spreadsheets, database management systems, text-retrieval systems, document image-processing systems, hypermedia systems and knowledge-based systems. 13–218 Perhaps the fullest benefit from information technology can be gained by creating an indexed database with full tagging and retrieval facilities in association with electronic storage of the subject documents, either in their original electronic format, or as image scans of available hard copy documents. With the use of the appropriate software, this allows the reviewer to retrieve and view electronic documents on screen, enabling access to the documents themselves for indexing, tagging, annotation and text extraction. Document extracts can be tagged for inclusion in issue summaries and schedules of documents associated with particular issues can be prepared readily for inclusion in reports. Since all document storage is electronic, it is a simple matter to add additional documents into the information set, reviewing and indexing these new documents as and when they become available. 13–219 Where it is not possible to assemble electronic copies of the documents, it is still very advantageous to use a database to index and tag hard copy documents in a similar manner. This relies upon ensuring that all documents carry a unique reference, which must be included in the database to associate the database records with the documents themselves. Creating unique references can be as simple as the use of careful pagination of the document sheets in named files, so that the combination of the file name and the page number forms a unique identifier for each sheet. Further refinement can be added if the reviewer annotates the document copies during review, marking serial numbers against selected text and recording these in the database. In this way, the specific text identified during the review can be readily identified subsequently for evidential, or other purposes. In some circumstances, it may even be appropriate to arrange for a data input clerk to re-key the numbered text extracts into the database and, in this way, move to a position where the hard copy documents are relied upon only as evidence for the extracts and are not required in further research.

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13–220 Those who have access to an indexed database with full tagging and retrieval facilities will be in a far better position to examine and collate their documentation at the very outset of the claim and to analyse, report on and respond to requests for information than if the documents have only been dealt with as hard copy, manually. They will have an invaluable storage mechanism that can be accessed, not only for negotiation and settlement, but, in the event that the dispute reaches arbitration and/ or litigation, also for preparing the list of documents prior to disclosure, supporting requests for further information (and replies to requests), as well as for regular inspection, comparison and preparation throughout187. 13–221 The application of database techniques to document sorting and searching varies widely. The objective coding of documents188 onto a database can produce very fast results in the search for duplicates and simple source information. It is this objective coding service that is well sold by most imaging companies and, as an add-on, they will often offer “dirty” optical character recognition (“OCR”) output from the scans189. To be of any real use, OCR documents must be cleaned up in order to render the text “word searchable” and, even with state-of-the-art handwriting recognition technology, handwritten notes, correspondence and commentaries will probably have to be re-keyed. 13–222 However, having done all that, the chance of finding the appropriate documents from simple word searches is minimal. Research in the United States has demonstrated that the hit-rate in word-searched documents can be as low as 25% of the relevant documents, as opposed to the regularly achievable 95% hit-rate for subjectively coded documents190. 13–223 The difference between the two is easily reconciled: with subjectively coded documents, the chance of getting them all depends on the intellect of the analyst in recognising their relevance at the time of coding. It is an intensive process with skilled operatives and, once coded, the information is available to anyone who can identify the appropriate subject for search and not only those who understand the evidence. On the other hand, the chance of getting it right in word searching depends entirely on the quality of the OCR or re-key and the intellect of the operative who is searching. For example, assuming everything had been processed by OCR, or re-keyed perfectly, difficulties with a conflict as to the services access positions and clean areas in a hospital could be variously referred to as “the difficulty with clean utility”, “prep room ceilings”, “theatre ceilings”, G127, G130191, and “ceilings to ground floor”. No simple word search of a listing or file could possibly hope to locate anything other than a small proportion of the documents in issue unless all the different ways in which the problem had been identified were known and independently listed as a “key” search.

187 K Pickavance, and S Barker, “The use of indexed databases in commercial litigation and arbitration” [1992] ADRLJ 13. 188 Objective coding refers to the coding only of such things as author, recipient, date sent, date received, copyees, etc, and is limited to that information which can be gleaned from the face of a document without having to understand its content or context. It is cheap, quick and anybody can do it. 189 “Dirty” OCR is the automatic output from computer software and will include the results of poor scans, poor interpretation and difficult text layouts. It can vary from virtually perfect to totally unintelligible depending on the quality of the document to be processed. 190 Objective coding relies upon what is actually on the document such as the name, address, reference of the author and the date and title, if any, that the document bears. Subjective coding adds to that the perceived relevance to prescribed subject headings of what is written in the document. 191 The room numbers recorded on the architects’ drawings.

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13–224 Similarly, a simple search in textual form for difficulties with light fittings might be confused by the way we use the word “light” and would have to exclude such expressions as “to be light on something”, “lightwell”, “light pressure”, “in light of”, “highlighting”, “highlighted”, “coming to light”, “slightly”, and so on, simply because a search for “light” would pick up that chain of letters in all the previous expressions. Nor would a search for “light fitting” find all the relevant information simply because it might also be referred to as “wall lights”, “uplighters”, “down lights”, or even “anglepoise”! 13–225 Apart from text, there is also the problem of drawings to be considered. There are two principal methods of putting a visual image onto a computer screen. It can be vectored, eg through computerised drafting systems (in which case the computer remembers the location of the beginning and end of every line), or it can be raster-scanned so that the lines are a mere picture (as in a photograph). Imaging scanners produce a photographic image and work in a similar way to photocopiers, except that, instead of getting a copy of the original on paper, the copy is made as a computer file, which can be viewed, or printed in the way any other computer file is viewed, or printed. 13–226 Document management systems are basically scanners with an integrated optical character reader and relational database. Some of these also include fuzzy-logic search engines too. They are marketed as a new and important advance in the creation and management of information on computer and can be quite expensive. Others are really no more than a standard feature of an ordinary word processor and database and they are very economical. For example, Datalex™192, a rather sophisticated application combining MS Word™193 and MS Access™194, will permit the categorisation of documentary text in thousands of different combinations with a fast report of those meeting the description of one or more categories. 13–227 There is a common misconception amongst those uninitiated in computerised information management that, if a document is not already the product of an accessible computer file, then creating and databasing the document adds time and money to the analytical process. Nothing could be further from the truth. In any claim situation, every document in issue must be read, often together with many documents that are not in issue. If the documents are read in a structured way, with a view to the relevant information later being sorted electronically, then the course of analysis and synthesis becomes quicker, more effective and vastly cheaper than in the case of any manual analysis. 13–228 “Structured reading” means that, on reading the evidence for the first time, a thesaurus should be prepared of parties, issues, subject-matter and key words. These should be set up as memory buffers in a “pick list” (in order to avoid misspellings and inconsistencies that would interfere with accurate search and retrieve at a later date). Then, as the documents are read, they can be marked with a highlighter and noted with the appropriate issue code for logging in the database. 13–229 Apart from the initial ease in referencing and cross-referencing, it is also apparent that those courts and tribunals that are literate in information technology and have access to an indexed database with full tagging and retrieval facilities are more likely to be in the position, quickly and thoroughly, to examine the collated evidence 192 A product of Business Numbers Ltd. 193 Word processing software produced by Microsoft Corporation. 194 Database software produced by Microsoft Corporation.

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in dispute than those that have not195. This inevitably results in quicker, better-reasoned and more just results than is possible with manual document analysis. 13–230 The essential characteristics of a system capable of subjectively coding documents are that it should be able to: retain a minimum of 100,000 records196; be used on different types of hardware in single-user networks and multi-user environments197; be edited and modified to suit individual circumstances198; be multiplied into identifiable modules for different matters199; and be fully integrated into a word processor that would enable the database records to be extracted and isolated into reports without the need to re-key200. 13–231 As with the databasing of contemporaneous site records, the data is usually entered into a protected screen, which prevents words from being entered out of position, and with data validation traps to make sure that only the words put into the pick list can be entered into the corresponding fields. This helps to avoid common errors in data input. The process of entering the evidence onto the database is arbitrary; it can be entered in any order, at any time, and updated, or edited at any time. Furthermore, there tends to be no restriction on the type of information that can be entered into each database field201, save that graphic information that is to be editable and searchable must be cross-referenced to a system capable of reading raster-scanned information. Neither is there any practical limit to the number or length of extracts that can be abstracted from the evidence. Of course, the objective of the use of such databases in court or arbitral proceedings is to abstract only those parts that are likely to be of any use and to ignore the rest. If more extracts are needed at a later date, then they can then be added at any time and in any order. The order of input does not matter because the extracts are reordered (for example, chronologically) when the search is made for listing. In most systems, the information can then be entered into the system by any competent data-input clerk. 13–232 Unless constructed as a database in the first place, there are essentially three ways of getting the data into a database: re-keying202; scanning the image203; or 195 See also K Pickavance, “Some suggestions for the use of computers in arbitration” (1992) 8 Arbitration Journal 187. 196 This is not the number of documents, or even pages in a document, but the records of relevant extracts. There can be several on each page and this is considered to be the lowest reasonably practicable quantity for most projects but, in some, ten times that may be necessary. 197 It is important that others within the “team” should be able to use the same information. 198 Most cases have something special about them. 199 It is administratively convenient to be able to contain the information about one project in a separate identifiable file or system. 200 For flexibility in use. It is very annoying to have to re-key information that should be capable of being transferred with the click of a keyboard or mouse. 201 A field is an identified compartment of a database in which data pertinent to the subject matter of the field is held. The identification of separate fields in which data of a like kind is held is essential to entering, extracting and sorting data. 202 This is essentially retyping relevant extracts into a database. This is the only way, at the moment, of preparing handwritten documents for computerised searching. 203 Pen-like scanners are available, which will, in connection with some database software, permit the direct insertion of a line of text over which the pen is moved, and convert it automatically into the appropriate format into the appropriate field on the database.

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scanning the text (using optical character recognition) to convert a document to a computerised text file204. 13–233 As it is committed to the database, the source evidence itself must be marked with the identifying “key” numbers which the computer has automatically attributed to the extracts. This is important because it facilitates the process of checking and crossreferencing with the original material. The source evidence can then be bound into looseleaf binders in date order for subsequent reference. On committing each record to disk, the principal details are usually held in dynamic memory, so that there is no need to retype the source details with every extract of the same evidence listed. 13–234 Whilst this may all seem a little complicated, once it is done, it is in data recall and listing that the computer demonstrates its power and speed. The idea is that, once entered, the extracts can be searched and sorted to narrow the selection to a single issue in question. For example, there may be perceived to be a problem with a delay caused by the bonding, or cladding of walls and a change in the selection of ties: by asking the database for “cladding”, a listing may appear, in chronological order, of every record entered in which the word “cladding” appears, or is cited as a “subject”. Similarly, a listing can be obtained of records in which the word “ties” appears, or is cited. One might equally want to know in what circumstances and when “cladding” was mentioned in letters by the CA, but “ties” were not. Each of these requests can produce a body of information, which can be sorted by source, in time or date order, or by type of evidence, or subject-matter. The selection can be produced in a number of predetermined formats, to which additions can be made for particular cases. 13–235 Although reports, Scott Schedules205 and other pleadings may not be prepared in their original form as database records, even as documents they can normally be searched in any word processor (although not so comprehensively) through the “find string” process. However, by transcribing the Scott Schedule into a database, sections that refer to particular aspects of the items pleaded can be mapped onto the screen in isolation from the remainder. Specific and typical items can then be tagged as representative items and a “mini” Scott Schedule produced onto the screen for trial purposes. This would enable the order of sections in the Scott Schedule to be altered to suit the convenience of the arbitrator or counsel during the course of the hearing almost instantaneously206.

Discovery, disclosure and inspection “To consider an electronic document as a means of simply storing the information printed out on paper is to ignore the depth and diversity of information truly contained within. It is analogous to defining a car by its colour without reference to any other information.”207

13–236 Disclosure and inspection used to relate to writing on paper and, whether it was an original or was a copy was generally relatively easy to say. However, the age of

204 This is the method used for bulk documents. It is important, before embarking on a scheme of scanning, that adequate planning is conducted to ensure that all the necessary fields are captured and that a foolproof audit trail is available to the original document. 205 See Ch.14, “Cause and effect”, at paras 14–208 to 14–215. 206 K Pickavance and S Barker, “The use of indexed databases in commercial litigation and arbitration” [1992] ADRLJ 13. 207 C Carmichael-Jones, “Electronic Documents” (2002) 8 The Expert and Dispute Resolver p.6.

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electronic communications has rendered the problem of identification of documents for the purposes of discovery and inspection much more complex. 13–237 Where arbitration, or court proceedings (but not adjudications) have been commenced208, the arbitration rules209, or rules of court generally permit that either by order of the arbitrator, or court, each party must disclose to the other parties all documents that are, or have been, in their “possession, custody, or power” relating either directly, or indirectly to any fact in issue210. The Civil Procedure Rules (CPR) describe this process as “disclosure”211 and, in the absence of an ad hoc agreement between the parties to the contrary212, apply the process to all formal disputes under the CPR. Prior to the CPR, the process was governed by the Rules of the Supreme Court, which described the process as “discovery”, a term that is still used in many arbitration rules and in civil proceedings outside the United Kingdom. 13–238 Standard disclosure under the CPR213 requires each party to disclose to the other: the documents on which it relies; and the documents which: – adversely affect its own case; – adversely affect another party’s case; or – support another party’s case; and the documents which it is required to disclose by a relevant practice direction. 13–239 This applies to all documents that are not protected by legal professional privilege (or some other form of legally recognised privilege). 13–240 Proceedings for contempt of court may be brought against a person who makes, or causes to be made, a false disclosure statement, without an honest belief in its truth214. 13–241 Furthermore, a party to whom a document has been disclosed has a right to inspect that document subject to two exceptions: where the document is no longer in the control of the party who disclosed it; or the party disclosing the document has a right to withhold its inspection on the grounds that the cost of inspection would be disproportionate (and it has stated as much in its disclosure statement)215. 13–242 The purpose of disclosure is to ensure that parties to a dispute have the opportunity not only to know in advance what are the documents upon which their opponent will seek to rely, but also to apprise themselves of the full extent of documentation in their opponent’s power, possession, or control.

208 And in certain cases before commencement, CPR r.31.16 provides for pre-action disclosure (previously Administration of Justice Act 1970, ss 31 and 32(1)). 209 Most arbitration rules have similar provisions to those of CPR. For an analysis of the IBA rules for example, see N Darwazeh, “Document discovery and the IBA Rules on evidence” (2002) Int ALR 101. 210 A “fact in issue” is a fact relevant to a particular case which is open to proof or disproof by one party or the other. 211 r.31.2. 212 Or an agreement contained in the applicable rules of arbitration. 213 r.31.6. 214 r.31.23(1). 215 r.31.3.

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13–243 There have been a few high profile cases in the last few years in which a party to major litigation has attempted to destroy its own documents with a view (as was alleged by the other party) to avoid having to disclose it in the action and so perverting the course of justice. The result of being found guilty of doing so can be catastrophic. In regard to the collapse of Enron Corporation, for example, the result of Enron’s auditor’s admission to overseeing the destruction of documents with the intention of thwarting the US government’s investigation into Enron’s accounting procedures is thought to have resulted in the collapse of Arthur Andersen LLP, then one of the world’s biggest accounting firms. 13–244 In Mirant v Ove Arup216, D complained that, amongst other things, C and/ or C’s legal team had concealed, or had knowingly or negligently participated in the destruction of relevant documentation, which should have been disclosed and had also failed promptly to disclose documents in their possession, or control. The lawyers were criticised, but the judge was able to decide the case on the facts available. In this case, D was based in Australia and habitually used Australian lawyers, but the case was brought in England and conducted by UK lawyers in co-operation with the Australian lawyers. The court referred to the decision of the Court of Appeal in Malhotra v Dhawan217, in which Morritt LJ outlined the principles concerning the destruction of evidence, as follows: “1. Where destruction of evidence was carried out deliberately so as to hinder the opposing party’s claim, that will reflect on the credibility of the destroyer. This would enable the Court to disbelieve the destroyer’s evidence. 2. If the Court has difficulty in deciding which party’s evidence to accept it would be legitimate to resolve that doubt by the application of the presumption. 3. If the judge forms a clear view as to which side is telling the truth he is not required to apply the presumption to accept evidence in which he does not believe or to reject evidence which he believes to be true.”

13–245 Having also observed that there was no significant difference between the rules of disclosure between the two countries, the late HH Judge Toulmin CMG, QC said218: “It is essential in such cases that the two firms work closely together, particularly on disclosure issues and that the firm on the record within the jurisdiction has the effective conduct of the litigation including the overall conduct of the disclosure process I am not persuaded that [the Australian lawyers] co-operated sufficiently fully with [the UK lawyers] in undertaking and carrying out the requirements under English procedure or the Orders of the court. I have no reason to think that [the English lawyers] failed to make [the Australian lawyers] aware of such requirements. Under the Rules of Procedure of the Commonwealth of Australia, the Federal Law of the United States and of this jurisdiction, there is a requirement to preserve documents which may be relevant to the litigation. I am satisfied that [C’s] Counsel and [the Australian lawyers] as standing outside counsel, could and should have made greater efforts to ensure the preservation of documents which were clearly relevant. These included many of the categories about which [D] makes complaint. It is clear for example that documents relating to the conduct of [C’s Managing Director] and documents relating to & dismissal in June 1997 were clearly relevant to this litigation. It should not have required any document

216 Mirant Asia-Pacific Construction (Hong Kong) Ltd v Ove Arup & Partners International Ltd [2007] EWHC 918 (TCC). 217 Malhotra v Dhawan [1997] EWCA Civ 1096; [1997] 8 Med LR 319. 218 Mirant Asia-Pacific Construction (Hong Kong) Ltd [2007] EWHC 918 (TCC) at [111] to [118].

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request by [D’s] solicitors in order to put [C] on enquiry that such documents should be disclosed. It is, as the parties have acknowledged, elementary that the experts have equality of arms as far as documents on which their opinion is based is concerned. The experts themselves should be careful to check that documents on which their opinions are based have been disclosed to the opposing parties. Under the procedural rules of the High Court it is important to emphasize that there is a duty on parties to litigation not only to preserve but also to disclose all documents relevant to the issues in the litigation. I have found that [C’s] legal team took an unreasonably narrow view of [C’s] disclosure obligations and that [D’s] specific criticisms are justified. Having heard all the evidence and read the documents that have been disclosed I am satisfied that although there is substance in [D’s] complaints, I can reach proper conclusions on each of the issues which I have to decide on the written evidence which has been disclosed and the oral evidence which I have heard. I have been careful to draw inferences from the evidence which I have heard and read and not in any sense to penalise [C] because of the fact that documents have not been disclosed. I have based this judgment on the evidence before me. Where I have drawn inferences from the evidence I have said so. In taking this approach I should indicate that I am making no finding that [C] destroyed evidence. I am making a finding that they failed to retain and/or disclose evidence which should have been retained and disclosed at trial.”

13–246 The standard order made by judges of the TCC at the first case management conference (and by many arbitrators) requires that parties provide disclosure by way of a list of documents, typically within a period of between 28 and 42 days of the order being made. That time will usually coincide approximately with the date of service of the last statement of case, or Scott Schedule. Any party failing to serve its list within the stipulated time may well find itself on the receiving end of an application to strike out its claim, or defence, unless the list of documents is served very shortly after the expiry of the original period. 13–247 Both the court and the arbitrator are entitled to strike out claims for failure to comply with a peremptory order219. In his guidebook to procedure in the Official Referees’ Court (the predecessor to the TCC), HH Judge Newey QC stated that, after the summons for directions has been heard and a hearing date given, there was no possibility of culpable delay occurring220. He also stated that a party’s, or parties’ failure to comply with court orders aimed at ensuring that a case is ready for trial by a fixed date should never be a good reason for altering that date. 13–248 In the Australian case of McCabe v BAT221, C applied to have the defence struck out when D refused to disclose documents from previous litigation against D. That case involved a woman dying of lung cancer suing the defendant tobacco company for negligently causing her cigarette addiction. D said that its documents had been destroyed under its document retention policy and they were not in litigation at the time they were destroyed. The Supreme Court of Victoria found in the first instance, however, that D knew that litigation was almost certain and that it had “taken advantage of a ‘window of opportunity’ to destroy any potentially incriminating documentation”. The court concluded that there had been a deliberate tactic to hide information and as a consequence had denied C a fair trial. Accordingly, it struck out the defence and entered judgment for her.

219 Sometimes referred to as an “unless order”. 220 HH Judge Newey QC, Official Referees’ Court Practice and Procedure (London: Butterworths, 1998). 221 McCabe v British American Tobacco Australia Services Ltd [2002] VSC 73.

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13–249 D, however, successfully appealed the decision. The Victorian Court of Appeal222 distinguished between deliberately destroying documents after the commencement of proceedings (which Enron’s auditors had been accused of) and destroying documents at a time when litigation was no more than anticipated. The Court said that, even though D had behaved badly, that should not remove the burden of C having to prove its case and the trial judge should have made an order for specific disclosure on the points in issue. 13–250 In the United Kingdom, an order for specific disclosure may be made under the CPR223, which provides that the court may order a party to disclose specific documents, or classes of documents specified in the order, or carry out a search to the extent stated in the order and disclose any documents located as a result. 13–251 Upon receipt of such an application, the court will take into account all the circumstances of the case and, in particular, the overriding objective and the concept of proportionality. Apart from a failure to comply with such an order constituting a contempt of court, in the case of Environment Agency v Lewin224, it was held that an action in damages could be successfully maintained against the party failing to comply. In this case, C had failed promptly to comply with an order for pre-action disclosure of documents in the hands of third parties, but under its control. D then embarked upon a series of actions for disclosure against the third parties, which were subsequently abandoned when C finally produced the documents. C was held liable for the costs of the abortive actions against the third parties, which, had it complied with its obligations as to disclosure, would have been unnecessary. 13–252 Whilst disclosure and inspection is a process widely understood and practised in the United Kingdom, the United States and other common law jurisdictions, it is virtually unheard of in civil law jurisdictions. In common law jurisdictions, in principle, the parties are expected to let each other know what are the documents in their “power, possession, or control”. The CPR225 provides that the duty to disclose documents is limited to those that are, or have been, in that party’s control and that a document is deemed to be within that party’s control if: it is, or was in its physical possession; it has or has had a right to possession of it; or it has or has had a right to inspect or take copies of it. 13–253 However, what is subject to disclosure will vary from case to case. For example, in Mariner v Atlas226, in which the defendants were alleged to have failed to construct the “Golden Bridge Hotel” to the same standard as the “Grand Plaza Hotel”, C required access to inspect and photograph both hotels. D objected to such examination on the basis that the hotels were in the possession of other companies not a party to the action. In dismissing the objection and ordering inspection, the Hong Kong High Court of First Instance held that the test was whether it is reasonable to suppose that the requested inspection would reveal information that may enable the party (applying for disclosure) either to advance its own case, or to damage that of its

222 223 224 574. 225 226

British American Tobacco Australia Services Ltd v Cowell [2002] VSCA 197. r.31.12. Environment Agency v Lewin Fryer & Partners [2006] EWHC 1597 (TCC), (2006) 22 Const LJ r.31.8. Mariner International Hotels Ltd v Atlas Ltd [2004] HKCFI 630.

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adversary, if it is a document that may fairly lead it to a train of inquiry that may have either of these two consequences; and a blanket refusal to permit inspection on the basis that the buildings are in the possession of other parties is an unrealistically narrow and wrong stance to adopt, particularly in a major building project where the contractual chain and framework can become very complex and sometimes artificial. For the purpose of this disclosure exercise, the court decided that the hotels were within D’s control and inspection should be permitted.

Disclosure of electronic documents 13–254 The CPR defines a “document” as meaning anything in which information of any description is recorded; and “copy”, in relation to a document, means anything onto which information recorded in the document has been copied, by whatever means and whether directly or indirectly227. 13–255 It can thus be seen that the definition of “document” is very wide and includes paper writings, tape recordings, computer programs and print-outs, computer records, back-up tapes and diskettes, microfilms, photographic film and other tangible means of recording information. There are, however, some problems with computer data, which appear yet to be resolved. 13–256 Recent developments in electronic communications have opened up a number of practical possibilities for the management of information and information flow in construction and civil engineering projects. Information management systems typically establish procedures for storing and retrieving original paperwork. Incoming and outgoing documents are captured, copied, codified and filed electronically. On top of that, we now have the daily experience of using electronic mail and through the internet of being able to communicate worldwide in seconds, sometimes involving communications made up of moving pictures and sound. Satellite link-ups enable people to “meet” electronically and to have open live discussions whilst physically thousands of miles apart. Because it is so easy, it is often forgotten that in the event of dispute the contents of such electronic communications are disclosable. For example, in the US government’s antitrust case against Microsoft Corporation228, it was reported that a government lawyer undercut Microsoft’s defence strategy by producing a Microsoft email message, suggesting that the company had cynically and selectively produced data in support of its defence. The International Herald Tribune229 reported: “In the email, a Microsoft public relations executive, Greg Shaw, asked others at the company: ‘What data can we find right away, showing that the Net-Browser is still healthy? The government is introducing a bunch of data showing Netscape headed down big time and Microsoft way up. It would help if you could send me some reports showing their market share healthy and holding’ Later that day Robert Bennett, Group product manager for Windows, wrote back saying: ‘All the analyses have pretty much come to the same conclusion which is that Netscape is declining and Internet Explorer is gaining’.

227 r.31.4. 228 Based on the contention that Microsoft used its dominance in the area of operating systems to bolster its share of the browser market by tying Internet Explorer into the Windows operating system and setting out on a campaign to dissuade other companies from working with Netscape. 229 International Herald Tribune, 7 June 1999.

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A half hour later, Yusef Mehdi, a marketing director, wrote that he had found a survey showing: ‘us very close to Internet Explorer share and one that has Netscape even, or even higher. This is for the trial so let’s provide the more negative analysis’.”

13–257 It was reported230 that, as the lead government lawyer read that aloud, the judge who was trying the case chuckled and shook his head. 13–258 The disclosure of electronic documents brings with it two problems that do not exist with disclosure of the traditional paper methods of communication: the electronic document always contains much more information than is immediately obvious to the user; and the dissemination of electronic documents by email produces many copies and each copy will contain different information from the others. 13–259 For example, each electronic copy will have its own time and date stamps recorded for key events in the history of the document, such as when it was accessed, read, or edited. Facilities for tracking changes and formatting information will also generally be stored on the computer in a way that is not always easy to get at. In the ordinary course of use, the computer operating system may make automatic back-up copies, it may also move the file around during clean-up and de-fragmentation processes, leaving a trail of information behind it. Other copies might be made for use or for archive onto many different types of storage systems, floppy disks, CDs, DVDs, optical disks, or USB flash memory cards, for example. In networked systems, the problem can increase exponentially. Modern network storage systems carry out routine data housekeeping tasks such as backing up files and have the ability to relocate them quite automatically and without any user intervention and, indeed, sometimes without the user’s knowledge231. 13–260 Byers v Illinois232 is quoted by Morgan J, in the Digicel case, as one in which the US courts contrasted the difficulty of applying rules designed for paper disclosure to electronic disclosure, saying: “Computer files, including e-mails, are discoverable. However, the Court is not persuaded by [C’s] attempt to equate traditional paper-based discovery with the discovery of e-mail files. Chief among these differences is the sheer volume of electronic information. E-mails have replaced other forms of communication besides just paper-based communication. Many informal messages that were previously relayed by telephone or at the water cooler are now sent by e-mail. Additionally, computers have the ability to capture several copies (or drafts) of the same e-mail, thus multiplying the volume of documents. All of these e-mails must be scanned for both relevance and privilege. Also, unlike most paper-based discovery, archived e-mails typically lack a coherent filing system. Moreover, data archival systems commonly store information on magnetic tapes which have become obsolete. Thus, parties incur additional costs in translating the data from the tapes into useable form.”

13–261 There is thus much to consider in relation to the dissemination and recovery of electronic data and the forensic analysis of computer systems is a new science in which there are few established experts. For a general purpose investigation, however, a program which will access all the files available (whether patent, hidden, or archived)

230 International Herald Tribune, 7 June 1999. 231 For an example of the difficulties that can flow from the process of discovery in inadequately managed electronic communications, see Digicel [2008] EWHC 2522 (Ch); [2009] 2 All ER 1094. 232 Byers v Illinois State Police 53 Fed R Serve 3d 740 (NDIII, 2002).

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and list them on a flat database together with their computer-held properties233 is probably sufficient. A typical cataloguing software package234, for example, will produce a listing at four levels of complexity: basic, intermediate, advanced and expert. For each file accessed at intermediate level, the following are listed: file name; subject; author; keywords or comments; when it was created; person who last revised it; how many revisions it has been through; total editing time; when it was last printed; number of pages, words and characters; individual spreadsheet page names; and any additional user properties listed. 13–262 From the listing, sorting can be achieved under any field and hyperlinks can be attached to the file to enable fast and easy access to the data to which reference is made. 13–263 On the other hand, the definition of document under CPR does not seem to fit easily with proprietary software, which, whilst it may be essential properly to interpret information, which is disclosable, may not of itself be disclosable, simply because it would not be a document falling within the CPR definition. Whether a party’s bespoke software is disclosable independently of the data contained therein (without which the data cannot be “read” in the ordinary way) does not yet appear to have been judicially considered. On the other hand, it is an important point and is a common problem with, amongst other things, accounting records (where, in general, only a very limited amount of data is printed out) and in schedule analyses (where the data which has dictated the pattern of the illustrated project schedule is contained separately and hidden in the computer program)235.

Disclosure of experts’ documents 13–264 In the federal courts and in some state courts of the United States (in contrast to most other jurisdictions), correspondence between an expert and his instructing lawyer, together with the expert’s working papers are frequently discoverable. In the federal jurisdiction, it is also a statutory requirement that the expert witness discloses a listing of the articles it has written in the previous ten years, previous reports it has produced in other cases in the previous four years and the fee it is being paid for the evidence it gives236. Whilst, hitherto, it has been unknown for discovery to go so far in the United Kingdom, one of the results of the Woolf Report237 (which led to the English 233 Referred to as “metadata”. 234 For instance, DAQS’s Cataloguer. See http://www.daqs.co.uk (accessed 19 July 2010). 235 This is a problem which is not confined to litigation in the United Kingdom. See JM Wickwire and S Ockman, “Use of critical path method on contract claims – 2000” (1999) The Construction Lawyer, No 4. 236 Federal Rules of Civil Procurement 1993 r.26. 237 The Rt Hon Lord Woolf MR, Access to Justice (London: HMSO, 1996). The final report to the Lord Chancellor on the civil justice system in England and Wales.

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Civil Procedure Rules) has been a change in the status of the expert and hence a change in the status of documents passing between the expert and a party’s solicitor. The report observes: “The purpose of the adversarial system is to achieve just results. All too often it is used by one party, or the other to achieve something which is inconsistent with justice by taking advantage of the other side’s lack of resources, or ignorance of relevant facts, or opinions. Expert evidence is one of the principal weapons used by litigators who adopt this approach. The present system allows them to withhold from their opponents material which may be damaging to their own case, or advantageous to their opponents. This practice of nondisclosure cannot be justified, because it inevitably leads to unnecessary cost and delay, and in some cases to an unfair result One of the recommendations in my interim report was that, once an expert had been instructed to prepare a report for the use of a court, any communication between the expert and the client, or his advisers should no longer be the subject of legal privilege. My intention was to prevent the suppression of relevant opinions, or factual material which did not support the case put forward by the party instructing the expert. There is, I believe, no disagreement with that intention, but it has been put to me very strongly that waiver of legal privilege is not the way to achieve it. The point has been made that experts must be free to submit drafts to clients and their legal advisers, so that factual misconceptions can be corrected. A further objection is that a great deal of time could be wasted if all these documents were disclosable, because the opposing party would have to comb through the various versions of a report to identify any changes, the reasons for which would not always be clear in any event. Another possibility is that lawyers and experts might begin to subvert the system by avoiding written communication in favour of off the record conversations I accept, in the light of these arguments, that it would not be realistic to make draft experts’ reports disclosable. I do not, however consider that privilege should apply to the instructions given to experts. The Chancery Working Group has pointed out that major problems can arise when opposing experts are working from different instructions, which leads to reports that are hard to compare and use. Joint, or agreed instructions would meet this specific point, but even a single expert’s report may be unclear, or open to misinterpretation unless the instructions on which it is based are known. Under the new system, transparency of instructions to experts will be particularly important. The effectiveness of pre-action protocols will depend on it. On the fast track, in cases where there are diverging opinions in two reports, it will be absolutely essential for the parties and the judge to know the basis on which the experts have been instructed. I therefore recommend that expert evidence should not be admissible unless all written instruction (including letters subsequent upon the original instructions) and a note of oral instructions are included in an annex to the expert’s report.”

13–265 Unfortunately, admirable though the intention was, it did not translate into the CPR without being virtually emasculated238.

Disclosure of privileged communications 13–266 Apart from privileged documents, how a document comes into existence is of no relevance in determining whether disclosure is necessary. All documents that relate to the issues in an arbitration or court action must be produced for inspection, including, for example, reports on internal investigation, reports to the board, board minutes and internal memoranda, whether, or not they are marked “confidential”. 13–267 In addition, the parties are entitled to be provided with details of documents previously in the possession of the opponent, but subsequently delivered to another person, 238 See K Pickavance and N Lane, “Experts under the 1998 Civil Procedure Rules” [1999] ADRLJ 96.

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lost, or destroyed. Under the pre-1998 Rules of the Supreme Court, this was referred to as a “Schedule 2” list. Failure to include identification of such documents in lists for disclosure can arouse suspicion. In most actions, documents disclosed in this category will be limited to the originals of documents destroyed in the ordinary course of administration. 13–268 If, by using an efficient database system, it becomes clear that a party has lost important documents, or has at some stage disposed of them to a third party who has then lost them, they can be noted as falling under Sch.2 from the outset. This will help to defeat applications from the opposition for specific disclosure of missing documents and will lead to a fuller disclosure, thereby potentially increasing the credibility of the disclosing party239. 13–269 In the case of privileged documents, their existence must be disclosed and then a claim for privilege made (which is open to challenge by the other party). Opposing parties are not entitled to inspect documents properly covered by privilege. However, a document is privileged only if it falls within one of the accepted grounds of privilege, and it is not enough that the document is confidential or prejudicial. 13–270 There are six grounds of privilege, although essentially items 4 and 5 are merely subsets of a single category of “legal privilege”: privilege against incrimination240; immunity in the public interest241; contractual and statutory privilege242; “legal advice” privilege243; “litigation” privilege244; and settlement proposal245.

239 K Pickavance and S Barker, “The use of indexed databases in commercial litigation and arbitration” (1992) ADRLJ 13. 240 Documents which tend to incriminate or expose a person to a penalty are privileged under the Civil Evidence Act 1968 s 14(1). This privilege avails both private individuals and limited companies. There is, however, no privilege against self-incrimination under foreign laws and the court has a discretion whether to order disclosure in these circumstances. 241 Documents are privileged if inspection of them would be injurious to the public interest. However, under CPR r.31.19, a party must apply for an order from the court permitting it to withhold such documents, where the documents in question are not permitted or required to be withheld on grounds of public interest by operation of a rule of law. 242 It is always possible to contract out of disclosure. 243 Confidential communications between a lawyer and its client that come into existence for the purpose of obtaining or giving legal advice are privileged at all times whether or not proceedings are contemplated: Police and Criminal Evidence Act 1984 s 10(1)(a), (b). This includes correspondence of this nature between a company’s in-house lawyer and other employees of the company provided the correspondence relates to legal as opposed to administrative matters. However, privilege may not extend to in-house correspondence with a secretarial department which is not staffed by qualified lawyers but which monitors legal enquiries and instructs outside solicitors when appropriate. 244 Communications between a party or its solicitor and a third party, such as a witness, expert or an insurer, are privileged only if they come into existence or are obtained in connection with preparing the party’s case in formal proceedings. If the document was created for a number of purposes, one of which was the obtaining of evidence for litigation, it will be privileged only if it was brought into existence for the “dominant purpose” of litigation: see Waugh v British Railways Board [1980] AC 521. 245 A document which forms part of a genuine attempt to seek a settlement of an existing dispute is privileged. The words “without prejudice” on a letter mean “without prejudice to the position of the writer of the letter if the terms it proposes are not accepted”. A document will not be privileged even if it is marked “without prejudice”, if it is not, in fact, part of a genuine attempt to negotiate a settlement of an existing dispute.

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13–271 The recent case of LFEPA v Halcrow246 concerned legal advice and litigation privilege. C had wanted an investigation into the reasons why construction of a fire house that commenced in 1998 with 12 months to run at a cost of £7m, by 2002 was still incomplete and cost over £14m. It had instituted a procedure referred to as an “audit”, whereby an expert interviewed members of the design consultants’ staff and compiled a report prior to the commencement of proceedings against the consultants. In this preliminary matter, the consultants sought disclosure of C’s expert’s audit report, together with its working papers and notes, which C attempted to resist. In ordering disclosure of the report, Judge Toulmin held that: “legal advice privilege can arise only in respect of legal advice given by a legal adviser to a client. Litigation privilege arises in relation to documents brought into existence whose dominant purpose is advice in relation to actual, or proposed litigation247; litigation can be said to be reasonably in prospect in relation to documents brought into existence for the purpose of considering whether a claim should be made, or resisted248; there is no affirmative duty upon a party requesting information from another to disclose the purpose for which that information is required249; however, if a party requesting information misleads the party providing it regarding the reason that the information is required, and if that party does provide the information, the party who requested it cannot maintain the privilege subsequently; where a party waives privilege in respect of part only of a document, it will have waived privilege in respect of the whole document unless the part disclosed can be severed from the remainder of the document; the consultants went far beyond any contractual obligation they had in providing their senior personnel for detailed and lengthy interviews with the claimant’s expert; the onus of establishing privilege was upon D. The immediate purpose (ie dominant purpose) of C’s expert’s report was to find out why the project had gone so far over its duration and budget, so that D could decide what to do and whether to continue the project, or not. The more distant purpose was to obtain an analysis that would be useful in considering future litigation. Litigation was not therefore the dominant purpose of the production of the report; and the fact that the report had been attached to a letter from the solicitors acting for C was not sufficient to grant it legal advice privilege.”

13–272 On the other hand, the rule that a party who fails to disclose an expert’s report may not use the report at the trial, or call the expert to give evidence250 does not provide the court with the power to order the disclosure of earlier reports made by experts in preparation of a final report. In Jackson v Marley251, the Court of Appeal determined that an expert’s preliminary report prepared to enable a party’s legal advisers to give legal advice to their client, or for discussion in conference with the party’s legal advisers, was covered by litigation privilege at the time it was made because it had come into existence for the purposes of litigation. Similarly, earlier drafts of an expert’s final report were privileged even if circulated amongst a party’s legal advisers before a final report was prepared for exchange. The CPR condition was held to refer only to the expert’s intended evidence and not to what may, or may not in due course become the expert’s evidence.

246 London Fire and Emergency Planning Authority v Halcrow Gilbert & Crow Ltd [2005] BLR 18. 247 See also, Three Rivers DC v Bank of England [2003] QB 1556 and Waugh v British Railways Board [1980] AC 521. 248 See also, Re High Grade Traders Ltd [1984] BCLC 151. 249 See also, Plummers v Debenhams [1986] BCLC 447. 250 CPR r.35.13. 251 Jackson v Marley Davenport Ltd [2004] EWCA Civ 1225.

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13–273 The effect of public interest immunity, where it applies, is to exclude from the consideration of the court evidence that is relevant to the matters in issue, with the consequence that the court may be required to decide the issues on incomplete evidence. 13–274 In D v NSPCC 252, Lord Edmund-Davies put the matter as follows: “It is a serious step to exclude evidence relevant to an issue for it is in the public interest that the search for truth should not in general be fettered. Accordingly, any hindrance to its seeker needs to be justified by a convincing demonstration that even higher public interest requires that only part of the truth should be told.”

13–275 Following the ruling in D v NSPCC, in Copeland v Hayton (No 1)253, HH Judge Gilliland QC rejected the contention that, on the grounds that the public interest required that it should not be discoverable, the local authority’s tendering information should remain privileged: “The principle is well settled that confidentiality of the information contained therein is not itself a species of privilege254. The information in the documents may well be commercially sensitive, but that circumstance has not, so far as I am aware, ever been held to be sufficient reason to refuse to order discovery, which is otherwise necessary. In the ordinary way, the implied undertaking on a party not to use documents disclosed on discovery for any collateral, or ulterior purpose is normally regarded as affording sufficient protection against the improper use of the documents.”255

252 253 254 255

D v National Society for the Prevention of Cruelty to Children [1978] AC 171 at 242B. Copeland Borough Council v Hayton Builders Ltd (No 1) (1998) 14 Const LJ 412. Copeland Borough Council (1998) 14 Const LJ 412 at 418. Copeland Borough Council (1998) 14 Const LJ 412 at 419.

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Cause and effect

Introduction The three-part chain of causation Primary causation – occurrence of a causal event Voluntary or implied variations and other instructed changes Expenditure of prime cost and provisional sums Developer’s acts or omissions Acts or omissions of third parties Other occurrences Secondary causation – a delay to progress of the works Instructed variations Suspension of the works Failure to perform Tertiary causation – delay to completion of the works Proof of causation Introduction The terms of the contract Completion is likely to be delayed Completion is likely to be, or has been, delayed Completion has been delayed Whatever is fair and reasonable The subject-matter of the proof The factual materials available Proportionality Illustrating inference Introduction Cause and effect matrix Scott Schedules Graphs and histograms Bar charts As-planned versus as-built Collapsing technique Visualisations Smoke and mirrors

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14–001 14–021 14–025 14–028 14–033 14–045 14–061 14–068 14–070 14–082 14–088 14–099 14–107 14–130 14–130 14–134 14–142 14–145 14–150 14–155 14–160 14–165 14–173 14–191 14–191 14–199 14–208 14–216 14–223 14–232 14–242 14–249 14–253

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Introduction “Even after one instance or experiment, where we have observed a particular event to follow upon another, we are not entitled to form a general rule, or foretell what will happen in like cases; it being justly esteemed an unpardonable temerity to judge of the whole course of nature from one single experiment, however accurate or certain. But when one particular species of event has always, in all instances, been conjoined with another, we make no longer any scruple of foretelling one upon the appearance of the other, and of employing that reasoning, which can alone assume us of any matter of fact or existence.We then call the one object, Cause; the other, Effect.”1

14–001 The logic of causation by inference can be illustrated by a chain of causation of two events: where an event “A” which occurs prior to event “B” is such that, if “A” had not occurred, “B” would not have occurred2 and, in other circumstances, whenever “A” occurred it would always be succeeded by “B”, it can be said that “A” causes “B”. Causation by inference is not along the lines of “if it is raining, I will get wet; I am wet, therefore it is raining”3 or, to put it in construction terms, “variations cause delay; a variation has been instructed, the work is delayed, therefore the instructed variation has caused the delay”. The fundamental flaw in such reasoning is that not all variations cause delay and not all delays are caused by variations. Therefore the inference that one must always have caused the other is manifestly false. [Please refer to Figures 14.1 to 14.3 inclusive] 14–002 One of the leading cases on the theory of causation by inference is Leyland v Norwich Union4, in which the court had to decide whether, or not the event that caused a ship to sink was a storm (which was an insured risk), or the result of being torpedoed by enemy action in the war (which was not). The evidence before the court was that, after being torpedoed, the ship was moored at Le Havre where, for two days, she lay regularly being grounded at low tide and floating off at high tide. After two days, her bulkheads gave way and she sank. It was held that the real cause of the sinking was not the action of the sea, but the torpedo. Lord Shaw of Dunfermline5 set out the meaning of establishing causation thus: “In my opinion, too much is made of refinements upon this subject. The doctrine of cause has been since the time of Aristotle and the famous category of material, formal, efficient and final causes, one involving the subtlest of distinctions. The doctrine applied in these is to existences, rather than to occurrences. But the idea of the cause of an occurrence or the production of an event or the bringing about of a result is an idea perfectly familiar to the mind and to the law, and it is in connection with that that the notice of proximate cause is introduced. Of this, I will venture to remark that one must be careful not to lay the accent upon the word ‘proximate’ in such a sense as to lose sight of or destroy altogether the idea of cause itself. The true and the overruling principle is to look at a contract as a whole and to ascertain what the parties to it really meant. What was it which brought about the loss, the event, the calamity, the accident? And this is not an artificial sense, but in that real sense which parties to a contract must have had in their minds when they spoke of cause at all.

1 2 3 4 5

D Hume, An Enquiry Concerning Human Understanding (London, 1777). Or, to put it another way, but for A, B would not have occurred, or A is the sine qua non of B. J McCullough, “Logic before litigation” (Spring 1998) The Expert, 19. Leyland Shipping v Norwich Union Fire Insurance Society [1918] AC 350. Leyland Shipping [1918] AC 350 at 368–369.

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To treat proxima causa as the cause which is nearest in time is out of the question. Causes are spoken of as if they were as distinct from one another as beads in a row or links in a chain, but – if this metaphysical topic has to be referred to – it is not wholly so. The chain of causation is a handy expression, but the figure is inadequate. Causation is not a chain but a net. At each point influences, forces, events precedent and simultaneous, meet, and the radiation from each point extends infinitely. At the point where these various influences meet it is for the judgement as upon a matter of fact to declare which of the causes thus joined at the point of effect was the proximate and which was the remote cause. We have had a large citation of authority in this case, and much discussion on what is the true meaning of causa proxima. Yet I think the case turns on a pure question of fact to be determined by common sense principles. What was the cause of the loss of the ship? I do not think that the ordinary man would have any difficulty in answering she was lost, because she was torpedoed.”

14–003 On similar facts in Yorkshire Dale6, the House of Lords said that: “the choice of the real, or efficient cause from out of the whole complex of the facts had to be made by applying commonsense standards”. Their Lordships emphasised that the interpretation to be applied did not involve any metaphysical, or scientific view of causation. Viscount Simon LC said: “one has to ask oneself what was the effective and predominant cause of the accident that happened whatever the nature of the accident may be.”7

14–004 More recently, in Knightley v Johns8, Stephenson LJ said: “questions of remoteness, or of causation have to be answered not by the logic of philosophers but by the common sense of ordinary men”9, and, it seems, in construction matters, by ordinary construction men10.

Illustration Facts: A copper factory owned by Mueller Europe Ltd (MEL) was being re-roofed by Central Roofing (Central) when one of Central’s gas heaters ignited a fire in the scaffolding, thereby causing £21m worth of damage. Central’s obligations included taking all precautions within its power, continuously to inspect the work, to prepare and maintain reports and to conduct all operations in such a manner so as to avoid damage. MEL’s obligations included protecting and electrically and/or mechanically isolating all plant as required during the contract works. Central produced a method statement for the works, under which MEL was to isolate the heaters in advance of the scaffolding being erected. MEL failed to read this method statement, assuming that Central would notify it as and when necessary. MEL claimed that the contract between the parties meant that Central was solely responsible for the fire and was liable to it for a sum in excess of £20m. For its part, Central submitted that the contract imposed sole responsibility for the fire upon Mueller, also submitted that, if it might otherwise have been liable to Mueller, its liability was avoided by the operation of the doctrine of estoppel by convention, or by the doctrine of waiver. It also advanced a plea of contributory

6 Yorkshire Dale Steamship Co Ltd v The Minister of War Transport [1942] AC 691. 7 Yorkshire Dale [1942] AC 691 at 698. 8 [1982] 1 WLR 349. 9 Knightley v Johns [1982] 1 WLR 349 at 367. 10 “The test is what an informed person in the building industry (not the man in the street) would take to be the cause without too much microscopic analysis but on a broad view.” P & O Developments Ltd v The Guy’s and St Thomas’s NHS Trust [1999] BLR 3, per HH Judge Bowsher QC at 10.

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negligence and submitted that the quantum of the claim advanced by Mueller was excessive. Held, by Stuart-Smith J, that Central had acted in breach of its contractual obligations to carry out the works safely and to report prior incidents; that Mueller had acted in breach of its contractual obligation to isolate the heaters; that Central’s breaches of contract were an effective, or dominant, cause of the fire and that it was liable to MEL for the consequences of the fire; that no waiver, or estoppel by convention, was established and that contributory negligence was inapplicable: Mueller Europe Ltd v Central Roofing (South Wales) Ltd11.

14–005 Although deduction of causation by inference being the application of common sense may seem an attractive proposition to many, for those who practise in the field of delay analysis, the linking of cause and effect by inference tends to be a product of intellect and logical reasoning that is not given to many and, in complex cases, it is apparently an approach that rarely produces a “common sense” result12. 14–006 In Ascon v McAlpine, HH Judge Hicks QC outlined the practical limitations to the inferential proof of causation of delay, saying: “That brings me back to the factual issues of causation. The first is whether it is proper, in the absence of other evidence, to infer that the causes of delay at one stage have a continuing effect so as to produce the same delay at a later stage. I believe that that is in principle a proper inference, but that the probability that it will be drawn, or drawn to its full extent, is likely to diminish with the passage of time and the complexity of intervening events. My reasons for regarding it as being proper, with those qualifications, are first that such an inference, at least over short periods, is tacitly assumed in all negotiation, arbitration and litigation of delay claims, and secondly that it represents the ‘neutral’ position, in the sense that if all other activities proceeded according to [schedule] (and if there were any direct evidence that they had not that would contradict the basis on which this issue is raised) that would be the result.”13

14–007 Where delay is concerned, it must be borne in mind that time expires at a regular and consistent pace irrespective of whether it is used intensively, or not used at all. Thus, once it starts, the contract period will expire even if no work at all is done. On the other hand, if the time is used intensively, the work may be completed before the time expires. If more work is ordered to be done than was originally required, it will always add cumulatively to the costs. But, if it can be carried out at the same time as the contract works, ie in parallel, it will not take any longer to complete than the contract works. When the fixed period of time expires before the work (to which changes have been made) is completed, it is apposite to ask whether the additional time then required to complete the work is needed because the expired time has not been used as intensively as it should have been, or, because at least a part of the changes was not carried out in parallel, but sequentially. 14–008 Thus, in order to identify the extent, if at all, that any activities have prevented completion within the fixed period provided by the contract, it is necessary to identify

11 [2013] EWHC 237 (TCC). 12 See, for example, John Barker Construction Ltd v London Portman Hotel Ltd [1996] 83 BLR 1; (1996) CILL 1152; Leighton Contractors (Asia) Ltd v Stelux Holdings Ltd [2004] HKCFI 822; (2007) 1 Const LJ 70; Mirant Asia-Pacific Construction (Hong Kong) Ltd v Ove Arup & Partners International Ltd [2007] EWHC 918 (TCC); and see also City Inn Ltd v Shepherd Construction Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590, affirmed [2010] CSIH 68. 13 Ascon Contracting Ltd v Alfred McAlpine Construction Isle of Man Ltd (1999) 66 Con LR 119; (2000) 16 Const LJ 316 at [95].

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those parts of the works that had to be carried out sequentially (in series) on the critical path, rather than in parallel with it, and whether, and to what extent, the critical path was adversely affected by all the changes imposed upon it, regardless of liability. 14–009 In these cases, the problem of causation is related to identifying one or more of the following: the occurrence which caused a delay to progress; the delay to progress which caused the delay to one or more completion dates; the delay to progress which caused loss and/or expense to be suffered by C, or one or more subcontractors; the delay to progress which caused the prolongation of C’s time-related costs and/or the costs of one or more subcontractors; and the occurrence that caused a reduction in productivity that caused loss and/or expense to be suffered by C and/or one or more subcontractors. 14–010 If one adds to that list, the possibility that the occurrence initiating the chain of causation might be a D’s time, or cost risk event, or an event at C’s risk, or a combination of both, and it may occur in one of a number of buildings, or levels, or zones of operation, and what started off as critical may have changed to be in float and vice versa14, the possibility of rationalising causation inferentially, in anything other than the simplest of projects on the basis of “common sense” is negligible15. 14–011 In Ipex v Melbourne Water16, Byrne J reflected upon the difference between inferring causation and taking a more scientific approach, stating: “Conventionally, causation will be demonstrated by showing what was to be done [as a result of the event] and how it was more difficult, or costly to perform in the context of [the event]. [C] however, does not pursue this course; it relies upon inference. Stripped to its essentials, [C] is saying that the number of calls was greater than it expected and that the number of hours of work was greater than expected and that the Court should infer that the one was the cause of the other.”17

14–012 In All Seasons18, the inference that, because variations cause delay, a variation had been instructed and the works had been delayed, therefore the variations had caused the delay was rejected in favour of a more scientific approach to causation. The Board said: “[C] may no longer rely on contract modifications granting time extensions, but has the burden of litigating every fact, including facts conceded or not disputed, proving that [D’s] action admitted by [D] in the contract modification delayed the overall completion of the project, and that such delay of the overall completion of the project was not due to any fault or negligence of [C], both for purposes of recovery and for avoidance of liquidated damages.”

14–013 In Kinetic Builders19, the Board took a similar approach, saying: “In the initial decision, we denied the portion of the appeal [an extension of time and prolongation costs] on the basis that ‘there is not a preponderance of evidence that the

14 John Barker Construction Ltd (1996) 83 BLR 31. 15 For an example of the commonly disastrous consequences of an attempt to manage intuitively, a complex project, see Mirant Asia-Pacific Construction (Hong Kong) Ltd [2007] EWHC 918 (TCC). 16 Ipex ITG Pty Ltd v Melbourne Water Corporation (No 3) [2006] VSC 83. 17 Ipex ITG Pty Ltd (No 3) [2006] VSC 83 at [25]. 18 All Seasons Construction & Roofing, Inc (1998) ASBCA No 45583, 98–2 BCA (CCH), p.30,061. 19 Kinetic Builders Inc (1999) ASBCA Nos 51012 and 51611.

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time taken by [D] to resolve the defective bathroom layout caused an increase in the time required for completion of the contract’. [C] contends that this finding is erroneous. The contention is without merit. The same is based on data from [C’s] contract progress schedule and its weekly contract progress reports showing that from 15 August 1995 to 20 November 1995, progress in the completion of the entire contract had slipped from 4.2% ahead of schedule to 5.8% behind schedule. From that data alone, [C] concludes that its ‘progress had been negatively affected by the defective design’. That conclusion requires a causal connection between the design defect and the slowing of the progress rate. None has been shown. [C] contends, alternatively, that it ‘is at least entitled to a time extension to restart and complete the dry wall work which was delayed’ while waiting for a modification to correct the design defect. [C], however, has not shown that the design defect delayed or prevented any dry wall work. Indeed, the record shows that there was dry wall installation and other work elsewhere in the building that could have been, but was not, accomplished by [C] while a solution to the design defect was awaited.”

14–014 Up until the latter part of the twentieth century, it was generally thought to be impractical to perform the cause–effect analysis contemporaneously20, because of: a shortage of competent resources in C’s contract scheduling department; higher-priority requirements on the project; lack of recognition of a delaying event; lack of contemporaneous factual information21; preconception of the responsibility for delay22; and an agreement with D to defer discussions regarding delay and disruption until after practical completion. 14–015 However, it is evident that, for the purpose of collateral agreements relating to the effect of change23, it is necessary to calculate the effect of delaying events prospectively24, and the SCL Protocol and CIOB Guide25 both recommend that the effect of events should be analysed contemporaneously, for the purposes of effective project control26. 14–016 The preparation of a quotation for the probable effect in time and cost of an event which has not yet occurred, or which has not fully run its course, presents special difficulties, which in the absence of prophetic skills, are incapable of contemporaneous resolution. The purpose of the quotation for the time and cost of such an event is to shift the risk for the outcome from D to C. If C can do it with some confidence, then so be it. However, in many cases of complex change, it would be prudent for C to qualify its estimates with a proviso such as:

20 See RJ Lane, “Cause–effect analysis for delay and disruption claims” (1994) Construction Briefings 12 at p.1 and B Bramble and M Callahan, Construction Delay Claims, 2nd edn (Wiley Law Publications, 1992) pp.305–309. 21 See Ch.13, “Construction records”. 22 R Fenwick-Elliott, Building Contract Litigation, 4th edn (Longman, 1993). 23 See Ch.12, “Variation and change”. 24 Contemporaneous time-impact analysis is recommended by the SCL Protocol as the appropriate method of analysis. This is also the method required by US government contracts. See, for example: US Army Corps of Engineers, “Section 01320A – Project Schedule”, Unified Facilities Guide Specifications (May 2002). 25 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects, (Chichester: Wiley Blackwell, 2010). 26 See Ch.10, “Project control”.

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“Costs other than the direct costs put forward in this quotation which have occurred since the variation referred to was instructed or which may later be incurred, such as additional head office costs and site preliminaries resulting from delay to completion, increases of wage rates, fringe benefits and travel pay, temporary heat and winter work costs, additional monitoring [scheduling] and updating costs, loss of efficiency on work not modified by this variation order, costs incurred by subcontractors and other knock-on effects, are not included in this quotation and are hereby specifically reserved to a future quotation. The extent of such additional costs will be evaluated following practical completion of the works when fully ascertainable and details will be submitted at that time.”

14–017 Every quotation for the purpose of a collateral agreement for the effects of a proposed variation order should include a request for additional time, even if it is only one day. However, it should be remembered that the time to complete the work is not the same as a request for an extension of time for completion and the additional work may have no effect at all on completion. Thus, in quoting for the time effects of a variation, unless supported by a CPM-based schedule analysis, the word “delay” should not be used. Words such as “interference with the progress of the work”, or “interruption to the smooth progress of the work” should then be used to describe the material cause of the effect on time and, unless C has the information to deal with this at the time, it should be similarly reserved in the quotation. If it is later found to have affected an activity on the critical path, then notice of the anticipated effect on completion can be given. 14–018 There are obvious advantages to making as good an attempt as possible at a contemporaneous analysis and, provided the information is available, it should not be too difficult to make a reasonable assessment of the cause and effect of delays to progress as they occur and to manage the possible knock-on effects upon completion. When a contemporaneous approach is not adopted, or is not carried out competently, disputes are likely to follow and then some form of retrospective analysis of causation will be required27. 14–019 Retrospective delay analysis is the process through which proactive scheduling techniques are used, inversely, to reconstruct from the contemporaneous project records and recollections of project staff the effects of delays to progress on C’s intended schedule of work during the course of the works. When faced with a claim made retrospectively, the courts in the United Kingdom and United States have both adopted the view that a more scientific approach to the causation of delay28 is generally desirable. For example, in Balfour Beatty v Lambeth LBC29, HH Judge LLoyd QC observed: “the foundations must be the original [schedule] (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”.

27 Indeed, it is apparent that the predominant interest in CPM analysis is currently in its retrospective application to delay analysis in a dispute related forum. See Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008) and see also Forensic Schedule Analysis, AACE International Recommended Practice No 29R-03 (2009). 28 See Ch.15, “Forensic programme analysis”. 29 Balfour Beatty Construction Ltd v The Mayor and Burgesses of the London Borough of Lambeth [2002] BLR 288, per HH Judge LLoyd QC 302.

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14–020 In principle, whether the proof is offered contemporaneously, or retrospectively, in order to demonstrate a causal relationship between D’s time, or cost risk event and its effect, the following process should be followed: if based on the original schedule, check and verify the schedule as a feasible method of construction30 and whether it was updated from time to time to conform to the progress actually achieved; identify whether, at any time, the schedule was revised to accommodate changed methods of working, changed resources, or to achieve accelerated progress; if based on the as-built schedule, check and verify the as-built schedule; develop a comprehensive listing of all changes, or unanticipated events that occurred during the project and relate those impacts to specific points in time; review the contract documents to confirm that the change, or unanticipated event is D’s time or cost risk event; identify the date of initiation of the causal event; calculate the effects on progress of the variances in work sequences, activities and durations, manpower and resources; calculate the effects of identified delays to progress on key dates; prepare a complete written description of each major change or event; and write up a narrative explaining the process and results.

The three-part chain of causation 14–021 How a proof may reasonably be made of the impact upon a defined completion date of the knock-on effect of D’s time risk event has resulted in much debate amongst learned commentators over the last 30 years or so, and much of the debate has evolved, because causation in construction contracts is not always broken down into its constituent parts. 14–022 In Brompton Hospital v Hammond, for example, C’s counsel submitted that the mere occurrence of the event was sufficient to found entitlement and it is in the common experience of those in the construction industry that many claims are based upon such a submission. However, in rejecting that proposition, HH Judge Seymour QC identified that the event at least had to be likely to have an effect on completion, saying: “An issue which needs to be considered before addressing the claims made against [D] in detail is the question of the circumstances in which it is proper to grant an extension of time under clause 25 of the Standard Form [JCT80]. The answer, in my judgment, depends upon the proper construction of that clause. Leaving aside for a moment the authorities to which my attention has been drawn, particularly by [counsel for C], as a matter of impression it would seem that there are two conditions which need to be satisfied before an extension of time can be granted, namely: – (i) (ii)

that [D’s time risk event] has occurred; and that that [D’s time risk event] is likely to cause the completion of the works as a whole to be delayed beyond the completion date then fixed under the contract, whether as a result of the original agreement between the contracting parties or as a result of the grant of a previous extension of time.

30 If the schedule has been submitted for approval, assessed by the CA and accepted or approved then this should not be necessary and indeed may be counterproductive.

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This analysis does not strike me as particularly exciting or novel, but I felt that it was necessary at least to consider the question, because it seemed to me that, in his submissions, [C’s counsel] was, rather glossing over the second element.”31

14–023 The purpose of an extension of time is to relieve C from liability for liquidated damages for which it would otherwise be liable. Liquidated damages are payable only for delay to defined stages of completion and, for there to be a delay to a defined stage of completion, there must have been a delay to progress on the critical path to that completion date. It follows therefore that, for C to be entitled to an extension of time, the delay to progress which affects the completion date must have been caused by one of the events for which D is at risk under the contract. There are thus three steps to be taken to establish that C is entitled to an extension of time: a D’s time risk event must have occurred; a delay to progress must have been caused by D’s time risk event; and a delay to completion of the works after the completion date must have been likely to be caused by the delay to progress that was caused by D’s time risk event. 14–024 This is the three-part chain of causation. They are not separate causes, they are merely successive links in a single “chain”, all three of which are usually necessary in order to prove entitlement to an extension of time32.

Primary causation – occurrence of a causal event 14–025 This section deals with the nature of causal events and how their initiation date might be established for the purpose of calculating their effect, rather than any effect they might have. In order to undertake any meaningful cause and effect analysis, identification of the date upon which the event itself and the initiation of the chain of causation arising from it will be of the utmost importance. This is because such an initiation date: will dictate whether events happen sequentially, in parallel, or concurrently and assist in distinguishing the effect of one event from that of another; will determine the calendar date after which an event can possibly have an effect; may determine the commencement of time within which notice may be required to be given as a condition precedent to entitlement; and may determine the time at which statutory limitation provisions commence33. 14–026 On site, it is often the effect upon progress that is first identified and the root cause has then to be investigated. For example, in practice, it is not unusual to find that C sees the delay in the ceilings to be a cause, whereas in fact the root cause may be a design fault, an information-related fault, a workmanship and materials fault,

31 Royal Brompton Hospital NHS Trust v Frederick A Hammond (No 1) [2000] EWHC 39 (TCC) at [31]. 32 But see also City Inn Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590, affirmed [2010] CSIH 68, in which, at [13] Lord Drummond Young decided the case without reference to the second part of the chain of causation, saying that, under JCT80, causation could be deduced in any way the CA thought reasonable. 33 But see also Henry Boot Construction Ltd v Alstom Combined Cycles Ltd [2005] EWCA Civ 814.

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or the absence of access, or resources and the delay to the ceilings is merely the effect upon progress which has followed. Accordingly, it will often be necessary for the analyst to make a conscious appraisal of the differences between, for example: a direct cause: the factor which brings the occurrence to attention, such as, in this example, the ceilings not being started and/or completed by the date they were scheduled to be started, or completed; a contributing cause: a condition that either results from, or contributes to the delay to progress; for instance, in this example of the delayed ceilings, it could be an absence from the site of the ceiling subcontractor; and the root cause: this is the “but for” test, that is, the cause without which the delay would not have occurred34, in this simple scenario, a design fault, which had to be corrected before the work could be carried out. 14–027 For the most part, the standard forms of contract are reasonably explicit in their description of those risks that are to be borne by D35 and the way in which they must be established. There are, however, a number of issues worth considering in relation to specific types of events, such as those arising out of: voluntary and implied variations and other instructed changes; instructions for the expenditure of prime cost and provisional sums; acts or omissions of D, or those for whom it is responsible; acts or omissions of third parties; and other occurrences.

Voluntary or implied variations and other instructed changes 14–028 Although the initiation date of an agreed variation is relatively easy to determine, many variations result from implied or constructive changes in design information, or from instructions not expressly acknowledged as variations36. Typical examples of the latter include the extra work arising from the unwarranted condemnation of contractually conforming work, the issue of amended drawings to correct a discrepancy in D’s requirements, and the issue of amended documentation to correct an error in the bills of quantity, or specifications. Variations may also arise from responses to requests for information (RFIs)37, or in the unwarranted rejection of contractually compliant submittals. 14–029 Whilst for some purposes in law, a communication might be deemed to have been made when it is posted, in construction matters, a variation cannot begin to have an effect upon C’s performance until C knows that a variation has been instructed. Thus, unless the contract specifies when C is deemed to have received an instruction for a variation38, where variations are instructed expressly or impliedly, it might be 34 See BHP Billiton Petroleum Ltd v Dalmine SpA [2003] BLR 271 at 277, per Rix LJ citing Clerk & Lindsell on Torts, 17 edn (2000) at para.2–06: “The ‘but for’ test asks: would the damage of which [C] complains have occurred ‘but for’ the negligence (or other wrongdoing), or to put it more accurately, can [C] adduce evidence to show that it is more likely than not, more than 50 per cent probable that but for [D’s] wrongdoing the relevant damage would not have occurred. In other words, if the damage would have occurred in any event [D’s] conduct is not a ‘but for’ cause.” 35 See Ch.4, “Standard form provisions for time and cost”, throughout. 36 See Ch.12, “Variation and change”. 37 The content and scope of which is not always easy to identify. 38 For example, by stating that a document shall be deemed to have been received a fixed period after being posted.

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argued that the event should normally be construed to have occurred when C can be shown to have identified that the instruction has been given. 14–030 Where variations are instructed orally, the standard forms sometimes specify that such instructions are to be of no effect at all39, or, alternatively, may be confirmed retrospectively in writing by the CA40, or may be confirmed by C and, if not subsequently rejected within a fixed period of time, are deemed to take effect. For example, JCT9841 states that: “If the [CA] purports to issue an instruction otherwise than in writing it shall be of no immediate effect, but shall be confirmed in writing by [C] to the [CA] within 7 days, and if not dissented from in writing by the [CA] to [C] within 7 days from receipt of [C’s] confirmation shall take effect as from the expiration of the later said 7 days. Provided always: that if the [CA] within 7 days of giving such an instruction otherwise than in writing shall himself confirm the same in writing, then [C] shall not be obliged to confirm as aforesaid, and the said instruction shall take effect as from the date of the [CA’s] confirmation; and that if neither [C] nor the [CA] shall confirm such an instruction in the manner and at the time aforesaid, but [C] shall nevertheless comply with the same, then the [CA] may confirm the same in writing at any time prior to the issue of the Final Certificate, and the said instruction shall thereupon be deemed to have taken effect on the date on which it was issued otherwise than in writing by the [CA].”

14–031 Thus, under JCT98, a variation is initiated by an oral instruction on a date either: seven days after the date of confirmation of the instruction by C to the CA (commonly known as a “confirmation of verbal instruction”, or CVI); the date of confirmation in writing by the CA; or if confirmed retrospectively, the date the oral instruction was actually given. 14–032 Substantially the same content is repeated in JCT0542, JCTsub/0543, DB0544, save for the useful guidance: “and the said instruction shall thereupon be deemed to have taken effect on the date on which it was issued otherwise than in writing by the [CA]”, which, for no obvious reason, has been omitted from the latest edition of the forms.

Expenditure of prime cost and provisional sums 14–033 It is good practice for C to identify in its schedule for the works a date by which it believes it requires an instruction for the expenditure of a provisional sum, a prime cost item, or the nomination by D of a subcontractor or supplier where required. The dates in the schedule can be based either upon information D has provided at the time of tender, as a contingency period, or they can be based upon C’s assessment as to the likely periods for the design, fabrication, delivery, or, if it is a nominated subcontractor, or provisional sum, the work on site, together with the likely interfaces with other activities. The issue that then has to be considered is whether, if not expended,

39 40 41 42 43 44

PCC06 Cl.3.12. IFC05 and IFCWCD/05 Cl.3.11.4. Cl.4.3. Cl.3.12. Cl.3.7. Cl.3.7.

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or nominated by the date then assumed likely to be necessary, an event at D’s risk has, at that time, been initiated. 14–034 The way in which such a claim is usually phrased is that: “C requested instructions for nomination by the scheduled date, but they were not given; therefore, there was a delay in issuing instructions properly requested, which can reasonably be deemed to have commenced the day after the instructions were expressed to be required.”

14–035 Whilst at first that may appear to be entirely reasonable, it should be recognised that an instruction for the appointment of a nominated subcontractor, or nominated supplier differs in character from other instructions in as much as it requires the essential participation of both C and the nominated party, without which the instruction for nomination is meaningless. For example, it is generally the case that the content and timing of the nominee’s obligations cannot be properly ascertained until the CA has stipulated its requirements in an invitation to tender, an acceptable tender has been received by the CA and, as result of the instruction to place its subcontract with the nominee, C has successfully negotiated its requirements and placed the subcontract. The importance of this is that it is probable that, as a result of that process, the time-frame for the work will be very different from that which was first assessed as possible. 14–036 Take, for example, a prime cost sum for the design, manufacture and supply of kitchen fittings for a multi-storey block of apartments. At the time of scheduling its work initially, C might quite properly identify that the kitchen fittings should be installed after the first fix mechanical and electrical installations have been completed and the structural frame rendered weatherproof, and that it must be completed before the tiling and finishes can be applied. Installation of the fittings might commence, say, 32 weeks from the date of commencement and they may take 18 weeks to install. C might also identify that the fittings will be required in three separate deliveries: shipping and delivery is likely to take four weeks, fabrication should take about eight weeks, design and approvals of drawings and samples should take around 12 weeks. Negotiation of the subcontract and preliminary matters should take two weeks. 14–037 A simple schedule illustrates this in Figure 14.1. It identifies three potentially important features of the anticipated process: 1. 2. 3.

a nomination acceptable to C is planned to be received by 14 February 2004; the whole of the kitchen fitting installation, from nomination to completion, is on the critical path to completion; and completion of the works is planned to be achieved by the end of April 2005.

14–038 At this stage, however, these dates can only be assessed as a possibility. In particular, C can have no idea of the potential nominee’s fabrication capacity, production rates, the number of fitters it could bring to the site, or how long they might take to complete the installation. Moreover, at this stage, the fittings have not even been conceived and so C cannot know whether they are to be manufactured from the finest solid hardwood and marble, or the cheapest chipboard and plastic. All these considerations are material to the periods of time that C must indicate on its schedule. 14–039 To illustrate the difficulty, let us say that, in fact, all other works proceeded as planned, but the nomination was not made until 14 May 2004. As a result of the failure to nominate by 14 February, in this scenario, the whole of the critical path would shift to the kitchen fittings; the superstructure and services would be in float and the one thing likely to cause the likely delay to completion would be illustrated to

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be the delayed nomination of the subcontractor in May 2006. The programme would then look like that in Figure 14.2. In these circumstances, with most forms of contract providing for nomination of subcontractors, if these periods are in fact planned for the future conduct of the kitchen fittings, C will be empowered to reject the nomination on the basis that the subcontractor cannot comply with C’s programme to complete by the end of April 200545. The late nomination then has no effect, because the CA is then in the position of having to find another subcontractor that can comply with C’s schedule. Alternatively, at the time of nomination, the CA could recognise that the failure to appoint by 14 February 2004 would rank as a delay to progress likely to delay completion until August 2005, for which C was entitled to an extension of time. 14–040 However, it might also be the case that, when the failure to provide the instructions came to an end on 14 May 2004, the facts of the nomination were very different from C’s initial assessment of the possibility as to what they might have been, when it first produced its schedule. For the sake of this example, Figure 14.3 illustrates a scenario in which the basis upon which the instruction, eventually given, to appoint the nominated subcontractor, was that: at nomination, the design had already been worked out and approved by the CA and was the basis of the subcontractor’s tender; as a term of its tender, the subcontractor planned to sublet parts of the fabrication to others, so the fittings could be ready for delivery within six weeks of its appointment by C; and the nominee then planned to have ten teams of fitters each on one floor at a time and expected to fit each floor within four weeks. 14–041 Thus, on the basis of the accepted instruction to appoint the nominated subcontractor, it can be shown that, whilst the fitting out on site would still be on the critical path, the date for completion would now be predicted to be brought forward to the end of February 2005. Accordingly, not only was this not likely to delay completion, but it projected that completion was now expected to be achieved three months earlier than originally planned. In fact, the nomination actually made is not critical to anything and the critical path then lies through the structure, windows and services installations and not through the nomination of the kitchen fittings subcontractor. 14–042 Because C is empowered to reject any nomination instruction for a subcontractor that cannot comply with its schedule, and under the standard forms of contract the CA is not empowered to reduce an extension of time once given, it would appear that the initiation date of a delay to nomination must properly be the date upon which the effect of the nomination, if any, can be calculated from the terms of the nominated subcontract (which in most cases can be expected to be the date upon which the instruction to appoint a nominee acceptable to C is received). It follows that only in the circumstances in which, notwithstanding C’s legitimate objection, the CA nevertheless requires C to enter into a subcontract that does not comply with C’s schedule can the CA then identify the effect of the delay in nomination as a D’s time risk event and, again, the date of initiation of the event is then the date on which the nomination is made, which is acceptable to C.

45 See, for example, HK05 Cl.29.2(1)(d), FIDIC/Build99 Cl.5.2 and JCT98 Cl.35.5.1.

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14–043 The importance of giving priority to the actual facts, rather than those that might originally be projected was illustrated in Blackhawk46. In that case, C based its claims on its planned schedule, but in an attempt to discredit the validity of C’s claims, D defended with a reconstructed as-built schedule, demonstrating that the planned schedule was not in fact followed. Significantly, one of the claims put forward by C was that it was improper to use the as-built schedule to assess extension of time entitlements, because, if the CA had dealt promptly with C’s claims, it would not have had access to the hindsight provided by the as-built records and would only have been able to assess the delay on the basis of the planned schedule now put in evidence by C. For that reason, it was claimed that the Board should only consider C’s planned schedule. This was not accepted, however, in the light of the evidence of actual progress in the works available at trial. The Board observed: “We do concede that the amount of delay granted can well depend on the point in time at which the delay claim is analysed and acted upon. [C] could be granted an extension of time, because of delay in an apparently critical activity when later evidence might show the activity non-critical and the extension of time therefore unwarranted. The real point is that extensions of time must be granted on the best evidence available. We had before us evidence as to how the contract was actually built, evidence, which did not exist at the time [C], filed its claims. This evidence compelled us to find that the sixth floor ductwork delays were noncritical. [C] has come forward with nothing to persuade us of any error in such finding.”

14–044 The principle of rendering the date on which the nomination instruction is issued as the date of initiation of the event, rather than the date C assesses it will possibly need the nomination instruction, would appear to be applicable to all instructions to appoint a nominated subcontractor or nominated supplier. It would also appear to be equally applicable to instructions to carry out other work that, at the time of tender, is allowed for on the basis of C’s assessment as to its possible content, including time allowances, if any, in regard to expenditure of provisional sums for contingent work.

Developer’s acts or omissions 14–045 The date upon which a failure of the CA to issue in due time any information, drawings, details, or instructions requested is initiated as a D’s time risk event similarly depends first upon the terms of the contract. In the case of JCT98, for example, there are two separate provisions. On the one hand, D may determine when information will be provided and set this out for the purposes of tender in an information release schedule. In such circumstances, the event will be initiated the day after the information was scheduled to be provided in the information release schedule, irrespective of whether it is then needed47. 14–046 On the other hand, under most forms (which provide for C’s request for information, rather than D’s offer of information), the date of initiation is usually the day after the end of the period during which the information requested should reasonably have been provided. 14–047 When it should reasonably have been provided may similarly depend upon what is stated in the contract provisions. ECC2 and ECC3 suggest that an event is initiated “when [D] fails to provide something which he is to provide by the date for 46 Blackhawk Heating & Plumbing Co (1975) GSBCA No 2,432, 75–1 BCA (CCH) 11,261, (1976) GSBCA 76–1, 55,577. 47 Cl.25.4.6.1.

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providing it set down in the accepted schedule”48. PPC2000 suggests initiation by reference to the date “beyond any agreed time limit”49. FIDIC/Build9950 suggests that the initiation date is after the lapse of “a particular time, which shall be reasonable”, implying that C is to give reasonable notice of its need before D becomes liable for the CA failing to fulfil it. Similar provisions appear in HK0551. 14–048 The UK government contract series GC/Works/1 specifically require C, at monthly intervals, five days before each progress meeting, to set out in detail what further information, if any, it requires52, and for the CA to report, within seven days of the meeting, on how it intends to deal with C’s request53. The initiation date under those forms then arises, it is suggested, after the lapse of a reasonable period following the request. The 2009 edition of the Irish government forms contains a similar regime, but without the seven days’ notice54. However, in those forms, there is also a protocol identified for the date upon which such information is to be requested and provided, saying55: “[C] shall give the [CA] at least 10 working days advance notice of the date by which [C] requires any instructions that the [CA] is to give, or works Items or other things that [D] is to give. The latest date for the [CA] to give required instructions, or [D] to give [C] any required works item or other thing, shall be the latest of the following: 1. 2. 3. 4.

the date stated in the contract, if any; the date shown in [C’s] current schedule; the date for which [C] first notifies the [CA] under this sub-clause that it is required; the date [C] requires the instruction, works item or other thing in accordance with its actual progress.”

14–049 Throughout the pre-1998 versions of the JCT family of contracts, it was provided that later information required must be requested “on a date which, having regard to the date for completion, is neither unreasonably distant from nor unreasonably close to the date on which it was necessary to receive it”56. Under those forms, an event would thus be initiated a reasonable time after the information was requested, such request being formulated in writing, or made by submission of an appropriate schedule indicating its need a reasonable time prior to such need arising57. 14–050 By contrast, under Cl.5.4.2 of JCT98, C has no obligation to request further information it needs, unless it is “reasonably practical to do so”58. Thus, under this form (and those other JCT forms which follow the same pattern), the initiation date of a failure to issue information in due time is, it is suggested, the date the information is in fact needed (irrespective of notice), or a reasonable period after any such

48 49 50 51 52 53 54 55 56 57 58

Cl.60.1(3). Cl.18.3(i). Cl.1.9. Cl.5.7(2). Cl.35(3)(b). Cl.35(4)(e). See, for example, IGBW/09, at Cll.4.10.2(6) and (7). See, for example, IGBW/09, at Cl.4.11. See, for example, JCT80 Cl.25.4.6. London Borough of Merton v Stanley Hugh Leach Ltd (1985) 32 BLR 51. Cll.25.4.6.2 and 5.4.2.

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request has in fact been made, whichever is the later. The post 2005 series of forms tends to follow the 1998 pattern59. 14–051 Similarly, the failure to respond in due time to a contractor’s submittal is initiated not on the date the submittal is made, but on the date by which the response was due to be received by C. In many contracts this is stipulated as a fixed period of time after the submittal is made for all submittals, irrespective of their content or importance. In the Board of Contract Appeals case of David Builders60, for example, it was recorded that the specification provided for: “a review period that includes at least 15 working days for submittals for QC Manager approval and 20 working days for submittals for Contracting Officer Approval. The period for review for each re-submittal is the same as for each initial submittal.”

14–052 In other forms, there may be differing approval periods, depending upon the nature of the submittal. The ECC2 and ECC3 forms provide that an event is initiated if the CA, or project manager does not reply to a communication from C within the period required by the contract61. 14–053 In many contracts, there is no stipulated time for consideration of a submittal. In those circumstances, the CA should have a reasonable time for consideration and response in all the circumstances before an event at D’s risk is initiated. For example, the AIA form A201/9762 stipulates that the CA will respond to a submittal: “with such reasonable promptness as to cause no delay in the work or in the activities of [D], [C] or separate contractors, while allowing sufficient time in the [CA’s] professional judgment to permit adequate review.”

14–054 A201/07 varies this by rephrasing the obligation to respond to a submittal as: “in accordance with the submittal schedule approved by the [CA] or, in the absence of an approved submittal schedule with reasonable promptness while allowing sufficient time in the [CA’s] professional judgment to permit adequate review.”

14–055 The effect of such a clause is to deem an event to be initiated either once the date on the approved submittal schedule has passed, or, in the absence of such a schedule, after sufficient time has elapsed to permit adequate review following the relevant submittal. Although it is expressed subjectively, in that the sufficiency of time is determined by the CA’s judgement, it would presumably be the case that that would be insufficient to protect D in the event that the CA’s professional judgement of the time required was unreasonable in all the circumstances. 14–056 Responses to submittals can initiate secondary processes, either as a result of the response requiring a variation in the quality, or quantity of the works, in which case the principles as to when a variation is initiated apply, or as a result of the response properly requiring a re-submittal, in which case the initial submittal can be without effect, the process having to recommence from the beginning. 14–057 Depending upon the phraseology used in the contract, a failure to give or deferment of possession of, or access to, or egress from any part of the site, it is

59 60 61 62

See, for example, JCT05 Cll.2.12.2 and 2.12.3. David Builders Inc (1998) ASBCA No 51262. Cl.60.1(6). Cl.4.2.7.

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suggested, is initiated the day after it was warranted that such possession, access, or egress would be given, either by virtue of the contract documents, or subsequent agreement. Alternatively, in the absence of any such specific warranty, the event could be construed to have been initiated after it was reasonably necessary for C to have such possession access, or egress in relation to its published intentions for the proper commencement, or continuance of the work. 14–058 As with a failure to provide access, egress and possession by a fixed date, a failure to obtain any third-party consents necessary for the development, it is suggested, is initiated the day after it was warranted that such consents would be in place, either by virtue of the contract documents, or subsequent agreement or, in the absence of any such specific warranty, after it was reasonably necessary for C to have it in relation to its published intentions for the proper commencement, or continuance of the work. 14–059 A failure to make prompt payment is a relatively new addition to the risks borne by D in relation to delay that arises from the provisions of HGCRA63, entitling C to suspend the performance of the work if it is not paid promptly and in full, in accordance with the conditions of contract. For these purposes, it is suggested that the event is initiated on the date C exercises its right to suspend the performance of the works. 14–060 In relation to other breaches of contract comprising, for example, any delay, impediment, or prevention caused by or attributable to D, D’s personnel, or D’s other contractors, it would seem that the date of initiation of the event is the date the breach is committed. For example, where C is to be excused delay to completion caused by D’s compliance with, or non-compliance with, the CDM regulations64, D’s obligation is to ensure that the principal supervisor, or the principal contractor under the regulations performs its duties competently. The initiation of the event in such circumstances will thus be the date of the breach of its obligations by the principal supervisor, or principal contractor.

Acts or omissions of third parties 14–061 Identifying the initiation date of acts or omissions of third parties is relatively straightforward as they are of no relevance to C unless they actually affect C’s works in some way. To this extent, the principles are similar to those on which the timing of a nomination of a subcontractor is construed. Civil commotion, strike, or lock out, for example, is not at D’s risk unless and until it affects the progress of the works. In circumstances such as these, the initiation date is that on which the delay to progress actually commences as a result of the event. 14–062 In some forms of contract, any breach of a subcontract with C is a matter only for consideration as between the subcontractor and C, and is of no consequence as regards the contract between D and C. The FIDIC forms, for example, provide nothing upon which C could be awarded an extension of time for a breach of the contract between, for example, a nominated subcontractor and C, and PPC2000 states expressly that if what it refers to as a “specialist contractor” nominated by D is appointed by C the risk of its non-performance passes to C65. ICE7 expressly states that, except in regard to design work carried out by a nominated subcontractor,

63 The UK Housing Grants, Construction and Regeneration Act 1996. 64 For example, JCT98 Cl.25.4.17. 65 Cl.10.12.

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“[C] shall be as responsible for the work carried out or goods materials or services supplied by a nominated subcontractor employed by him as if he had himself carried out such work or supplied such goods materials or services.”

14–063 Conversely, JCT98 expressly provides that “delay on the part of a nominated subcontractor, or nominated supplier which [C] has taken all practical steps to avoid, or reduce” is D’s time risk event. It is perhaps unsurprising that, because of the many occasions on which such provisions have been abused in the past (to conceal the effect of delay for which C would otherwise be liable), nomination of subcontractors has declined in favour of other forms of appointment, or the clause is simply edited to make it plain that, once appointed, C is responsible for the conduct of its nominated subcontractors and, in case of default, its redress is against the nominated subcontractor and not against D as its otherwise implied guarantor. 14–064 In cases where this clause does apply, it would appear that the initiation date of the causal event is the date upon which the nominated subcontractor actually causes delay to progress, notwithstanding the steps C has taken to avoid it, or reduce it. Thus, in order to ascertain the initiation date, it will be important to identify not only the terms of C’s contract with the nominated subcontractor and the factual matrix giving rise to the delay to progress caused by the nominated subcontractor, but also C’s mitigation measures. 14–065 An example of the latter point was in evidence in Wallace66, in which the contract provided that C was entitled to an extension of time for an occurrence beyond the control and without the fault or negligence of both C and the subcontractors or suppliers. It was C’s evidence that, once it had taken the first submittal from the supplier of windows and found the specification defective (an event beyond C’s control and hence at D’s risk), whatever time the supplier subsequently took to deliver the windows was also at D’s risk. The court rejected this supposition, saying: “[C] plainly has neither shown that the delay in completing the work was ‘beyond [its] control,’ nor that the ‘delays’ experienced by [its supplier] in delivering the windows were ‘from unforeseeable causes beyond the control and without the fault, or negligence of both [C] and the subcontractors, or suppliers. rather, donning rose-colored glasses, [C] seems to operate now, as it did then, on the assumption that once the original design of the windows was found to be defective, both it and [D] were ‘stuck’ with whatever schedule [the supplier] could provide. That sticky assumption is counterfactual, particularly given the apportionment rule, discussed above, under which [D’s] initial delay did not absolve [C] from having to obtain the windows in a timely manner, so as to minimize further delay in the completion of the contract.”

14–066 The execution of work, and the supply of materials or goods by others, falls into a similar category to that of nominated subcontractors67. C may reasonably be required to plan for the commencement and completion of work, or supply of goods, or materials by other contractors directly appointed by D, or the work of statutory undertakers and suppliers and their integration with its schedule. However, such planning can only be upon the basis of the information available at the time the schedule is created and, unless at the time of scheduling there is some form of warranty by D, as to the periods of time likely to be required for their integration, the effect of their intended performance cannot properly be gauged until they have entered into contract

66 RP Wallace Inc v The United States, COFC No 96–222 C (2004), (2005) 21 Const LJ 378. 67 Discussed above at paras 14–061 to 14–065.

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with D and the relevant terms of that contract have been communicated to C. In the event that D requires C to schedule its work on the basis of a stipulated commencement date and duration for utilities and statutory undertakers, or direct contractor’s work, the date of initiation will be either the date it performs, or fails to perform, so as to cause delay to progress in C’s work. 14–067 JCT9868 provides that D takes the risk as to time if, due to unforeseen conditions, C is unable to obtain the labour or materials it needs. In such circumstances, provided all other conditions of D’s risk event are met, it would appear that the event occurs when the labour, or materials concerned are in fact needed so as to avoid a delay to progress, but in fact are not supplied.

Other occurrences 14–068 These are generally: force majeure; exceptionally adverse weather; the discovery of unforeseeable ground conditions; the occurrence of an insured risk; a change in the law; the exercise of a statutory power that affects the supply or use of labour, plant, or materials; the use of, or threat of, the use of terrorism; and insured risks such as fire, storm, tempest, flood, and so on. 14–069 The precise terms of each event differ between the forms and must be examined for the precise nature of the event described. However, a common theme is that the occurrence must affect the carrying out of the works. If it does not, then it cannot give rise to further entitlement. Accordingly, it might be considered that the appropriate initiation date of any of these events is the date upon which they actually begin to affect the progress of the works.

Secondary causation – a delay to progress of the works 14–070 A delay to progress is not always easy to identify. Before a delay to progress can be identified, it must be possible to identify an intention to start or finish whatever it is that is in issue69, by a fixed point in time, prior to the completion date. 14–071 The point is well illustrated by the case of Leighton v Stelux70, in which the Hong Kong Court rejected an appeal from an arbitrator’s award arising out of the HK86 standard form without quantities. This form of contract states that: “If, in the opinion of the [CA], upon receipt of any notice, particulars and estimate given by [C] under sub-clause (1) of this condition, the completion of the works is likely to be or has been delayed beyond the date for completion by reason of [C] not having received in due time necessary instructions, drawings, details or levels from the [CA] for which he specifically applied in writing on a date which having regard to the date for completion stated in the appendix to these conditions or to any extension of time then fixed under this clause was

68 Cll.25.4.10.1 and 25.4.10.2. 69 For example, the start or finish of a defined activity, subcontract, trade or undertaking that is not contractually binding. 70 Leighton Contractors (Asia) Ltd [2004] HKCFI 822; (2007) 1 Const LJ 70.

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neither unreasonably distant from nor unreasonably close to the date on which it was necessary for him to receive the same, then the [CA] shall so soon as he is able to estimate the length of the delay beyond the date or time aforesaid make in writing a fair and reasonable extension of time for completion of the works.” (emphasis added)

14–072 In this case, [C] alleged that [D] had caused delay to progress by releasing tender information for MVAC71 and electrical subcontract works late in relation to the date it was required according to C’s original planned schedule of work. The arbitrator found that the information was indeed provided later than it should have been according to the original schedule, but that such lateness could not have delayed the progress of works, and hence could not, at its lowest, have been “likely to delay the completion of the works”. 14–073 The arbitrator found that, because of other delays for which it was not alleged D was responsible, on the date on which the information was originally planned to have been needed, C was still involved in substructure works. Even by the time that the information had been provided and the MVAC and electrical subcontracts had been awarded, C was only just ready to start (and had not yet commenced) construction of the basement slab, completion of which was a predecessor to the commencement of the works in question. In rejecting the application, Reyes J said: “Whether information is provided in ‘due time’, or is ‘necessary’ when requested, can only be determined by reference to the state of the works at the time when information is requested, or provided. Clause 23(2)(f) refers to [C] ‘not having received in due time necessary instructions’ and to [C]. If [C] was still working on the substructure when it requested tender information from [D], the information could not then have been necessary. Due to [C’s] own substantial delay, there was ample time for the information to be provided much later, even after the original [schedule] date. On the facts found by the arbitrator, the tender information can neither have been ‘necessary’ when requested by [C] nor out of ‘due time’ when provided by [D]. ‘the completion of the works is likely to be delayed’ requires some finding of a causal link between [D’s] late submission of information and potential delay to completion of the works. It is not enough for [C] to show that information was provided late. [C] must also show that, on the date (say) when the information ought originally to have been provided, delay to completion was ‘likely’. But the arbitrator found that substructure works were so delayed that it obviously did not matter if tender information was given later than first envisaged. She said: – ‘Where [C] relies on Clause 23(2)(f), the issue is not what caused the instruction to be “late” and what might have delayed [CA] in issuing the necessary instruction, but simply whether the necessary information is late, having regard to the time when [C] actually required it’. In the actual circumstances of the case, looking prospectively from the time of [D’s] initial failure to provide information, [D’s] failing could not be causative of delay [to completion]. The late information could not cause actual delay [to progress], having regard to the state of the works at the time when the information ought to have been furnished originally.”72

14–074 The calculation of a delay to progress might at first appear to be straightforward, but there can be many subtleties to the calculation depending upon the event in question and the nature of the materials available. There are, in principle, six different ways in which any one causal event might adversely affect progress: suspension of progress with immediate effect – the suspension of an activity, or group of activities which commences on the initiation date of the event; 71 Mechanical, ventilation and air conditioning. 72 But see also City Inn Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590, affirmed [2010] CSIH 68, in which the court declined to distinguish between sequential and concurrent delay and held C’s progress, or lack of it, to be irrelevant.

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suspension of progress with deferred effect – the suspension of an activity, or group of activities which results from the event via a chain of other activities, or happenings consequent upon the initiation of the event; commencement delay with immediate effect – deferment of the commencement of an activity, or group of activities commencing on the initiation date of the event; commencement delay with deferred effect – deferment of the commencement of an activity, or group of activities resulting from the event via a chain of activities or happenings consequent upon the initiation of the event; production delay with immediate effect – deferment of the completion of an activity, or group of activities already started, commencing on the date of initiation of the event and where work is continuing; and production delay with deferred effect – deferment of the completion of an activity, or group of activities already started, resulting from the event via a chain of activities, or happenings consequent upon the initiation of the event and where work is continuing. 14–075 Whilst a delay to progress may be self-evident and co-extensive with a suspension of the work, in many cases it is not, and the effect on progress of D’s time or cost risk event has to be calculated, or deduced, in isolation from any other cause. Ascertainment of the duration of the delay to progress suffered, the activities affected and the calendar period in which the delay to progress was suffered are important considerations in regard to the calculation of time-related loss and/or expense, and are always material considerations in relation to the calculation of the knock-on effect on a completion date or key date. 14–076 Construction projects are invariably highly labour-intensive, and so, when establishing a measure of delay to progress, the availability of resources to cope with additional, or changed work and the effect of such changes on that resource are often material considerations. 14–077 In the absence of very clear records, it may be necessary to make an approximation of the delay to progress as a result of the resources expected to be available, but here lies a danger. If one takes, by way of example, a variation for some additional joinery work that occupies two joiners for one week, then the delay to progress of the work of those two joiners is one week. If the particular work they are engaged in is critical to completion, then this would equate to a delay of one week to the completion date, but if the inference that the work is critical can be disproved by demonstrating that that particular activity, whilst taking time for those two joiners, was in fact not critical to completion, then there will be no entitlement to an extension of time. 14–078 It is not unusual for those who are involved in making claims for delay to inflate the claim by overstating the effect of an event by equating entitlement with the effect of the event on specific resources engaged in the specific additional work, rather than the effect on all the resources engaged in that particular trade at that point in time73. It was in this way that the expert witness for C approached the quantification of delay in McAlpine Humberoak74, in which, Lloyd LJ observed: “[The expert] went through each of the VOs, and arrived at a number of days or weeks, based either on the time actually taken to carry out the extra work or on a calculation. 73 A Burr and R Palles-Clark, “Critical path analysis in English law: the present state of play” (2005) 21 Const LJ 222, at 233. 74 McAlpine Humberoak Ltd v McDermott International Inc (No 2) (199) 58 BLR 61.

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With perfect logic, he added a claim for night working, for his method of calculation assumed the same workforce working one night shift throughout, as originally planned without any night shift. One cannot help admiring the way in which [the expert] set about his task. It may be that there was no other way in which it could be done. But it suffers from two major defects, So far as the first stage of calculation is concerned, [the expert’s] approach assumes that one man was working for one day on a particular VO, [and] the whole contract was held up for that day. The point was illustrated by VO 64, described by [D’s counsel] as the reductio ad absurdum of [the expert’s] method. The claim was for £39, being the cost of an inspector carrying out a lamination check on one of the secondary tees on W3. The inspection was carried out on 12 May 1982. It took no more than an hour. Yet [the expert] has allowed the whole day’s delay to the whole of work. The second, and even more serious defect relates to the second stage of the calculation. It assumes that the whole of the workforce planned for a particular activity was engaged continuously on that activity from the day it started to the day it finished. This was hardly likely to be so, quite apart from the labour difficulties which [C] suffered in phases 2 and 3 of the contract and the decision by [C] towards the end of the contract to run down the labour force.”

14–079 A similarly flawed approach to the calculation of delay to progress was advanced in Ascon, in which HH Judge Hicks QC observed: “[The subcontractor’s expert’s] second main technique was to translate cumulative hours recorded on daywork sheets as spent on salt washing or mud clearing into equivalent working days and to treat those as further justification for attributing that part of the days lost to water ingress. Again, however, that conclusion simply does not follow. First, the labourers involved in those activities were only a part, and usually a small part, of the workforce, the rest of which was not necessarily idle (and indeed, so far as the records have been examined with this point in time, was usually not so in fact), so even in purely arithmetical terms the logic is flawed if an hour spent by, say, one or two labourers is equated with an hour lost to the whole project. Secondly, time lost in this way could in principle be made up by late working (as, again, often seems to have happened in practice). Thirdly, it is wrong in principle to ‘carry forward’ a part day if the next element on the critical path is a concrete pour. A pour, once embarked upon, must be completed before the end the working day. Either it is commenced on the due date, however late, and completed, or it has to be postponed by complete day or days; there simply cannot be a part-day loss on that score to be added to other part days.”75

14–080 Among the ways in which a schedule properly might be impacted to represent and calculate the effect of a causative event on progress are: 1. 2. 3. 4. 5. 6. 7.

adding a fragnet with a fixed initiation date that links in with schedule activities; adding one or more new schedule activities that link with existing activities; increasing, or reducing the original and/or remaining durations and percentage completion of an activity; replacing an activity with two or more equivalent, smaller, linked sub-activities, thereby depicting a greater level of detail; replacing two or more activities with a smaller number of larger, equivalent activities, thereby depicting a lesser level of detail; imposing inhibitory constraints on a schedule76; removing inhibitory constraints on a schedule77;

75 Ascon Contracting Ltd (1999) 66 Con LR 119; (2006) 16 Const LJ 316 at [20]. 76 Such as “mandatory start”, “mandatory finish”, “start on”, “zero free float”, “zero total float”, or finish “no earlier than”, or “no later than”, constraints, which inhibit the schedule from reacting dynamically to change. 77 See fn 75.

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8. 9.

changing logic links; and changing calendars to represent different times when work could, or could not take place.

14–081 Of the above, option 1 is advantageous for presentational purposes in that it provides a clear depiction, within the amended schedule, of the change that has caused the effect. For options 2 to 9 above, fragnets depicting the change that do not link in with the schedule can always be provided for visual clarity.

Instructed variations 14–082 An instructed variation will almost always fall into the first or second categories as listed above78. Accordingly, it is likely to result in a commencement or production delay via a chain of activities consequent upon the occurrence of the event. Typically such a chain might comprise: the instructed variation; assessment of content of work, detail design and off-site fabrication; procurement of resources and mobilisation; and execution of content of variation on site. 14–083 Taking the example of the kitchen fittings referred to earlier79, if, shortly after the instruction to appoint the nominated subcontractor was issued on 14 February 2004, D decided to change the layout and design of all the kitchens on floors 21–30. Assuming that the change would not affect the time taken to design, manufacture, or ship, the delay to progress might then reasonably be calculated by identifying the difference in installation time on site and the sequence necessary to commence the work on site following the variation instruction. 14–084 For the sake of the above example, if there were 20 kitchens on each floor and each kitchen was expected to take a full working day of eight hours to install and the rearranged and redesigned layout was calculated to take ten hours to install, the effect upon the activity duration on site could be calculated as follows: as contracted for: {8 208} = 20 days as revised: {10 208} = 25 days. 14–085 The additional work content on site, therefore, is five days; however, before it is possible to take account of that, the chain of activities listed in Figure14.4 below must first be performed. [Please refer to Figures 14.4 and 14.5] 14–086 For the purpose of this example, if the impact of the variation is then gauged upon the planned schedule (first illustrated at Figure 14.1), which for convenience is reproduced as Figure 14.5 (on which the intended commencement date of installation is indicated as the beginning of September 2004), it can be seen that the effect of the event can be calculated by linking together the installation dates planned with the installation achievable as a result of the instructed variation to demonstrate that the work on site cannot start until the end of September 2004. 14–087 Figure 14.6 demonstrates that, if the schedule was being followed, but for the effect of this event, and absent any mitigation by subsequent re-sequencing, the

78 See para.14–080. 79 See paras 14–033 to 14–037.

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delay to progress caused by the alteration of the kitchen fittings would affect the commencement of “2nd fix M+E”, by delaying its commencement by approximately four weeks. It is also likely, in the absence of any recovery, to delay the commencement of the activities “floor and wall finishes” and “install equipment” by a like period. These are the periods for which C is entitled to reimbursement of any loss, or expense it suffers as a result of deferment of these activities, if any is actually suffered. [Please refer to Figure 14.6]

Suspension of the works 14–088 Delay to progress arising out of the suspension of an activity between particular dates, either as a result of an instruction to suspend the work, or as a result of some other event, can be identified in one of two ways: it can be identified as a non-working period in the working calendar in the schedule for that particular activity; and the activity can be split, and divided by an additional activity of identifiable duration described as “suspension of work”, or whatever it is that aptly describes the suspension. 14–089 By way of example, if, in relation to the planned schedule at Figure14.5, the activity “glaze windows and secure” could not be carried out during two weeks in July as a result of exceptionally adverse weather, this could be identified as “exceptionally adverse weather” (activity 2), breaking the suspended activity into two activities identified as: “1. Glaze windows and secure (1)” and “3. Glaze windows and secure (2)”: see Figure 14.7. Alternatively, the same effect can be achieved by a suspension of the working calendar as is illustrated in “1. Glaze windows and secure (interrupted)”. [Please refer to Figure 14.7] 14–090 In both cases, the effect of the weather is identical: that is, to suspend performance between the second and fourth weeks of July and the ultimate completion date of the disturbed activity is the same, namely the end of the third week in August. 14–091 However, in the first option, that is the suspension of the working calendar, the interrupted activity is visually uncluttered, takes up less scheduling space, is quicker to schedule and, provided that it is properly documented, is probably to be preferred for a simple suspension such as this. 14–092 Where there is not a complete suspension, but there is a reduction in productivity that can be quantified, the impact on time has to be identified in a slightly different way. Say, for example, that the effect of the exceptionally adverse weather was not to cause a complete suspension between the second and third weeks of July, but was to render it more difficult to work, with the result that, on average, 30% less work was achieved during that period than before, or after it. 14–093 A calculation based upon that scenario might look like: Average attainable productivity = 6 windows per day Productivity achieved during exceptional adverse weather

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= 4 windows per day Number of days affected = 10 days Number of days of delay to progress = {(6–4)6} 10 = 3 days 14–094 The effect of those cumulative three days cannot be identified according to any whole calendar date, because the period was accumulated over a ten-day period. However, its effect is to render completion of the activity three days later than it would otherwise have been achieved. The effect of this on progress can then be identified by tagging it on to the end of the planned period and correcting the logic to demonstrate that any successor activity cannot start until after the additional period of time has been exhausted. This is illustrated at Figure 14.8. [Please refer to Figure 14.8] 14–095 This demonstrates, for example, a delay to progress in the commencement of the successor activity 12 “first fix M+E” of a reciprocal three days. 14–096 It is occasionally the case that a delay to progress will have a disproportionate effect on one particular activity. For example, because of restricted working calendars or restricted resource calendars, a small delay to progress to ground works (which are prohibited during a winter period) could potentially result in a delay to completion equivalent to the entire season80. 14–097 Similarly, if a subcontractor is required to re-schedule the commencement of its work as a result of a delay to progress to a predecessor activity, a disproportionate effect could result where, because of other obligations, the subcontractor is unable to mobilise when ultimately required. 14–098 Discontinuity and loss of integration may also adversely affect the productivity of labour so that, for instance, what would have taken three months to complete during the originally planned period, once delayed, may take three-and-a-half months to complete, when the same task comes to be carried out81.

Failure to perform 14–099 Where D, or anyone for whom D is responsible is required under the contract to do any act within a specified time, or by a specified date and fails to do so, irrespective of the method of analysis selected, it will present a different sort of challenge in the presentation of a technical proof of causation than does the proof of causation by a positive act, such as the issuance of a variation instruction. 14–100 Typically, this can affect such obligations as: grant of access to, or egress from the works; grant of possession of a part of the works; 80 See also Ch.6, “Extensions of time and time at large”, at paras 6–002 to 6–006. 81 See also, H Fairweather and Co Ltd v London Borough of Wandsworth (1987) 39 BLR 106 at 118, per HH Judge Fox-Andrews QC.

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provision of goods, or materials by D, or any of D’s consultants, contractors, or suppliers; the carrying out of work by any of D’s contractors; the carrying out of work by any third party, utility, or statutory undertaking; provision of instructions, drawings, details or other information; approval of any submittal; and anything of the like kind for which C has a legitimate expectation of performance by a stated or objectively assessed reasonable time. 14–101 Because the object of a proof of causation is to demonstrate the effect of events as they occurred in fact, the method of analysis for failures to perform is slightly different for two reasons: Whilst the start of a failure to perform may well be identifiable from the moment the act was planned to have taken place, that may not always be the date from which the event should be impacted82; The end of a failure to perform will only occur when the act is performed, which may be months, or even years after commencement of the failure and, in some cases, during the period of omission, many other events will have occurred also to have affected the progress of the works. 14–102 The reason that this type of event presents particular difficulties is that, once there has been a failure to perform by a predicted date, and the event has commenced, it will not normally be possible to predict when it will come to an end by the cessation of the delay in performance, until that actually happens. On the other hand, if it is known that the failure to perform will come to an end on a certain date in the future, then the event should be impacted, not as an omission to act, but as an act of predictable duration. 14–103 Except for when the duration of the failure to perform is of a brief period, the impact of the whole of the period from the date of its inception is not only likely to overshadow the true effect of other events and slippages occurring over the same period, but is likely seriously to distort the true effect of the event. Thus, unless the failure to perform, the effect of which is to be impacted, is of short duration, say less than four weeks, it will rarely be appropriate for the duration of the failure to be impacted in full in one impact. 14–104 Accordingly, for failures to perform lasting longer than four weeks, a “windows” process83 should normally be adopted. So, for example, if information was to be provided, or access granted to a part of the works, say, by 1 April, but was not in fact provided until 10 July, in the same year, it would rarely be appropriate for that omission to be impacted in full from 1 April. 14–105 Other events occurring after commencement, but before the end of a failure to perform should normally be identified as having had effect before the omission to act is taken into consideration. When impacted in this way, a failure to perform will only be found to delay the progress of the works, if the progress achieved in any window is less than that which was predicted by the effect of all D’s events taken together, within the same window. It is generally appropriate, at the end of each window (before each update is performed), to enquire whether, at that point in time such a failure to perform

82 Consider the failure to expend a provisional or prime cost sum; referred to above at paras 14–033 to 14–037. 83 See Ch.15, “Forensic programme analysis”, at paras 15–164 to 15–175.

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has yet come to an end and, if not, simply to impact the schedule only with the duration of the period of delay to the performance that has, at that date, already occurred. 14–106 Thus, in this example, by the end of April, the duration of the failure to perform would be 29 days; at the end of May that 29-day delay activity would be extended in duration to 60 days; at the end of June, it would be extended to 90 days; on 10 July when the failure to perform could be identified as having ended (chronologically in order of other events occurring in July) this event duration would be extended to 100 days. It is thus entirely possible that the period of failure to perform in events such as these may be found not to cause a like time delay to progress, simply, because other events acting in parallel during the same period of time may have had the effect of delaying the works during the same windows.

Tertiary causation – delay to completion of the works 14–107 In order to identify a delay to the date for completion, one must have a date by which it is intended to complete. Normally, of course, that is easily found in the terms of the contract between the parties: it is first written down in the contract agreement and it is varied by extensions of time granted. It may also be reflected in C’s schedule registering its intent to finish work at a time before, or after that date. 14–108 Secondly, C must demonstrate not only that a measurable delay to progress has occurred as a result of an event at D’s risk, but that that delay to progress is, at its lowest, likely to cause a delay to completion of the works, after the completion date. It is this, the quantifiable delay to the completion of the works, after the completion date, that forms the third link in the chain of causation. 14–109 In Chestermount, Colman J appeared to think that a delay to progress was co-extensive with a delay to completion where he said: “His yardstick is what is fair and reasonable. For this purpose he will take into account amongst other factors the effect that the [D’s time risk event] had on the progress of the works. Did it bring the progress of the works to a standstill? Or did it merely slow down the progress of the works? In both cases his objective must be the same; to assess whether any of the [D’s time risk events] has caused delay to the progress of the works and, if so, how much. He must then apply the result of this assessment of the amount of delay caused by the relevant event by extending the contract period for completion of the works by a like amount and this he does by means of postponing the completion date.”84

14–110 In this case, it appears that the court felt that the delay to completion would invariably be co-extensive with the delay to progress. However, it is apparent that, unless C regularly works a seven-day week, every week of the contract, the knock-on effect on completion by a particular calendar date will not be identical to the duration of the delay to progress calculated by reference to the working calendar85. 14–111 In the Ascon case86, Judge Hicks said that, whilst that was an inference that might reasonably be drawn in some circumstances, it would not always follow. Notwithstanding the respective seniority of the judges in these two cases, Judge Hicks’s more refined view seems preferable, and a delay to progress cannot always be taken to be co-extensive with a delay to completion, even if C intends to work seven days per week. 84 Balfour Beatty Building Ltd v Chestermount Properties Ltd (1993) 62 BLR 1 at 29. 85 There can be no delay to progress on a day on which no progress was ever intended. On the other hand, time passes whether, or not, it is used productively. 86 Ascon Contracting Ltd (1999) 66 Const L R 119 (2000) 16 Const LJ 316 at [95].

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14–112 In fact, given that delays to progress are usually most meaningfully measured in working days, and that delays to completion must frequently, for the purposes of calculating extension of time entitlement, be counted in calendar days, the two, when measured in a conventional manner, are rarely co-extensive. Such discrepancies are likely to be particularly pronounced if any of the following factors are present: 1.

2.

3.

4.

Where there is free, or total, float in the schedule between those activities affected by a delay to progress and the completion date, until that float has been absorbed, there will be no effect upon completion. When completion is planned to be achieved before a non-working calendar period (at Christmas, for example, when, in the United Kingdom, there is commonly a two-week shutdown), the impact on completion will be greater than the delay to progress, to the extent of the non-working period together with a post-holiday re-mobilisation period87. Where critical resources or activities have restricted working calendars, for example, in critical ground works when the activity is prohibited during the wet season from, say, the end of October until the end of March the following year, a delay to progress in that activity preventing completion of the activity within the dry season, will have an effect on completion greater than the quantified delay to progress, to the extent of five months. If the planned critical path on which an event is predicted to have an effect is re-sequenced, or otherwise changed, the likely effect upon the completion date will also change proportionately to the degree of re-sequencing of the critical path actually accomplished.

14–113 However, notwithstanding that, normally, C’s entitlement to more time will take into account the effect of weekends and other non-working days, it is possible for C’s entitlement to be limited to the actual duration of the delay to progress suffered and conditions to that effect are express terms of some bespoke contracts. For example, a contract might provide that: “If at any time C becomes aware that the works will not be or are unlikely to be completed by the completion date, C shall forthwith give notice to the CA to that effect specifying the relevant delay or impediment. In relation to any such delay or impediment if D is satisfied that such delay or impediment has arisen as a result of the occurrence of D’s time risk event, then the CA shall allow C an extension of time equal to the delay or impediment caused by such D’s time risk event.”

14–114 Such a clause may be interpreted to mean that C’s entitlement to an extension of time is co-extensive with the delay to progress caused by D’s time risk event. In the 2009 edition of the Irish government standard forms of contract, the same effect is achieved by the use of the expression: “there shall be an extension to the date for substantial completion of the works and any affected section equal to the amount of the delay beyond the date for substantial completion caused by the delay event taking into account only site working days.”88 87 See, for example, EH Cardy & Son Ltd v Anthony Edward Vye Taylor (1994) 38 Const LR 79, at 95 per HH Judge Bowsher QC: “There was some delay due to inclement weather. If the design had been done properly in the first place, the work would not have gone into the period of inclement weather, nor would there have been any intervention of a Christmas break. The delay due to inclement weather, Christmas break, and redrawing were all results of the original bad design of the third party.” 88 See, for example, IGBW/09 Cl.9.3.2.

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14–115 The New South Wales standard form of government contract, C21/03, specifies that entitlement to an extension of time is to be gauged by reference to the delay to progress, independently of any consideration of criticality or float and hence regardless of its likely or actual effect on completion. The view has also been expressed that that is the way entitlement should be gauged in relation to all contracts89. But this is an unusual form and, under most forms of contract, C must demonstrate the chain of causation from the delay to progress through to its effect on the completion date. For example, in Balfour Beatty v Lambeth in relation to a JCT form of contract HH Judge LLoyd said90: “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 [schedule] (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 [D] will not be responsible under the contract.”

14–116 A similar approach was taken in the case of Wallace91, in which the US Court of Federal Claims relied upon, amongst others, the Armed Services Board of Contract Appeals cases of Santa Fe Inc92 and Sauer93. In Santa Fe, the Board held that: “When [C] is seeking extensions of contract time, for changes and excusable delay, which will relieve it from the consequences of having failed to complete the work within the time allowed for performance, it has the burden of establishing by a preponderance of the evidence not only the existence of an excusable cause of delay but also the extent to which completion of the contract work as a whole was delayed thereby.”94

14–117 In Sauer95, moreover, it was held that: “In addition, the unforeseeable cause must delay the overall contract completion; ie, it must affect the critical path of performance.”

14–118 In principle, apart from the possibility of dismissing the problem of proof of an effect on completion and granting an extension of time that is co-extensive with

89 M Black QC, “Contemporaneous extensions of time – why now?” An occasional paper given to the Owners’ International Superconference (London, 2004). See also City Inn Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590, affirmed [2010] CSIH 68, in which a similar approach seems to have been taken in relation to causation under JCT80, notwithstanding their Lordships’ expressed appreciation of the relevance of a critical path to completion. 90 Balfour Beatty Construction Ltd [2002] EWHC 597 (TCC) at [30]. 91 RP Wallace Inc v United States (1996), COFC No 96–222 C (Ct Cl) (2005) 21 Const LJ 378. 92 Santa Fe Inc (1984) VABCA No 1943, 84–2 BCA 17,341, 86,410, (1984) WL 13360. 93 Sauer Inc v Richard J Danzig, Secretary of the Navy (2000) 224 F 3d 1340 (Fed Cir). 94 The Federal Circuit also opined that “a party asserting that liquidated damages were improperly assessed bears the burden of showing the extent of the excusable delay to which it is entitled”: Sauer v Danzig (2000) 224 F 3d 1340 (Fed Cir) at [38]; see also Aptus Co v United States (2004) 61 Fed Cl 638 at 647; PCL Construction Services Inc v United States (2002) 53 Fed Cl 479 at 484; CJP Contractors Inc v United States (1999) 45 Fed Cl 343 at 372. 95 Sauer v Danzig (2000) 224 F 3d 1340 (Fed Cir), at [28], Citing Mel Williamson Inc v United States (1982) 229 Ct Cl 846 at 850–851.

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the delay to progress, there are two entirely different, but rarely expressly distinguished, methods of approaching the issue of what was likely to, or did, cause a delay to completion of the works beyond the completion date: the proof can be attempted as inference from a process of logical reasoning; or the chain of causation can be proved by calculation from a dynamic CPM schedule. 14–119 Causation by inference is along the lines of “The foundations were altered to create five days’ additional work; because the foundation layout drawings were altered, C suffered five days’ delay to its foundation work; although C tried to mitigate by starting the superstructure before completion of the foundations, the start of the superstructure was delayed and, because the superstructure is on the critical path it must delay completion and C is entitled to an extension of time of five days.” This is often accompanied by a schedule, sometimes based upon a partial CPM network, to illustrate the causal connection claimed. This is an inductive proof in that the schedule merely illustrates what is alleged by inference. It might, for example, be illustrated as at Figure 14.9. [Please refer to Figure 14.9] 14–120 Instructed additional work will almost always cause either a deferment of the commencement or completion of an activity (or activity group) via a chain of activities consequent upon the occurrence of the event. The figure is very simple, easy to understand and, although it looks obviously right, it can be very misleading. It is, however, the way many construction claims are presented96. 14–121 Apart from the number of days of delay to completion, there are a number of express or implied assumptions upon which the logic of the inference depends and, whilst they may be true in any particular case, in this example the planned assumptions are unsupported in fact. The assumptions are that: the completion of the part of the foundations affected by the amendment is on the critical path; the foundation works concerned would have started on the date planned, but did not; the amendment to the drawings prevented the foundation works from starting; the completion of the foundations is a precondition to the commencement of the superstructure; and the completion of the superstructure is on the critical path to completion. [Please refer to Figure 14.10] 14–122 Using CPM-based modelling, the proof can also be made by the scientific approach of calculating the putative effect of the event upon C’s schedule as it was in fact built, claiming the result of the calculation as its entitlement97. This is a deductive proof that relies upon the calculation prepared from the data input by the software to identify the resultant effect on completion, if any: see Figure 14.10. It might, for example, be established that: for reasons unconnected with the amendment, the foundations work started in a different area than that initially planned, with the work being carried out in a different sequence; 96 See, for example T Farrow, “Delay analysis – methodology and mythology”, an occasional paper given to the Society of Construction Law (Manchester, 2001). 97 See Ch.15, “Forensic programme analysis”.

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although, as planned, the superstructure could not be commenced until the latest planned foundations were constructed, the latter were completed in a different sequence, enabling the superstructure to proceed before completion of the foundations as a whole; as a result, the calculated effect of re-sequencing reveals a likely early completion; and the amended foundations were not likely to have any effect upon the planned early completion; but because neither the first nor the second tranches of the foundation work were completed in good time, the superstructure was delayed in commencing. 14–123 Thus, although the amended area of foundations was constructed later than it could and should have been, the delay to progress that actually occurred could not logically have been caused by the amended drawings. This cannot be proved, without some difficulty, from the inference of a static illustration such as Figure 14.9; it can only easily be established by impact methodology applied to a CPM schedule that is updated to recreate, properly, the actual history of the project98. 14–124 In McAlpine Humberoak v McDermott99, the respective expert witnesses for McAlpine as subcontractor and for McDermott as C, both used CPM techniques to analyse the effect of delays in the provision by the subcontractor of nine steel pallets forming part of the weather deck for a tension-leg offshore platform. The Court of Appeal overturned the first instance Official Referee’s decision that the contract had been frustrated by the number of instructions issued to the SC. At first instance, the SC’s expert carried out an exercise basing his argument on the implication that all the working time he had identified in relation to each instruction caused a delay to progress and that each delay to progress was critical to completion, without considering the context of the event in relation to other work being carried out at that time. Lloyd LJ said: “When [C’s] witnesses came to give evidence, they undertook the task which was never undertaken by [the SC], of tracing the impact of every drawing revision, VO and TO. The judge at first instance dismissed the [C’s] approach to the case as being ‘a retrospective and dissectional reconstruction by expert evidence of events almost day by day, drawing by drawing, TO by TO and weld procedure by weld procedure, designed to show that the spate of additional drawings which descended on [the SC] virtually from the start of the work really had little retarding or disruptive effect on its progress’. In our view [C’s] approach is just what the case required.”

14–125 This provides strong guidance on the proper approach to be taken in such complex situations. The analysis must primarily be a factual one that shows what actually happened, so that the events and their effects on progress should be examined at the time they occur, in the context of the work actually going on at the time, for which good records are invariably essential100. 14–126 A recent illustration of the importance of positively calculating entitlement in relation to the facts, rather than drawing inferences reliant on unproven assumptions, occurred in relation to a hospital unit, in which C was required to cast radiation barrier walls of concrete some 600mm thick and 6m high. As planned, the work was separated into panels one metre wide and each panel was planned to cure for three days

98 Ch.15, “Forensic programme analysis”. 99 McAlpine Humberoak Ltd (1995) 58 BLR 1. 100 See Ch.13, “Construction records”, throughout.

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before the formwork was struck to enable it to be moved to the next panel. The work was on the critical path, because the roof was not planned to be started until the concrete structure had been cast. When the first panel formwork was struck, the concrete slumped and the CA then instructed C to leave the formwork in place for five days, in each panel, before striking101. 14–127 C was four weeks late in completing the walls and claimed an extension of time of four weeks as a result of the additional time it would take to cast the concrete arising out of the CA’s instruction to delay striking the formwork. It was established that, if the additional time instructed was added to the number of planned castings, it would add four weeks to the construction period and an extension of time was granted. 14–128 In a subsequent dispute arising out of other matters, C disclosed its daily site records, which demonstrated that only three panels were in fact left in place for three days, none were left in place for five days, the majority were left in place for one or two days and, in aggregate, the structure was completed in less time than was planned. However, for other reasons not connected with the CA’s instruction, the structure had in fact taken four weeks longer to complete. 14–129 In this case, it could be inferred that the instruction to prolong the curing period of each casting had caused the delay to completion of the concrete. The one should follow the other. However, the facts demonstrated that the curing had not been prolonged at all, the curing period had in fact been reduced, and, in fact, the reason for the delayed completion was C’s difficulty in getting adequate deliveries of concrete.

Proof of causation Introduction 14–130 A satisfactory proof of causation is that which the CA, D, a tribunal, or the court accepts as adequate in the circumstances to demonstrate on a balance of probabilities102 that the events alleged to have caused the effect alleged is acceptable. 14–131 It is a fact of life that, even when the contract requires otherwise, at first instance with the CA and in negotiation with D, C is likely to adopt an inferential approach, which does not account for any liability on its part. If, in fact, C bears no liability for any of the delay to completion caused, that will be a total time claim103, otherwise, because at least a part of the delay to completion is caused by factors at C’s risk and no allowance is made for that, it will be a global claim104. On the other hand, where there is mixed liability, courts and tribunals are more likely to attempt an apportionment105 or, where the materials are available to do it, to look for a more scientific approach to a schedule-based proof106. 14–132 None of the standard forms of contract discussed here state expressly how entitlement to an extension of time or to time-related compensation is to be proved. However, it is evident that what constitutes an acceptable proof of causation, in any

101 102 103 104 105 106

An unreported case of the previous author’s experience. In some (mainly US) jurisdictions, this burden of proof is a “preponderance of evidence”. See Ch.19, “Total time, total loss and global claims”, paras 19–013 to 19–020. Ch.19, “Total Time, total loss and global claims”, paras 19–040 to 19–072. See Ch.20, “Apportionment”, throughout. See Ch.15, “Forensic programme analysis”, throughout.

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particular case and circumstance, will generally depend upon a number of factors, including: the terms of the contract; what is to be proved; the factual materials available; and proportionality. 14–133 However, whether delay is to be analysed contemporaneously, on the basis of information then available, or is to be calculated retrospectively, is probably one of the most significant factors in the choice of methods of analysis.

The terms of the contract “Many contract documents specify a prospective timing method of delay analysis in order to try to resolve delay issues as they arise. But at the end of the project even when using an additive modelling technique the schedule analyst knows what actually occurred on the project and may need to use as-built information as the basis of the analysis. Further while prospective analysis is typically performed by individuals actively involved in the project retrospective analysis is most often performed by specialized forensic analysts who had no involvement in the project.”107

14–134 Although none of the standard forms discussed here contain much by way of an indication of appropriate methods of analysis, some bespoke forms and bespoke modifications to standard forms contain a scheduling specification and an indication of the type of analysis necessary for proof of entitlement to an extension of time. Whenever there is a contractual specification for the method of analysis to be adopted, this should be followed in preference to any other method, unless it is inconsistent with the contract conditions, ambiguous, impossible to perform, or simply does not provide the information necessary. 14–135 The standard forms of contract forms tend to divide into four groups; those providing for C to receive relief from liquidated damages in the event that: completion is likely to be delayed; completion is likely to be, or has been delayed; completion of the works has been delayed; and the CA considers it is reasonable to grant an extension of time. 14–136 It is recommended by the SCL Protocol that assessment of entitlement to an extension of time should always be made contemporaneously upon the basis of the likely effect upon the completion date at the time that D’s time risk event was initiated108. That is what is also required by the CIOB Guide in order to maintain effective project control109. 14–137 In principle, whenever the contract requires entitlement to be gauged during the course of the works (as opposed to after the completion date has passed), because the completion date has not yet occurred, it must be gauged by reference to that which is likely to affect the completion of the works beyond the completion date. In those

107 JG Zack Jr, “Delay and delay analysis – isn’t it simple?”, a paper presented to 1st ICEC and IPMA Global Congress on Project Management Ljubljana (Slovenia, April 2006). 108 Core Principle 3 and para.1.2.4. 109 Core Principle 24 and see also para.4.5.15.

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circumstances, the proof must be based upon C’s planned intent for the future conduct of the works. That is, because it is the planned schedule that indicates the likely sequence of activities up to the point of completion and what the effect, if any, on that planned intent is likely to be. 14–138 On the other hand, the likely effect of an event upon completion of the works is unlikely to be identical to the actual effect, for a number of reasons, including the effects of: latent errors in C’s planned schedule, including: the absorption, or otherwise of float; contingent fixed lags; express, or implied contingency activities; re-sequencing; changes in resources; or C’s, or D’s time risk events. 14–139 Thus, in order to identify the actual effect on completion of the works, as opposed to the likely effect of a delay to progress, the baseline must be the schedule of the way in which the work was in fact built, the as-built schedule. 14–140 So far as concerns likely delay to completion of the works beyond the completion date, the baseline is the planned schedule of work usually updated to a point before the event occurs, taking into consideration what has gone before and, in the light of that, predicting what is likely to happen in the future. In these circumstances, the effect of the event is then calculated in relation to its likely impact on the planned schedule for the future conduct of the work on the express, or implicit planned date for completion. 14–141 Conversely, what has actually caused a delay to completion of the works cannot be calculated by reference to a planned schedule that predicates no more than that which is likely to happen in the future, in certain circumstances. Naturally, delay to completion of the works beyond the completion date cannot actually occur until after the completion date has passed and an effect upon it can only be calculated in relation to that which actually happened, as opposed to that which was planned to happen.

Completion is likely to be delayed 14–142 In the first category of standard forms are HK05110 and the JCT forms JCT80111, JCT98112, JCT05113, WCD98114 and DB05115. These are the only standard forms that expressly indicate that an extension of time may only be awarded when, as a result of D’s time risk event, completion of the works is no more than likely to be delayed. 14–143 However, by implication116, this class also includes ECC2 and ECC3, in which C’s entitlement to an extension of time “is assessed as the length of time that, due to the [D’s risk event], planned completion is later than planned completion as 110 Cl.25.3. HK05 also adds the alternative where completion “is being” delayed, but that only goes to culpable delay in the period before substantial completion. 111 Cl.25.3.1. 112 Cl.25. 113 Cl.2.28.1.2. 114 Cl.25. 115 Cl.2.25.1.2. 116 The implication being that an assessment of the effect of an event that is undertaken before completion has been achieved can only be based, at best, on its effect on the planned schedule.

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shown on the accepted schedule”117. A similar formula is implied by the phraseology used at Cl.25.10 of C21/09. It may arguably also include the New South Wales Government construction contract C21/03118, which unconventionally requires that, for an extension of time to be awarded, either “(a) a clear majority of work in progress, or planned to be started during the period of the delay could not be proceeded with; or (b) a clear majority of work will not be able to be proceeded with in the future, as a result of the delay which has occurred.”

14–144 Where they provide for a contemporaneous analysis based on the likely effect on the completion date, JCT80, JCT98, WCD98, JCT05 and DB05 also provide for a retrospective assessment, after the completion date has passed, on the basis of a “fair and reasonable” extension of time119. HK05 contains similar provisions that are operable only up until substantial completion120, after which the provisions give no guidance on how the completion date is to be ascertained121.

Completion is likely to be, or has been, delayed 14–145 The majority of standard forms of contract (including the other JCT forms, GC/Works/1, IChemE, the FIDIC suite of contracts, AS2124, AS4000, SGC95 and HK86) provide in the alternative for entitlement to an extension of time on the basis of what is likely to happen, or what actually happened. So, for example, GC/Works/1122 requires relief to be given on the basis of a delay to progress which “will prevent or has prevented” completion of the works. Other than those identified above, the JCT forms use the expression “is being, or is likely to be delayed”123; AS4000124 says “is, or will be delayed”; the older FIDIC forms also use the expression “is, or will be delayed”; SGC95 uses the expression “will be, might be, or has been caused”125; and HK86 uses the expression “is likely to, or has been delayed”126. 14–146 The intention of these forms seems to be that, during the course of the works, interim relief should be granted on the basis of what, at the time of the event, is likely to affect completion of the works beyond the completion date, because at that time the completion date has not yet been achieved and it cannot be appropriate for an interim calculation to be based upon what has caused delay to a key date that has not yet arrived. On the other hand, once the completion date has passed, where the contract provides for an extension of time to be assessed by reference to what has caused delay to completion instead of what was likely to cause delay to completion, it is correct to establish C’s entitlement in terms of an extension of time by reference to what affected the as-built schedule, rather than by what affected the as-planned schedule. 14–147 This would appear to be the logical result of such provisions, because any other approach would render otiose the words “is delayed” and “has been delayed”, a 117 Cl.63.3. 118 Cl.43. 119 See JCT98 and WCD98, Cl.25.3.3.1 and DB05 Cl.2.25.5.1 but no basis upon which such a fair and reasonable extension of time can be calculated is specified other than what was likely to cause delay to completion. 120 Cl.25.3(7). 121 Cl.25.3(8). 122 Cl.36(1). 123 Generally, Cl.25.3.1.2. 124 Cl.34.3. 125 Cl.14.2. 126 Cl.23.

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position that logically can only be established after the completion date has passed. In so far as the baseline for what is likely to be the effect on completion must be C’s schedule, competently updated to a point before the event occurs, the baseline for what in fact caused the completion date to be delayed is C’s as-built schedule demonstrating how the work was actually built. The logical effect of this alternative would be to give to D the benefit of any post-event re-sequencing, or other recovery measures put in hand, which were not expressly, or impliedly instructed by D. 14–148 Under this protocol, if, after the completion date has passed, it can be seen that entitlement was previously underestimated, because of an error in the calculation of the delay to progress, the CA must increase its allowance. However, if entitlement had been overestimated during the interim period, either, because of an overestimate of the extent of the delay to progress, or, because C later re-sequenced, or otherwise overcame the effects of the delay to progress in whole, or in part, C is entitled to the benefit of the error127. 14–149 On the other hand, where it is found that acceleration has been impliedly, or expressly instructed, notwithstanding that the contract expresses the parties’ agreement that, post completion, the extent of entitlement is to be gauged upon the effect actually experienced, rather than that likely to be experienced, the effects of that acceleration must still be identified on the basis of what would have been the likely result had such acceleration not been put in place128.

Completion has been delayed 14–150 The third category of standard forms restricts analysis for the purposes of entitlement to a calculation based upon delay to completion that has occurred. This class includes SIA80, which requires that delay to completion “has been caused”129 and MF/1, which requires that C “shall have been delayed in the completion of the works”130. 14–151 Where C’s entitlement is restricted to relief for a delay to completion that has occurred, SIA80 also provides for an interim assessment on the basis of what is fair and reasonable, although this does not appear to be the case with MF/1, which makes no reference to interim assessments prior to the completion date. 14–152 Where provision is made for relief on the basis of what has actually delayed completion, but also with the possibility of an interim award, the idea is presumably that, during the course of the work, the CA may make a fair and reasonable assessment on the basis of the best information available to him at that time and, after completion has been achieved, entitlement can then be calculated on the basis of what actually happened. 14–153 In Balfour Beatty v Shepherd131, the contract between Balfour Beatty (the subcontractor) and Shepherd [C] provided that: “In relation to any such delay or impediment, if [C] is satisfied that such delay or impediment has arisen as a result of the occurrence of a delay event, then [C] shall allow the

127 None of the standard forms of contract makes provision for the CA to reduce, after the completion date has passed, an extension of time given during the course of the works to extend the time for performance. 128 Motherwell Bridge Construction Ltd v Micafil Vacuumtechnik (2002) 81 Con LR 44. 129 At Cl.23(1). 130 Cl.33.1. 131 Balfour Beatty Engineering Services (HY) Ltd v Shepherd Construction Ltd [2009] EWHC 2218 (TCC).

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subcontractor an extension of time equal to the delay or impediment caused by such delay event (taking into account reasonably foreseeable consequences of the delay events) and shall fix a new contract completion date which shall replace the existing subcontract completion date.” (emphasis added)

14–154 Akenhead J observed that132 the adjudicator had dismissed the SC’s case that it was entitled to an extension of time by reason of delayed access to Block Z, because it had been claimed on a prospective basis, judged as at October 2007, when the extent of the alleged failure to provide access to Block Z became known. The claim was not pursued on a retrospective basis, that is looking at the events that had happened, to see how much actual delay had actually been caused to completion by the delay event relied upon.

Whatever is fair and reasonable 14–155 A number of standard forms give no express indication at all of the basis upon which the assessment of C’s entitlement is to be made. HK05 falls into that class once substantial completion has been achieved133. The AIA form A201/97134 rather obscurely, says: “If [C] is delayed at any time in the commencement, or progress of the works by a [D’s time risk event] which the [CA] determines may justify delay then the contract period shall be extended by such reasonable period as the [CA] may determine.”

14–156 Similar phraseology is employed in A201/07. Other standard forms, whilst inviting the inference in one clause that entitlement is to be on the basis of what has actually caused the completion date to be affected, in another imply that entitlement should be on the basis of what is likely to affect the completion date. This class includes ICE7, in which the word “delay” is not used consistently. The partnering contract PPC2000, for example, states simply that: “[C] shall be entitled to be granted an appropriate extension of time if and to the extent that, despite [C’s] best endeavours any of the following adversely affect the date for completion.”135

14–157 It might reasonably be assumed from this that the CA is to ascertain what the actual effect on completion is before granting C an extension of time. However, that interpretation sits uneasily with Cl.18.4, which states that, by way of notice, C is to provide its calculations of the likely effect of an event and its proposals for overcoming them as soon as it becomes aware of the occurrence of a D’s time risk event. The clause also provides that, within 20 working days of such notice, the CA is to: “ascertain any fair and reasonable extension of time in accordance with clause 18.3”. 14–158 In practical terms, this must mean the likely effect of the event, but, if the tone of Cl.18.3 is taken literally, that cannot be done until after the completion date has passed. 14–159 Similarly, under another contract, after a “delay or impediment” had occurred, C was required to give notice specifying “the relevant delay” and, provided the CA was satisfied that “such delay” had arisen (in the past), it was then to allow C an extension of time “equal to the delay”. Bearing in mind that the precondition to the 132 133 134 135

Balfour Beatty v Shepherd [2009] EWHC 2218 (TCC) at [10]. Cl.25.3(8). Cl.8.3.1. Cl.18.3.

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CA’s duty was that at any time the works “will not be, or are unlikely to be completed” (in the future), it seems that the “delay or impediment” was probably a delay to progress and that the “relevant” (delay to progress) was that which was likely to cause delay to completion. The effect of this was interpreted to mean that the extension of time to be granted was an interim entitlement on the basis of an extension of time to completion equal to the delay to progress caused by the “delay event”; in essence, a day’s extension of time for each day’s delay to progress136.

The subject-matter of the proof 14–160 Depending upon the terms of the contract between the parties, whereas, for the purposes of relief from liquidated damages, it may be acceptable to demonstrate entitlement to an extension of time by reference to the likely effect of an event on completion, it has been clearly acknowledged by the courts and tribunals in most common law countries that financial compensation must be related to a loss, or expense actually suffered as a result of an event at D’s risk as to cost. Where that loss, or expense is time-related, it follows that it must be calculated by reference to the delay to progress, or disruption, or prolongation of the works, which actually occurs as a result of the delay to progress caused by D’s risks137. 14–161 In Costain v Haswell138, for example, C claimed prolongation costs for delay to the whole of the works caused by delay to the foundations of the Rapid Gravity Filters building (“RGF”) and the Inlet Works (“IW”). The RGF and IW were two structures forming a part of a contract for a water treatment works which, in all, comprised a direct filtration plant, including chemical handling, chlorine contact tank and washwater treatment plant, a new treated water reservoir of 35ml capacity and associated pumping stations at Lostock and new washwater clarifiers and a new pumping station at Rivington in the United Kingdom. Richard Fernyhough QC (sitting as a Deputy High Court Judge) held that139: “it is necessary to draw a distinction between a claim for damages for delay and a claim for an extension of time of the completion date on account of delay. When an extension of time of the project completion date is claimed, [C] needs to establish that a delay to an activity on the critical path has occurred of a certain number of days or weeks and that that delay has in fact pushed out the completion date at the end of the project by a given number of days or weeks, after taking account of any mitigation or acceleration measures. If [C] establishes those facts, he is entitled to an extension of time for completion of the whole project including, of course all those activities which were not in fact delayed by the delaying events at all, ie they were not on the critical path. But a claim for damages on account of delays to construction work is rather different. There, in order to recover substantial damages, [C] needs to show what losses he has incurred as a result of the prolongation of the activity in question. Those losses will include the increased and additional costs of carrying out the delayed activity itself as well as the additional costs caused to other site activities as a result of the delaying event. But [C] will not recover the general site overheads of carrying out all the activities on site as a matter of course unless he can establish that the delaying event to one activity in fact impacted

136 An unreported case of the previous author’s experience. 137 However, see also City Inn v Shepherd, in which, for the purposes of compensation, Lord Drummond Young declined to acknowledge any distinction between a number of events which he had accepted as being likely to have caused a delay to completion and the cause of prolongation. 138 Costain Ltd v Charles Haswell & Partners Ltd [2009] EWHC B25 (TCC); [2010] TCLR 1. 139 Costain Ltd [2009] EWHC 3140 (TCC); [2010] TCLR 1 at [183]–[185].

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on all the other site activities. Simply, because the delaying event itself is on the critical path does not mean that in point of fact it impacted on any other site activity save for those immediately following and dependent upon the activities in question. It seems to me that [C]’s claim in respect of its prolongation costs has fallen between the two stools described above. The claim is put on the basis that the delays to the foundation works caused critical delay to the whole project of over twelve weeks and the whole project’s general site costs are claimed on that basis. Those costs are evaluated as at October 2002–January 2003 and not at the end of the project which occurred well over two years later in May 2005. But no evidence has been called to establish that the delaying events in question in fact caused delay to any activities on site apart from the RGF and IW buildings. That being so, it follows, in my judgment, that the prolongation claim advanced by [C] based on recovery of the whole of the site costs of the Lostock site, fails for want of proof.”

14–162 Again, in Micafil140, D was held to be responsible for a likely delay to completion that had largely been overcome by acceleration. In construing the extension of time provisions, the court held that whereas C was entitled to an extension of time for the delay likely to be caused to completion (in the absence of subsequent acceleration) that was to a date beyond that upon which it actually completed, so far as concerns its prolongation costs, these were to be gauged by reference to the date it actually completed as a result of D’s cost risk events of which it complained. 14–163 The actual effect of an event can only be proved by reference to the way the work was actually built in fact, not by reference to the way the work was planned to be built. Thus any proof of delay to progress, or prolongation for which reimbursement of loss or expense is claimed must be related to the period of delay to progress, or prolongation actually suffered. Generally, the as-built schedule must be employed as the baseline from which such periods are measured. Except in the simplest of cases, in which a comparison between the as-built record and what was planned to happen (an as-planned versus as-built analysis)141, may be acceptable, some form of forensic schedule analysis will usually be required142. This may be achieved by employing a time impact analysis143, in which the ultimate effect of events is traced from initiation to ultimate effect on the final as-built schedule144, or by reference to what the asbuilt schedule would have been, but for the effect of D’s cost risk events (a collapsed as-built analysis)145. 14–164 Where C has not followed its planned schedule and has suffered sequential and concurrent delays to progress, the analysis selected must be able to identify the effects of C’s culpable delays to progress independently of the effects of those delays to progress caused by D. This may be achieved with a time impact analysis146 and with collapsed as-built147 methods of calculation, provided the factual material is available. It may also be inferred from (but not calculated by) a comparison of the as-planned and the as-built schedules148. However, whenever C has attempted re-sequencing and has changed its planned approach to the work, each planned schedule must serve as 140 Motherwell Bridge Construction Ltd (2002) 81 Con LR 44. 141 See below, paras 14–232 to 14–252. 142 See Ch.15, “Forensic programme analysis”. 143 Ch.15, “Forensic programme analysis”, paras 15–149 to 15–163. 144 In this tracing technique, the likely impact of events is traced through subsequent impacts, updates and rescheduled schedules to identify the residual effect of those events that actually had a continuing effect from their initiation through to the actual impact upon the relevant key date. 145 See Ch.15, “Forensic programme analysis”, paras 15–117 to 15–148. 146 Ch.15, “Forensic programme analysis”, paras 15–149 to 15–163. 147 Ch.15, “Forensic programme analysis”, paras 15–117 to 15–148. 148 Ch.15, “Forensic programme analysis”, paras 15–061 to 15–076.

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a separate baseline and that is often best achieved by a time impact analysis, which takes into account the change of baseline as it is put in place.

The factual materials available 14–165 A delay analysis can only ever be as probative as the factual materials upon which it relies. This was recognised by Judge Seymour in Brompton Hospital v Hammond149, a case in which it had been alleged that the CA had been negligent in calculating an appropriate extension of time. Judge Seymour said: “it was plain from the evidence called at the sub-trial on behalf of [D], in particular that of [D’s expert], who, of course, is a [scheduling] expert, that there are a number of established ways in which a person who wishes to assess whether a particular event has or has not affected the progress of construction work can seek to do that. Because the construction of a modern building, other than one of the most basic type, involves the carrying out of a series of operations, some of which, possibly, can be undertaken at the same time as some of the others, but many of which can only be carried out in a sequence, it may well not be immediately obvious which operations impact upon which other operations. In order to make an assessment of whether a particular occurrence has affected the ultimate completion of the work, rather than just a particular operation, it is desirable to consider what operations, at the time the event with which one is concerned happens, are critical to the forward progress of the work as a whole. On the evidence of [D’s expert] and [C’s expert] the establishment of the critical path of a particular construction project can itself be a difficult task if one does not know how [C] planned the job. Not only that, but the critical path may well change during the course of the works, and almost certainly will do if the progress of the works is affected by some unforeseen event. [D’s expert] frankly accepted that the various different methods of making an assessment of the impact of unforeseen occurrences upon the progress of construction works are likely to produce different results, perhaps dramatically different results. He also accepted that the accuracy of any of the methods in common use, critically depends upon the quality of the information upon which the assessment exercise was based. All of this does, of course, emphasise the vital point that the duty of a professional man, generally stated, is not to be right, but to be careful his conduct has to be judged having regard to the information available to him, or which ought to have been available to him, at the time he gave his advice or made his decision or did whatever else it is that he did.”150

14–166 In relation to the issue of, in light of the materials available, which method of analysis is most appropriate, the questions which must be posed are: are there as-built records available; is there a planned schedule available; is the planned schedule a critical path network; has the network been updated with progress; and has the network been re-sequenced or accelerated? 14–167 The decision tree in regard to the material available can be illustrated by a flow chart as in Figure 14.11. [Please refer to Figure 14.11] 14–168 In consideration of the materials available, the issue that should always first be approached is the competence of the as-built schedule, or the records from which such a schedule could be built retrospectively. If there are no satisfactory as-built

149 Royal Brompton Hospital [2000] EWHC 39 (TCC) 39. 150 Royal Brompton Hospital [2000] EWHC 39 (TCC) at [32].

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records, then an analysis on the basis of as-planned versus as-built151, collapsed asbuilt152, or time impact153 will be impossible to perform satisfactorily and the analyst must then consider the availability and competence of the planned material available. 14–169 If a planned CPM network is available154, then an as-planned impacted analysis might be performed. If there is merely a bar chart then, subject to evidence being made available to the tribunal as to the reasonableness of the decisions made, it might be made workable by the addition of reasonable logic and converted to a CPM network155. 14–170 In the event that there are neither as-built records nor a planned schedule, then the analyst must either proceed inferentially, or must revert to the tender documentation available at the time of contract and consider whatever documentation and other evidence is available to produce a reasonable CPM network for the works as it might reasonably have been envisaged at the time the contract was commenced. As with the addition of logic to bar charts, it is desirable for the decisions taken in retrospectively creating such a baseline in this manner to be adequately recorded in detail and, if necessary, encapsulated in a witness statement. 14–171 Whenever there exists a planned schedule (whether a CPM network or otherwise) along with as-built records, an as-planned versus as-built analysis156 may be considered. 14–172 Whenever C’s schedule has been updated during the course of the works, provided it is a CPM network, a time impact analysis should be considered. This method is also more likely to be appropriate whenever C has suffered concurrent delays, has attempted acceleration to overcome delays to progress that are both C and D’s responsibility, or where C has re-sequenced its planned schedule from time to time. In those circumstances, subject to other overriding considerations, a time impact analysis is more likely to produce a meaningful calculation of the respective entitlements of the parties than any other method currently available157.

Proportionality 14–173 Whereas parties to legal proceedings are normally at liberty to incur as much cost in pursuing and defending actions as they wish, in formal dispute procedures where the losing party can be ordered to pay the winning party’s costs158, generally, it will be only those costs that are proportionate to the nature and gravity of the case and the stage the claim has reached that will be recoverable in the event of success159. 151 See Ch.15, “Forensic programme analysis”, paras 15–061 to 15–068. 152 Ch.15, “Forensic programme analysis”, paras 15–117 to 15–148. 153 Ch.15, “Forensic programme analysis”, paras 15–149 to 15–163. 154 The planned programme must be credible otherwise it will be of no use: see JW Bateson Co Inc (1984) ASBCA 84–3 BCA 17,566, ASBCA No 27491. See also Ch.15, “Forensic programme analysis”, paras 15–017 to 15–046. 155 But see Donohoe Construction Co (1998) ASBCA No 47310 et al for the dangers of consequential changes. 156 See Ch.15, “Forensic programme analysis”, paras 15–017 to 15–046. 157 This is because it is the only method of analysis that takes into account all the relevant data. 158 This applies to the UK and most Commonwealth jurisdictions, although not to the United States. 159 “Proportionality” as a formal legal doctrine has only emerged into UK law from European Union administrative law (the doctrine itself being borrowed from German law). It was adopted by

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In practice, this means that complicated and expensive methods of analysis should not be applied to matters that have little in dispute, or at a time when it is unnecessary for the purpose to be achieved. 14–174 An example of the courts’ attitude to disproportionate expense is found in Peakman v Linbrooke160. At first instance, evidence and submissions took seven days. Judgment was given on the eighth day, in which the judge awarded C £1,145, which was less than it claimed, and D was awarded £1,410 and interest of £56.28, which was also less than it counterclaimed. The absence of an order for costs was appealed by C. As to the costs involved, the Court of Appeal observed: “Relative to the sums involved the costs are enormous. [D’s] costs below were estimated to be £32,700 before the costs of an 8 day trial. [C’s] costs were some £18,000. According to the statement of costs supplied to this court [C’s] costs of his appeal (taking into account the uplift on a conditional fee agreement) amount to £30,481.80. This is deeply troubling, not only for this case, but as a reflection of the least satisfactory aspect of our civil justice system. It makes no sense at all for over £100,000 and 9 days (including the appeal) to be spent on what was a perfectly straightforward piece of litigation about a few thousand pounds.”161

14–175 The facts of the case are as follows162: “[C] was a self employed cable jointer. His services were retained by [D] in April 2005 to joint multi-strand cables into junction boxes situated along railway lines in the Vale of Glamorgan and in Blackburn. [D] was doing the work for a company called Thales. His claims against [D] were for pay for work done (£860); the cost of diesel fuel bought by him for the use of [D] (£45); damages for breach of contract in summarily terminating his contract and failing to give him reasonable notice (£995); and damages for the cost of replacing personal tools which went missing. His total claim was therefore for £2,232.40. [D] contested all the claims. It admitted that [C] had done certain works, but contended that there was a total failure of consideration, because they were of poor quality and alleged that he had repudiated his contract, or that his contract was terminable at will. It counterclaimed £3,019.44 for the cost of remedial work required to rectify his defective work (‘the basic counterclaim’). It also claimed for profits which it claimed had been lost due to [C’s] work. The loss on a single contract was said to be in the region of £30,000 to £40,000; it also claimed that it lost further contracts with Thales (‘the Thales counterclaim’).”

14–176 The effect of the value of the “Thales counterclaim”, on which no evidence was ultimately offered, was to take the dispute out of the small claims court, in which C could have represented himself and in which the matter could reasonably have been dealt with in a day, and into the High Court with the attendant costs of solicitors and barristers for a week, or more. In setting aside the judge’s decision on costs, Goldring LJ said: “It seems to me that any costs order should recognise that [D] did succeed to some extent on its basic counterclaim. [C’s] suggestions that the poor workmanship was down to others failed. So too did his claim in respect of the summary termination of his contract and failing to give reasonable notice. In the end, [C] had to pay [D] £265 plus interest. Moreover, the Thales counterclaim took up very little court time. In my view, [D] should pay 50% of [C’s] costs from the date of allocation.”163

Lord Woolf MR in the drafting of the Civil Procedure Reforms (CPR) in 1998–1999. 160 David Peakman v Linbrooke Services Ltd [2008] EWCA Civ 1239. 161 Peakman v Linbrooke Services [2008] EWCA Civ 1239 at [3]. 162 Peakman v Linbrooke Services [2008] EWCA Civ 1239 at [4]–[6]. 163 Peakman v Linbrooke Services [2008] EWCA Civ 1239 at [32].

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14–177 In other words, notwithstanding that D ultimately succeeded in its defence and ordinarily would have been entitled to have its reasonable costs paid by C, as a result of the way in which it conducted that defence, it had to pay its own and half of C’s costs. Goldring LJ also criticised the lower court and the advocates for the parties conducting the case and concluded: “What happened in this case, exemplifies much that is wrong with our civil justice system. The costs involved dwarf the damages. The trial took far too long. It was virtually 12 months after it began that it finished. The advocates appear to have lost all sense of proportion in their conduct of it. [Counsel for D], for example, cross-examined [C] for some two days (albeit the judge himself appears to have asked many questions during the course of that cross-examination). The judge should not have allowed such a cross-examination to take place. He should not have permitted the case to take, in all, 8 days. I am afraid that it is clear that overall the judge failed to exercise that degree of control over these proceedings which he should have. The CPR gives him wide powers in that regard. Unfortunately he did not exercise them.”164

14–178 The obligations of the CA when considering C’s entitlement to an extension of time are typically defined in subjective terms and the CA is usually required to award an extension of time which is “fair and reasonable”. The process of forming an opinion and deciding upon what is fair and reasonable are both subjective, rather than objective, or absolute requirements165. However, in Barker, a case in which C had produced a competent CPM schedule of its contemporaneous intentions, Mr Recorder Toulson QC (as he then was) felt that, in identifying C’s due entitlement to an extension of time under Cl.25 of JCT80, the CA must undertake a logical analysis in a methodical manner of the impact of D’s risk events upon C’s schedule and, in such circumstances, the application of an “impressionistic”, or inferential approach is not sufficient to discharge the CA’s duty to make a fair and reasonable award166. 14–179 Those observations have been interpreted by some to imply that all extension of time assessments must be arrived at by carrying out some form of forensic schedule analysis, but that can hardly be correct. Apart from anything else, there are many small building contracts performed in which there is either no workable schedule at all, or, if a schedule, not one that is fully networked167. In Barker, however, there was indeed a fully networked CPM schedule that formed the basis of the acceleration agreement on which the dispute ensued. In that case, it was thus entirely appropriate to assess C’s entitlement by reference to that schedule. 14–180 Barker was subsequently considered in Balfour Beatty v Lambeth168, in which it was said by Judge LLoyd 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.”169

164 Peakman v Linbrooke Services [2008] EWCA Civ 1239 at [33]. 165 Royal Brompton Hospital [2000] EWHC 39 (TCC). 166 John Barker Construction Ltd (1996) 83 BLR 31 at 62. But, see also City Inn Ltd [2008] BLR 269; (2008) 24 Const LJ 590, affirmed [2010] CSIH 68, in which Lord Drummond Young took the view that, where a CPM schedule was not available, a more subjective approach was appropriate. 167 See Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008) charts 17 and 18. 168 Balfour Beatty Construction Ltd [2002] EWHC 597 (TCC). 169 Balfour Beatty Construction Ltd [2002] EWHC 597 (TCC) at [21].

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14–181 Thus, where a CPM networked schedule has been used by C, both the UK and the US courts have held that a CPM analysis is appropriate to ascertain causation. In Gassman170, for example, the Board observed: “To receive an extension of time, [C] must demonstrate: liability; causation; and resultant injury. This means that when the claim being asserted by [C] is based upon alleged [D]caused delay, [C] has the burden of proving the extent of the delay, that the delay was proximately caused by [D’s] action, and that the delay harmed [C]. In addition, when a contract utilises CPM scheduling, [C] must demonstrate that the ‘critical path’ of work was prolonged in order to prove a delay in project completion.”

14–182 In practice, of course, it is always preferable for C to present some form of CPM network, updated with as-built records, so that there is an indication of which activities were critical to completion at any one time but, in regard to some events, the ensuing delay to progress and its likely effect upon completion may be so plainly obvious171 that it will be right for the CA to calculate the delay to completion caused without undertaking his own CPM analysis. If the CA’s decision is not accepted, then a third party with no prior knowledge of the project has to be persuaded of the merits of C’s case. However, even in post-contract disputes, it is by no means certain that a CPM analysis, or indeed any delay analysis at all, will always be necessary and it is suggested that if, in the day-to-day running of a project, the works were not managed by reference to a CPM network, a CPM analysis may be neither required nor merited. For example, in the case of Lamb Engineering172, the Board of Contract Appeals said: “The complexity associated with delay claims compounds [C’s] burden of proof. Not only must it prove the existence of one or more delaying events chargeable to [D] and the amount of delay caused by events, but it must also present evidence and argument which sort out seemingly overlapping (concurrent) delays. Optimally, [C’s] proof includes day-by-day accounting connecting up each claimed day to a circumstance for which [D] is responsible and demonstrating that there was no concurrent delay for which [C] was responsible. Frequently, a contractor employs a Critical Path Method (CPM) analysis to establish delay; however, a CPM analysis is not required, particularly where a job is not managed using critical path methodology, and the delay aspects of the claims are relatively small in comparison to the costs and probative value of a CPM reconstruction. Nevertheless, some form of an accounting is required.”

14–183 In David Builders173, the Board also considered the acceptability of proof of concurrency and liability for loss and expense by inference in a small project with a contract sum of $174,000, in which C’s schedule was prepared as a bar chart for a wildlife observation area at the Naval Air Station, Jacksonville, Florida. The schedule indicated that the roof trusses were to be erected between 13 November and 4 December 1996 with roofing laid between 5 and 11 December 1996 and completion on 20 December 1996. 14–184 At a pre-commencement meeting, C identified what it said was an inconsistency in the contract documents, in that the specifications required 22-gauge roof cladding, and the drawings required 5V crimp cladding, whereas it said the 5V crimp cladding was manufactured in 24-gauge only and not 22-gauge material. After a series of letters between the CA, C and roofing manufacturers, on 15 November 1996 (60 days 170 171 172 173

The Gassman Corporation (1999) ASBCA Nos 44975 and 44976. For example, an instructed suspension of all work. Lamb Engineering & Construction Co (1997) EBCA 97–2 BCA (CCH), 29207. David Builders Inc (1998) ASBCA No 51262.

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after the pre-construction meeting), the CA gave instructions for lighter weight 24-gauge cladding and an extension of time for the 60-day period between the request for clarification and the instruction. 14–185 In regard to its loss and expense claim, the Board accepted evidence that during the same period of 60 days, C also suffered delayed approvals as a result of its own fault in numerous other submittals, and was subsequently delayed in the commencement of erection of the roof trusses until 25 March 1997 (when the truss connectors arrived on site). 14–186 In the subsequent dispute, C claimed that it was entitled to an extension of time for eight days of exceptionally inclement weather together with 113 days for the period between 5 December 1996 when the roof cladding was scheduled to start and 28 March 1997, when cladding was eventually delivered to the site together with compensation for a coextensive period of prolongation of 113 days. In rejecting C’s claim, the Board concluded that: “[C] may provide persuasive evidence of what were critical activities and what was the proximate cause of delay in contract completion without CPM analysis. However, without specific proof, the Board cannot determine what effect delay to one item of work has to the project as a whole. When both parties contribute to the delay, neither can recover, unless there is in the proof a clear apportionment of the delay and expense attributable to each party. [D] does not deny that it was responsible for the 60-day delay. Instead, [D] asserts that [C] had concurrent delays and therefore is prevented from being compensated for the 60-day time extension. We find that the [D] has succeeded in showing concurrency of at least 60 days to the extent of overcoming the presumption of delay cost entitlement. Accordingly, [C] is not entitled to compensation for the 60-day delay.”

14–187 Static methods of analysis, which are based upon an unvarying single baseline, are relatively quick, simple and cheap to perform. Among these are as-planned versus as-built174, as-planned impacted175 and collapsed as-built176. If the planned activities vary at all in duration, or sequence during the course of the works, however, these methods of analysis will not produce as accurate a result as a dynamic method, such as time impact analysis177, which takes such a change of baseline into account. 14–188 Obviously, an analysis based upon information that is already in a usable form will be quicker and cheaper than one based upon material that has to be reconstructed from records. Typically, whilst the collapsed as-built is a static method, it tends to be more laborious to reconstruct a project’s history retrospectively, as a result of the need to reconstruct logic as well as durations. Time impact analysis is generally accepted to be the most thorough and accurate method of analysis and, whilst relatively cheap, quick and simple to perform contemporaneously, when performed retrospectively it also tends to be the most time-consuming and costly. 14–189 In the absence of compliance with the contract, a failure to consult the other party on appropriate delay analysis methodology, or to identify differences in methodology that might reasonably be resolved by agreement, is a matter that might reasonably be taken into account by the judge or arbitrator in awarding and allocating recoverable costs of the dispute. In practice, it would thus be advisable, when attempting to depart from a method expressly or impliedly required by the contract, to seek to agree, or set

174 175 176 177

See Ch.15, “Forensic programme analysis”, paras 15–061 to 15–068. Ch.15, “Forensic programme analysis”, paras 15–077 to 15–116. Ch.15, “Forensic programme analysis”, paras 15–117 to 15–148. Ch 15, “Forensic Programme Analysis”, paras 15–149 to 15–163.

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out in writing, a method to decide the most appropriate way of determining causation and the effect of the time-related issues in dispute178. 14–190 The SCL Protocol also recommends that, where litigation or arbitration has been commenced, in the absence of agreement, careful consideration should be given to obtaining the decision of the judge or arbitrator as to the appropriateness of the method proposed, before proceeding with a full delay analysis. However, in the United Kingdom, it is doubtful whether currently there are many judges179 or arbitrators with sufficient experience of the nuances of various methods of impact methodology to be able to express a view with authority on the pros and cons of appropriate methodology.

Illustrating inference Introduction 14–191 Whenever the work has been performed by reference to a planned sequence of work, recorded as a CPM network, or recorded in sufficient detail for a CPM network to be constructed retrospectively, it will be appropriate for causation to be demonstrated, scientifically, by reference to the impact of events on that network180. That is so, notwithstanding that the original network may have been created only as a target, against which progress has been reported, or that, as originally prepared, it is inadequate and must be corrected before it can be used to predict the effect of the excusable and/ or compensable events claimed. 14–192 On the other hand, it is often the case that, whilst causation of delay by inference will be theoretically weaker than a technical proof, C will more often than not adopt a “soft” inferential approach to its attempted settlement by negotiation with the CA and with D and, similarly, a subcontractor is likely to do the same in its negotiations with C. Apart from that, currently many projects are simply not managed by reference to a CPM network. The CIOB research found that, for example, in nearly 2,000 projects, executed over a three-year period, 54% were managed by reference to a bar chart alone181. It follows that, except in unusual circumstances182, in some projects it will be necessary to demonstrate causation of delay by inference, rather than demonstrate it technically, by calculation and, sadly, this may be so, even on major projects. 14–193 In Mirant v Ove Arup183, for example, a case concerning the construction of a large power station in the Philippines, in which it had been claimed that the need to replace the foundations of boiler unit No 1 had caused the delay to the completion of the project based on the mistaken assertion that “the boiler is always on the critical

178 It is the author’s experience that where both parties’ experts are experienced and unhindered by partisan considerations, such agreements are both easy to achieve and useful. On the other hand, where either are not so unencumbered, such agreements tend to be impossible to achieve. 179 But see Mirant Asia-Pacific Construction (Hong Kong) Ltd [2007] EWHC 918. 180 See Ch.15, “Forensic programme analysis”, throughout. 181 Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (June 2008) at chart 18. 182 In which, for example, the experts agree to construct a network, retrospectively. 183 Mirant Asia-Pacific Construction (Hong Kong) Ltd [2007] EWHC 918 (TCC).

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path”184, in fact an independent engineering review found that, by the end of April 1997, “the civil design was seven months late. Even before the problems to the unit 1 boiler foundations, the foundations were found to be delayed by 11ø weeks and boiler unit 2 foundations also by 11ø weeks.”

14–194 The court found that no critical path network had ever been created for the project and that not only had management decisions during the works been based on poor planning and a fictitious assumption of where the critical path lay, but so had the basis of the claim, which failed. The late Judge Toulmin CMG QC recorded that185: “On 1 February 1996 the ‘contract effective date’ was specified under the Construction Contract. In January 1997 the works were still being monitored against strategy [schedule] Rev D in February 1997 a revised [schedule], Revision E, was agreed. By March 1997 the civil works were reported to be two to three months behind Rev E [schedule]. The Revision E [schedule] for the Project was used by the [delay analysis] experts as their benchmark in calculating delay. It was not, and did not contain, a critical path analysis showing what activities were at or near the critical path as the Project progressed. The experts also agreed that in a number of respects the Rev E [schedule] was unreliable. . . . In relation to the Revision E [schedule] I have reached the following conclusions186: 1. 2.

3. 4.

5.

By the end of March 1997, one month after being introduced, it was already in significant delay. The evidence before me and the time that had elapsed between the introduction of the revised [schedule] and the end of March 1997 makes it impossible to predict with accuracy what the scale of delay would have been in that period without costly measures being taken to remedy the general and specific problems identified in the [Independent engineer’s report]. [C’s expert’s] estimate of 42 days (since February 1997) may well be a reasonable estimate. These delays did continue to increase until the end of the year when the incoming [replacement for C’s] management started to reverse the trend. By the end of 1997 there appears to have been the potential for up to four months’ delay to completion of the project caused by problems other than boiler unit 1. This conclusion is based on what must inevitably be a somewhat uncertain analysis, because it uses uncertain data but is amply supported by the contemporaneous documents which have been disclosed. On the basis of [C’s expert] and [D’s expert] analysis, the boiler unit was not on the critical path as of 1 April 1997. Had a monthly critical path analysis been undertaken, as would have been normal at the time in a similar project in the United States, the parties would have been able to determine how much time was available (if any) to deal with the boiler foundation problem before it affected the project as a whole and therefore how urgent it was for the consortium to agree and implement a solution.”

14–195 Where there is no CPM network schedule upon which a calculation of cause and effect can be based, there are a number of techniques established for illustrating the asserted causative relationship, such as: cause and effect matrix; Scott Schedules; graphs and histograms; bar charts; 184 Mirant Asia-Pacific Construction (Hong Kong) Ltd [2007] EWHC 918 at (TCC) [587](7). 185 Mirant Asia-Pacific Construction (Hong Kong) Ltd [2007] EWHC 918 at (TCC) [143]–[147]. 186 Mirant Asia-Pacific Construction (Hong Kong) Ltd [2007] EWHC 918 at (TCC) [477].

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as-planned v as-built bar charts; collapsing technique; and visualisations. 14–196 However, whichever method is used, it must deal with the delays to the project as a whole and not just the particular section that one party or the other wishes to assert caused all the difficulties. In Mirant v Ove Arup, where the project as a whole was not considered by C’s expert, Judge Toulmin criticised the evidence put forward, saying: “[C’s expert] therefore failed to investigate the causes of delay between April and October 1997 despite the important changes (including changes of management) which occurred in this period. [C’s expert] has not considered whether [D] is properly responsible for the whole of the 162 day delay which occurred and if not what lesser part of the delay. [He] stopped his analysis in October 1998 soon after first fire of the boiler although the benchmark under the contract was the commencement of the reliability trials. [He] did not consider the effect of potential delays caused by events close to the critical path. [He] did not consider the effect of problems relating to the transmission lines on the date for the commencement of the reliability trials.”187

14–197 Again, in Costain v Haswell188, Richard Fernyhough QC (sitting as Deputy High Court Judge) in rejecting C’s claim for prolongation costs arising out of the delay to two structures (referred to as the RGF and IW) in a multi-structure water treatment plant, criticised both parties’ experts for the limited nature of their investigation, saying189: “Both experts have concentrated their attention on the four months from October 2002 to January 2003 during which the effects of the abandonment of the ground treatment works and the design and construction of piled foundations were taking place. Both experts have agreed that, during this period, those works ie foundations to the RGF and IW were delayed, albeit to differing extents. They have also agreed that, at that time, those works were on the critical path of the project so that, all other things being equal, and if no later mitigation measures were taken, those delays would ultimately delay the completion of the project as a whole. But the experts have not considered the effects of the delays to the foundation works on all the other activities taking place on site during the relevant period nor have they carried out any investigation, post-January 2003, to see whether the delays to the foundations of the RGF and IW, locked in to the [schedule] as at the end of January 2003, were later mitigated, neutralised or even exacerbated by later events. The limited nature of the experts’ investigations as described, becomes highly material later when the Court has to assess the damages recoverable by [C] flowing from these delays.”

14–198 Finally, in Balfour Beatty v Shepherd190, in which an adjudicator’s decision was challenged, amongst other things on the basis that he was wrong in dismissing “expert” evidence that had been challenged as biased, Akenhead J held that191: “The complaint is in reality that the adjudicator took against [D’s expert] and that displayed actual or ostensible bias. It is said that, because he found that [D’s expert] was or must be taken to have been instructed to ignore the earlier access delays, this was harmful to [D]. This does not demonstrate bias of either sort. It is clear that [D’s expert] had not actually considered the earlier access delays. This must have happened with the concurrence of him and his clients. It is not an unreasonable inference for a tribunal to draw that between

187 Mirant Asia-Pacific Construction (Hong Kong) Ltd [2007] EWHC 918 at (TCC) [587]. 188 Costain Ltd [2009] EWHC 3140 (TCC); [2010] TCLR 1. 189 Costain Ltd [2009] EWHC 3140 (TCC); [2010] TCLR 1 at [181]. 190 Balfour Beatty Engineering Services (HY) Ltd v Shepherd Construction Ltd [2009] EWHC 2218 (TCC). 191 Balfour Beatty v Shepherd [2009] EWHC 2218 (TCC) at [73] and [74].

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them they decided that it was unnecessary or inappropriate to consider those delays. Even if [D’s expert] said that he had not been so instructed, it was open to the adjudicator to reject that statement and infer and find as he did.”

Cause and effect matrix 14–199 A cause and effect matrix is a hand-drawn chart illustrating the alleged primary, secondary and tertiary (if any) cause of what is claimed to be the impact ultimately suffered. 14–200 The cause and effect matrix is a useful tool for graphically illustrating an hierarchical analysis of the multiple cause and effect relationships between primary causes and final results in a number of different scenarios. 14–201 Typically, when people think of organisational matrices, they think of a chart with one variable along the x-axis and another along the y-axis. However, such a simple two-sided matrix cannot deal effectively with even the simplest relationships in construction. Take, for example, the simple relationship between an event and whether it is at D’s risk as to time, at D’s risk as to both time and cost, or neither. Even that would take something more than a two-sided matrix. In Figure 14.12, this has been reduced to three sides, but it could easily have been expanded to use more if the various conditional cases had been taken into account. [Please refer to Figure 14.12] 14–202 The complexities of a major construction project will necessarily require a multi-sided matrix, because of the multiplicity of parties, and the fact that the nexus between the root cause and the ultimate effect may be blurred by a series of intermediate and multiple cause and effect relationships. For instance, it is often the case that confirmed instructions for variations are a secondary or intermediate cause of contract cost increases, rather than the primary cause192. 14–203 In Figure 14.13, the analysis demonstrates the proportional effect to C’s costs caused by: defective materials; bad workmanship; design errors on the drawings; faulty descriptions or quantities in the bills of quantities; design changes required by D; failure to give necessary instructions in due time; disruption caused by directly appointed contractors; delay in receiving materials that D was to supply; defective design work by a nominated subcontractor; and failure to give an adequate and prompt extension of time. [Please refer to Figure 14.13] 14–204 These can be resolved into five heads of cost to be apportioned between the parties193: return of wrongly deducted liquidated damages; loss and expense arising out of disruption to progress; 192 The Kellogg Corporation, Avoidance and/or Mitigation of Construction Claims (Kellogg Corporation, 1993). A seminar paper given to the Colorado Department of Transport. 193 See also Ch.20, “Apportionment”.

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loss and expense arising out of constructive acceleration; loss and expense arising out of prolongation of the contract period; and increased direct cost of work. 14–205 The form of the matrix is driven by the specific issues and problems that the analyst wishes to resolve and, for any particular project, will often depend on the inferences drawn by the analyst. Therefore, even given the same facts, it is foreseeable that no two matrices will look exactly alike. 14–206 Figure 14.14 demonstrates a logical progression from manufacture and selection, through to defective repairs and modifications. Whilst it may now seem obvious what inferences could reasonably be drawn as to causation and liability, the facts had taxed many minds over a considerable period of time before the parties were able to appreciate the interface of responsibility through this matrix and settle their differences. [Please refer to Figure 14.14] 14–207 The production of a cause–effect matrix is particularly useful in delay and disruption claims if prepared at the same time as the regular schedule update. If the matrix is developed during the course of the project together with the periodic updates, then the only retrospective analytical work required to resolve a disputed claim may be no more than an objective review of the data used in the matrix and update.

Scott Schedules “The Scott Schedule is named after its inventor, His Honour George Scott, Q.C., Official Referee 1920–1933. It is now used in courts in most common law countries and is a very useful device for clarifying a case and making it manageable, but nowadays parties seldom wish to spend time and money working through one and the selection of representative items generally avoids the necessity for doing so. In practice, official referees seldom try Scott Schedules.”194

14–208 The essential character of a Scott Schedule is that it is a hand-drawn schedule in three parts and is particularly used in the English Technology and Construction Court to clarify construction claims and defences involving complex factual allegations. One part is drawn by C (or D in its counterclaim), identifying what it says is the cause of its complaint, what effect that had and what it says it claims. The second part is drawn by D (or C in response to the counterclaim) setting out what it accepts in whole or in part, what it denies and the basis for its position. The third part is for the tribunal or court to use, to identify its decision in relation to each element of the claim, or counterclaim. 14–209 As with the cause and effect matrix, the shape and content of a Scott Schedule will depend upon the nature of the matters in dispute and the process of reasoning adopted by the parties. However, a Scott Schedule differs from the other methods in that, if it is to be an effective clarification of the issues in dispute, it requires the active participation of both sides to the dispute. Where there are many parties to an action, they can all be required to join in the same Scott Schedule. For example, C195 may first set out its case against D and D may comment upon it, then D may set out its case against the third party and the third party may comment upon

194 J Newey J, QC, Official Referee’s Court Practice and Procedure (London: Butterworths, 1988). 195 Under the CPR, the party previously referred to as the “plaintiff ” is now to be known as the “claimant”.

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that, and so on196. Ideally, the parties should agree between them the form of the schedule, but, if they cannot agree, the judge or arbitrator will decide for them the form it should take197. 14–210 Typically, a tribunal’s order198 for the shape of a Scott Schedule might take the following form: “[C] shall produce as a part of its statement of claim, one or more Scott Schedule(s) for its claim for adjustment in cost of the works and for its claim for loss and expense. The Scott Schedule(s) shall be the smallest paper size consistent with clarity and shall in no case be larger than A2 paper size and, in every case shall comprise columns containing the following information: To be completed by [C]: 1. 2. 3. 4. 5. 6.

Item number Obligation under the contract Description of instructed, or implied change Reference of correspondence, instruction, drawing, or witness statement in evidence of change Method of valuation claimed Calculation of valuation claimed

To be completed by [D]: 1. 2. 3.

Admittance of change, or reference to obligation under the contract to carry out described work, if change not admitted Method of valuation preferred, if [C’s] method not admitted Calculation of valuation, if [C’s] calculation not admitted

To be completed by the Tribunal: 1.

Observations.”

14–211 Essentially, the content and form of presentation should be that which clearly brings out the differences between the parties. It is not sufficient for D to “deny” or “not admit” an allegation made by C in a Scott Schedule; it must assert facts and give reasons in answer to it on the schedule itself and, if it is served in hard copy, in a way that does not require reference to other documents to understand it. On the other hand, if served electronically, there appears to be no intrinsic reason why hyperlinks should not be embedded in the schedule to permit automatic cross referencing to documents to which reference is made. 14–212 Scott Schedules are most useful in cases that involve many issues in contention, but where those issues are separable and not interrelated. For example, in claims that involve construction defects, and in which there are claims and counterclaims in regard to items of work that are incomplete or defective. The whole point of the Scott Schedule is then to pigeon-hole the damages by allocation of the cost claimed in respect of each item to a breach of a specific duty. Where there is an overlap between issues, such as between quantum of loss and delay, the issue is more complex. If it cannot be

196 J Newey, J, QC, “The preparation and presentation of cases in the Official Referee’s Courts” (1990) 6 Const LJ 216. 197 J Newey, J, QC, “The preparation and presentation of cases in the Official Referee’s Courts” (1990) 6 Const LJ 216. 198 The Practice Direction to CPR Pt 49 provides that in litigation, the parties may indicate their preference for the names of up to 12 column headings in the Case Management Conference Directions Form. However, there is nothing specified regarding the size of the schedule.

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properly categorised, then a Scott Schedule is of little benefit and can unreasonably constrain the proper analysis of the issues199. [Please refer to Figure 14.15] 14–213 An abbreviated example of a Scott Schedule appears at Figure 14.15, in which a typical format is illustrated where the design team are being held responsible for enhanced costs arising out of delay. In this example, although there are two parties against whom allegations are made, there are only columns indicated for the defence of one of them. Normally, each defendant would have its own column to deal with any allegations it had to meet. The final column on the right is for the judge or arbitrator to make notes of their award. 14–214 In ICI v Bovis200, HH Judge Fox-Andrews QC remarked upon the Scott Schedule as follows: “A Scott schedule is an admirable tool for the efficient resolution of factual issues. This is particularly so where a plaintiff claims against a number of defendants. The factual matters relative to the alleged breach will be contained in the Scott schedule. It is essential that the case against each defendant is fully set out and properly particularised. Each defendant in their turn must set out their positive case in response to the extent that they blame the plaintiff or another defendant. This too must be properly set out and properly particularised. However, its benefit is at once reduced if a party fails properly to particularise his case. Again, if, because of lack of particularisation, further and better particulars are sought and given, but in a separate document from the Scott schedule, trial duration is at once increased, because of the necessity to look at not one document, but at two or more. Where a Scott schedule is not properly particularised and the party at fault is ordered to give particulars, I almost invariably require the particulars to be incorporated in a freshly dated substituted Schedule. It is almost always unnecessary on these factual matters to see what amendments in the Scott Schedule were made on what date. With a word processor therefore the task of producing a substituted Scott Schedule is a relatively simple matter.”

14–215 Whilst CPM-based analyses are most often used to calculate delay to progress and disruption, there is no reason why the logic underlying the claim could not usefully be set out by means of a Scott Schedule, showing how the matter arose and what consequences are alleged to have followed. In effect, this is what Judge Fox-Andrews ordered ICI to produce in ICI v Bovis. However, whilst Scott Schedules are often ordered by the judge, or arbitrator, it is not so common for other methods of clarifying the issues such as cause and effect matrices and bar charts, or CPM-based analyses to be ordered. The order of Mr Recorder Toulson in Barker201, that the CPM analysis put in evidence be rerun to demonstrate the delay to completion resulting from his assessment of the factual evidence, is thought to be unique in this regard.

Graphs and histograms 14–216 Whenever monitoring techniques202 are used to identify a trend and to predict, as a result of such a trend, the likely consequences, cumulative progress graphs, or histograms may be employed as a means of identifying the trend and predicted consequence.

199 200 201 202

GMTC Tools and Equipment Ltd v Yuasa Warwick Machinery Ltd (1995) 11 Const LJ 370. ICI Plc v Bovis Construction Ltd (1992) 8 Const LJ293 at 298. John Barker Construction Ltd (1996) 83 BLR 31. See Ch.9, “Revising, updating, monitoring and reporting”.

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14–217 Typically, such methods will be employed in predicting consequences using, for example, cash flow monitoring; cost monitoring; earned value monitoring; and resource monitoring. 14–218 Cash flow monitoring can be a useful indicator of whether C’s alleged delay has in fact occurred and what, or when a significant change occurred to its earning capacity, or cash flow. For example, in a simple project, in which, from the beginning, there had been many changes to the tendered design, all of which were alleged by C to have caused it delay to the works, an examination of C’s planned cash flow against its actual cash flow demonstrated that many of the changes at the beginning of the project had improved C’s progress, rather than delayed it in relation to what it had intended to achieve. It also showed that a significant change in performance in cash flow occurred, not when the works were in the ground as alleged, but when the roof trusses failed to arrive on time. 14–219 In Figure 14.16, the grey line indicates C’s cash flow, retrospectively calculated from its bar chart schedule and priced schedule of works; and the black line represents C’s actual cash flow based on certified values backdated to the time of valuation. From this, it can be seen that C’s actual income was far greater than it expected until week 13, when its certified value reduced below the norm. It can also be seen from this that, as soon as the roof trusses arrived, C’s certified value picked up again, but by then its cash flow had dropped to well below its intended target203. 14–220 Several construction commentators have remarked upon the inaccuracy of this approach to modelling cash flow and it would be imprudent to contract on the basis of an “S” curve without first comparing the tender–schedule related expenditure and anticipated value, with the contract provisions204. [Please refer to Figure 14.16] 14–221 Notwithstanding the problems of a predetermined cash-related “S” curve, it is of value in simple projects in that it gives the analyst a retrospective point of reference for a closer and deeper investigation into an area of relevance. This can be a useful technique and helps to avoid the time and cost of an overall investigation into many issues that are unlikely to be relevant to delaying factors. 14–222 Similarly, when attempting to demonstrate causation in disruption, an inferential approach based upon identifying a trend and predicting its consequences, through the “measured mile” technique, graphs and histograms may usefully be employed205.

Bar charts 14–223 The illustration of the claimed effect can be identified on a schedule that is no more detailed than a bar chart. A bar chart, or “time-line” schedule is really no more than a pictorial representation of diary dates and, if all the delays to be considered 203 The lower level of payment in relation to the anticipated. 204 P H McGowan, R Malcolm, W Horner, D Jones and P A Thompson, Allocation and Evaluation of Risk in Construction Contracts (1992, Chartered Institute of Building). Occasional Paper No 52 of The Chartered Institute of Building. 205 For further examples see Ch.17, “Disruption to progress and lost productivity”.

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occur on a single critical path, without any suggestion of concurrency, or recovery, or acceleration, then it may be possible to illustrate the cause and implied effect by means of simple bar charts without the use of CPM-based techniques. Such a method of proof can rarely be acceptable as a proof in itself and can really do no more than provide a diagram from which it is possible to infer that the evidence upon which the diagram is produced illustrates the position claimed, and based upon some principle of causation206. 14–224 Before the advent of CPM networks, causation between an event, a delay to progress and a delay to completion was usually inferred from illustrations comparing the planned schedule (or, if appropriate, a corrected planned schedule) with the as-built schedule by means of bar charts207 or time-lines and inviting the inference that the difference between them, in whole or in part, was the resultant effect of the event for which reimbursement or relief was claimed. Such techniques have the advantages that they can be illustrated on any schedule, and are quick and easy to produce and read. In some circumstances, this is still a valid and appropriate method of proof208. In the event that there is no delay to completion for which C is liable, this may be acceptable as an illustration of a total time claim209. However, if there is delay to completion caused by C and it is not allowed for, it is in effect a global claim210 and, because bar charts neglect to address the issues of float, concurrency and the critical path and do not convincingly provide proof of a causal relationship, they should be treated with great care and should be avoided in all but the simplest of delay-related claims211. 14–225 In particular, it should be observed that non-CPM techniques do not show any: interrelation between activities; interdependency between activities; critical path; or float. 14–226 Without CPM analysis, it is impossible to demonstrate the effects of: concurrency, or parallel delays; unproductive working; the effects of secondary, or consequential delay; or acceleration. 14–227 In particular, because of the absence of logical links between activities, the bar chart is of no use at all in demonstrating that the prolongation of a particular 206 See, for example, City Inn Ltd [2007] ScotCS CSOH 190, [2008] BLR 269, (2008) 24 Const LJ 590, in which Lord Drummond Young’s decision adopted a theoretical approach to causation, affirmed [2010] CSIH 68. 207 Note that a “bar chart” in this context refers to a set of activities that are not linked together to form a network. A bar chart can be differentiated from a CPM network, although the latter may actually be displayed graphically in a bar chart form. 208 For example, in regard to the productivity calculations where the purpose of the exercise is to prove the proportion of loss of efficiency, rather than its effect on the completion date. See Danac Inc (1994) ASBCA No 33,394, 94–1 BCA. 209 Ch.19, “Total time, total loss and global claims”, at paras 19–013 to 19–020. 210 Ch.19, “Total time, total loss and global claims”, paras 19–040 to 19–072. 211 In the absence of the materials to do otherwise and, where there is mixed liability, some form of inferential apportionment will be essential if the claim is not to be treated as a global claim. See Ch.20, “Apportionment”.

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activity had any effect on other activities, or the completion date, except in the most obvious of circumstances. Take, for example, the simple bar chart at Figure 14.17. That bar chart indicates four activities, “A” to “D”. Although it is often argued that there is an implied start-to-finish connection arising out of their juxtaposition on the chart, that implication can be quite mistaken, since it could be any relationship at all. The most common relationship amongst such activities is a lagged start-to-start relationship212. The effect on the difference between the two can be demonstrated by examining the effect on the completion date of the prolongation of activity B shown in Figures 14.18 and 14.19. 14–228 On Figure 14.18, the finish-to-start relationship extends the completion date, whereas, on Figure 14.19, the lagged start-to-start relationship merely allows the prolonged part of activity “B” to continue in float and has no effect on completion. 14–229 Thus, because the bar chart does not indicate the logical connection between the activities, no conclusions can safely be drawn as to the effect the prolongation of one will have on another. Indeed, in the US case of Minmar Builders213, the Board of Contract Appeals held that: “Since no interrelationship was shown as between the tasks, the charts cannot show what project activities were dependent on the prior performance of the plaster and ceiling work, much less whether overall project completion was thereby affected. In short, the schedules were not prepared by the critical path method and hence are not probative as to whether any particular activity or group of activities was on the critical path or constituted the pacing of the project.”214

14–230 Similarly, in rejecting C’s claim in Detwiler215, the Board of Contract Appeals commented that: “[C] opted to schedule the work on a bar graph through which it reported both its scheduled and actual progress because [C] chose to use a bar chart to assess its progress, its proposed schedule was necessarily general and somewhat vague with respect to planning discrete construction activities.”

[Please refer to Figures 14.17 to 14.19 inclusive] 14–231 The bar chart is, however, an easily read document and, so far as concerns proof of causation, provided it is used as a method of illustration of the inference drawn, rather than as an absolute proof of causation, it is a very useful display technique.

As-planned versus as-built 14–232 As an illustrative device, the as-planned versus as-built bar chart method simply compares the durations of activities in the tender, or first prepared planned bar chart schedule, with the time the activities actually took and often (but not always) relies on the assumption that the difference between the two is the delay for which C is entitled to an extension of time or compensation. In the event that there is no delay to completion caused by any matter at C’s risk, this may be an acceptable as an illustration of a total time claim216. However, if there has been delay caused by C and no 212 213 214 215 216

In the absence of additional evidence it is never really clear as to what the lag should be. Minmar Builders Inc (1972) GSBCA No 3,430, 72–2 BCA (CCH) 9,599. Minmar Builders Inc (1972) GSBCA No 3,430, 72–2 BCA (CCH) 9,599 at para.44,857. HW Detwiler Co Inc (1989) ASBCA No 35,327, 89–2 BCA (CCH) 21,612. See Ch.19, “Total time, total loss and global claims”, paras 19–013 to 19–020.

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explanation is provided as to how it has or has not affected the delay to completion, it is in effect a global claim217. 14–233 Refinements can be made to this method, however, by breaking down the total duration into discrete periods, each to be looked at, in isolation, one period from another. This segregation of periods tends to produce a finer grain to the process, reduce the degree of speculation, often evident when taken as a contract period as a whole, and can filter out C’s slippages, which might otherwise not be exposed, or mistakenly be claimed as D’s delaying events. However, to the extent that such a breakdown is thought to be more persuasive as to its accuracy, such a perception is illusory; it is, after all, only an illustration of an inference and not a proof of causation. Even the most ardent proponent of an as-planned versus as-built approach to the proof of causation can be expected to recognise that this method does not identify solutions to issues of shifting critical path, float, concurrency and so on. It merely provides a static comparison after which further analysis or rationalisation is required in order to provide a cogent proof of causation. 14–234 In Canon218, delays were caused by D and conditions were changed, because of tree removal, realignment of a roadway, removal of ashes and relocation of other paving work. C was entitled to compensation for extended overhead costs where the compensation was measured according to the difference between the actual date of completion and the date on which the contract would have been completed without the excusable and reimbursable delays. With regard to this method of analysis, the Board said: “a proper determination of this appeal requires at the outset that the Board determine the date as precisely as possible upon which [C] would have completed the contract work but for delays which might have been due either to [D’s] fault or the performance of changed work. The next determination must be the actual date of the completion of the work. The difference between the two dates establishes the extended period of performance for which [C] would be entitled to be paid for extended fixed overhead costs.”

14–235 In Figure 14.20, a simple four-activity construction schedule is illustrated, in which some delays have occurred in each activity, all of which are identifiable and are excusable and reimbursable. The delay to commencement in week 1 is inferentially a critical delay, as is the additional work added in week 30. For this scenario, the two-week delay in activity B, during weeks 12 and 13, and the one-week delay to activity C, in week 20, might equally have been caused by suspension of the work. Thus, all the delays are illustrated to appear to have affected the inferred critical path and there are no other delays of any type during the course of the work. Therefore, the difference between the as-planned duration and the as-built duration represents C’s deduced entitlement. [Please refer to Figure 14.20 and 14.21] 14–236 Because it is so simple, it is equally possible to illustrate it in two bars, one for the duration of the as-planned schedule and the other for the duration of the asbuilt schedule, with C’s entitlement being the difference between the two, as illustrated in Figure 14.21. 14–237 There are a number of conditions that have to be satisfied before this can reasonably be considered to be persuasive of entitlement. Without further analysis, or rationalisation, the illustration should be considered to be persuasive only if either:

217 Ch.19, “Total time, total loss and global claims”, paras 19–040 to 19–072. 218 Canon Construction Corporation (1972) ASBCA No 16,142, 72–1 BCA, 9404.

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the effect of the various contingencies that affect the as-planned schedule, the as-built schedule, or both (whether or not the effect is adverse), can be clearly identified; or there are no such contingencies in the as-planned schedule and the only contingency in the as-built schedule is the discrete event the effect of which is to be identified. 14–238 In practice, this tends to mean that it must be possible to demonstrate that: all the delays to progress are excusable delay; the events giving rise to the delay can be clearly identified; there were no consequential delays to be taken into account; there were no concurrent, or parallel delays; there was no recovery, or acceleration; the activity durations have been accurately calculated, without any float; and the completion of each activity was a prerequisite of the commencement of its successor. 14–239 This was the method preferred over a collapsed as-built method by Lord Drummond Young in City Inn v Shepherd219. In comparing the approaches of the two expert witnesses, the court stated as follows: “[C’s expert] described his approach as follows. He first examined the [schedule] against which the works were being constructed and tested it for reasonableness and completeness. He then examined the factual evidence to determine where time on the project was critically lost and identify the cause, or causes of that loss of time. He concluded that three weeks had been lost during weeks 6, 7 and 8 of the contract; the cause of the loss in [C’s expert’s] opinion was additional work instructed in connection with the gas venting scheme He was further of opinion that five weeks were lost between weeks 27 and 32 of the contract. He considered that the cause of this loss of time was a late instruction by the [original CA], to vary the roof coverings from a built-up system to the Stramit Speedeck system. The lost time was in part concurrent with the effect of the loss of time caused by the gas venting works. The effect of the late instruction was that work on the roof steelwork began late; the design of the steelwork was dependent upon the roofing system that was used. In addition, the start of the roof coverings was similarly delayed by five weeks, because the late instruction had led to delay in the procurement of the roof coverings. Finally, [C’s expert] thought that six weeks were lost between weeks 44 and 52 of the contract. This was caused by the lateness of a substantial number of [CA’s] instructions varying the works following the dismissal of [the original CA] and their replacement by [the second CA]. [C’s expert’s] overall view was that 11 weeks (6 weeks plus 5 weeks) were critically lost during construction. On that basis, he considered that a fair and reasonable measure of any extension of time to which the defenders might be entitled was 11 weeks. In evidence, [C’s expert] stated that he had considered undertaking a critical path analysis, but decided not to do so. He did not have access to an electronic version of [C’s] original [schedule] for the project, and, because of this it was impossible to identify [C’s] original critical path through the [schedule]. Nevertheless, making use of his experience in [scheduling, C’s expert] had attempted to replicate what he surmised might be the logic of [C’s] original [schedule]; he stated, however, that he had no great confidence that his version of that [schedule] was either correct, or complete. [C’s expert] stated that to continue with a critical path analysis based on logic that he knew not to be completely correct would have meant that he could not be sure of the evidence that he was giving to the court. Rather than following such a course, he adopted the method described in the last paragraph.

219 City Inn Ltd [2007] ScotCS CSOH 190, [2008] BLR 269, (2008) 24 Const LJ 590, per Lord Drummond Young at [26]–[29], affirmed [2010] CSIH 68.

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[D] criticized [C’s expert’s] approach to the case. [D] referred in particular to his failure to undertake a critical path analysis of the present project. That might be explained by the fact that [C’s expert] preferred to use the as-planned v as-built method. Nevertheless, the weakness of that method was that, as [C’s expert] acknowledged, it does not identify the critical path and therefore needs to be used with great care and understanding of the processes in the whole of the project. [D] submitted that an expert could only give a meaningful opinion as to which activities in a project are critical on the basis of an as-built critical path analysis, such as that carried out by [D’s expert]. For that reason it was suggested that I should treat with caution, and indeed scepticism, [C’s expert’s] opinion. In my opinion [D] clearly went too far in suggesting that an expert could only give a meaningful opinion on the basis of an as-built critical path analysis. For reasons discussed below I am of opinion that such an approach has serious dangers of its own. I further conclude, as explained in those paragraphs, that [D’s expert’s] own use of an as-built critical path analysis is flawed in a significant number of important respects. On that basis, I conclude that that approach to the issues in the present case is not helpful. The major difficulty, it seems to me, is that in the type of [schedule] used to carry out a critical path analysis any significant error in the information that is fed into the [schedule] is liable to invalidate the entire analysis. Moreover, for reasons explained by [C’s expert], I conclude that it is easy to make such errors. That seems to me to invalidate the use of an as-built critical path analysis to discover after the event where the critical path lay, at least in a case where full electronic records are not available from [C]. That does not invalidate the use of a critical path analysis as a planning tool, but that is a different matter, because it is being used then for an entirely different purpose. Consequently I think it necessary to revert to the methods that were in use before computer software came to be used extensively in the [scheduling] of complex construction contracts. That is essentially what [C’s expert] did in his evidence. Those older methods are still plainly valid, and if computer-based techniques cannot be used accurately there is no alternative to using older, non-computer-based techniques.”

14–240 Returning to this subject later in his judgment, Lord Drummond Young added220: “[D] submitted, however, that no practical analysis had been carried out by [C’s expert]. The en suites were taken as an example: [C’s expert’s] analysis started from the premise that the reasonable time for issue of the instruction had to be measured against a completion date of 25 January 1999. He proceeded to calculate the delay period by reference to that date, and on the assumption that certain necessary elements of the work happened after that date. Thereafter he worked on the basis that the whole of the delay in issuing the instruction would necessarily produce an equivalent delay in completion. Thus, in the case of the en suite fittings, the delay in issuing the instruction is shown as 59 days and it is assumed that that automatically delayed completion after 25 January 1999 by the same number of days, giving a date of 25 March. No analysis was carried out to establish whether that was in fact correct. In this respect, it was assumed that there was no other work to be done; it was only on that basis that it could be assumed that the delay to completion corresponded to the delay in issuing the instruction. That was not warranted by the facts, however, in that various causes of delay were operating together. I do not think that this criticism is well founded. The method used by [C’s expert] was as follows. He first established a chronology, based on what actually happened on site in respect of each of the enumerated items. He then calculated the time that was reasonably required for delivery, installation and snagging. In part this calculation was based on what actually happened, and in part was based on [C’s expert’s] judgment as to what was reasonable for any particular aspect of the work. I was satisfied that he had great experience of [scheduling] in the construction industry and that his estimates of the periods required for particular items of work were reasonable. Once [C’s expert] had calculated the period required for delivery, installation and snagging he worked backwards from the contractual completion date (25 January 1999) to determine the latest reasonable date for issue of the relevant instruction. On that basis he was able to calculate the delay in issuing the instruction. He then assumed that the

220 City Inn Ltd [2007] ScotCS CSOH 190, [2008] BLR 269, (2008) 24 Const LJ 590 at [93]–[94] affirmed [2010] CSIH 68.

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delay to completion caused by the lateness of the instruction would be the same as the delay in issuing the instruction. That seems to me to be reasonable in relation to the particular item of work that is involved. This of course assumes that no other causes of delay were operative. There were in fact a substantial number of other causes of delay, and to that extent [D’s] criticism has some foundation. Nevertheless, this simply means that delay was caused by a number of concurrent causes. These must in my opinion be dealt with in the manner discussed above, in particular at paragraphs [17]–[19]. The result is that any extension will be granted not on the basis of the delay in any individual case, but on the basis of the whole of the causes of delay that are operative in the period following the contractual completion date.”

14–241 Notwithstanding the endorsement that this approach has received from the Scottish courts, because of its inherent limitations, it is rarely accepted as a probative method of proof of causation in complex construction claims. However, a comparison of the as-planned and as-built schedules may provide some useful insight into the possible merits of allegations as to delay, or recovery, or acceleration. For example, similarities between the schedules may reflect an absence of merit in a claim, if an activity was performed in the same duration as it was planned to be performed it might be deduced that its performance was neither delayed nor accelerated.

Collapsing technique 14–242 Where there is more than one type of delay, or reimbursable event, and the simple time-line, or as-planned versus as-built method is not a satisfactory illustration, then a slightly more complex illustration may be prepared. 14–243 One way of doing this is through the collapsing technique. Figure 14.22 illustrates the same as-planned schedule with a mixture of delays to progress having affected the as-built critical path. These delays to progress have resulted in the same quantity of delay to completion, although in this as-built schedule there are three different types of causal event. 14–244 In activity A, one short period has been delayed by an excusable, but not reimbursable event, being, for example, bad weather. Activity B has been delayed by two different events. The first is a delay entirely at C’s risk, for example a failure to carry out the work adequately, requiring it to take down and replace defective work. The same activity is then delayed again by an event that is both reimbursable and excusable; an act of interference by D giving rise both to an extension of time and compensation for loss and expense. Activity C has again been delayed by an event, which is excusable, but not reimbursable, for example, a strike, or bad weather. [Please refer to Figure 14.22] 14–245 The collapsing technique essentially requires the grouping of these activities together into their various constituent parts at the end of the as-planned schedule. The as-planned schedule is then repeated, and the delaying events are extracted from the as-built schedule and displayed as a time period at the end of the as-planned schedule. They are extracted to the total amount of time attributable separately to reimbursable and excusable events, the total period of delay to progress alleged to be caused by excusable, but non-reimbursable events and the total amount of events that are neither excusable nor reimbursable. C is entitled to four weeks of extension of time and one week of loss and expense. Two weeks of the total delay will be at C’s own risk. 14–246 If there are only two types of delaying events, for example, in Figure 14.23, where there is one delaying event that is both reimbursable and excusable and one that is only excusable, then it is possible to illustrate the inference by using as a simple time-line comparable to that for the elementary as-planned versus as-built.

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14–247 Figure 14.23 illustrates a period of two weeks for which C will be entitled to an extension of time only and one week for which it will receive both an extension of time and compensation. [Please refer to Figure 14.23] 14–248 As with any other bar chart-related techniques, in the absence of further rationalisation and analysis, the limitations of this method are that, if it is to be used properly to infer a causal relationship, it must be possible to demonstrate that: the events giving rise to the delay can be clearly identified; there are no consequential delays to be taken into account; there were no concurrent or parallel delays; there was no recovery or acceleration; the activity durations have been accurately calculated, without any float; and the completion of each activity is a prerequisite of the commencement of its successor.

Visualisations “An illustration is no argument – nor do I maintain the wiping of a looking-glass clean, to be a syllogism; but you all, may it please your worships, see the better for it.”221

14–249 Computer-generated visualisation can be usefully employed to illustrate the inference of causation. The inferential types may usefully be classified as222: descriptive; introductory; and illustrative. 14–250 Descriptive visualisations do not rely upon facts, but upon a “story” based upon the facts. To that extent, they can reasonably be conceived as the visual equivalent of a written narrative. Because descriptive visualisations are not factually driven, they should always be treated by their recipients with some caution. 14–251 Introductory visualisations, can usefully be employed in providing a summary of the principal issues to be demonstrated by the evidence of fact and opinion. These ought properly to be factually correct, so far as they go, but may legitimately omit those parts of the facts that cannot be illustrated, or are perhaps inconvenient to the party putting them forward. Generally, they comprise comparative illustrations used to set the scene of the actual evidence to follow. 14–252 Illustrative visualisations are used to describe something that could not normally be seen, such as an aircraft, shipping, or car accident, a structural collapse, or other construction failure, or the outbreak of a fire.

Smoke and mirrors “‘Beware the dark arts’ was the sage advice of Albus Dumbledore to the young Harry Potter. Besides budding wizards, construction clients (at the project or dispute resolution stages), contractors and lawyers would be equally well served by this advice when it comes to the difficult subject of delay analysis. 221 L Sterne, The Life and Opinions of Tristram Shandy, Gentleman (1761) (University of Florida Press, 1978) vol.3, Ch.20. 222 For case studies and sample animations see A Burr and K Pickavance, “The use of visualisations in case presentation and evidence” (2010) 26 Const LJ 3.

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Project scheduling in general, and delay analysis in particular, suffers from its own particular technical jargon, with terms such as ‘critical path’, ‘free float’, ‘logic links’ and ‘concurrent delay’ being cited with free abandon. Moreover, delay analysis, like LordVoldemort, comes in many guises and it seems there is a spell for every circumstance. ‘What would you like conjured err proven, sir? Let me just mix up some ‘fragnets’, ‘lags’, eye of newt and hey presto!”223

14–253 “Smoke and mirrors” is a derogatory term used to describe an analysis that is not all that it is said, by its originator, to be. In other words, when it is described to be something thorough, virtuous and accurate, whereas in fact it is not, it is said to be “all smoke and mirrors”224. 14–254 In Costain v Haswell225, for instance, the experts had agreed to carry out a time impact analysis using a windows process, but C’s expert had merely compared C’s updates carried out during the course of the works (not a time impact analysis but, in effect, an observational, rather than modelling technique, appearing, from the description, to be along the lines of as-planned updates versus as-built updates in windows). Richard Fernyhough QC (sitting as a Deputy High Court Judge) found that226: “[D] submits that [C’s expert] has not correctly applied the time impact analysis method in that, rather than applying the impact of the delaying event himself and assessing its consequences, he has used [C’s] monthly updated progress [schedules] for that purpose and, after the correction of certain anomalies, has accepted those [schedules] as correctly showing the impact of the delaying event. [D’s expert], on the other hand, has carried out what he considers to be the more correct approach, namely to consider the state of the progress of the works prior to the inception of the delaying event and then impacting that event on to that [schedule] in order to see what the software produces as the impact of that event. It is not clear to me what difference to the actual results these alternative approaches lead to but, if it becomes material to decide, I prefer the approach of [D’s expert]. The reason for that preference is that it eliminates any subjective distortion or manipulation (either advertent or inadvertent) in the production of the monthly progress [schedules] by [C]. [D’s expert’s] approach seems to me to be more rigorous and to be more in accordance with the accepted understanding of a time impact analysis approach, as agreed by the experts.”

14–255 Whilst the principles of delay analysis are simple enough, the words used and the equipment and software employed in carrying out the task can prove to be overwhelmingly complex to those unfamiliar with the procedures and processes. That is so, whether the delay analysis is performed for a UK audience or, apparently, for one based in the United States. Thus, for example, in remarking upon the fact that all methods of delay analysis are rooted in the principles of “fairness, efficiency and common sense”, an American firm of lawyers has observed that: “This clear-eyed view should not be lost when one encounters the specialized terms used by professional schedulers and lawyers in reading the tea leaves of delay (ie, ‘impact/update method,’ ‘window-snapshot,’ ‘sub-critical,’ and ‘negative float’). More than a few of these terms are used with more conviction than reality can justify. Indeed, American construction 223 D Barry, “Beware the dark arts! Delay analysis and the problems with reliance on technology” (2008) Society of Construction Law International Conference (London, 2008). 224 See also J Zack Jr, “Schedule ‘games’ people play and some suggested remedies”, Journal of Management in Engineering, vol.8, No 2 (American Society of Civil Engineers, 1992). J Wickwire and S Ockman, “Obstacles to success, use of critical path method on contract claims – 2000”, 19 Construction Lawyer 4. 225 Costain Ltd [2009] EWHC 3140 (TCC); [2010] TCLR 1. 226 Costain Ltd [2009] EWHC 3140 (TCC); [2010] TCLR 1 at [179] to [180].

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lawyers and consultants created delay ‘cultism,’ when in the 1960’s and 1970’s, they began to put forward elaborate exercises, including Critical Path Method (CPM) networks, ‘precedence diagramming’ and ‘PERT’ as the best means of divining causation and damages in construction delay claims. Curiously, it has taken American lawyers quite a long time to admit to the absence of the proverbial Emperor’s clothing, and to face the stark reality that these delay and damage methodologies are, quite often, mythology!”227

14–256 It has also been observed in the United States that: “A key step toward improving legal advocacy is to increase attorney understanding of schedule analysis. Lawyers who rely on their consultants to analyse schedule issues may be limited in their ability to cross examine expert witnesses allowing them to evade questioning with a smooth flow of technical jargon.”228

14–257 The difficulty in the field of delay analysis is no different from that in many other fields of expertise; it is that, if the wool is not to be pulled over his eyes, the knowledge of the CA, adjudicator, arbitrator or judge must be adequate for the task of understanding the evidence, or he must rely upon an expert to interpret it for him. 14–258 In his article on logic and causation, McCullough uses the analogy of a book. He observes that: “1. 2. 3. 4.

if it is shown to an animal, the animal will observe that it has shape and scent and possibly colour. The dog is correct; if it is shown to an untutored savage, the savage will observe more than the dog. For example, he might observe that the book opens up and the bits inside have patterns on them. The savage is also correct; if it is shown to an educated person, but who is not knowledgeable of the language involved, he will know it is a book, but will not know what it is about. That person is also correct; and if it is shown to a person educated in the same language, then he will fully appreciate all that it is. That person is also correct.

The important point is that all four of the above observers are correct, but only one has knowledge which is adequate for the subject. The others are correct only in so far as they are able to go.”229

14–259 The names given to CPM analyses are not terms of art. That is to say that the terms used have no meaning, save that ascribed to them by the person using them. Some, such as the as-planned impacted, collapsed as-built, and as-planned versus asbuilt, are generally understood in the industry to have certain identifiable characteristics, but few have a clear understanding of what all those characteristics are, or what is involved in a time impact analysis. Unfortunately, words rarely tend to be used with great precision in the field of delay analysis, and it is not unusual to find evidence that is categorised by one of the established descriptions of a reliable analysis being, in fact, something completely different and unreliable. Accordingly, it has been well said that: “one should never presume to understand the analysis technique employed by an analyst simply on the basis of what label he gives his analysis, rather one should investigate the technique to establish a clear understanding of the methodology employed.”230

227 King and Spalding, “Selected principles of delay analysis”, London Court of International Arbitration (2002). 228 DS Oles, “The inexact science of delay analysis” (1997) The Construction Lawyer at 3. 229 J. McCullough, “Logic before litigation” (1998) The Expert at 21. 230 D. Barry, “Beware the dark arts! Delay analysis and the problems with reliance on technology”, Society of Construction Law International Conference (London, 2008).

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14–260 In 2007, an attempt was made by the American Association of Cost Engineers to rationalise the terminology used in forensic delay analysis, by identifying objectively how they are performed and what are their respective perceived advantages and disadvantages231. This has since been reviewed, revised and updated232. Whilst the title “Forensic schedule analysis” might have given rise to much hope that the recommended practice note would have come down on one side or the other as to the appropriateness of different types of delay analysis for different purposes, such much needed advice to the industry has not been forthcoming. The introduction to this recommended practice makes it plain that the purpose of the document is to provide a unifying technical reference for the forensic application of critical path method analysis by: “minimizing procedural subjectivity. It does this by defining terminology, identifying methodologies currently used by forensic scheduling analysts, classifying them, and setting recommended procedural protocols for the use of these techniques. By describing uniform procedures that increase the transparency of the analytical method and the analyst’s thought process, the guidelines set forth herein will increase both the accountability and the testability of an opinion and minimize the need to contend with ‘black-box’ or ‘voodoo’ analyses.”

14–261 In order to set up a classification of the different types of analysis, the practice guide adopts a layered approach to its nomenclature, illustrated by Figure 14.24 below; it divides the methodologies used only in retrospective delay analysis into “observational” (as being based upon the materials available without any correction, or modification) and “modelled” (as being based upon materials corrected or constructed for the purpose). The unexpressed intent is therefore to eradicate “smoke and mirrors” by encouraging practitioners to state clearly which method of analysis has been adopted and, by setting out the methodology of each, to encourage precision in their application. [Please refer to Figure 14.24233] 14–262 Apart from its choice of words, which is by no means intuitive, the recommended practice could be criticised for failing to commit to an opinion upon the use to which the various methodologies can reasonably be put, if they are of any use at all. In omitting to do that, the recommended practice guide may give unwarranted encouragement to those whose analysis may be of little or no probative value, but who derive some support from the fact that a name (derived from a recommended practice) can be applied to it. 14–263 Typically, the manifestation of “smoke and mirrors” may be found in the analyst’s report. Examples include: The report may say that it is concerned with “actual delay to progress” and not theoretical calculations, but the delay to progress to which it refers has simply been inferred. That is usually a good indication that it is an attempt to confuse the reader into thinking the report is something that it is not. In the introduction, it may well say that the analyst is charged with identifying where the critical path actually lay at the time of the events but, on examination, it may be found that what the analyst has done is intuitively to divine a “critical path” that includes the events it says caused delay, simply by drawing the “critical path” on an “as-built” bar chart in a position which might reasonably be inferred. 231 American Association of Cost Engineers International Recommended Practice for Forensic Schedule Analysis, Recommended Practice No 29, June 2007. 232 American Association of Cost Engineers International, Forensic Schedule Analysis, Recommended Practice No 29R-03 (2009). 233 Based upon American Association of Cost Engineers International, Forensic Programme Analysis, Recommended Practice No 29R-03 (2009) (RP/FSA) at App. B: Figure 1.

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The software used may be no more than a drawing tool used to illustrate what the analyst infers caused the delay identified instead of a logically stable database that calculates the effect of events that occurred on progress and on completion. The analysis may be described as a “critical path analysis”, but in fact it may be simply a comparison of the as-planned and the as-built, without consideration of the impact on the critical path. The delay caused by events may be asserted and imposed upon the schedule, rather than calculated to have occurred as a result of activity durations and logic. The analyst’s instructions may say that the reason it is appointed is that those appointing the analyst detect a trend away from hypothetical delay analyses to those rooted in fact, whereas what it produces is based upon hypothesis and inference. Sometimes there will be introduced a “risk analysis” by which, through some formula only the analyst is party to, the difference between the as-planned period and the asbuilt period is depreciated, but does not transmute into an objective analysis rooted in fact, as it is described by the analyst. 14–264 Smoke and mirrors are not difficult to detect by experienced analysts. However, those inexperienced in technical processes can be very easily confused by those minded to do this.

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CHAPTER 15

Forensic programme analysis

Introduction Preparing the materials The planned programme Correcting the planned programme Updating the planned programme with progress The as-built schedule Analytical methods As-planned versus as-built As-planned updated versus as-planned updated As-planned impacted Collapsed as-built Time impact analysis Windows and watersheds

15–001 15–017 15–017 15–019 15–037 15–047 15–061 15–061 15–069 15–077 15–117 15–149 15–164

Introduction “‘Forensic’ is defined as ‘belonging to, used in, or suitable to courts of judicature or to public discussion and debate’. Thus, forensic schedule analysis is that form of schedule delay analysis intended for use in delay claim situations in negotiation, mediation, arbitration, or litigation. As a result, the RP/FSA focuses primarily on the Critical Path Method (CPM) of scheduling. As defined in the RP/FSA, forensic scheduling is the study and investigation of events on a project using CPM or other recognized schedule calculation methods, for potential use in a legal proceeding. Forensic schedule analysis is the study of how actual events on a project interacted in the context of a complex scheduling model for the purpose of understanding the significance of those events on the following activities within the scheduling model.”1

15–001 The use of CPM-based programming techniques to analyse construction contract disputes, in a process known as forensic schedule analysis, has increased dramatically over the past 25 years. In the United States this increase is at least in part a direct result of the increasing sophistication of the courts and tribunals in working with CPM methods in government contracts and their published decisions on a multitude 1 J Zack, Jr, “Delay and delay analysis – isn’t it simple?” a paper presented to 1st ICEC and IPMA Global Congress on Project Management Ljubljana (Slovenia, April 2006).

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of cases dealing with technical proofs as opposed to proof by inference2. On the other hand, in the United Kingdom there is no equivalent of the Boards of Contract Appeals, many construction claims are dealt with in adjudication or arbitration, the results of which are rarely published3 and, it appears that even when CPM-based analyses are considered by the UK courts, little of the courts’ consideration of the relevance, or application of the methodology adopted has usually been published4. 15–002 The question of what was required of the CA, when granting an extension of time under JCT80, was explored in Brompton Hospital v Hammond5, in which it had been alleged that the CA had been negligent in awarding extensions of time, inferentially, from the information presented. In that case, HH Judge Seymour QC observed that: “it was plain from the evidence called at the sub-trial on behalf of [D], in particular that of [D’s expert], who, of course, is a [scheduling] expert, that there are a number of established ways in which a person who wishes to assess whether a particular event has or has not affected the progress of construction work can seek to do that because the construction of a modern building, other than one of the most basic type, involves the carrying out of a series of operations, some of which, possibly, can be undertaken at the same time as some of the others, but many of which can only be carried out in a sequence, it may well not be immediately obvious which operations impact upon which other operations. In order to make an assessment of whether a particular occurrence has affected the ultimate completion of the work, rather than just a particular operation, it is desirable to consider what operations, at the time the event with which one is concerned happens, are critical to the forward progress of the work as a whole. On the evidence of [D’s expert] and [C’s expert] the establishment of the critical path of a particular construction project can itself be a difficult task if one does not know how [C] planned the job. Not only that, but the critical path may well change during the course of the works, and almost certainly will do if the progress of the works is affected by some unforeseen event. [D’s expert] frankly accepted that the various different methods of making an assessment of the impact of unforeseen occurrences upon the progress of construction works are likely to produce different results, perhaps dramatically different results. He also accepted that the accuracy of any of the methods in common use, critically depends upon the quality of the information upon which the assessment exercise was based. All of this does, of course, emphasise the vital point that the duty of a professional man, generally stated, is not to be right, but to be careful. His conduct has to be judged having regard to the information available to him, or which ought to have been available to him, at the time he gave his advice or made his decision or did whatever else it is that he did.”6

15–003 Since the advent of critical path analysis, determination of what causes delay to completion of the works has largely been directed to the calculation of the effect of an event upon the date completion would have been achieved had it not been for the event in question. That is so irrespective of whether the impact is calculated prospectively (by reference to the impact upon the planned schedule of work) expressly or

2 S Holloway and K A Berg, Jr, “Schedule and damages analysis in construction contract disputes” (Peterson Consulting, 1995). An occasional paper in three parts. 3 The Construction Law Year Book (Sweet & Maxwell) publishes a few sanitised arbitration awards with commentary every year. The International Chamber of Commerce also publishes some sanitised awards from the arbitrations which are administered by that organisation. 4 For example, in London Underground Ltd v Kenchington Ford (1998) CILL 1452, the court discussed the evidence of delay prepared by the claimant’s expert as an “interesting academic and theoretical approach which on this issue led her into difficulty” but did not, with any clarity, describe what that approach was. 5 Royal Brompton Hospital NHS Trust v Frederick A Hammond (No 1) [2000] EWHC 39 (TCC). 6 Royal Brompton [2000] EWHC 39 (TCC) at [32].

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impliedly (as a result of updates to show prior slippage or other events), or by reference to what the as-built schedule would have been absent the effect of the event in question. This is how the SCL Protocol described the process in 20027 and also how it has been taken to be correct in numerous cases in the courts of England and Wales, and in the United States for many years8. 15–004 In general, forensic scheduling techniques are used for proving and calculating the effect of causal events, rather than inferring the cause from a perceived effect. In principle, there are three methods of analysis available that rely on a single fixed baseline, which are referred to as static methods, and there are two methods that rely upon a shifting baseline, referred to as a dynamic method. However, the names commonly given to particular methods of analysis and analytical processes are not without difficulty, because, historically, the usage of these names throughout the construction industry has been undisciplined. However, the enormously helpful and impressive analytical work conducted by the US Association for the Advancement of Cost Engineering (AACE) over the last five years or so has resulted in a recommended practice and an updated amendment to the recommended practice (RP/FSA). As a result, it can be hoped that debate about what an analytical method should be called, how it should be carried out and what it does and does not do, should, in the future, diminish significantly9. 15–005 The static methods are: 1. 2. 3.

as-planned versus as-built10; as planned impacted11; and collapsed as-built12.

15–006 The dynamic methods are known as: 1. 2.

updated as-planned versus updated as-built13; and time impact analysis14.

7 The Society of Construction Law, Delay and Disruption Protocol (2002). 8 See, for example, McAlpine Humberoak Ltd v McDermott International Inc (No 2) (1993) 58 BLR 11; John Barker Construction Ltd v London Portman Hotel Ltd (1996) 83 BLR 31; Balfour Beatty Construction Ltd v The Mayor and Burgesses of The London Borough of Lambeth [2002] EWHC 597 (TCC), [2002] BLR 288; Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 Con LR 32; Wunderlich Contracting Co v United States (1965) 173 Ct Cl 180, 199; 351 F 2d 956; All Seasons Construction & Roofing, Inc. (1998) ASBCA No 45583, 98–2 BCA (CCH) 30,061; F Whitten Peters, Secretary of the Air Force (2000) 226 F 3d 1307, 1316; Essex Electro Engineers Inc v Richard J Danzig, Secretary of the Navy (2000) 224 F 3d 1283, 1295–96 (Fed Cir.); and Kinetic Builders Inc (1999) ASBCA Nos 51012 and 51611. 9 See American Association of Cost Engineers International, Forensic Schedule Analysis, Recommended Practice No 29R-03 (2009) (the RP/FSA) and see also, “Smoke and Mirrors”, Ch.14, “Cause and effect”, at paras 14–253 to 14–264. 10 Also referred to as an “observational/static logic/gross” analysis, see American Association of Cost Engineers International, Forensic Schedule Analysis, Recommended Practice No 29R-03 (2009). 11 American Association of Cost Engineers International, Forensic Schedule Analysis, Recommended Practice No 29R-03 (2009) a “modelled/additive/single base” analysis. 12 American Association of Cost Engineers International, Forensic Schedule Analysis, Recommended Practice No 29R-03 (2009) a “modelled/subtractive” analysis. 13 American Association of Cost Engineers International, Forensic Schedule Analysis, Recommended Practice No 29R-03 (2009) an “observational/dynamic logic/contemporaneous as-is” analysis. 14 American Association of Cost Engineers International, Forensic Schedule Analysis, Recommended Practice No 29R-03 (2009). Although essentially this is a contemporaneous delay analysis, according to the taxonomy, if carried out retrospectively, this method would be a “modelled/dynamic/modified or recreated/multiple base” analysis.

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15–007 In the United Kingdom, save in some more recent cases15, the courts have not generally gone into any great depth as to what method of proof is acceptable in particular circumstances or, when a method of analysis has not been accepted, the reasons for its rejection. However, it is apparent that, given the same factual data, each method of analysis will produce a different calculation of the effect of a known delay to progress on the completion date16. This is not only because of the difference in data taken into account, but also as a result of the way the data is applied in the various methods. For example, an as-planned impacted method17 does not take account of the as-built record. Conversely, the collapsed as-built method18 does not necessarily take account of information on the planned schedule. Neither of these two methods, nor the as-planned versus as-built, take account of the shifting nature of the available float and critical path or paths. 15–008 Each method of analysis can adopt as its baseline the whole of the construction period from start to finish, or the construction period can be broken down into discrete periods, the analysis being performed on each identified period in succession and the effect on the earlier period being carried forward to the next. When applied to fixed periods, such as a regular period of reporting, this is called the “windows”19 process of conducting an analysis, and, when applied to arbitrary, or varied periods, it is referred to as the application of a “watershed”20 approach to the process21. 15–009 It has been observed that: “critical path analysis can only ever be regarded as a model that approximates the sequence and duration of the operations and activities on site. The perfect model would follow each resource around the site and show what it was doing and in what location and the sequence in which it carried out its work. Records are invariably not available at this level of detail, and further a [schedule] at this level may involve tens of thousands of operations, any meaningful analysis of which would be impossible. Critical path analysis therefore has, at each level, to be a summation of groups of like operations. The higher the level of the analysis and the smaller the number of activities shown on the analysis, the easier it is to follow and understand but the higher the level of summation and therefore probably the higher the level of approximation. There is always therefore likely to be some level of impressionistic assessment applied to decisions about the extent of extensions of time, even where critical path delay analyses form the basis of such decisions.”22

15–010 However, whichever method of proof is adopted and however the data is summarised, if at all, if the resultant opinion is to be at all credible, the analyst must

15 See for example, Mirant Asia-Pacific Construction (Hong Kong) Ltd v Ove Arup and Partners International Ltd [2007] EWHC 918 (TCC) and Costain Ltd v Charles Haswell & Partners Ltd [2009] EWHC 3140 (TCC); [2010] TCLR 1. 16 See, for example, The great delay analysis debate, Society of Construction Law, paper No 130, (April 2006), in which the same factual scenario was analysed by four different methods and produced four different results. 17 Also known as a “modelled/additive/single base” analysis, see American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009). 18 Also known as a “modelled/subtractive” analysis, see American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009). 19 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009) “fixed periods” 20 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009) a “variable windows or grouped” analysis. 21 See also “Windows and watersheds” at paras 15–164 to 15–172 below. 22 A Burr and R Palles-Clark, “Critical path analysis in English law: the present state of play” (2005) 21 Const LJ 222, at 239.

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take into consideration the whole of the contract period and not just that part of it that is convenient for the purposes of a case presentation sympathetic to its client’s interests. In Mirant v Ove Arup, for instance, where the project as a whole was not considered by C’s expert, the late HH Judge Toulmin CMG QC rejected his evidence, saying: “[C’s expert] therefore failed to investigate the causes of delay between April and October 1997 despite the important changes (including changes of management) which occurred in this period. [C’s expert] has not considered whether [D] is properly responsible for the whole of the 162 day delay which occurred and if not what lesser part of the delay. [He] stopped his analysis in October 1998 soon after first fire of the boiler although the benchmark under the contract was the commencement of the reliability trials. [He] did not consider the effect of potential delays caused by events close to the critical path. [He] did not consider the effect of problems relating to the transmission lines on the date for the commencement of the reliability trials23. ... [C’s expert’s] analysis does not even take into account events to the end of December 1998 immediately before the generator failure. His analysis, which only goes to the completion of unit 1 first fire and steam to set, is flawed, because it does not attempt to address the position at the critical date of start of the reliability trials. I note the words of caution which the experts have very properly introduced into their second joint statement. I conclude that the reports of the [scheduling] experts take me no further than the findings which I have already made.”24

15–011 Similarly, in the US case of Gulf Contracting25, in relying on Haney v US26 and Pathman27, the Board observed that: “We have found that [C’s expert’s] analysis systematically excluded all delays and disruptions except those allegedly caused by [D]. We conclude that his analysis was inherently biased, and could lead to but one predictable outcome. For our purposes therefore, we deem [the expert’s] analysis to be totally unreliable. To be credible, [C]’s CPM analysis ought to take into account, and give appropriate credit for all of the delays which were alleged to have occurred.”

15–012 In March 2014, the Society of Construction Law (the SCL) published a paper written by Akenhead J, entitled “Through the Ages: Construction Law and All That”. That paper had been presented to a joint meeting of the SCL and the Technology and Construction Bar Association (TECBAR) in London on 26 November 2013 and, among the subjects covered, in an erudite, but thoroughly amusing manner, is that of delay. Akenhead J discussed the use of critical path analysis in modern litigation and arbitration and stated that programme experts “have to play the factual cards with which they are dealt”. 15–013 Two recent Technology and Construction Court judgments have concerned delay and in which the evidence of delay experts was considered in detail. In the first of these, Obrascon Huarte Lain SA v Her Majesty’s Attorney General for Gibraltar 28, Akenhead J stated at paragraph [32] that “One of the problems for programming experts in construction cases is that often they have to make assumptions about (TCC) the facts, albeit

23 24 25 26 27 28

Mirant Asia-Pacific Construction (Hong Kong) Ltd [2007] EWHC 918 (TCC) at [587]. Mirant Asia-Pacific Construction (Hong Kong) Ltd [2007] EWHC 918 (TCC) at [595]. Gulf Contracting, Inc (1989) ASBCA Nos 30195 et al, 89–2 BCA, 21,812. Haney v United States (1982) 676 F 2d 584 Ct Cl. Pathman Construction Co (1985) ASBCA No 23392, 85–2 BCA 18, 096. See the illustration below.

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that they are not always agreed or admitted”, but that the logic applied by the expert witnesses in their analyses “. . . must [ultimately] follow the facts. . . .”

Illustration Facts: A dispute arose out of a £30m contract for design and construction work to Gibraltar Airport, including the construction of a new dual carriageway and a tunnel under the eastern end of the airport runway. This contract incorporated the FIDIC Conditions of Contract for Plant and Design Build for Electrical and Mechanical Plant, and for Building and Engineering Works, designed by the Contractor, First Edition 1999 (commonly known as the “Yellow Book”). The contract works were due to be completed in two years, but, after over 30 months and with only 25% of the work completed, the contract was terminated by the employer (the Government of Gibraltar). The Spanish contractor (Obrascon Huarte Lain) (C), commenced proceedings for an extension of time (EoT) and associated loss and expense (L and E). C argued (amongst other things) that it had encountered more rock and contaminated material than would have been reasonably foreseeable by an experienced contractor at the time of tender. It also argued that a report that it had commissioned (which concluded that airborne contamination posed a health and safety risk) meant that it was necessary to suspend the excavation works and re-design the tunnel. Akenhead J disagreed with C’s arguments and found that it had failed to proceed with the design and execution of the works with due expedition and without delay. Of the EoT of 660 days originally claimed (reduced to 474 days in the amended particulars of claim submitted during the trial), it was awarded only a single day of EoT for a small amount of unforeseen rock. No weight whatsoever was given to the expert’s report commissioned by C, which was found to be neither “independent nor competent”29. Instead, it was decided that D was fully entitled to and did effectively terminate the contract. Quantum was left to be decided at a later date. Held, that: (1) D had lawfully terminated the contract by notice of termination dated 28 July 2011 (delivered to C’s site office), alternatively by notice dated 4 August 2011 (re-delivered to C’s head office in Madrid); (2) D was entitled to serve a notice of termination pursuant to Cl.15.2(a) of the contract, by reason of C’s failure to remedy defects notified in the notices to correct issued by the engineer under the contract; (3) D was entitled to serve a notice of termination pursuant to Cl.15.2(a), because C had clearly abandoned, or otherwise plainly demonstrated the intention no longer to continue, performance of its obligations under the contract pursuant to Cl.15.2(b); (4) Since C was entitled to only a single day of EoT, such limited entitlement did not mean that D was no longer entitled to serve a notice of termination pursuant to Cl.15.2(b); (5) D was entitled to serve a notice of termination pursuant to Cl.15.2(a), because C had failed, without reasonable excuse, to proceed with the works in accordance with Cl.8, pursuant to Cl.15.2(c)(i); (6) D’s notice of termination was a valid and effective notice pursuant to Cl.15.2, even though it was not served at C’s head office in Madrid, which was the address for service stated in the appendix to the tender; the contract was lawfully terminated by D on 20 August 2011 (when it wrote to inform C that it was terminating the contract and, shortly thereafter, took possession of the site) pursuant to Cl.15.2 of the contract; (7) The service of the notice of termination dated 28 July 2011 at the site office (rather than at the head office in Madrid, as specified in the appendix to the tender) did not amount to a repudiation of the contract and C was not therefore entitled to elect to accept it as a repudiation on 3 August 2011, as it had purported to do. C’s letter dated 3 August 2011 therefore itself constituted a repudiatory breach, albeit that it was never expressly accepted as such by D; (8) the service of the notice of termination dated 28 July 2011 in the terms in which it was written did not amount to a repudiation of the contract

29 [2014] EWHC 1028 (TCC).

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(or an anticipated repudiation) by D, which C either accepted, or was entitled to accept on 3 August 2011; (9) C’s conduct when it left the site evinced the intention no longer to be bound by the terms of the contract and therefore amounted to a repudiatory breach, albeit that D did not expressly accept this; (10) D was entitled to the relief provided for by Cll.15.3 and 15.4 of the contract, together with interest as allowed for under the contract, or to the extent that the court had a discretion pursuant thereto: Obrascon Huarte Lain SA v Her Majesty’s Attorney General for Gibraltar30.

15–014 The second TCC case is that of Bluewater Energy Services BV v Mercon Steel Structures BV31, in which Ramsey J preferred the evidence of Bluewater’s expert (which was noted in the judgment to have been based upon factual analysis), whereas Mercon’s expert had relied upon a theoretical analysis (although the specific methodologies adopted by the respective experts are not recorded in the judgment). It was also noted in the judgment that there had been a fair degree of consensus as between the experts on the factual matrix. 15–015 The trend in delay cases is clearly, therefore, towards analyses which have their basis in the facts (ie retrospective analyses) and not on theory-driven (ie prospective) methodologies. However, returning to Akenhead J’s paper, he there approves the approach of one of the expert witnesses in Walter Lilly32, which “. . . had regard to the likely longest sequence of outstanding work . . . as being a primary pointer to what was delaying the work at any one time”. This is clearly a prospective approach but, in fairness, and as Akenhead J goes on to explain and approve, the expert witness then carried out a “reality check” in order to give proper regard to what actually happened on the project. 15–016 For the moment, it therefore seems that delay experts who seek to establish and rely upon “the facts” (before an English law tribunal) are likely to win the day33.

Preparing the materials The planned programme 15–017 The starting point for any analysis of C’s progress during the course of the works34, and the effect upon it of delay and disruption, is C’s working schedule. Depending upon the method of analysis selected, which may be its original planned schedule, or that updated to a point immediately before the occurrence of the delaying events. Some recent decisions in both the United Kingdom and the United States35 have confirmed that delay analysis based on an original baseline schedule is not an acceptable

30 [2014] EWHC 1028 (TCC). 31 [2014] EWHC 2132 (TCC). 32 Walter Lilly & Co Ltd v Mackay [2012] EWHC 1773 (TCC). 33 See also Alstom Ltd v Yokogawa Australia Pty Ltd (2012) 28 Const LJ 553. 34 In the event that there are no, or no sufficient, as-built records to substantiate a proof based on the as-built records, the as-planned schedule can also be used as a baseline retrospectively. See, for example, John Barker Construction Ltd (1996) 83 BLR 31 at 62–64. 35 See, for example, Balfour Beatty Construction Ltd [2002] BLR 288, per Lloyd J at 302; Royal Brompton [2000] EWHC 39 (TCC); [1999] 4 BLR 162; [2001] 76 Con LR 148 (CA); Gulf Contracting Inc (1989) ASBCA No 30,195, 89–2 BCA (CCH) [22,812], affirmed (1990) 90–1 BCA (CCH) 22,393 and Ealahan Electric Co (1990) DOTBCA No 1,959, 90–3 BCA (CCH) 23,177.

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proof unless it is up to date at the time of the particular delaying event of which complaint is made36. 15–018 If the original schedule prepared at the time of tender, or in the initial stages of the contract, was accurate and was followed without change apart from the delaying events complained of, then it could competently serve as a baseline schedule. It is very rare, however, for that to happen in practice. For the purpose of delay analysis, C’s schedule will be of little use unless it accurately represents C’s intentions at the time of the occurrence of the delaying events. In Donohoe37, for example, where C’s bar chart of the early parts of the project, which had obviously been relied on and used by C, was inaccurately converted to a CPM, it was held to be unacceptable as a baseline from which to measure effect. The UK court came to a similar conclusion in Egger38, where it was found that the completion dates of some subcontractors’ works had been inadvertently combined into a single activity. In Bateson39, in rejecting C’s CPM produced late in the project, the Board said: “In our judgment it has not been established that the CPM ever had or deserved status as a credible schedule for use in fulfilling the purpose of a [contract compliant] schedule, rather, we find it has been used primarily to further [C’s] claim interests which began to emerge at some point during the creation of the CPM documents. Accordingly, we have no confidence in and will not rely on the schedule [as planned] portions of the CPM but will consider the actual [as-built] portions as normal evidence.”

Correcting the planned programme 15–019 Because construction schedules are currently more often produced for monitoring the proactive construction process, rather than as a basis for managing the effects of change, or forensic examination of liability for delay40, unless they are prepared in accordance with a specification that requires them to be suitable for such a purpose41, they are rarely satisfactory for cause and effect analysis without some alteration or correction. 15–020 In a dispute concerning the conversion and refurbishment of nine apartments, the contract had been let on IFC84 with a common start date and different sectional completion dates for each of the apartments42. The apartments were not all of the same size, nor did they require the same work to be done. Notwithstanding these differences, early in the contract C had produced a schedule in bar chart form, which it reproduced, in identical form save for a different title, for each of the separate apartments. Each section of the work, therefore, was erroneously illustrated to have the same work content and the same completion date. These schedules were delivered to D and the CA, neither of which made any comment. 15–021 During the course of the work, progress was severely hampered by restrictions on noise and working hours and by numerous changes to the design of each apartment. As a result, all the apartments were completed late. A nominal extension of time was awarded in respect of some apartments and liquidated damages deducted for the late completion of all of them. C disputed the extension of time awarded and 36 37 38 39 40 41 42

See also Ch.9, “Revising, updating, monitoring, updating and reporting”, at paras 9–069 to 9–088. Donohoe Construction Co (1988) ASBCA No 47310 et al and on appeal (1999). Skanska Construction Ltd v Egger (Barony) Ltd [2004] EWHC 1748 (TCC) at [421]. JW Bateson Co Inc (1984) ASBCA 84–3 BCA 17,566 ASBCA No 27491. See Ch.10, “Project control”. See, for example, the requirements of the CMS referred to in Ch.10. An unreported case of the previous author’s experience.

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referred the dispute to an arbitrator. The arbitrator found, inter alia, that, contrary to the requirements of the contract, C had: 1. 2. 3. 4. 5. 6. 7.

failed to provide a method statement; failed to provide any schedule with the tender; failed to follow the specification for the schedule; failed to provide a network analysis of the schedule; failed to make up a copy of the schedule; produced a schedule that was inconsistent, ambiguous and unclear; and failed to point out to the CA that the schedule for all flats was identical.

15–022 C had also failed to keep any schedule records or site diaries and was thus unable to demonstrate proof of entitlement by reference to an as-built schedule. 15–023 It was agreed between the experts for both sides that the cause and effect analysis should be based upon the as-planned impacted method43, but they were not agreed as to what should be the baseline schedule. D’s expert wanted to use C’s bar charts simply with logic added, on the basis that: 1. 2.

they were issued by C as its planned method for carrying out the works; and they were the baselines upon which the CA had monitored progress44.

15–024 C’s expert, whilst conceding that logic had to be added, declined to use as a baseline the schedules in the form prepared by C, because: 1. 2. 3.

the operations reflected by the bar charts were often in a sequence which was illogical; they contained activity bars and hence time for work that was not required under the contract; and they failed to show the correct contract periods.

15–025 C’s expert proposed that, as baselines for each unit, nine individual “corrected and adjusted” schedules should be adopted relevant to each of the nine different apartments and contract sectional completion periods. 15–026 In his interim award on the issue, the arbitrator determined that, whatever baseline was adopted, it must be “workable” and that “workable” in this sense meant workable for the purposes of determining a fair and reasonable extension of time. He determined that: “the ‘contract schedule’ is incompatible with proper requirements for delay analysis and was never produced with such in mind”

and held that: “the approach of [the expert for C] in correcting inconsistencies, illogicalities and adding logic to the schedule to produce the baseline from which to deduce the impacts is the proper procedure to adopt.”

43 Also referred to as a “modelled/additive/single base” analysis. See American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009). 44 No attempt was made to explain, in the light of the disparity between the schedules and reality, how the CA had monitored progress against a schedule that clearly did not relate to the work required.

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15–027 On the other hand, it is important, in retrospective analysis, that any reconstruction accurately reflects C’s planned intent. In Donohoe45, in rejecting a reconstruction of C’s bar chart as a CPM baseline, the court observed: “Prior to development of the CPM, [C] used the bar charts, particularly the 7 February 1992 bar chart, to schedule its work. [C] negotiated agreements with a number of subcontractors based on his draft of the bar chart. On 4 and 9 March 1992, he distributed copies of the 7 February 1992 bar chart to the subcontractors for their use and co-ordination. We conclude, therefore, that the bar charts constitute the best evidence of [C’s] as planned schedule for the period from 27 January 1992 to 9 June 1992, the as built duration of the first two windows. As we noted above, [C’s expert] used the CPM for all of its as planned dates. [C’s expert] states that it compared the 8 May 1992 bar chart to the CPM, ‘and the durations and total period of performance are substantially the same.’ There are, however, significant differences between the bar charts and the CPM insofar as the first two windows are concerned. Briefly, the CPM changed the durations of the critical work, shortening the first window and lengthening the second window after the fact. These differences render [C’s expert’s] comparisons for these windows invalid.”

15–028 In City Inn v Shepherd46, Lord Drummond Young also preferred to see proof based upon an as-planned versus as-built analysis47, rather than on a collapsed as-built analysis48 based upon a retrospectively constructed schedule and critical path. 15–029 Thus, in circumstances such as these when there are errors on the face of the schedule, it does not necessarily follow that, merely because C produced a schedule at the outset and that it was “accepted”, “approved”, or even formed the basis upon which progress was monitored, it therefore fulfils the required level of accuracy and integrity necessary for the purposes of proving the extent of, or the responsibility for delay, or for retrospective forensic schedule analysis. 15–030 In the Canadian case of Pacific v GVRHD49, the British Columbian Supreme Court determined that, where C’s planned schedule of work was used as a basis for determining D’s liabilities for the effects of delay to completion, C must show that: 1. 2.

there was a cause and effect linkage between D’s action and the delay to progress experienced by C; and C’s original planned schedule of work was reasonable, namely that it did not underbid by artificially compressing its time estimate to get the contract.

15–031 Clearly, if it is to be of any use for delay analysis, no matter how it is recorded, the baseline schedule prepared at the beginning of the project should: 1. 2. 3. 4. 5.

be realistic and capable of achievement; be based on available information; contain clearly defined assumptions; be supported by a method statement identifying C’s construction logic; and reflect the contract requirements.

45 Donohoe Construction Co (1998) ASBCA No 47310. 46 City Inn Ltd v Shepherd Construction Ltd [2007] ScotCS CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590, affirmed [2010] CSIH 68. 47 Also referred to as an “observational/static logic/gross” analysis. See American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009). 48 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009) a “modelled/subtractive” analysis. 49 Pacific Coast Construction v Greater Vancouver Regional Hospital District [1986] 23 Const LR 35.

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15–032 It should also demonstrate in relation to the assumptions made at the time of tender: 1. 2. 3. 4. 5. 6.

7.

safe and sound construction methods; the current production outputs; the current lead-in times; the current procurement times; the current design approval times; the effects of contract constraints, for example, working hours, traffic restrictions, weather, holidays, seasonal influences, and so on; and, if it is based on a CPM network; and appropriate construction logic linking activity to activity.

15–033 Thus, before adopting it as a baseline for the purpose of cause and effect analysis, C’s planned schedule must be checked to ensure that it is satisfactory for that purpose, because, if there are errors in the baseline, any subsequent conclusions drawn from a comparison between the baseline and impacts upon it will be meaningless. 15–034 By correcting C’s schedule and basing its analysis only on the corrected schedule, the analyst removes from any future calculation the effect of C’s scheduling errors. However, there is always more than one way of efficiently constructing a project, so it is wise not to be overly critical or allow subjective preferences to dictate unnecessary modifications. In reviewing the schedule, it is prudent to concentrate attention not only upon the content of the schedule, but also its integrity and its ability to perform the task for which it is then intended50. If there are any obvious errors, activity omissions, false activity durations, or errors in the schedule logic, these should be corrected to establish a “reasonable” baseline schedule for analysis51. 15–035 For example, if the provision of information, or drawings is in issue, the design, approval and procurement stage of all relevant activities should be listed in the schedule and, in a contract incorporating SMM7 as the method of measurement52, the description of any “undescribed” provisional sums should be incorporated in the corrected schedule with “zero” duration. 15–036 In the event that corrections to the baseline schedule are made, it is vitally important that the corrections and adjustments are adequately recorded so that use of the corrected schedule as a basis for deduction can be proved reasonable. Typically, the audit trail should contain the following information as a minimum: 1. 2. 3. 4.

a description of the activity durations or logic found inadequate; evidence of that inadequacy; a statement of any opinions on which that inadequacy is based; a listing of any documents referred to;

50 See Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), at para.3.8.63 et seq. for an example of the requirements of a quality appraisal of a schedule to be used pro-actively to manage time. 51 See, for example, Neal & Co Inc v The United States (1996) 36 Fed Cl 600, 41 Cont Cas Fed (CCH) para.77,003 in which the Board rejected the US government’s use of C’s as-planned schedule as a baseline from which to deduce the effect of delays on the basis that: “the failure to build crew and resource allocation restraints into the schedule creates an unrealistic amount of ‘float’, the amount of time an activity can be delayed without affecting completion of the project. To utilise the approved schedule to determine when a delayed activity realistically becomes critical would be misleading.” 52 For example, JCT98 With Quantities.

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5. 6.

reference to any witness statements relied upon; and a description of the corrections made.

Updating the planned programme with progress 15–037 The next stage in the preparation of the baseline schedule for analytical purposes is to consider whether it is suitable for comparison with what actually happened. It is important to recognise that, even if it represents a reasonable assessment of the way in which the work should have progressed, a schedule is no more than a model of future intention and differences between what was planned and what happened can occur for a variety of reasons. For example, in practice: 1. 2. 3. 4. 5. 6.

C might work faster or slower than anticipated; work may start or finish at the contemporaneous convenience of the trades concerned; materials may arrive earlier or later than anticipated; plant may break down or become unavailable; the site agent may have its own way of doing things53; or a previous excusable event may have occurred.

15–038 It is the common experience of everyone in the construction and civil engineering industries that things change rapidly, and that desire is rarely reflected in performance for more than a few weeks at a time. Most contractors produce some sort of schedule at the beginning of a contract. However, unless constrained to do so, they seldom review, revise or update it, or do not revise or update it accurately enough to enable it to be used to illustrate the potential effect of D’s risk events upon it before such events actually occur. In the CIOB’s research, it was found that: “more than 40% of those responding to this part of the questionnaire were unfamiliar with progress being reported either in meetings or in correspondence. Of the 57% who were familiar with the reporting of the progress of the project as a whole, it was the experience of 46% that progress was either reported against the first [schedule] or the last revised [schedule]. Only 10% were familiar with progress being reported in the period since the last report. This tends to suggest that in more than half the projects reported upon, the parties did not have a common understanding of the state of progress from time to time, and in only a small minority of projects was progress reported against a reporting period.”54

15–039 It is no use having a baseline schedule which, for example, has been produced before C has even set foot on site and then, by reference to it, trying to demonstrate the impact of delays to the M&E55 installations, many months later, when by the time the M&E contractors are required on site, the schedule is already out of date and bears little relationship to what happened, or was intended to happen. Thus, for all these reasons, many schedules that are more than, say, six to eight weeks old are unlikely to be of any use at all as a basis from which to deduce the real effect of D’s risk event.

53 There is rarely only one correct way of proceeding and, unless he is made a part of the planning decision-making process, the site agent may not have absolute faith in the sequence predicted by the project planners. 54 See Chartered Institute of Building, Managing the Risk of Delayed Completion in the 21st Century (2008), chart 42. 55 Mechanical and electrical.

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15–040 Counter-intuitively, in City Inn v Shepherd56, Lord Drummond Young declined to adopt any adverse inference from the fact that C’s CPM schedule had not been properly updated during the course of the works and that it had been “lost” during the course of proceedings. However, this decision is contrary to what has been held in numerous other cases around the world and it is felt that it is unlikely to be followed. In the United States, for example, the courts and Boards of Contract Appeals have consistently taken the view that, in complex cases that involve delays caused by both C and D, unless C’s schedule is properly updated, it cannot safely be used as a baseline from which to measure the effect of D’s risk events. For example, in Kemron57, in which C attempted to recover liquidated damages on the basis that it had not been responsible for the subsequent delay to completion, the Board found that: “The only evidence which suggests that [C] might not have been delayed is found in its revised project schedule. However, inasmuch as it is apparent that the schedules were not updated to reflect contemporaneous events and the record contains no relevant explanations, we find them to be inherently unreliable for purposes of determining the number of days [C] was delayed.”

15–041 Again, in Yates58, where C had failed properly to update its schedule, it was held not to have any intent by which delay could be measured and not entitled to adduce evidence as to what was really its intent so as to demonstrate delay to progress caused by instructed changes. In Gassman59, moreover, where C attempted to demonstrate its entitlement to more time in relation to its original planned schedule without regard to the sequence actually followed, the Board observed that: “neither [C] nor its expert ever modified the CPM schedule to reflect [C’s] change in logic regarding erection of steel. The schedule’s usefulness in evaluating the alleged slab ‘delay,’ therefore, is limited.”

15–042 In the case of L & C Europa60, the Board declined to accept oral testimony that was not supported by an updated impacted schedule, saying: “There are no updated schedules in the record that might demonstrate the relationship of the alleged delays to other work at the site, or the timing and impact of alleged delays on overall completion of the contract. With respect to the nature of the proof offered by [C] generally, [C] for the most part relies on general, unspecific and conclusory testimony that was not credible.”61

15–043 Thus, in any case, before it can safely be used for the purposes of comparison, the schedule must be corrected and brought up to date as the planned schedule for the job immediately before the occurrence of the event or events about which complaint is made. If the schedule is updated regularly during the course of the project then, subject to any corrections that may be required, the contemporary as-planned schedule

56 City Inn Ltd [2007] ScotCS CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590 affirmed [2010] CSIH 68. 57 Kemron Environmental Services Corp (1999) ASBCA 51536. 58 WG Yates & Sons Construction Co (2001) ASBCA Nos 49398, 49399. See also AGH Industries Inc (1989) ASBCA Nos 27960, 31150, 89–2 BCA, 21,637. 59 The Gassman Corporation (1999) ASBCA Nos 44975 and 44976. 60 L & C Europa Contracting (2004) ASBCA No 52848. 61 L & C Europa Contracting (2004).ASBCA No 52848 at para.12.

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will usually be satisfactory for this purpose62. However, if it has not been updated regularly, then the next step is to reconstruct the updated schedule from the as-built records available63. 15–044 If it is demonstrable that, at a point in time, C could have adopted a number of alternative methods, some of which would not have caused the delay to completion complained of, then, because, typically, C is obliged to do all it reasonably can to avoid, reduce, or overcome delays64, it is unlikely that a proof of evidence based upon a reconstruction of the most advantageous method will be accepted without argument. For this reason, if the as-planned schedule has to be reconstructed retrospectively, it may be more tactically sound and cost effective in dispute resolution to produce the proofs of cause and effect selecting a baseline on an a fortiori basis – that is, adopting the method least advantageous to the party putting it forward in order to minimise the scope that the opposing party has for casting doubt upon it. 15–045 Finally, for the purposes of clear presentation65, if proof is to be based on a comparison of any two, or more schedules, then it is important that they are as statistically comparable as possible. This might be achieved, for example, by converting the original schedule into an adjusted as-planned schedule, incorporating into it all those activities which actually occurred in the project and are listed in the impacted schedule, but which were not listed in the original schedule, or on the updated asplanned schedule. 15–046 In order to maintain the construction logic, such additional activities should be listed in the adjusted as-planned schedule as having “zero” duration.

The as-built schedule 15–047 The dates used for the as-built schedule are usually most accurate when recorded contemporaneously with the progress of the work and often this is made available in the form of an approved, or accepted, regularly updated schedule, supported by site diaries and progress reports66. When contemporaneous as-built data is unavailable, however, actual start and finish dates for each activity can typically be reconstructed retrospectively from several data sources, including, amongst others: 1. 2. 3. 4. 5. 6. 7.

requests for approvals; delivery notes and invoices; labour payment returns; contractor and subcontractor daily reports; the CA’s, clerk of works’ and site agent’s diaries; correspondence; and meeting minutes.

62 For an indication of what corrections may need to be considered, see American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009), pp.25–27. 63 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009), pp.26–27. 64 Depending on the wording of the contract. See Ch.11, “Mitigation, recovery and acceleration”. 65 A Willett, “Programme analyses: a dispute resolution tool” (The Kellogg Corporation). An occasional paper. 66 For guidance on validation of the as-built schedule see American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009), pp.22–23. See also, Ch.13, “Construction Records” throughout.

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15–048 The recollections of key personnel are also likely to be essential in solving many of the logical relationship issues and are likely to be the principal source of information regarding changes in the construction logic, or activity durations67. 15–049 To get to the root of this sort of change it may well be important to hold detailed interviews with those concerned and, to the extent that any analysis that follows will depend on the information gleaned from those interviews, they must be accurately recorded so that they can be used in evidence at any future determination of the issues. Where such evidence of fact is taken and relied upon in the retrospective reconstruction of a schedule, it is important that the witness providing the information is made available for cross-examination, or conclusions based upon that evidence may be held unreliable. For example, in Skanska v Egger68, the court observed: “It was evident that the [expert’s] report was largely based upon factual matters in part relying upon data provided by [D’s project manager for structures] who administered the contract and [the witness] who was works manager for [D]. Neither [D’s works manager] nor [D’s project manager] gave evidence as to these matters. Both were available to do so. Both were working upon [D’s] case defending [C’s] claim and on the counterclaim made by [D] reliance upon the untested judgment [sic] of others in selecting and characterising the data for input into the computer [schedule] however impeccable the logic of that [schedule], adversely affects the authority of the opinion based upon such an exercise.”

15–050 It is thus important that any evidence used to verify the duration of an activity, or its logical interface with others is preserved, an audit trail is provided by way of cross-reference to the activity code on the schedule and, where the evidence in support is that of a witness, the witness is actually called to give that evidence to the court or tribunal. 15–051 Notwithstanding the difficulties of preparing an as-built schedule retrospectively, if any analysis is to be based on a comparison of what happened with what was intended, then the as-built schedule must be an accurate reconstruction of what actually took place. 15–052 In the US Board of Contract Appeals case of Freeman-Darling Inc69, for instance, C claimed that the delay to completion had been caused by 13 variations and not by other delays that were at C’s risk. However, when the as-built schedule was compared to C’s evidence and to the daily construction reports, numerous significant inconsistencies appeared. For example, the as-built schedule showed that the ductwork began on 4 June and ended on 19 November, while the answers to interrogatories and the daily construction reports showed that this work began on 27 April and ended on 11 August. Substantial inaccuracies existed in the dates of performance for masonry, painting, acoustical fencing and gate, millwork, landscaping, ceramic tiles, hollow metal doors, guardrails and posts. 15–053 C admitted that the as-built programme and as-planned programme contained inconsistencies, alleged they were minor and inconsequential, and argued that, as the as-built record was intended merely to represent a general guideline as to the construction progress, its credibility was only enhanced by the errors and inconsistencies, because they showed that C had obviously not tried to “manufacture” the evidence (sic!). The Board, however, declined to award C any compensation for delay-related damages, 67 See Ch.14, “Cause and effect” at paras 14–116 to 14–123 for an example of the effect of C simply deciding to start the foundations in a different area of the site from that originally planned. 68 Skanska Construction Ltd [2004] EWHC 1748 (TCC) at [415]. 69 Freeman-Darling Inc (1989) PSBCA No 7,112, 89–2 BCA (CCH) 21,882.

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because of the absence of an accurate record of what happened and when it happened. In rejecting the appeal, the Board said: “In determining the amount of time extension due to [C] we are unable to rely on [C’s] as-built CPM, as it is rife with inaccuracies.”

15–054 Depending upon the use to which it is to be put, the as-built programme can be recorded as a bar chart only, or as a network with logical links. In any event, at its most basic it should contain a listing of the actual start and end dates of every activity on the programme, together with all those other activities that, whilst not indicated by the contract documents, were added to the work content during the construction process. It may be counterproductive, however, to have an overly detailed as-built schedule containing thousands of activities. Apart from the fact that it will be extremely large, it may also be difficult to interpret. Thus, for the purpose of analysis, activities that are not in issue should be concatenated or summarised in a generic activity or hammock70. For example, if the principal delays to be analysed occurred in the first and second fix M&E installation integrating with the non-load-bearing partitions, there will be little point in scheduling separately every detail of the foundations and below-ground construction: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

remove topsoil; reduce levels to underside of ground floor; excavate foundation trenches; excavate below-ground services; construct through foundation ducts; planking and strutting; shuttering; concrete foundations; brickwork to damp proof course; ducts to slab positions; below-ground services; hardcore and blinding; and concrete floor slab.

15–055 All these can simply be referred to as one activity: “below-ground work”, and so on. Nevertheless, the as-built schedule must be as true a record of what happened on the project as is possible. It will include not only the planned activities, but also the unexpected events. 15–056 Consider, for example, a project in which the roofing is not initially critical and would normally have been concatenated into the structural shell. Suppose that, as was planned, the roofing materials arrived on site just before they were needed, but were then found to be the wrong colour and had to be sent back to the manufacturer for replacement taking, say, four weeks in remanufacture. In those circumstances, the roofing would have to remain as a separate activity and this delay added as a new activity. 15–057 A similar effect may occur if, without any new delaying activity occurring, the roofing takes longer than anticipated. Say, for example, that what was originally

70 See also, American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009) at p.24.

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planned to take eight weeks, in fact took 12 weeks to complete. The as-planned schedule will then have to be adjusted in the as-built schedule and what may have been part of a generic activity may have to be separated simply because it may change a float activity into one that is critical to completion. 15–058 The addition of new activities will include not only those events for which C is entitled to relief from liquidated damages, or compensation, but also those events that are at C’s risk, such as: 1. 2. 3. 4. 5.

any defective work that had to be put right during the course of the contract; any defects in materials or goods that had to be rectified during the course of the contract; delay in delivery of materials; absence of or breakdown of plant; and any loss of productivity as a result of: – management errors or loss of morale; – gang-size inefficiency; or – poor timekeeping.

15–059 If the as-built schedule is to be used for comparison with the as-planned schedule, then, in the same way that, for comparison purposes, the as-planned schedule must be statistically comparable with the as-built schedule, so every effort should be made to define the as-built activities in a manner consistent with that contemplated in the as-planned schedule. So, for example, in the event that any work originally intended to have been carried out and listed on the as-planned schedule has been omitted in its entirety, that should be noted as being of “zero” duration, rather than deleted from the as-built schedule. 15–060 It often helps to summarise the as-built schedule with a few important activities. Schedules with more than a few hundred activities become very time-consuming to analyse and certainly do not lead to a more easily perceived picture of the cause and effect matrix.

Analytical methods As-planned versus as-built 15–061 As-planned versus as-built methodology71 can be applied to simple bar charts as well as to critical path networks. However, the essence of this type of analysis is normally that the two are compared and inferences drawn from the differences perceived. Whereas an impact analytical method depends upon the addition to, or subtraction from, a baseline of the factual matrix of an event, this type of analysis does not rely on the calculation of impacts so much as the implied cause of the difference between the two baselines. Refinements can be made to this method, however, by breaking down the total duration into discrete periods, each to be looked at, in isolation, one period from another. This segregation of periods tends to produce a finer

71 Also referred to as “observational/static logic/gross”. See American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009), pp.31–43.

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grain to the process and reduce the degree of speculation that is often evident when taken as a contract period as a whole. 15–062 In the event that there is no delay to completion caused by any matter at C’s risk, this method may be an acceptable method of illustration of a total time claim72. However, if there has been delay caused by C and no explanation is provided as to how that has, or has not affected the delay to completion, it is in effect a global claim73. Thus, if bar charts alone are available, there is delay caused by both C and D and thus a separation of liability must be demonstrated, this method of proof can still be used provided that the contract permits it74 and the facts are available to calculate, rather than simply to infer the balance of liability. 15–063 As a method of calculating the effect of an event, rather than inferring that the perceived effect has the root cause alleged, it is generally acceptable when the constituent parts of the equation can be quantified and the only effects claimed are upon either activities that were indisputably on the critical path, such as the initial or last stages of construction, or those that have caused a total suspension of the works. Accordingly, where: T = time allowed for completing the work as tendered for (the as-planned period) po = time allowed for as a result of scheduling errors by overestimate of time needed mo = time allowed for as a result of overestimate of content of work tendered for t = time allowed for total float pu = time not allowed in plan as a result of underestimate of time needed mu = time not allowed in plan as a result of underestimate of content of work C = time actually taken to complete the contract work (the as-built period) f = time taken up by C’s inefficiencies a = time taken up by D’s time risk events w = time taken up by other risks not at C’s risk e = time taken up by loss of efficiency caused by D’s time risk events A = time saved by instructed or constructive acceleration n = time saved by C’s recovery measures to overcome its own inefficiencies s = time saved by instructed omissions from contract works EOT = extension of time Then: (T – t) + (pu + mu ) – (po + mo ) = C + (A + s) – (f – n) – (a + e + w). And where: EOT = a + e + w; EOT = [C + (A + s) – (f – n)]–[(T – t) + (pu + mu) – (po + mo)] So, for example, if: the planned contract period is 52 weeks (T = 52) 72 See Ch.19, “Total time, total loss and global claims”, paras 19–013 to 19–020. 73 Ch.19, “Total time, total loss and global claims”, paras 19–040 to 19–072. 74 Because ECC2 and ECC3 expressly require that the baseline from which C’s entitlement is to be calculated in relation to any particular event is to be C’s approved schedule as updated and impacted by the effect of previously occurring events, this method is not suitable for use with those forms of contract. (See Cll.31, 32 and 63.3.)

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there are no errors in the schedule, which would have added to the planned period (pu + mu = 0) there is a two-week period of float (t = 2) there are errors in the schedule, which would have shortened the planned period by 1.5 weeks (po + mo = 1.5) the construction period actually took 87 weeks (C = 87) C’s errors, and difficulties in getting labour and materials added 12 weeks to the construction programme (f = 12) the decoration period was reduced, saving one week of the construction period (n = 1) D omitted some fitted joinery, saving 1.5 weeks of the construction programme (s = 1.5) D instructed C to work extended hours and weekends, saving one week (A = 1), the formula EOT = [C + (A + s) – (f – n)]–[(T – t) + (pu + mu ) – (po + mo )] demonstrates: EOT = [87 + (1 + 1.5) – (12 – 1)]–[(52 – 2) + (0) – (1.5)] EOT = [78.5 – 48.5] EOT = 30 weeks 15–064 When the as-planned versus as-built method of analysis is applied to CPM schedules, it is possible to conduct a more sophisticated process comparing, for example, the dates and relative sequences, logic, resources, productivity and so on. 15–065 When conducted as a single process comparing the whole of the planned period with the whole of the built period, this method is unlikely reliably to demonstrate causation except in the most simple of cases. However, as with any other analytical method, it can be used in increasing degrees of sophistication in breaking the period of analysis into smaller periods75, even to a daily basis for some purposes. 15–066 The advantages of this method are perceived to be that it is: Easy to understand. Based on as-built critical path. Technically simple to perform. Can be performed with very rudimentary schedules. Can be performed with very little as-built data. Closely related to actual events”76.

75 When broken down into fixed periods, this method referred to as “observational/static logic/ gross/fixed periods” and when applied to watersheds it is known as “observational/static logic/gross/ variable periods or grouped”. See American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009). 76 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009), p.37.

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15–067 On the other hand, its disadvantages and weaknesses are said that it is also perceived to be: Not suitable for projects with long durations. Not applicable to projects built in a manner significantly different than planned. Not suitable for complicated projects with multiple planned critical paths. Less accurate as the analysis advances through the project. Relatively time-consuming when implemented correctly77. 15–068 To this list one might also add that78: 1.

2. 3.

because this method relies upon finding an effect and attributing a cause to the effect, it is easy to manipulate the results of the analysis to suit the preferred case; it cannot deal effectively with concurrency; and it cannot deal effectively with re-sequencing, acceleration, or recovery,

although when executed in windows or watersheds79 it is often thought that many of the alleged disadvantages are diminished. However, in this author’s opinion, that is not the case and such benefits as are alleged are often illusory80.

As-planned updated versus as-planned updated 15–069 Sometimes referred to as “contemporaneous period analysis”81, this process is identical to the as-planned versus as-built analytical method but, instead of employing the planned schedule and as-built schedule, it uses the various planned schedules updated with progress, as the project proceeds82. To the extent that it does not require anything to be impacted upon it, it is also an observational, rather than a modelled method of analysis. On the other hand, because it relies on updated CPM schedules, which change the sequence and critical path according to progress made, provided there is actually some progress made, which changes the schedule, it can reasonably be described as a dynamic method. 15–070 Accordingly, much will depend upon the integrity of the schedules and, if the quality is poor, so will be anything deduced from the difference between them. The updated schedules must be able to react dynamically to change and any with open ends, constraints, negative lags and other impediments will inhibit the production of any meaningful analysis. 15–071 Put simply, the method requires the analyst to compare the programme updated at the end of one window, or watershed, with another updated at the end of another window, or watershed and to opine on the reason for the difference between the two. Notwithstanding that windows is a process, rather than an analytical method, 77 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009). 78 See Society of Construction Law, The Great Delay Analysis Debate (King’s College London, 2005). 79 For which, see below at paras 15–164 to 15–175. 80 See also American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009), p.43. 81 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009) an “observational/dynamic/contemporaneous as-is” analysis, at pp.43–49. 82 If this method is used with retrospectively created or with modified programme updates it is referred to as an “observational/dynamic/modified or recreated” analysis.

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because in this method, it is essential to employ a windows, or watershed, process, this method is also often, but incorrectly, referred to as “windows analysis”. 15–072 A gloss on this is the process of dividing the update period by taking information from the successor update and adding it to the predecessor update. The RP/ SA describes this process thus: “for each update an intermediate file is created between the current update and the previous update consisting of progress information without any non-progress revisions. Generally the process involves updating the previous update with progress data from the current update and recalculating the previous update using the current data date. This is the intermediate schedule or the half-step schedule. The process allows the analyst to bifurcate the update-to-update schedule variances based on pure progress by evaluating the difference between the previous update and the half-step, and then the variance based on nonprogress revisions by observing the difference between the half-step and the current update.”83

15–073 Although it is, in effect, a retrospective method of analysis, it actually relies upon the prospective planned intent for the schedules at the time they were prepared for the effect upon completion of whatever it is that is divined as having caused the apparent slippage between successive updates. 15–074 The advantages of this method of analysis are perceived to be that it: allows the forensic analyst to claim objectivity, because it relies on the contemporaneous schedules to identify and measure delays or gains instead of relying on the analyst’s after-the-fact analysis model; considers the real-time perspective of project conditions, the state of mind, and knowledge of the project participants during each update period; uses as the primary tool a set of schedules that are already familiar to the parties at dispute, thereby minimising surprises and fundamental disagreements over source data; considers the dynamic nature of the critical path, because it identifies shifts in the critical path between the updates; delays or savings in time can be assigned to specific activities; data-preparation process is quicker than other methods that require an as-built schedule84. 15–075 On the other hand, its disadvantages are perceived to be that it: cannot be implemented if contemporaneous schedule updates do not exist; relies on the validity of the contemporaneous schedule updates; must show that the project participants used the contemporaneous schedules to plan and construct the project; except with very simple network models, it may become extremely difficult to distinguish schedule variances caused by non-progress revisions from schedule variances caused purely by progress or lack thereof; if date constraints were liberally used in the update schedules, analysis may be very difficult85. 83 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009) “observational/dynamic/contemporaneous split”, pp.49–55. 84 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009), pp.48–49. 85 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009).

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15–076 To this list one might also add the same shortcomings as any other method of comparison of schedules in that: 1.

2. 3.

because this method and its variety of processes rely upon finding an effect and attributing a cause to the effect, it is easy to manipulate the results of the analysis to suit the preferred case; it cannot deal effectively with concurrency; and it cannot deal effectively with re-sequencing, acceleration, or recovery.

As-planned impacted 15–077 As-planned impacted analysis86 is a static method of calculation in that it relies for its baseline on a single planned schedule, to which is added the factual representation of events in order to calculate their effect on the schedule. 15–078 The essential characteristics of as-planned impacted methodology is thus that a CPM network schedule, which will react dynamically to change, forms the baseline from which calculations of effect are made. The calculations are generated by adding to the baseline the fragnet, sub-network, or other calculation of the period of effect of the event on progress alleged and recalculating the schedule key dates and completion date as a result of the changes added. The effect of the causal event on the key or completion dates is then the difference between the date calculated before the event was added and that calculated after the event is added. 15–079 This method of analysis requires the analyst to identify excusable delays as discrete, time-duration activities and add these to the original as-planned schedule. In Figure 15.1, a new activity is illustrated in the as-planned schedule at the beginning of week 12. The duration of the new activity is then added to the as-planned schedule and the schedule re-run with its calculated duration to demonstrate the resultant impacted completion date on the as-planned impacted. The hypothetical impact of excusable delays on C’s work is then portrayed through a comparison between the original as-planned date for completion and the completion date calculated from the simulated as-planned impacted network. 15–080 The method is essentially as follows: Establish that the as-planned schedule is reasonable and fit for use as a baseline. 15–081 For acts of commission: 1. 2.

3.

4. 5.

take activities, or durations comprised in the causal event; estimate the reasonable resources necessary to complete the task on the same basis as the calculation for those resources that were calculated at the time of tender; identify the period of time that it would normally take to carry out those activities, or durations comprised in the event during the ordinary working period and in those circumstances anticipated at the time of tender; add the causal event to the baseline schedule; and recalculate the completion date.

86 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009), also referred to as a “modelled/additive/single base” analysis, pp.59–68.

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15–082 For omission of work: 1. 2. 3.

identify the activities to be omitted; set the duration to zero; and recalculate the completion date.

[Please refer to Figure 15.1] 15–083 For a failure to perform: 1. 2. 3. 4.

identify the activity, the start, finish or duration of which is affected by the failure to perform; identify the date by which performance was required and, if not already planned as a milestone, mark with a start milestone; add an appropriate “delay” activity, separated into periodic bars if necessary, logically linked between points 1 and 287; and recalculate the completion date.

15–084 The baseline schedule has then been impacted with the causal event in order to calculate its effect on the schedule. However, there are at least three different ways of carrying out an as-planned impacted analysis. 1.

2.

3.

All events can be inserted, in any order and the total effect of all when taken together can be calculated by re-scheduling once, after all events have been added, or, in the case of omissions of work, subtracted88. The total work period can be divided into a series of windows or watersheds and the events added to or, in the case of omissions, subtracted from the schedule, chronologically in order of date of inception in each chronological window or watershed to be analysed in turn89. Each event can be added to or, in the case of omissions, subtracted from the schedule chronologically in order of date of inception and the effect recalculated after each event and before the impacting of a subsequent event90.

15–085 The difference between the completion date on the as-planned schedule and the completion date on the as-planned impacted schedule is the period of delay to progress in identifiable activities, or delay to completion of key dates that could reasonably have been expected to have been planned, as a result of that impacted event. 15–086 Because it relies upon the reaction of the schedule to the changes made to it, it can reasonably be described as a dynamic method. Accordingly, much will depend upon the integrity of the baseline schedule and, if the quality is poor, so will be anything deduced from the impact of events upon it. The baseline schedule must be able to react dynamically to change, and anything with open ends, constraints, negative lags and other impediments will inhibit the production of any meaningful analysis. 87 See also Ch.14, “Cause and effect” at paras 14–070 to 14–106, above. 88 This process is also known as “modelled/additive/single base/global insertion”. See American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009). 89 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009) for windows, the process is also known as a “modelled/additive/multiple base/fixed period” analysis or, in the case of the watersheds: a “modelled/additive/multiple base/variable periods or grouped” analysis. 90 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009) also known as a “modelled/additive/single base/stepped insertion” analysis.

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15–087 The perceived advantages of this method are that it: [is] intuitively easy to understand; does not require an as-built schedule; can be implemented relatively easily and quickly compared to other methods91. 15–088 On the other hand, its perceived weaknesses are said to be that: because it does not rely on an as-built schedule it is perceived as an analysis based on a purely hypothetical model; it cannot, by itself, account for concurrent delay92. 15–089 However, its use is also very limited, because: 1. 2. 3. 4. 5. 6.

the baseline must be a schedule that is relevant to C’s intentions at the time the event occurs; the effects of the events calculated are not related directly to the time the events actually occurred; it is a static method based on a single baseline, which does not change; accordingly, it is unsuitable for projects of long duration; unless it is also configured to account for it, it takes no account of C’s slippage for which C is itself liable; it is difficult to deal effectively with concurrency; and it cannot deal effectively with re-sequencing, acceleration or recovery.

15–090 Notwithstanding its shortcomings (the cynical might say “because of its shortcomings”), the as-planned impacted analysis is a CPM-based method commonly used in the presentation of claims to the CA and in negotiation with D to demonstrate the effect on the planned schedule for completion of the putative effect on C’s schedule of D’s time risk events93. In the past94, it has been a popular technique used by contractors for demonstrating delay in the United States95 and, because of the absence of as-built records and the proximity of the events to the date on which the schedule was produced, it was also the method used by C in Barker96. 15–091 Whereas other CPM-based analyses generally require relevant current as-built records to be taken into account, this type of analysis is not prepared on the basis of the actual state of work when the events occurred. However, it is precisely because the impact on the as-planned schedule is an objective assessment of the likely effect of the event on C’s schedule, rather than the effect on the works, that it does not require as-built records in order to produce it.

91 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009) at p.63. 92 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009). 93 See also K Pickavance, “The proof of excusable delay in building contracts without ‘as-built’ records” (1997) Const LJ 243. 94 In the 1970s and 1980s, CPM network software was often not sufficiently sophisticated to be able to take into consideration actual progress up to a particular point in time. The considered appropriateness of the as-planned impacted technique in older cases should thus be read in its historical and technological context. 95 R Lane, “Cause–effect analysis for delay and disruption claims” (2nd series, 1994) 12 Construction Briefings 1. 96 John Barker Construction Ltd (1996) 83 BLR 31.

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15–092 Accordingly, unless configured to do so, the as-planned impacted method takes no account of C’s dilatoriness during the progress of the works in calculating the completion date. Instead, it merely looks objectively at the putative effect of D’s risks on C’s intended method of working. It determines the amount of time that should be granted to C as an extension of time, because of excusable delays to its planned schedule, rather than to the works. It also determines the date from which D may deduct any liquidated damages, once C has failed to complete its work. 15–093 The underlying assumption supporting the use of this technique is that the difference between the completion date on the as-planned schedule and the completion date on the as-planned impacted schedule is that period for which an extension of time should be granted. The logic underlying the acceptance of this as proof of the extent of delay is really no more than that the resultant as-planned impacted schedule is what the as-planned schedule would have looked like if the impacted excusable events had been known about at the time the as-planned schedule was prepared. In other words, had the facts been known at the time, it would have been the basis of the calculation of the contract period at the time of tender. 15–094 Because this method normally takes no account of any as-built record, it is usually advanced on the basis that there is no delay to completion caused by any matter at C’s risk and it simply illustrates the build-up of a total time claim97. However, if there has been delay caused by C and no explanation is provided as to how that has or has not affected the delay to completion, it is in effect a global claim98. 15–095 Provided that details of C’s culpable delays are available, one method of getting over the problem of the global claim and demonstrating the conclusions reasonably to be drawn from the data is to run the schedule three times to demonstrate the delays impacting the as-planned schedule as a result of delay to progress caused by C, then those caused by D, and, finally, the two together as follows: 1. 2. 3.

4.

the planned schedule is corrected to take account of adjustments for any contingency periods or acceleration; the as-planned schedule is impacted with the delays to progress caused by D and C and the completion date calculated; the durations of the delays to progress caused by D are then set to zero, any delays to progress caused by C are indicated as positive durations and the second impacted completion date is calculated; and the durations of the delays to progress caused by C are then set to zero, any delays to progress caused by D are then indicated as positive durations and the third impacted completion date is calculated.

15–096 When all the impacts have been added, the path can then be analysed and the responsibility for the extent of individual delays on the critical path attributed and any concurrency identified. 15–097 Not all the excusable delays will necessarily be on the critical path, or affect the contract completion date. Some delays may occur on parallel paths or affect activities that are planned to be in float. However, when performed properly, the as-planned impacted analysis is a valid method of providing an objective assessment of the putative effect of D’s time risk events on C’s planned schedule.

97 See Ch.19, “Total time, total loss and global claims”, at paras 19–013 to 19–020. 98 “Total time, total loss and global claims” at paras 19–040 to 19–068.

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15–098 Provided that the contract permits it, this technique can work well with smaller contracts, and with larger contracts where the impacts in question have occurred over limited periods, or where the as-planned schedule has been affected by a limited number of events. Unfortunately, the technique is often misapplied, because: 1.

2. 3. 4.

the basis of the analysis is not satisfactory (for example, because the baseline schedule contained invalid logic, or as-built records demonstrate that the planned schedule was not followed); the initiation dates of causative events are incorrect; the causal events are not calculated correctly; or the causal events are not logically linked to the planned logic in a proper manner.

15–099 Because ECC2 and ECC3 require that the baseline from which C’s entitlement is to be calculated in relation to any particular event is to be C’s approved schedule99 and if, in spite of the requirement to do so, C fails to update and revise its schedule to reflect its true intent100, then, because these forms define the “accepted [schedule]” as either the original schedule first submitted, or that contained in the project data, or an updated schedule101, in the absence of any later accepted schedule, C is bound to use its original schedule as a baseline. Conceivably, this may restrict C and D to this method of calculation of entitlement, notwithstanding that in so doing C may achieve a substantial advantage from its own breach. 15–100 One other aspect of this methodology, which is worth observing, is that the results of the as-planned impacted technique often produce a theoretical completion date that is well beyond the actual completion date. In Barker102, for example, the analysis demonstrated an impacted completion date of 4 October 1989, whereas the work was actually completed and “taken into possession” on 26 September 1989. 15–101 The difference between the completion date projected on the as-planned impacted and the actual completion date can be used to demonstrate either a failure to proceed efficiently, or, as the facts demonstrated in Barker, a proof of recovery or mitigation, ie to show that C has attempted to reduce, or avoid delay103. In so far as it can be shown that the acceleration has been induced by a wrongful failure to extend the time for completion, it might also form the basis of a claim for the costs of constructive acceleration104. 15–102 Because the result of an as-planned impacted schedule rarely bears any relationship to what actually happened, it would be wrong to use it for the purpose of demonstrating a period of time for which loss and expense might be assessed in relation to reimbursable events105. It cannot reasonably be used for that purpose, because the assessment of loss and expense in a period in which disruption occurred cannot be properly identified without good evidence of what actually occurred and when it

99 Cl.63.3. 100 See Cll.31 and 32. 101 Cl.11.2. 102 John Barker Construction Ltd (1996) 83 BLR 31. 103 Although some commentators have interpreted it otherwise, Cl.25.3.4.1 of JCT80 and JCT98 does not call for C to “reduce” delay, but requires that he should use his best endeavours to “prevent” delay. 104 See Ch.11, “Mitigation, recovery and acceleration”, paras 11–093 to 11–136. 105 For example, under Cl.26 of JCT98.

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occurred, and evidence that it was not concurrent with any other delay for which compensation is not payable106. 15–103 In Motherwell Bridge v Micafil107, Micafil (C) was required to design and build what was reputed to be the largest autoclave in the world. C engaged Motherwell Bridge as its subcontractor (SC) to design and carry out the construction of the highgrade stainless steel works. Whilst no standard form was expressly incorporated into the subcontract, the agreement provided that the “spirit” of the FIDIC conditions would govern the rights and obligations of the parties108. On this basis, it was held that the SC was entitled to an extension of time if completion “is, or will be delayed”109 by the effect of a time risk event at C’s risk. 15–104 There were numerous changes instructed by C, many to address work that fell short of the standard required by the contract. The completion date was vital; C did not want the work to finish late and declined to grant an extension of time. The SC worked extended day shifts and additional night shifts over a period of three months to reduce the likely delay to completion. Apart from other things, the SC submitted an as-planned impacted analysis showing the likely effect on the completion date that was likely to occur as a result of C’s changes and accordingly claimed an extension of time for that period. C, however, said that was wrong; it said the methodology was fatally flawed, because it failed to demonstrate actual periods of delay to completion and only indicated what was likely to have occurred in the absence of the acceleration. 15–105 Judge Toulmin dismissed C’s argument and said that the subcontractor was entitled to complete on the hypothetical date on which completion would have occurred (to which an extension of time would have been awarded) had the accelerative measures not been put in place, together with reimbursement for prolongation of the work up until the date it was actually completed and the costs of the accelerative measures. In dealing with the effect of acceleration, Judge Toulmin observed that: “taking into account the additional man-hours arising from the additional works, [the SC] was entitled to complete the ‘autoclave ready for reception test’ on 3 June 1999. Since the date is later than the actual certified ‘autoclave ready for reception test’ on 28th February 1999, [the SC] cannot be liable for liquidated damages in any amount.”110

15–106 His Honour then recalled C’s argument, which sought to apply the same rules as to recovery of the costs of prolongation actually suffered to the proof of causation of the likely effect of an event absent the effect of acceleration, identifying that: “[C] submits that the methodology applied to the delay analysis is fatally flawed, because it fails to demonstrate actual periods of delay to completion of the works. [C] contends that [the SC] is only entitled to extensions of time and prolongation costs for actual critical delay.”

106 John T Jones Contracting (1996) ASBCA Nos 48,303 and 48,593. 107 Motherwell Bridge Construction Ltd v Micafil Vacuumtechnik (2002) 81 Con LR 44; [2002] CILL 1913. 108 Motherwell Bridge Construction Ltd (2002) 81 Con LR 44; [2002] CILL 1913 at [74]–[76]. 109 Cl.8.4. For a detailed discussion of the effect of such phraseology, see Ch.14, “Cause and effect”, para.14–145. 110 Motherwell Bridge Construction Ltd (2002) 81 Con LR 44; [2002] CILL 1913 at [581] and [582].

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15–107 In rejecting this argument in relation to the proof of entitlement to more time, as opposed to the proof of entitlement to the costs of prolongation, the judge observed that: “[the SC’s] first analysis shows the date which [the SC] ought fairly and reasonably to complete the works after taking account of the cause of delay which occurred both within and after the time for completion.”111

15–108 It is sometimes the case that, notwithstanding that C has changed its schedule during the course of the works, it attempts to demonstrate its entitlement by reference to a single fixed baseline, which it alleges has been corrected to incorporate the later amendments. However, it is sometimes apparent that, in modifying the schedule, all that has been achieved is concealment of delay to progress for which C is liable. In the Board of Contract Appeals case of Galaxy Builders112, C claimed that delayed approval of submittals had delayed completion of the Mission Support Facility at Laughlin Air Force Base, Texas. 15–109 As was found by the Board, none of C’s 16 monthly schedule updates published during the course of the works, nor the final update of January 1996, changed the essential engineering logic of the sequence of work set out in C’s initial schedule, which required that, after the steelwork had been erected, C would begin internal walls, plumbing and ducting, whilst the roof was being put on and before the building was dry. 15–110 Structural steel, moreover, was supposed to have arrived in June 1994, but was eventually delivered seven months late in January 1995. However, before it arrived, in December 1994, C submitted for approval its design for the metal roofing system, which should have been approved within two months, but was in fact not approved until 14 June 1995, four months late. 15–111 At trial, C attempted to put forward an as-planned impacted analysis based upon an amended baseline schedule illustrating a change in sequence and duration of the roofing from its original planned schedule and ignoring its progressed updated schedule during the course of the work. 15–112 The Board rejected C’s as-planned impacted analysis, saying that, whilst based upon an amended schedule baseline, such a methodology: “distorts a schedule, assumes that [D] is responsible for all delay, and does not present a proper delay analysis113. [C’s] addition of over 200 days of delay to the May 1994 CPM data presupposes that [D] is exclusively responsible for delays on the project, thereby disregarding evidence suggesting concurrent delay. Moreover, [C’s] use of the May 1994 data, as distinguished from a later update, disregards the dynamic nature of CPM scheduling, as reflected in the update requirement, because it assumes that the all other activities and their durations remained static over the 18 month period until project acceptance in November 1995.”

15–113 In addition to Galaxy Builders, numerous other cases have also indicated that the trend in formal dispute resolution is to disregard as-planned impacted analyses as a basis for measuring delays, particularly when the technique is used in an attempt to determine the date on which C would have finished its work, but for the effect of D’s 111 Motherwell Bridge Construction Ltd (2002) 81 Con LR 44; [2002] CILL 1913 at [594]. 112 Galaxy Builders Inc (2000) ASBCA Nos 50,018 and 50,136, 00–2 BCA para.31040. 113 Galaxy Builders Inc (2000) ASBCA Nos 50,018 and 50,136, 00–2 BCA para.31040 at [43].

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delay events114. In Titan Pacific115, for instance, at the commencement of the contract, C had submitted a schedule that had been approved by D. However, in support of their claim, C’s expert presented a schedule not based on events which had occurred, but simply predicting a revised intention adjusted for seasonal weather, which shifted the critical path from building construction to roadwork operations. C’s expert then presented further analysis showing that excusable delays had affected the revised schedule. C claimed a “like-time”116 extension of time and the effect of the impacted events, the return of liquidated damages and acceleration costs based upon the asplanned impacted analysis. The Board rejected C’s claims, saying that entitlement to extension of time must be demonstrated by showing, on a CPM network, that the events complained of delayed work that was actually on the critical path. 15–114 Similar sentiments were also expressed by the Hong Kong Court of First Instance in Leighton v Stelux117. In this case, C claimed an extension of time based upon the putative effect upon its original planned schedule of the failure of the CA to issue information on the date indicated on its original schedule. In this case, the Hong Kong Court of First Instance said that, by reference to the records, on the date on which the information was originally planned to have been needed, C was in fact still involved in substructure works. Even by the time the information had been provided and the MVAC and electrical subcontracts awarded, C was only just ready to start (and had not yet commenced) construction of the basement slab, completion of which was a predecessor to the commencement of the works for which the information was required. The Court observed: “In the actual circumstances of the case, looking prospectively from the time of [D’s] initial failure to provide information, [D’s] failing could not be causative of delay [to completion]. The late information could not cause actual delay [to progress], having regard to the state of the works at the time when the information ought to have been furnished originally.”

15–115 Again, in GEH v Laing118, HH Judge Wilcox declined to accept an as-planned impacted analysis as demonstrating a delay to the provision of informational packages for works contracts, saying: “the impacted as planned analysis delay takes no account of the actual events which occurred on the project and gives rise to an hypothetical answer when the timing of design release is compared against the original construction [schedule]. Thus it would take no account of the fact that the design team would have been able to prioritise design and construction to fit this.”

15–116 Numerous decisions by courts and Boards seem to confirm that, where there are records to show what actually happened, attempts to prove excusable delay through the use of analysis based on an as-planned impacted analysis are not acceptable.

114 See Gulf Contracting Inc (1989) ASBCA No 30,195, 89–2 BCA (CCH) 22,812, affirmed 90–1 BCA (CCH) 22,393 and Ealahan Electric Co (1990) DOTBCA No 1,959, 90–3 BCA (CCH) 23,177; Blackhawk Heating & Plumbing Co Inc (1976) GSBCA 76–1 55,577; Santa Fe Inc (1987) VABCA No 2,168, 87–3 BCA (CCH) 20,104; Continental Consol Corp, Eng (1967) BCA Nos 2,743, 2,766, 67–2 BCA (CCH) 6,624; Lane-Verdugo (1973) VABCA Nos 16,327, 16,328, 73–2 BCA (CCH) 10,271 and Fortec Constructors v United States 8 Cl Ct 490 (1985). 115 Titan Pacific Construction Corp v The United States (1989) No 747 87C, Cl Ct. 116 Acceptance of the “like-time” theory would have meant that C would have been entitled to an extension of time based on the difference between what it planned to do and what it actually achieved. 117 Leighton Contractors (Asia) Ltd v Stelux Holdings Ltd [2004] HKCFI 822; (2007) 1 Const LJ 70 at [24]–[25]. 118 Great Eastern Hotel Co Ltd v John Laing Construction Ltd [2005] EWHC 181 (TCC) at [184].

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Collapsed as-built 15–117 The collapsed as-built method, also sometimes referred to as the “as-built butfor” method119 is another impact technique which, when properly used, may provide an acceptable technical proof of the effect of a causal event. It is a static method of calculation that relies for its baseline on the final built schedule of work, from which are subtracted the delays to progress alleged to have been caused by identifiable events in order to calculate their effect on the key dates or completion date. 15–118 The essential characteristic of collapsed as-built impacted methodology is thus that a CPM-based as-built schedule will react to change forms the baseline from which calculations of effect are made. The calculations are made by subtracting from the baseline the fragnet, sub-network, or other calculation of the period of effect on progress of the event alleged and recalculating the schedule key dates and completion date as a result of the changes subtracted. The effect of the causal event on the key dates and completion date is then the difference between the date calculated before the event was subtracted and that calculated after the event is subtracted. 15–119 The collapsed as-built analysis is typically more difficult to perform than the as-planned impacted analysis, because project-planning software invariably treats asbuilt dates as historical events fixed in time, but this type of analysis cannot be executed on schedules containing actual dates. Thus, to create a schedule fit for use to accomplish “but-for” simulations, these fixed dates must be removed from the computerised asbuilt schedule and substituted by planned dates, and a logic network created that calculates the start and finish dates identical to those actually achieved replicating the historical start and finish dates. 15–120 The divination of the actual logic followed in an as-built schedule often causes problems for the analyst. Take, for example, the timing of a particular activity, which at the planning stage may have depended on a logical predecessor. When it comes to the result of delaying events, the sequence in which that particular activity occurs can often be conditioned more by such things as the availability of labour or materials, dictating when a particular activity may start, or re-start, rather than any objective, predictable engineering sequence, or “hard” logic120. 15–121 This can produce some difficulties for the analyst who, in the absence of adequate records and faced with an as-built schedule that bears little relationship to the as-planned schedule, must, for the purposes of any collapsed as-built analysis, try to find some form of logic that will hold the activities in the periods in which they were actually carried out. 15–122 Once the schedule logic has been established, the next stage is to convert the as-built schedule into a dynamic model. This schedule, simulating the as-built schedule, is then called the simulated as-built schedule and is used to produce the collapsed as-built analysis. 15–123 In preparing the as-built dynamic schedule, the analyst must include the durations of all those activities and variations that have affected the construction process. Thus, having produced the dynamic model, the analyst must then separate the activities into those durations that represent the planned duration, those that represent the durations of

119 Also known as a “modelled/subtractive/single simulation” analysis, see American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009), pp.68–84. 120 For guidance on different types of logic see Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (2010), para.3.8.27.

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D’s risk events and those that represent C’s slippages. There is necessarily a degree of subjectivity in this, which is often the subject of criticism of analyses based upon this methodology. In the collapsed as-built analysis, those delays to progress caused by identifiable events are removed to predict what would have been the completion date, but for the effect of the delays to progress caused by a selected party or by all the parties. 15–124 Typically, the methodology involved in converting an as-built schedule to a simulated, dynamic as-built schedule will follow the pattern below: 15–125 Milestones: 1. 2. 3. 4. 5.

identify the milestone flag; fix “start-on” date to match the “as-started” date; remove “as-started” notation; recalculate the critical path; and check that the as-planned date is the same as was the as-built date.

15–126 Activities without starting constraint: 1. 2. 3. 4. 5. 6. 7.

identify the activity; fix the “start-on” date to match the “as-started” date; set the activity’s original duration to equal the actual duration; set the activity’s percentage complete to equal zero; remove the “as-started” and the “as-finished” dates; recalculate the critical path; and check that the as-planned dates driven by the logic are the same as the as-built dates; if not, adjust the start-on date and original duration, and re-schedule until they are the same.

15–127 Activities with starting constraint121: 1. 2. 3. 4. 5. 6. 7. 8. 9.

note the start date of the activity; identify the predecessor and the logical links; locate each predecessor in turn and identify the driving relationship; if there is lag, adjust it to conform to the difference between the finish of the predecessor and the start of the subject activity; set the original duration as equal to the actual duration; set the percentage complete as equal to zero; remove the “as-started” and “as-finished” dates; recalculate the critical path; and check that the as-planned dates are the same as were the as-built dates; if not, adjust the lag, or original duration, and re-schedule until they are the same.

15–128 Omission of work: 1. 2. 3. 4.

identify the activity, the start, finish, or duration of which was omitted; identify the date upon which such omission was planned to happen, or to be performed together with its logical predecessor(s) and successor(s); add the “omitted” activity, with its duration set to zero, logically linked to its predecessor and successor; and recalculate the completion date.

121 Where the finish of the predecessor is not the same as the start of the activity, ie there is a period of lag between the finish of the predecessor and the activity.

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15–129 Failure to perform: 1. 2. 3. 4.

identify the activity, the start, finish or duration of which is affected by the failure to perform; identify the date by which performance was required and, if not already identified as a milestone, mark with a start milestone; add an appropriate “delay” activity, separated into periodic bars if necessary, logically linked between points 1 and 2122; and recalculate the completion date.

15–130 When completed, the simulated as-built schedule will permit activities to move and interact within the bounds of their logical predecessors and successors and will reflect the effects of the causes identified. 15–131 Figure 15.2 illustrates a simulated as-built schedule, with a delay to progress identified. In the collapsed as-built analysis, the identified delay to progress has been given a zero duration to simulate the effect of its not having happened. Once the delays to progress caused by identifiable events are identified as unique activities and are tied to specific schedule activities by logical predecessors and successors in the simulated as-built schedule, the as-built critical path of the project can then be identified to determine which events, if any, actually affected the completion of a key date on a party-by-party basis. 15–132 The collapsed as-built analysis technique is popular with both developers and contractors, because, unlike the as-planned impacted method, it is based on consideration of the actual build times and can be used for determining not only the period of excusable delay, but also the period over which loss and expense may have been suffered. 15–133 The method to be adopted in producing a collapsed as-built analysis will depend largely on what is to be proved and the tools available to the analyst. For example, if C’s schedule has been updated regularly to reflect progress on the site and the problem to be analysed concerns the extended duration of planned activities, then the process might well proceed according to the following analytical steps: 1. develop a comprehensive listing of all changes, or unanticipated events which occurred during the project and relate those impacts to specific points in time; 2. prepare a complete and accurate written description of each major change or event; 3. review the contract documents to confirm that the change, or unanticipated event is reimbursable, or excusable; 4. document the contractual bases for alleging excusable and reimbursable delays; 5. from the project files, obtain electronic copies, if possible, of the original schedule and any subsequent revisions to it; 6. using the periodic as-planned schedule updates and contemporaneous project records, establish or confirm as-built dates for critical and near-critical activities over the life of the project; 7. using these as-built dates, update the last recorded schedule to reflect the complete as-built history of the project through to completion; 8. identify where variances exist between planned and actual performance; 122 See also, Ch.14, “Cause and effect” at paras 14–070 to 14–129, above.

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9. prepare a “variance analysis table”, which compares as-planned and as-built start and finish dates, as well as as-planned and as-built lag durations for activity successors and predecessors; 10. determine the extent of the variances (in calendar days) when an as-built activity: (a) takes longer to complete than planned; (b) is completed earlier than planned; (c) starts later than planned; or (d) starts earlier than planned; 11. using contemporaneous project records, establish the “cause”, or “causes” for each variance between planned and actual performance; 12. determine the responsibility for each change or unanticipated event identified that impacts a critical or near-critical activity; 13. incorporate this information into the previously developed variance analysis table; 14. create a discrete activity for each delay and incorporate it into the network logic; 15. adjust the duration of the delayed activity so that the combined duration of the imposed delay and the delayed activity or lag equals the as-built duration of the delayed activity or lag; and 16. perform simulations to determine the extent of C’s reimbursable, excusable and concurrent delays. [Please refer to Figure 15.2] 15–134 In the event that, apart from disruption, there are additional activities carried out as a result of change, or in the event that C’s schedule has not been followed, or has not been updated regularly, then the first seven steps will tend to follow a different pattern: 1. 2. 3. 4.

5.

recover and analyse all relevant records that record progress on any work on site, eg instructions or requests for information; reduce the records analysis to time bars on a schedule illustrating the sequence of work actually followed; where records are missing, or plainly inadequate, supplement the record by witness statements; identify those activities that: – were omitted from the contract; – are additional to the contract tendered for; – were extended in duration as a result of disruption; or – were accelerated; and prepare a logic framework linking together the activities.

15–135 Simulations can then be performed by setting to zero the duration of the events “but for which” the project would have been completed earlier in the case of: 1. 2. 3. 4.

D-caused delays to progress, which are excusable and reimbursable; reimbursable delays to progress, together with excusable, but non-reimbursable delays123; C-caused delays to progress; and all delaying events together of whatever cause.

123 Such as severe weather, or labour disputes and strikes.

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15–136 There are at least three different ways of carrying out a collapsed as-built analysis. 1.

2.

3.

The duration of events of commission can be zeroed and the planned durations added to any omitted work, in any order and the total effect of all when taken together can be calculated by re-scheduling once, after the durations of all events have been modified124. The total work period can be divided into a series of windows or watersheds and the duration of events zeroed, or durations added into the schedule for omitted work, in reverse chronological order of date of cessation of effect in each window or watershed to be analysed in reverse chronological order in turn125. Each event can be zeroed, or the duration of omitted work added to the schedule in reverse chronological order of date of cessation of effect and the effect recalculated after each event and before the impacting of a subsequent event126.

15–137 Theoretically, the last run of the schedule in each case should be the “no disruptions” model, which should produce the same schedule as was prepared as C’s planned schedule at the outset of the project. However, if the “no disruptions” period is of longer duration than the original schedule, then this may be because: 1. 2. 3.

all the excusable events have not been taken into account; all the culpable delays have not been taken into account; or the planned schedule was in error.

15–138 On the other hand, if the “no disruptions” period is less than the period in C’s original planned schedule, this may indicate that: 1. 2. 3. 4. 5.

the excusable events have been exaggerated; the culpable delays have been exaggerated; omissions have not been added back; the planned schedule was in error; or C has accelerated production.

15–139 In any event, whatever errors are left should also be corrected and, if appropriate, added as specific events and the iterations rerun. 15–140 The resultant delay for which D is liable can be found by two sub-processes. In the first sub-process, the simulated as-built schedule can be analysed by progressively removing, in reverse chronological order, D-caused delay periods from the critical path until another path becomes critical127. At that point, the delay at D’s 124 This process is also known as a “modelled/subtractive/single simulation model/global extract” analysis. See American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009). 125 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009), for windows, the process is also known as a “modelled/subtractive/multiple simulation model/periodic modelling” analysis or, in the case of the watersheds, a “modelled/subtractive/multiple simulation model/ cumulative modelling” analysis. 126 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009), also known as a “modelled/subtractive/single base/stepped extract” analysis. 127 This method of analysis is also referred to as a “modelled/subtractive/multiple simulation/stepped extraction” analysis. See American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009).

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risk ends and the other activities and paths can be examined. If no other D-caused delay can be found on other paths, then concurrent C-caused delays, which may prevent C from recovering loss and expense for the balance of the overall project delay period, should be examined to see whether there are any “pacing delays”128, which should properly be regarded as part of the effects on progress of a D’s time risk event. 15–141 When the critical path can be traced from start to completion without coming across any specified “events”, then the analysis is concluded. Any such specified “events” not found on the critical path will then be found in float and, if reimbursable, can be examined for the purposes of compensation only. 15–142 The other sub-process is perhaps a little simpler. C can impact only those events that are D’s responsibility and the resultant analysis will then demonstrate the excusable delay period, leaving any excess over the contract period as culpable delay129. 15–143 By subtracting the induced effect of events from a recreated dynamic as-built baseline, rather than adding deduced events to an original planned baseline, it is sometimes thought that the result might be more meaningful. So, for example, the RP/FSA states: “Because it uses one network analysis model, it is technically a static logic method as opposed to a dynamic logic method. But recall that the significance of the distinction rests in the fact that the project undergoes non-progress revisions reflecting the as-built conditions in contrast to the original baseline logic. And in view of that, a method that dynamically considers how the original logic changed is thought to be more forensically accurate than that which statically relies solely on the baseline logic.”130

15–144 Provided that the contract permits it131 and, apart from the events identified, the work carried out actually followed the sequence of the baseline, this form of analysis has an advantage over the other forms of analysis based upon a static baseline. Subject to the reservations expressed above, the principal benefit of this method is that it produces a verifiable method of comparing an “as-built” record schedule against another that depicts, to an examinable degree, the schedule model of what would have transpired had none of the events occurred for which additional time or money is claimed. Other perceived advantages of this method of analysis are stated to be that: the concept behind the method is intuitively easy to understand; it utilises only records of actual events; proof of reasonableness of baseline schedule is not necessary; it can be implemented without any baseline or update schedules132. 128 See Ch.18, “Concurrency, parallelism and pacing”. 129 This method of analysis is also referred to as a “modelled/subtractive/multiple simulation/global extraction” analysis. See American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009). 130 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009) p.69. 131 Because ECC2 and ECC3 expressly require that the baseline from which C’s entitlement is to be calculated in relation to any particular event is to be C’s approved schedule as updated and impacted by the effect of previously occurring events, this method is not suitable for use with those forms of contract. (See Cll.31, 32 and 63.3.) 132 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009) pp.76–77.

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15–145 On the other hand, the perceived disadvantages of this method of analysis are that: it is perceived to be purely an after-the-fact reconstruction of events that does not refer to schedule updates used during the project; there are relatively few practitioners with significant, hands-on experience in preparing this analysis; it does not necessarily reflect changes in the prospective critical path indicated in contemporaneous schedule updates133. 15–146 However, in this author’s experience, there are a number of additional problems with this type of analysis flowing from the quality of the records relied upon. The challenge is in identifying: 1. 2.

the as-built period of work, or cessation of work caused by the effect of definable events, and the logical interface between activities and between activities and events in the order and sequence in which they were in fact carried out. As a result, the critical path must usually be inferred.

15–147 Other drawbacks to the collapsed as-built analysis method include134: 1. 2.

3.

4. 5.

the conversion from the as-built records to a network schedule fit for analytical purposes is often difficult and time consuming; the extraction of arbitrarily established periods of delay to progress from the simulated as-built schedule and manipulation of the extraction process can conceal the effect of C’s delays. These deficiencies can usually be discovered, however, by running several “what if” scenarios on the simulated as-built schedule, extracting D-caused and C-caused delays to progress separately and jointly, and evaluating more accurately the impact of each party’s effects on the project completion date and any concurrency; whilst the as-built schedule is analysed at completion, the critical path that contains the delaying activities will be the primary critical path at the date the event occurred. However, at the time that the delays to progress occurred, the ultimate route of the critical path may have been quite different, simply, because of the changes to the construction logic during the course of construction after the event took effect; it is difficult to deal effectively with concurrency135; and it cannot deal effectively with re-sequencing, acceleration or recovery.

133 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009). 134 See also Society of Construction Law, The Great Delay Analysis Debate (King’s College London, 2005). 135 Indeed, in City Inn Ltd [2010] CSIH 68, at [15], Lord Osborne thought it impossible for this method to deal appropriately with concurrency, saying: “in the application of [Cl.25, JCT80, a D’s time risk event] may still be taken into account even though it operates concurrently with another matter that is not a [D’s time risk] event. In other words, the ‘but for’ rule of causation, that an event A will only be a clause of a result B if B would not have occurred but for A, has no application.”

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15–148 Although, when executed in windows or watersheds136, it is sometimes thought that many of the alleged disadvantages are diminished, in this author’s opinion that is not the case and such benefits as are alleged are often illusory.

Time impact analysis “The impact of each change, or delay, on the previously charted sequences must be fitted into the network Activities that were not critical prior to the new event may be rendered critical; and conversely, formerly critical activities may develop float.Whether the change or delay affects the critical path must be determined on the basis of conditions existing immediately prior to its occurrence.”137

15–149 As its name suggests, time impact methodology (also sometimes referred to as the “snapshot”, or “time slice” method)138 is another impact technique that calculates the effect of a defined causal event, rather than relying on inference of a cause from the perceived effect. When properly used, this method produces the most thorough and reliable technical proof of the effect of a causal event. It is this method of analysis that is impliedly required by ECC2 and ECC3139 and expressly required by US government contracts140, it has been recognised as an appropriate method of analysis by the US Boards of Contract Appeals141, and it is acknowledged by the CIOB Guide142 as the appropriate method for contemporaneous analysis and by the SCL Protocol143 as the appropriate method of contemporaneous analysis and the most thorough method of retrospective analysis. 15–150 It is a dynamic method of calculation, which derives its baseline from C’s changing schedule during the course of the works, to which are added the fragnets of events that have occurred in order to calculate their effect on the schedule expressly, or impliedly in use at the time of the event. In doing so, it takes account of the changing pattern of float and shift in the critical path. 15–151 The essential characteristics of time impact analysis are: 1. 2.

3.

there is a CPM baseline schedule that will react dynamically to change144; that schedule is updated to a date shortly before D’s time, or cost risk event was initiated to identify the effects of any delay, recovery, or acceleration by C not related to the event and to establish C’s express or implied intent for the future conduct of the works; the fragnet of the event is then added to the updated schedule, linked logically with the schedule and its effect calculated on progress and on a key date, in

136 For which see, below at paras 15–164 to 15–175. 137 Norair Engineering Corp (1990) ENGBCA 3804 et al, 90–1 BCA 22,327. 138 Although essentially this is a contemporaneous delay analysis, according to the taxonomy, if carried out retrospectively, this method would be a “modelled/additive/multiple base” analysis. See American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009). 139 Cll.32 and 63.3. 140 See USACOE Modification Impact Evaluation Guide, EP415–1–3 and VACPM Handbook 4–08–11. 141 See, for example, Gulf Contracting Inc (1989) ASBCA No 30,195, 89–2 BCA (CCH) 22,812, affirmed (1990) 90–1 BCA (CCH) 22,393; Norair Engineering Corp (1990) ENGBCA 3804, et al, 90–1 BCA 22,327. 142 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects, 2010, para.4.5.15. 143 Society of Construction Law, Delay and Disruption Protocol (2002). 144 For a specification of what is required of the schedule for the pro-active effective management of time, see Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects, (Chichester: Wiley Blackwell, 2010), Pt 3.

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4.

5.

the same way as in an as-planned impacted analysis. This identifies the putative effect of the event as the difference between the key date calculated before the event was added, and that calculated after the event was added; the impacted schedule is then updated again with as-built records to determine whether the dates on which activities were started, completed, or key dates were achieved are actually greater or less than the delay to progress or completion that was likely to occur as a result of the event. From this can be deduced whether C was in concurrent delay to progress or completion, or achieved recovery or acceleration; whenever C changes its intended planned sequence145, the new planned sequence is impacted by substituting the new for the old and recalculating the completion date as a new baseline. In the event that that indicates an earlier planned completion date, it illustrates C’s intent to implement recovery. In the event that it illustrates a later completion date, it illustrates C’s intent to delay completion.

15–152 This simple contemporaneous approach to delay analysis allows assessment to be made of four important aspects, which tend to be unavailable with other methods: 1. 2. 3. 4.

the actual state of progress at the time the event was initiated; the changing nature of the critical path as a result of delays to progress, recovery and acceleration; the concurrency of delays to progress and to completion; and the degree of recovery or acceleration planned and achieved from time to time.

15–153 Time impact analysis is a CPM-based method based on the analysis of delaying events at the time they occur. In this method, it is recommended that, during the course of a project, in addition to preparing periodic updates of the as-planned schedule, when changes, or other unanticipated events have been recorded as having occurred, C should also prepare an analysis to determine what the delay to the progress and likely completion of the project has been and how it has occurred, to quantify the extent of the delay, and to document the pertinent facts contemporaneously146. If this is carried out in conjunction with the regular schedule update, then the time impact analysis can be based on the current as-planned schedule, updated to reflect the as-built conditions and progress of the project, up to the point in time when the change, or unanticipated event occurred. 15–154 The as-planned, or uncompleted portion of the schedule is then used to forecast the intended timing of outstanding work. By comparing the newly established completion date to the previously as-planned completion date, the analyst can then assess the anticipated impact of any delay-causing event. The as-planned schedule can also be updated and issued after the delay, or impact has been resolved as being the intended schedule for the future conduct of the work. 15–155 In the first step of this technique, the as-built history of the project, including changes in sequence, is determined up to the date of the delay. A fragnet147 of activities is 145 In practice, it is often found that, rather than being the subject of a published recovery schedule, re-sequencing is not apparent until the as-built records are taken into consideration in updating the schedule between events. In such circumstances the analyst will often need to go back and investigate when the decision to implement recovery was, or can be deemed to have been made, so as to be able to attribute the root cause for it and consider whether it might have been acceleration or constructive acceleration. See also Ch.11, “Mitigation, recovery and acceleration”. 146 This is what is required by ECC2 and ECC3, Cl.32. 147 See Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), throughout.

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then developed to indicate the activity content of events that were not originally anticipated in C’s as-planned schedule. The planned durations and sequences are then used to forecast the schedule dates for the remaining work, as well as the revised project completion date. 15–156 If C’s as-planned schedule has been revised, or updated to reflect actual progress, re-sequencing and delays to progress already experienced, the revised and updated schedule will be employed for this. The schedule is then monitored and updated to record any changes in the schedule until the “event” has ceased to operate. Thus, the time impact method reflects both C’s event history and the as-built history of the project through the effects of each event. 15–157 The method of analysis for activities that are added to or changed is below: 1. 2. 3.

4. 5. 6. 7. 8.

9.

At the start of the simulation, identify the planned network and gather together the relevant records and documents. Make a chronological list of those events148, along with supporting documentation, which are to be considered. Identify the first event which is: – reimbursable; – excusable, but non-reimbursable; – neither reimbursable nor excusable (if identifiable). Identify the dates on which the events in step 3 were initiated. Identify the progress records for the date, or just prior to the date, on which the causal event occurred. Using the progress data, update and reanalyse the network and recalculate the critical path149. Using the updated network, add the causal event and connect its logical predecessors (if any) and successors. When the causal event has been added, the network is reanalysed and the critical path recalculated. If the causal event was on, or near the critical path, the forecast end date (calculated by the progress update) will be extended. The difference between the forecast end date and the finish date now calculated is the delay to progress actually caused and the delay to completion likely to be caused by the event. Once all activity delays have been quantified, the origins and causes can then be researched and responsibility for the consequences of each event can be allocated to either C or D according to the terms of the contract.

15–158 When carried out retrospectively, because the object of a time impact analysis is to reproduce the sequence of events as they occurred in fact, the method of analysis for a failure to perform is slightly different for two reasons. 1.

Whilst the commencement of a failure to perform may well be identifiable from the moment the act was planned to have taken place, that may not always be the date from which the event should be impacted150.

148 Including non-excusable delays by C. 149 If the update indicates that the project is forecast to finish ahead of schedule, C has, by its efforts, created additional float in the project. On the other hand, if the update indicates that the project is forecast to finish behind schedule, C has an inexcusable delay which it may wish to take action to reduce. 150 Consider the failure to expend a provisional or prime cost sum; see also Ch.14, “Cause and effect” at paras 14–033 to 14–044, above.

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2.

The end of a failure to perform will only occur when the act is performed, which may be months or even years after commencement and, in some cases, many other events will have occurred during the period of omission to affect the works in parallel therewith.

15–159 In a similar manner to the identification of a delay period in the as-planned impacted method151, in this method of analysis, the duration of a failure to perform has to be added as a “delay” activity, logically linked to its predecessor planned start and successor related activity. 15–160 Unless the omission to be impacted is of short duration, say less than four weeks long, it will rarely be appropriate for the duration of the omission to be impacted in full from its commencement. For omissions or failures to perform lasting longer than four weeks, a “windows” approach to its impacting should normally be adopted152. 15–161 There are at least two different ways of carrying out a time impact analysis: 1.

2.

The events can be added and the durations of omitted work zeroed, in chronological order of date of inception, the schedule being updated with progress, and re-scheduled immediately before each event is impacted and the effect of progress and each event being calculated, in turn153. Each event can be added to the schedule in chronological order of date of inception and its effect calculated after each event is impacted and before the impacting of a subsequent event, the schedule being updated in windows154 or watersheds in chronological order155.

15–162 When executed retrospectively, this technique can lead to a vast amount of data if the project experienced several hundred excusable and non-excusable delays, over a long period of time and this is a practical problem with the use of time impact analysis when executed other than in “windows” (that is, updated to reflect the contemporaneous status of the works at regular intervals of time, rather than immediately before the initiation date of each event). The essential difference between time impact analysis updated before every event and one updated in “windows” is that, whereas in the latter it is the closing of the “window” in time that dictates when and what is analysed, in the former it is the occurrence of the event itself and the cessation of its operation that dictate what is analysed and at what point in the progress of the project it is analysed. 15–163 Despite the windows approach representing a degree of compromise of accuracy for the sake of practicality and convenience, time impact analysis is commonly understood in the industry to be the most thorough method of analysis and the only way in which the true effect of an event can be analysed to take account of all its consequential effects and concurrency during the course of a building contract.

151 See Ch.14, “Cause and effect” at paras 14–045 to 14–060 and also paras 14–099 to 14–106. 152 See paras 15–164 to 15–175, below. 153 In the United States this would be referred to as a “modelled/additive/multiple base/stepped insertion/variable periods” analysis. See American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009). 154 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009), referred to as a “modelled/additive/multiple base/stepped insertion/fixed periods” analysis. 155 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009), referred to as a “modelled/additive/multiple base/stepped insertion/variable periods or grouped” analysis.

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Windows and watersheds 15–164 “Windows” and “watersheds” are not methods of analysis in themselves; they are merely processes in the conduct of a given method of analysis. In essence, they represent the division of the overall construction period into smaller periods into which each new set of corresponding progress information can be entered into the schedule. Once divided into identifiable periods, any method of analysis can then be applied to the selected “windows” of time156 or “watersheds”157. 15–165 For example: 1.

2.

If, during the course of a project, C’s schedule was updated on a regular basis, for instance, by way of report to monthly project meetings, the periods analysed can conveniently be matched with those corresponding with when progress information was issued, or the schedule was updated, hence forming monthly “windows”. If the schedule was not updated, but regular progress records were kept, then a series of windows can be selected to reflect dates upon which events were initiated. For instance, if two groups of events occurred three months apart, one convenient window might be from commencement until the first group of events had occurred; the second might be formed between completion of that and the initiation of the second event; and the third window might be from the second event, until completion. This is commonly referred to as a “watershed” approach.

15–166 In principle, there is no reason why the window analysis process should not be used with any method to analyse any event, whether it affects the critical path or not. The essence of window analysis is not in what is analysed, or how, but in the point at which it is analysed. Generally, the methods of discovering the relationship between a causal event and its effect, previously discussed, have been based upon an appreciation of the effect on the total contract period. Window analysis is based not on the whole contract period, but particular “windows” in time. It is based on analysis of the effects of delays over the life of a project by looking at the events which have affected progress within each “window” of the contract period sequentially. 15–167 In approving a windows approach to time impact analysis on a major complex project, in Mirant v Ove Arup158 Judge Toulmin observed: “Unlike previous monthly reviews, the [analyst] would use sophisticated software [schedules] to plot which activity, or activities were on and which were near to the critical path each month. The [schedules] would take into account those activities which had started early, or had been delayed. Also built into the [schedules] would be the progress of those activities which had started since the previous monthly window. This would enable [D] and [C] to analyse over the relatively short periods of time what changes had occurred, and identify what problems needed to be investigated and put right. The analysis would also identify delay, enabling those concerned to investigate and, if appropriate, agree the cause at an early stage. A monthly review would, in a complex project like Sual, have enabled the consortium to see what activities were at, or close to the critical path and to take urgent action where necessary. It would also have enabled a much more sophisticated retrospective analysis of the delay to be undertaken than that which was able to be carried out.”

156 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009), referred to as “fixed periods”. 157 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009), referred to as “variable windows or grouped”. 158 Mirant Asia-Pacific Construction (Hong Kong) Ltd [2007] EWHC 918 (TCC) at [132]–[133].

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15–168 Analysis of the events within a “window” can be carried out by any method that appears suitable in relation to the data to be analysed. For example, in the Armed Services Board of Contract Appeals case of Donohoe159, it appears to have been carried out by the as-planned versus as-built method160. If it is carried out by means of the collapsed as-built method161, then, in “window” analysis, the data will obviously be that derived from factual, as-built information and not an objective assessment of likelihood, such as that used in the as-planned impacted analysis discussed earlier. However, as with any as-planned versus as-built method, unless the facts are remarkably simple in a schedule of work that is very simple to analyse, claiming for the difference between what was planned and what was built is a method of proof that is unlikely to be satisfactory as a proof of entitlement, even on a “windows” basis. 15–169 Windows and watershed processes are most effective when used contemporaneously and on the basis of the as-planned schedule being updated regularly throughout the course of the project as a time impact analysis. The CPM schedule used in this method then becomes a dynamic model, adjusting and reacting to the changing circumstances with each update. This method can also be used retrospectively to impact the effect of additions to the schedule and is really the only effective way of dealing with omissions and failures to perform when the record of the state of play at regular intervals is also available162. 15–170 It is foreseeable that, in any one window, there may be a change in the planned logic, sequences, activity durations and added or deleted activities. Since these modifications may also change the route of the critical path, from period to period, it is always necessary to analyse the critical path in each of the updates from commencement to completion and not just actual activity dates compared to the original plan in discrete periods163. 15–171 Because each window is only a segment of the contract period, the results of the analysis of each window must be summarised and carried forward to the next window. It is thus only when the last window, closing at actual completion, has been analysed and summarised that the totals of the various changes can be added together to demonstrate the effect on completion of the various events and contingencies. 15–172 At the close of each window it will be necessary to list those events found in the window which, in relation to what was expected at the beginning of it, represent the: 1. 2. 3.

addition of a new activity164; omission of an activity; or a failure to perform;

159 Donohoe Construction Co (1998) ASBCA Nos 47,310, 47,311, 47,312, 47,315, 47,535 and 47,538 and on appeal (1999) ASBCA Nos 47,310 and 47,312. 160 Also referred to as an “observational/static logic/periodic/fixed period” analysis. See American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009). 161 American Association of Cost Engineers International, Recommended Practice No 29R-03 (2009), a “modelled/subtractive/fixed periods” analysis. 162 It is a method which has been used retrospectively by this author in a number of highly complex projects, involving several hundred events, impacted over several years, on a monthly basis, successfully to attribute the cause and effect of delay to multiple completion dates, key dates and subcontractor completion dates. 163 See for example, Mirant Asia-Pacific Construction (Hong Kong) Ltd [2007] EWHC 918 (TCC) and Costain Ltd [2009] EWHC 3140 (TCC); [2010] TCCR 1. 164 Specific acts of omission that cause delay, such as the repair of defective work, should be defined as a new activity.

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or have, in relation to the status of the previous “window”: 1. 2. 3. 4.

taken longer to complete; been completed earlier; started later than planned; or started earlier than planned.

15–173 Because the “window” method of analysis focuses on sequential periods of project performance and on the contemporaneous critical path, this method of analysis has significant benefits over those that deal with the project period as a whole165. Whilst each window may contain a number of conditions affecting progress, because the window necessarily represents a limited period in time, it will affect few activities. This is the principal advantage of window analysis. The small number of activities analysed in each window makes analysis easier, and tends to render the interpretation of the results of the analysis more convincing than when the analysis is based on hundreds of activities over the whole contract period. It is a method that has been accepted by the US166 and UK167 courts and one that follows naturally from a regularly updated CPM project schedule. 15–174 Naturally, the preparation of a window for analysis becomes more challenging when these scheduling rests are unavailable and the as-built history of each window has to be reconstructed retrospectively from the project information. Some commentators168 think that, if periodic updates are not available, then it is still possible retrospectively to reconstruct the window by adopting a watershed approach169. The idea is that the analyst will choose various milestones through the project that dictate the course of the project170, or decisions that change the course in some way171. It is then said that such a watershed approach is helpful in keeping down the size of the analysis and that it tends to bear a closer relationship than other methods with a “common sense” approach in terms of what the parties consider to be important. 15–175 However, it is sometimes the case that, when regular updates are not available, not only do contractors not keep good records of the progress of their planned work, but they also generally fail to keep any records at all of anything that is not on the planned schedule. The task of then identifying, retrospectively, the effect of change on the planned schedule of work in windows of time becomes extremely difficult and accuracy suffers.

165 See also R Lane, “Cause Effect Analysis for Delay and Disruption Claims” (2nd series, 1994) 12 Construction Briefings 1. 166 See, for example, Donohoe Construction Co (1998) ASBCA Nos 47,310, 47,311, 47,312, 47,315, 47,535 and 47,538, 98–2 BCA 30,076, and on appeal (1989) ASBCA Nos 47,310 and 47,312. 167 Mirant Asia-Pacific Construction (Hong Kong) Ltd [2007] EWHC 918 (TCC) at [131]–[136]. 168 R Fenwick-Elliott, Building Contract Litigation, 4th edn (Harlow, Longman, 1993). 169 R Fenwick-Elliott, Building Contract Litigation, 4th edn (1993). 170 For example, completion of below-ground works, weatherproof envelope, walls and partitions, first fix M&E, power on, static completion, and so on. 171 Analysis by event, rather than by time “window” is essentially “snapshot analysis” or, by reference to the RP/FSA, “stepped insertion”.

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CHAPTER 16

Float and time contingencies

Introduction Float Free float Independent float Interfering float Total float Negative float Time contingencies Standard form provisions Who owns the float? Potential ambiguities between free float and contingency Ad hoc creation of total float Interpretation of total float as contingency Example 1 – absence of completion constraint on planned work Example 2 – applied completion constraint upon planned work Example 3 – non-driving link between applied constraints Example 4 – applied fixed lag between unconstrained milestones Example 5 – time contingency activity Example 6 – contract duration bar Total float belongs to D Total float belongs to C Total float belongs to the first to get to it

16–001 16–007 16–012 16–018 16–020 16–022 16–043 16–044 16–058 16–073 16–075 16–088 16–097 16–100 16–103 16–107 16–110 16–113 16–115 16–120 16–123 16–134

Introduction “If every activity is a problem, then nothing is really a problem. If all blends into the overall morass of project difficulties, and the most appropriate target of management attention and available resources fades into the mist.”1

16–001 As with many other terms used in connection with time management, scheduling and delay-related issues, the word “float” is not used consistently by everyone to

1 M Harfield, PM Network (2001).

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mean the same thing. Depending upon how the word is used, it can refer to at least two distinct phenomena: time that is unallocated for any purpose; and time that is allocated, but for an unspecified purpose. 16–002 Whilst this primary distinction might appear to be superficial, its true significance becomes apparent when the origin of float is taken into consideration. Float is a by-product of critical path network planning and, before the invention of CPM network scheduling, in the early 1960s, projects were managed by reference to bar charts and flow charts, without any concept of interdependencies or float at all. Outside the context of the critical path network, from which it is calculated, the word “float” has no meaning. Its genesis is the matrix of activity durations and their predecessor and successor relationships in a CPM network. Float is really the time that is unallocated for any purpose and is truly a representation of “spare time”. 16–003 Whilst, in the event of subsequent shift in the timing and sequence of activities in the network, it may later become time required for a purpose, which had not previously been considered, that, alone, does not render such float a contingency. Thus, at the time of its creation by the software calculations, its essence is that it is unallocated and is thus available to be taken up, or redistributed by whatever it is that uses it, to extinction, or it will remain as spare time. In this regard, the CIOB Guide advises: “Float occurs in a critical path network as a result of the calculations made by reference to activity durations and logical sequence. Designated non-working periods (such as those identified as religious, industrial, or statutory holidays, or weekends), are not float and should not be treated as such. Consistent with the type and quantity of float, activities which are in float will be able to absorb a degree of flexibility in their start and finish dates without affecting other activities and/or the critical path. However, because the available float at any one time will not remain constant, and it is not normally preserved by the construction contract for any one party’s use at any time, the availability of float on some, or even on all, activities in a network should not be seen as a substitute for contingency planning.”2

16–004 It is the use of the word “float” in the context of contingency planning that stimulates much of the confusion and the debate about who “owns” the float. 16–005 Time that is positively set aside for an unspecified purpose is truly a time contingency. It is not then “spare time”, or time that is not required; it is time that is required, but for something yet to be decided upon. Unlike periods of float, which are calculated by the network algorithms of the scheduling software, contingency periods are decided upon by the parties and can exist in any schedule, of any type and not necessarily in critical path networks. 16–006 In this regard, the CIOB Guide advises that3: “Contingency planning is the development of a strategy to minimise the effects of intervening events which could possibly occur to interfere with the smooth running of the project at some time between inception and completion. A contingency is a planned allotment of time, which may be taken up as a result of the occurrence of an intervening event. Accordingly, in the same manner that cost budgets usually have an allocation of funding called ‘a contingency sum’ which [D] may rely upon to spend against unforeseen additional 2 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) paras 3.8.50.1 to 3.8.50.2. 3 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010) paras 3.8.54.1 to 3.8.54.3.

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work, the schedule must have strategically placed contingency activities to absorb the time effect of intervening events which are at [D’s] risk. A prudent contractor will also make allowances for the risks it bears in the management and distribution of the resources, their variable productivity in different circumstances and the quality of the work carried out.”

Float 16–007 The expression “float” tends to be an elusive concept because: depending upon whether the arrow diagramming method (ADM) or precedence diagramming method (PDM) of scheduling is adopted4, the calculation of available float will be different; and the word is used to describe several different phenomena that can exist together, in the same time period, or at time periods independent of each other. 16–008 Figure 16.1 illustrates the relative positions of float in relation to a single activity in an ADM network, as described in the CIOB Guide5. [Please refer to Figure 16.1] 16–009 As Weaver points out6, in the ADM method of calculating float, a calculation is made only on the basis of logical finish-to-start relationships and not only for the events at the end of the arrow, but also the arrow itself. As a result, float data becomes available for: float existing at the start of an activity7; float in the activity itself 8; and float existing at the end of the activity9. 16–010 On the other hand, in PDM networks, the position is potentially different because of the start-to-start and finish-to-finish logic available in this type of schedule (which links are not available in an ADM network): “the only two ‘floats’ that can be reliably calculated in a PDM schedule are the total float that is calculated from data contained within the activity/task and free float which is calculated by measuring the time gap between the early finish of the preceding task and the earliest of the early starts of its successors Calculating the other floats for a PDM network depend[s] on whether the activity is allowed to stretch, split or is scheduled contiguously to meet the latest of the ‘early start’ conditions imposed by different link types.”10

16–011 Accordingly, CPM scheduling software typically calculates the different types of float for each activity after performing a “forward” and “backward” pass to evaluate 4 See Ch.8, “Presentation and approval of programmes”, paras 8–036 to 8–047. 5 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects, 2010 at Fig 27. Based upon the diagrams of HS Woodgate, Planning by Networks, 3rd edn (Beekman Publishers Inc 1977) pp.89 and 113. 6 P Weaver, “Calculating and using float” (November 2009) PM World Today. 7 P Weaver, “Calculating and using float” (November 2009) PM World Today, referred to as early event float. 8 P Weaver, “Calculating and using float” (November 2009) PM World Today, referred to as independent float. 9 P Weaver, “Calculating and using float” (November 2009) PM World Today, referred to as late event float. 10 P Weaver, “Calculating and using float” (November 2009) PM World Today.

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the early and late dates and, depending upon whether the schedule is an ADM or PDM network, the network can produce radically different calculations of the float available: “Precedence networks position the activities on the ‘node’ (Ie, the event in an arrow network) and connect the activities with ‘arrows’ called links. The PDM methodology does not attempt to calculate any values for its links; each link merely defines a logical relationship between two activities. However, given links can be connected to or from the start and the end of a precedence activity, the issues of the existence of pseudo start and end events independent of the activity duration remain. But, whereas Arrow diagrams had discrete components and precise rules as to how these were calculated, the PDM methodology has never defined an agreed set of calculations to deal with the same issues.”11

Free float 16–012 Free float is the amount of time by which any activity can be delayed without delaying any other activity12. Weaver describes this as “free float early” and also identifies the possible variant of “free float late”13. Free float only exists internally within the body of the schedule of works between the commencement date and the date for completion indicated on the schedule. 16–013 In the diagram at Figure 16.214, the free float is the unallocated time of four days between the completion of activity 18 “slipform parapet” and activity 2 “clear site”, which is the free float on the completion of activity 18. The effect of this is that activity 18 can take up to four days longer than was planned, without affecting any other activity on the schedule15. [Please refer to Figure 16.2] 16–014 At Figure 16.3, after re-sequencing, an additional resource logic link was added so that the second tranche of “excavate embankment”, activity 8, could start immediately after the first tranche had been completed, instead of waiting until after asphalt finish had been applied to the first tranche (activity 7). This automatically creates 31 days of free float on the first tranche of asphalt, activity 7, with the effect that that activity, although planned to be carried out starting on 19 April, could equally well be started at any time between 19 April and 1 June without affecting any other activity. 16–015 Accordingly, it can be seen that free float occurs incidentally to the planning of the works, as a result of the chosen sequence and durations of the planned activities in the schedule of operation. [Please refer to Figure 16.3] 16–016 Thus, the free float will change from day to day throughout the currency of the works, as a result of planned, or accidental re-sequencing, or as a result of the difference between planned and actual start and finish dates for planned activities. 11 P Weaver, “Calculating and using float” (November 2009) PM World Today. 12 Also defined as “time by which an activity may be delayed or extended without affecting the start of any succeeding activity” see British Standard BS 6079–2: 2000 Guide to Project Management –Vocabulary, para.2.70. 13 “The amount of scheduling flexibility available on the activity when every operation is scheduled at its latest possible time. This is the ‘free float’ used for resource levelling on the ‘back pass’” P Weaver, “Calculating and using float” (November 2009) PM World Today. 14 Based upon a diagram produced by M Lehmann, PE “CPM Schedule development, review and analysis guidelines”, Accelerated Construction Strategies Guideline (Texas Department of Transportation, 2003). 15 Note that on this and subsequent diagrams, total float is represented by the small grey bars appended to the end of the activity bars, whilst critical activities are those with darkened edges.

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When resource levelling is carried out to reduce the peaks and troughs in resource allocation, it is the free float that is sacrificed16 (or created) by extending the duration of activities to reduce the resource needed, or by shortening the activity duration to increase the resource required. For example, if, for the purpose of resource management, it was decided to carry out the asphalt in one continuous operation, activity 7 would be carried out between 1 June and 6 June and activity 11 would follow on straight after it (Please refer to Figure 16.4). Because its predecessor must be completed before work to the south lane can commence, the free float on activity 7 would then automatically be extinguished entirely. 16–017 Floating non-critical activities to absorb the effects of labour, or plant allocation to critical activities (in other words, smoothing, or levelling17 resource allocations by dragging out the time it takes to complete non-critical activities) is one of the more subtle uses of float. Most construction schedules will have a significant amount of free float that can be taken up in order to make the most efficient use of the available labour and plant. If a critical activity is running behind schedule, then, without causing any adverse change in the progress of an activity in float, C can shift its resources from the activity in free float to improve progress on the critical activity. The non-critical activity then extends in duration whilst absorbing some of the free float, but still permitting C to finish on time.

Independent float 16–018 Independent float (sometimes referred to as “activity float”) is the difference between the time allocated for an activity and the time that, with resources allocated, it is estimated that the activity will take to complete. It is float that is directly related to a particular activity, buried within the activity itself and calculated by the software18. 16–019 Independent float is usually manifest in a “discontinuous”19, “interruptible”20, or “stretched”21 activity. In this category of float, the gross period of time required to carry out the activity with the resources and productivity quotient anticipated will result in a shorter duration than that indicated on the schedule. It is created by the projectplanning software as a result of the calculation by reference to the specified predecessor and successor logic of a duration greater than the specified activity duration.

Interfering float 16–020 Whereas free float represents that proportion of time by which an activity can be delayed without impacting upon subsequent activities, interfering float is that element of free float to an activity which, if taken up, will interfere with its successors,

16 Although free float changes sympathetically. 17 Some software packages (for instance, Primavera P3) distinguish between resource “smoothing” and resource “levelling”. The former refers to adjusting the allocation of resources in a schedule so that the utilisation at any one time never exceeds a prescribed limit; the latter refers to adjusting the allocation of resources in a schedule so that the overall numbers of resources required are minimised altogether. 18 Also described as: “The amount of scheduling flexibility available on the activity without displacing any other activity (before or after). It is the float available to the activity regardless of the timing of either node”: P Weaver, “Calculating and using float” (November 2009) PMWorld Today. “Independent float” is not defined in British Standard BS 6079–2: 2000 Guide to Project Management – Vocabulary. 19 Open Plan Professional TM. 20 Primavera P3®. 21 Pertmaster Professional ®.

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but will not cause the project to be delayed22. Accordingly, interfering float can be calculated by the formula: Interfering float = total float – free float

16–021 Since interfering float is nothing more than the difference between free float and total float, both of which can be considered more useful from an analytical perspective, and since interfering float is an ADM concept and the majority of software packages currently in use are PDM based, many current software packages and commentators omit to mention interfering float. Nevertheless, reference to the concept is useful as an aid to understanding and distinguishing between these types of internal float.

Total float 16–022 Total float is the time by which the start, or finish of any activity may be delayed or its duration extended without affecting the total duration between the commencement and completion date23. Whilst total float is external to the schedule of work and resides between the completion of the last activity on the schedule and the contract completion date, each activity on the longest path to that completion date will have the same total float. Total float is created by the date for completion pre-dating the completion date, when an early completion is planned. It can be referable to the early completion of a defined section of a project or to early completion of the project as a whole. 16–023 CPM software usually calculates total float for each activity by either of the following equivalent formulae: Total float = free float + interfering float Total float = late start – early start Total float = late finish – early finish.

16–024 When calculated in this way, total float will be positive, and can be conceived as the difference between the length of the longest path upon which the activity in question lies and the duration between commencement and completion. 16–025 Unlike free float, total float can either be planned, or it can occur quite incidentally to the planning of the works as a result of the chosen sequence and durations of the planned activities in the schedule of operation. [Please refer to Figure 16.5] 16–026 For example, it cannot be determined from an examination of the CPM network alone, whether the total float of four days on the chain of activities comprising the bridge works in Figure16.2 (which, for ease of reference is reproduced as Figure 16.5) 22 This is also described as being the same value as “event float late” but calculated as total float minus free float. It is not defined in British Standard BS 6079–2: 2000 Guide to Project Management – Vocabulary; see also P Weaver, “Calculating and using float” (November 2009) PM World Today, in which by reference to ADM networks, its existence is explained as: “The reason interfering float was calculated was so that it was part of the activity record (with punch cards, etc it was very difficult to include data from different record types in a report).” 23 See also P Weaver, “Calculating and using float” (November 2009) PM World Today: “The time the activity can be delayed without delaying the end of the schedule or an imposed constraint”; and British Standard BS 6079–2: 2000 Guide to Project Management – Vocabulary, at para.2.175, “time by which an activity may be delayed or extended without affecting the total project duration”.

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was positively created as being a required time contingency for the bridge construction, or simply occurred because that chain of activities could reasonably be executed in a period of time that is four days less than the period calculated for the construction of the road works, over the same calendar period. It is this sort of ambiguity that is usually at the core of the debate about who owns the float24. [Please refer to Figure 16.6] 16–027 In Figure 16.5 it can be seen that, although only activity 18, the last in the chain, has four days of free float, every activity in that chain of activities 12 to 18, with a five-day working calendar, has four days of total float. It can also be observed that, because of the two additional days of the weekend between the last activity in the chain and the chain to completion, the activity with the seven-day working calendar, the concrete curing activity “cure deck”, has six days’ total float. 16–028 The significance of total float is that, whilst it appears on every activity on the chain, it only truly exists after the last activity has been completed earlier than the completion date and, if used in relation to any activity in the chain, it will reduce the total float on every activity in the chain by the same amount. Take for example, a delay of two days to the start of the bridge works piling activity as illustrated in Figure 16.6. 16–029 The effect of this delay to progress demonstrates that, although the total float is allotted to each activity in the chain, each activity is allotted the same total float: it is thus the same total float in each case which will be absorbed by any slippage in any of the activities and the reduction of the total float on the “piling” activity to two days, as a result of the two-day delayed start, reduces the total float on all other activities in the chain by two days. 16–030 In this example, a delay of two days effectively removes half of all float on the entire path. Losing half of the float through delay in the first activity may seem to be a careless use of resources but, in many projects, delay to progress occurs in the ground works, the first activity to be accomplished, and, from the beginning of the contract, a reduced probability of completion on time is its natural consequence. 16–031 It is not uncommon for contractors and CAs to attempt to manage the works by reference to the available total float; however, as can be seen from the above diagrams, the longest path and the longest float path do not necessarily occupy the same working days and are unlikely to be the same where there are mixed working calendars. This can be a matter of serious concern where there are multiple key dates to be monitored, as well as mixed calendars, and it is evident that most currently available project-planning software does not give an adequate report for these purposes in relation to total float monitoring25. 16–032 Delay analysis tends to focus on the critical path and the events that impact on the critical path. Indeed, specifications sometimes state that extensions of time will be granted only for delays affecting a critical activity. Sometimes critical activity is defined and sometimes it is not. Usually, it will be identified as an activity that falls

24 See below at paras 16–073 to 16–150. 25 S C Herold, “‘Enhanced’ PDM scheduling systems”, an occasional paper given to the annual conference of the Project Management Institute’s College of Scheduling (PMICoS, April 2004); but see also: R Winter, “Longest Path Value (to the Rescue)” Ron Winter Consulting LLC, for guidance as to how, for example, Primavera P3 can be configured to display the longest and near longest paths.

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on the critical path26 but that is not always so27. In summary, and in the absence of express contract terms to the contrary, the thesis underpinning the importance of total float is that the relationship at common law between extensions of time, liquidated damages and total float is: extensions of time are given to relieve C from liquidated damages, which it would otherwise be required to pay; liquidated damages are payable only for delay to completion of the works beyond the completion date, or stages of completion defined by the contract; for there to be a delay to a defined stage of completion, there must have been a delay to progress on the critical path to that completion date; for C to be entitled to an extension of time, the delay to progress must have been caused by an occurrence specified as D’s time risk event under the contract; a delay to progress occurs when something impedes C’s intended progress; C’s intended progress is identified by reference to the schedule it happens to be working to at the time; a delay to completion of the works occurs when a delay to progress has a knockon effect onto a chain of activities, the start and finish of which are all dependent upon their predecessors, on the critical path to the completion date; a delay to progress to an activity that does not directly impact the critical path cannot cause a delay to completion of the works; and where there is total float anywhere on the path between the delay to progress and the completion date, there can be no impact to the completion date until that float has been absorbed. 16–033 Whilst it is uncommon for standard forms of construction contract in the United Kingdom to contain provisions dictating how total float in C’s schedule is to be dealt with28, US government contracts frequently contain express provisions dealing with such allocation. In Galaxy Builders29, for example, the contract contained the following provision: “[Total] Float, or slack is not time for the exclusive use, or benefit of either [D], or [C]. Extension of time for performance required under the contract clauses entitled Changes, Differing Site Conditions, Default (Fixed Price Construction), or Suspension of Work will be granted only to the extent that the equitable time adjustments for the activity, or activities affected exceed the total float, or slack along the paths involved.”

16–034 Again, in Gassman30, the contract contained a provision that: “[Total] float is not time for the exclusive use, or benefit of either [D], or [C], but must be used in the best interest of completing the project on time. Extensions of time for

26 See for example, C21/09, Cl.25.11, which states: “All extension of time claims must show how [C] has been or will be delayed in reaching completion, by specific reference to an activity or activities on the then current (as adjusted under clause 25.8) critical path or paths of the contract [schedule].” 27 In City Inn [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590, for example, in relation to JCT80 in which criticality is not mentioned, the court construed a critical activity to be any work at all which was required in order to achieve practical completion which, in effect, is every activity on the project. 28 In its guidance on float at s 1.3 the SCL Delay and Disruption Protocol (Society of Construction Law, 2002), it recommends not only that the contractor should be required to indicate what time contingencies it needs (para.1.3.8), but also that all construction contracts should set out how float is to be allocated (para.1.3.3). 29 Galaxy Builders Inc (2000) ASBCA Nos 50,018 and 50,136. 30 The Gassman Corporation (1999) ASBCA Nos 44,975 and 44,976.

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performance required under the contract provisions pertaining to equitable time adjustment will be granted only to the extent that the equitable time adjustment exceeds total float in the activity, or path of activities affected at the time notice to proceed was issued for the change. One critical path (no float) shall be shown for the project. Not more than 10% of the activities shall be on the critical path. Unnecessary creation of multiple critical paths will be rejected.”

16–035 Similarly, the provision developed by the US Army Corps of Engineers specifies31: “float available in the schedule at any time should not be considered as for the exclusive use by either [C], or [D]. Extensions of time for performance of work required under contract clauses entitled ‘Changes’, ‘Different Site Conditions’, ‘Default (Fixed Price Construction)’, or ‘Suspension of Work’ would be granted only to the extent that equitable time adjustments for effective activities exceed the total float along their paths.”

16–036 In Gulf Contracting Inc32, the Board of Contract Appeals interpreted this as meaning that an extension of time would be granted only for events that “exceeded the total float, or slack along the channels involved” and, in evaluating C’s delay claim, the Board of Contract Appeals held that, if the imposed change were efficiently executed, the only effect it would have would be to cause C to consume the available total float. 16–037 This restricted focus on the critical path is based on a concept called “primacy of delay”. That is to say, only delays to the critical path are considered as having any bearing on delay to completion of the works beyond the completion date. The theory runs that a delay to progress affecting activities that have total float merely absorbs the unallocated time and can never have an effect on completion. A similar position is adopted by the guidance contained in the SCL Protocol, which states: “Unless there is express provision to the contrary in the contract, where there is remaining float in the schedule at the time of [D’s time risk event], an extension of time should only be granted to the extent that the [D’s time risk event] is predicted to reduce to below zero the total float on the activity paths affected by the [D’s time risk event].”33

16–038 Whilst delays to progress affecting activities in total float (which do not take up more than the total float) cannot impact on the critical path, any change in content or circumstances which absorbs total float may still cause financial loss, or expense. 16–039 Closely related to the issue of float ownership is the right to finish early, where the time between the scheduled completion date and the contract completion date is indicated as being available as total float34. The right to finish early presents two questions: whether C can recover its time-related costs if D prevents early completion, even though completion is not delayed beyond the completion date; and whether the right to recover such costs is affected by a float-sharing clause. 16–040 In the same way as disruption costs flow from the event causing the disruption at the time the event takes place rather than as a result of the effect of the event upon completion, so a float-sharing clause, which provides that there will be no 31 32 33 34

Department of Defense Federal Acquisition Regulation Supplement 252236–7012. Gulf Contracting Inc (1989) ASBCA 30,195 89–2 BCA 21812. para.1.3.1. Typically, C plans to finish early to reduce its overhead costs.

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entitlement to an extension of time, should not serve to prevent recovery of disruption costs for a delay to progress not going to completion. 16–041 US authorities, however, seem to be divided on this point. In MontgomeryRoss-Fisher Inc35, the Board of Contract Appeals accepted that C was entitled to damages for instructed variations that prevented C from achieving early completion. In the later case of Robglo Inc36, the Board held that D was entitled to use all the float in the schedule and that, in order to be entitled to compensation under the float-sharing agreement, C must show that the delay to progress took up more than the available scheduled total float. However, the decision in the latter case seems to conflict with the principle that C is entitled to recover the costs consequent upon an imposed variation, whether or not the imposed variation affects the period for completion. 16–042 In as much as the reason for extensions of time is to provide relief from liquidated damages, there is a philosophical problem to resolve in identifying, for the purpose of an extension of time, a delay to progress that does not also delay a completion milestone carrying liquidated damages. If there is total float to be absorbed, ipso facto, delay to completion of the works beyond the completion date will not occur until that total float is absorbed. On the other hand, if what is termed “float” is not float at all, but C’s time contingency, which is merely less explicit than it could have been, the conceptual difficulty is overcome, because there is then no total float and it is C’s time contingency. The problem that then has to be resolved is in construing C’s time contingency out of a schedule that does not mention contingency and construing what is identified as total float as something other than float.

Negative float 16–043 Many software packages provide an alternative option for “total float” to be calculated by reference to a completion date fixed by a date constraint37. Negative total float thus indicates that the completion date, as scheduled according to its logic, would complete later than the constrained completion date (to the degree of negative total float).

Time contingencies 16–044 Whilst it is the project-planning software that creates free float, as an automatic by-product of the selected planned sequence of work, a time contingency cannot exist other than as the result of a positive decision to create it within the network by one or other of the parties. Thus, in essence, the difference between time allocated as a time contingency and unallocated time as free float is its genesis. Whether time, which is not allocated to an activity, is allocated as a time contingency, or is permitted to remain as free float is for the creator of the schedule to decide as a matter of planning philosophy, within the terms of the contract. 35 Montgomery-Ross-Fisher Inc (1984) PSBCA Nos 1,033, 1,096, 84–2 BCA (CCH) 17,492. 36 Robglo Inc (1990) VABCA Nos 2,879, 2,884, (1990) VABCA LEXIS 27. 37 The CIOB Guide advises against the use of mandatory date constraints. See Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects, 2010, paras 3.8.48 to 3.8.49.

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16–045 On the other hand, total float may be planned as a time contingency38, or it may just happen unwittingly as a consequence of planning the required activities and sequence, in the same way as free float. The CIOB Guide observes: “Contingency planning is the development of a strategy to minimise the effects of intervening events which could possibly occur to interfere with the smooth running of the project at some time between inception and completion. A contingency is a planned allotment of the time, which may be taken up as a result of the occurrence of an intervening event. Accordingly, in the same manner that cost budgets usually have an allocation of funding called ‘a contingency sum’ which [D] may rely upon to spend against for unforeseen additional work, the schedule must have strategically placed contingency activities to absorb the time effect of intervening events which are at the [D’s] risk. A prudent contractor will also make allowances for the risks it bears in the management and distribution of the resources, their variable productivity in different circumstances and the quality of the work carried out.”39

16–046 The CIOB Guide recommends40 that, for the purposes of time management, both D and C should make plain their respective time contingencies, advising: “Contingency periods should be designed to be identified separately for both [D’s] and [C’s] risks and for those risks which are related to: an activity, or chain of activities a contractor, subcontractor, supplier, or other resource an access, or egress date, or date of possession, or relinquishment of possession; and the works, any defined section, and any part of the works.”

16–047 Each project will have its own special risks and these should be set down in a risk register, evaluated and constantly reviewed and revised throughout the design and construction process, and when thought necessary, an appropriate contingency period designed for them. Those risks that are normally borne by D under the standard forms of contract, and for which D may also wish to have a contingency period set aside in the working schedule, are set out in the CIOB Guide 41 and discussed earlier42. Depending upon the form of contract, those risks to be borne by C and for which C may ordinarily wish to allow a contingency are risks such as: poor productivity; changes in methodology which are inefficient; errors in calculation of activity durations; additional activities, or variations in quantities of work; lack of suitable labour, or materials; poor workmanship resulting in work having to be done twice; and/or absence, or breakdown of plant or equipment. 16–048 For these risks, C should decide how much time contingency to build into the schedule in accordance with its judgement of the likelihood of such risks maturing

38 See “Who Owns the Float,” at paras 16–073 to 16–150, below. 39 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects, 2010 paras 3.8.54.1–3.8.54.3. 40 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects, 2010, para.3.8.54.7. 41 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (2010), App.1. 42 See Ch.2, “The Risk of Development”, and Ch.4, “Standard form provisions for time and cost”.

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to delay the progress of the work in activities on the critical path43, and so on. These are C’s risks for which no extension of time may be granted under the terms of the contract. As the project proceeds, the rate of production and probability of timely completion can be measured by monitoring the use of unexpired time contingency on the relevant path. The CIOB Guide advises44 that: “Only that party who is contractually liable for the consequences of the risk maturing45 can properly determine the quantity and distribution of the contingency it perceives to be required from time to time. Accordingly, contracts should (and generally do) make clear who is contractually liable for the consequences of the risk maturing and thus who owns any contingency provided for the risk.”

16–049 As to the distribution of contingencies, the CIOB Guide advises: “Some scheduling software will offer a choice as to whether activities are, by default, to be scheduled as early as possible, or as late as possible. Others default to one or the other. Where an activity would otherwise be scheduled as late as possible, the introduction of a contingency period buffering its end date will have the effect of scheduling the planned commencement of the activity earlier than would otherwise be the case. The effect of this will provide for a degree of delay in the completion of the activity to be absorbed by the contingency period46. At the lowest level of density, contingencies are likely to be the longest in order to provide some accommodation for the unknown aspects of the schedule. Because of the absence of precision at this level of density, the separately allocated contingencies to one party, or the other may both be arrived at by a formula adjustment. One way of identifying contingencies at this level is to use a formulaic approach such as Monte Carlo analysis to allocate an additional period to the known activities. The Monte Carlo algorithm randomly generates values for uncertain variables over and over again to generate model contingency periods47. At medium density, the risks should be clearly identified and a rational explanation set down in the planning method statement of the manner in which the possibility of the risk maturing has been allowed. Allowances should appear at this level for such unknowns as prime cost and provisional sums (which are not required to be measured by the contractor, according to the definition under the relevant standard method of measurement, if any), approximate quantities, and other allowances for time to be taken up in the expenditure of other financial contingency sums48. [T]he risks which need to be accounted for at high density will tend to be significantly fewer than at other densities. At this density contingencies must be clearly allocated to one party, or the other. There must be no contingency which is unallocated to an owner and none which are not clearly justified in the planning method statement. There may legitimately be risks such as adverse weather, unforeseeable ground conditions and utilities and third-party projects, plant breakdown, rework, or absenteeism which may need to be allowed for at this density, but there should not be the need for design risk contingencies, or implied variations at this stage.”49 43 Some standard forms provide for difficulties in getting labour, or materials such difficulties were not foreseeable at the time of tender, eg JCT98 Cl.25.4.10. 44 Chartered Institute of Building, Guide to Good Practice in the Management Projects (Chichester: Wiley Blackwell, 2010), para.3.8.54.4. 45 In an ideal world, this is also the party most able to manage it. 46 Chartered Institute of Building, Guide to Good Practice in the Management Projects (Chichester: Wiley Blackwell, 2010), para.3.8.54.5. 47 Chartered Institute of Building, Guide to Good Practice in the Management Projects, 2010, paras 3.8.55.2–3.8.55.3. 48 Chartered Institute of Building, Guide to Good Practice in the Management Projects, 2010, paras 3.8.56.3–3.8.56.4. 49 Chartered Institute of Building, Guide to Good Practice in the Management Projects, 2010, paras 3.8.57.1–3.8.57.3.

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to be at D’s risk if of Time in Complex of Time in Complex of Time in Complex of Time in Complex of Time in Complex

FLOAT AND TIME CONTINGENCIES

16–050 A time contingency can be identified in the schedule in at least three ways. It can be created as an activity of fixed duration, but of unspecified technical purpose. Typically, for example, it might simply be called “C’s time contingency”, or “D’s time contingency”. This is to be preferred. It can be created as an activity of specified technical purpose that is either not for work actually required or unlikely to be required in that sequence. For example, where C has planned to take up the closing stages of the works with such anodyne activities as “cleaning”, “snagging”, or unspecified “testing”, which are normally carried out intermittently during the currency of the contract, the allocated duration of such activities might be construed as C’s time contingency. Such concealment of contingency should be avoided. It can be created as a lag of fixed duration between defined activities unrelated to the technical requirements of the activities. For example, in the absence of a method statement defining its purpose, a fixed period of lag after the activity of pouring concrete might reasonably be construed as a necessary time period for concrete curing planned to elapse before the commencement of the next activity. On the other hand, the same fixed lag between the completion of work on one lane of a road before commencement of the other might be interpreted as representing a planned time contingency. Such ambiguities should be avoided wherever possible. 16–051 Activity contingency can be built into and hidden in an activity by the simple device of positively dictating an activity duration that is greater than the actual time needed to complete the activity with the resources and productivity planned. 16–052 Activity contingency is formed as a result of a positive decision to allow more time for that activity than is really necessary, in the light of the resources and productivity planned for the activity in question. Take, for example, the calculation of a period for plastering. The activity duration might be calculated thus. 16–053 Working an eight-hour day, two plasterers and one labourer can achieve 2.5 m/hr in two-coat work and 4 m/hr in plasterboard and skim. With 75 metres of ceilings and 85 metres of walls the work will take: {752.5 8}=3.75 days for ceiling {854 8}=2.6 days for walls

16–054 A total period is therefore needed of approximately 6.5 working days. If the activity was scheduled to take ten working days, it could then reasonably be said that 3.5 days of that planned period was an activity time contingency period. 16–055 Concealing time contingency in this way is not good practice. There are at least three obvious difficulties that can follow from concealing time contingency as float within the activity duration in this way. In executing the activity, because of the concealed time contingency period, it may not be recognised that the work is supposed to be completed before the end of the allotted activity duration and then the time contingency disappears unwittingly as a result of reduction in resources to take up the time available, or the productivity reducing to fill the time available. During the course of the works, as slippage occurs, the concealed activity contingencies can be overlooked in the updating and review process when otherwise a simple adjustment of the contingencies in future activities might have been the most competent solution to the management of the effects of delays to progress already suffered.

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After completion and disputes have arisen as a result of allocation of liability for delay, hidden contingencies in activity durations can be sacrificed to a retrospective second guess of C’s true intentions, resulting in correction of the activity durations unsupported by reasonable calculations by re-allocation of the hidden time contingency as float. 16–056 Without a clear understanding of how C has calculated its working periods in relation to its resources and expected productivity, unallocated time can be difficult to detect. This is recognised by the SCL Protocol, which provides for a schedule, method statement and resource details to be submitted to the CA electronically for acceptance to enable the CA to familiarise itself with C’s true intentions and that any such positively identified time allocations are transparently identified as activity time contingency and reserved for C’s use50. 16–057 Obviously, if C uses up its time contingencies, it has to accept the consequences, but if D wishes to use time allocated by C to its own use, C should then be compensated. Whether such compensation arises out of direct loss, or expense only, or encompasses compensation for C’s increased risk of failure to complete on time, depends largely on the nature of the event, the surrounding circumstances and the terms of the contract. This is also the way in which the CMS deals with time contingencies51.

Standard form provisions 16–058 Some contracts define what they mean by “float”; some specify that C is to indicate “float” in its schedule, but do not say what it is, and some are silent. Similarly, as it is with float, some forms of contract make provision for time contingencies; some require C, D, or both to indicate their required time contingencies, and some ignore the issue entirely. 16–059 In US government contracts, it is not uncommon in recent years to find float defined. For example, in Santa Fe Engineers Inc52, the contract identified that: “Float, or slack is defined as the amount of time between the early start date and the late start date, or the early finish date and the late finish date, of any of the activities in the CPM schedule.”

16–060 Similarly, in Gassman53, the contract stated that: “Float is defined as the amount of time between the early start date and the late start date, or the early finish date and the late finish date, of any activity in the project schedule. Total float is defined as the amount of time any given activity, or path of activities may be delayed before it will affect the project completion time.”

16–061 The FIDIC forms, IChemE, MF/1, PPC2000, the JCT forms, the ICE forms, the Australian AS2124 and AS4000 forms and the AIA forms A201/97 and A201/07 contain no references to float at all. The old UK government forms in the GC/Works/1 series, whilst making no reference to float, require C to identify critical activities. 16–062 ECC2 and ECC354 are unusual amongst standard forms of contract in that they not only distinguish between time contingency and float, but whilst nothing appears 50 See SCL Protocol, para.1.3.8. 51 See App.2 to the 4th edn. 52 Santa Fe Engineers, Inc (1994) ASBCA 94–2 BCA (CCH) 26,872. A similar definition appeared in the contract in Galaxy Builders Inc (2000) ASBCA Nos 50,018 and 50,136. 53 The Gassman Corporation (1999) ASBCA Nos 44,975 and 44,976. 54 Cl.31.2.

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in the contract itself to specify what is meant by either term, or how float and contingency are to be dealt with, the forms require C’s schedule to make provision for both55. However, presumably in an attempt to be helpful, the guidance notes set out several provisions which, whilst similar in concept to the practice recommendations of the SCL Protocol, are not consistent with the contract to which they refer56. In the guidance in relation to Cl.31.2, for example, the notes state that float is any spare time within the schedule after the time risk allowances have been included and that the time risk allowances are owned by C as part of its planning to cover risks, but they make no reference to any contingencies that may be required by D. 16–063 The CMS also requires C to identify float and also to identify separately D’s and C’s time contingencies. These supplements to the 1998 series of JCT standard forms state that whatever the float is calculated to be, from time to time, it is to be available for either party to use as required57. 16–064 The 2009 edition of the Irish government standard forms of contract exhibits a radical departure from the normal contract provisions in not only requiring float and time contingencies to be indicated on the schedule, but also identifying specific requirements for contingencies to cover only D’s compensable risk events and the manner in which these are to be allocated and expended. 16–065 Although, under these forms, C is to indicate “floats, and other flexibility” in its schedule58, C is not expressly required to indicate any contingency period for its risks; no definition of “floats” is provided and nothing is expressed as to how it is to be dealt with in determining entitlement. 16–066 Since, under these forms, C’s entitlement to more time is to be gauged by reference to whether the completion date has been, is being, or will be delayed59, it would appear that, in the absence of anything to the contrary, float probably belongs to the project and any event that only absorbs float will not, at its lowest, show that it is likely to delay completion until that float has been absorbed. 16–067 However, bearing in mind that there is no provision in this contract for compensation for the effects of disruption, delay to the completion of a sub-contractor’s work, or delay to a sectional completion date60, it would be prudent for either C expressly to declare (on submission of its schedule) that any float is C’s contingency, or C and its sub-contractors should make substantial provision in their schedules for contingency periods other than those contractually required by the schedule to the contract61. 16–068 In other than the minor works form in this series of forms, at the time of tender, D is to indicate a duration of site working days to be allowed as a contingency period in a first and second “threshold”. The schedule to the forms distinguishes between “delay events”, for which, if they adversely affect completion, C is entitled to an extension of time and “compensation events”, for which, if they adversely affect completion, C is entitled to both an extension of time and financial compensation62. 55 Although without provision as to how each is to be dealt with in relation to the effect of any change. 56 See also A Williamson, “Ownership of time risk and float under the ECC”, NEC User’s Group Newsletter, No 31 (November 2004). 57 That for use with JCT98 appears at App.2 to the 4th edn. 58 See, for example, IGBW/09 Cl.4.9.1(6). 59 IGBW/09 Cl.9.3.2 60 IGBW/09 Cl.10.7.4. 61 The Schedule to the relevant form, Pt 1 section K. 62 See, for example, the Schedule to IGBW/09 Pt 1 section K.

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16–069 The threshold contingencies required are specified only to accommodate the effects of compensable events affecting the completion date, for which D is at risk as to prolongation costs, but not disruption, or the costs of prolongation of sectional completion dates, nor for the effect of events that are not compensable63. The phraseology of the 2009 series of forms is radically different than the May 2007 edition in setting out how those contingency periods are to be expended, stating: “The [schedule] contingency is applied to derive extensions as follows: 1. 2. 3.

Unless delay exceeds the first threshold, there are no extensions. If delay exceeds the first threshold but is less than or equals the sum of the first threshold and twice the second threshold, extensions equal half of the result obtained by subtracting the first threshold from delay. If delay is more than the sum of the first threshold and twice the second threshold, extensions equal delay minus the first threshold minus the second threshold.”

16–070 No doubt in an attempt to be helpful, the 2009 series then provides three formulae by which entitlement can be calculated where T1 is the first threshold, T2 is the second threshold, D is the calculated delay to completion of the works beyond the completion date caused only by D’s cost risk events64 and E the resultant extension of time to which C is entitled: Rule 1: If D T1 then E = 0 Rule 2: If T1 ; (T1+2T2) then E = D – T1 — T2 16–071 The form then provides some sample calculations, as follows: “For example, if the first threshold (T1) is 20 site working days and the second threshold (T2) is 30 site working days if delay (D) is 10 site working days, [C] would be entitled to no extensions, applying rule 1 if delay (D) is 28 site working days, [C] would be entitled to 4 site working days’ extension, applying rule 2 if delay (D) is 38 site working days, [C] would be entitled to 9 site working days’ extension, applying rule 2 if delay (D) is 90 site working days, [C] would be entitled to 40 site working days’ extension, applying rule 3.”65

16–072 What is to happen in regard to contingency for those events for which the schedule indicates that C is entitled to an extension of time, but compensation is not mentioned, is left unstated. Presumably, the intention is that these should follow the usual rules and C will be entitled to an extension of time equal only to the number of working days actually affected.

Who owns the float? “Few of even those who claim to be CPM experts fully appreciate the fact that in a resource restrained schedule the concept of float breaks down and quite often the concept of a critical path breaks down. Since almost all construction projects are resource restrained, at least to some extent, this becomes a source of major problems. The classic legal question in recent years as well as the

63 See the Schedule IGBW/09 Pt 1 section K. 64 See the Schedule to IGBW/09 Pt 1 section K. 65 See, for example, IGBW/09 Cl.9.4.3.

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subject of numerous professional papers is ‘who owns the float time’. It is difficult to claim ownership of something that may not exist, or that hasn’t been quantified properly.These are fundamental matters that after 30 years still don’t seem to be understood.”66

16–073 Whereas the standard forms of contract, which refer to float, generally distinguish between float and time contingency, it is clear that many of the difficulties associated with float emanate primarily from those contract forms in which float is not mentioned at all or, if mentioned, no distinction is drawn between float and contingency. That failure, coupled with an indication on a schedule of float when intending it to remain a time contingency, or conceiving float as time contingency without acknowledging the difference between the two, lies at the root of widespread confusion surrounding the use of the word “float” and its “ownership”. 16–074 At common law, in the absence of express agreement to the contrary, float is “owned” by neither party67. However, to dismiss the question as nonsense would do an injustice to the many commentators in the construction industry who have written volumes on the subject of ownership of float over the last 50 years, or so. In fact, the question has considerably more depth to it than would first appear, simply because the question “who owns the float?” does not distinguish between the different types of float, whether the question refers to free float, or total float, whether C is encouraged to indicate its requirements for time contingency, or whether in fact float can reasonably be conceptualised as an item of property that can be owned68. As Weaver rightly points out: “The calculation process to determine float is arithmetically precise, but the data used in the calculation is a collection of estimates, guesses, simplifications and assumptions. Once created, float is ephemeral; the effluxion of time will of itself destroy float (there is no float on completed activities). Similarly, float cannot be bought, sold, stored or transferred, it only exists as a result of an arithmetic calculation, on some future activities in a schedule and any changes that occur during the execution of the project can have dramatic effects on the overall schedule and all of its embedded float values.”69

Potential ambiguities between free float and contingency 16–075 In the absence of evidence to the contrary, prima facie the schedule is likely to be construed by the CA, D, tribunals and courts as representing the intent of whichever party prepared it70. Where there are ambiguities concerning what is intended to be float, or contingency the first port of call is likely to be the schedule.

66 J Person, “Who owns the float?” (1991) 7 Construction Briefings 1, Vol 5, 423. 67 N Brown, “An examination of the ownership of float from an Australian perspective”, (1999) 15 Const LJ 419. 68 See for example JM De La Garza, et al, “Float traded as commodity” (1991) Journal of Construction Engineering and Management, Vol.117, No 4. 69 P Weaver, “Float – is it real?” an occasional paper presented to the 9th Australian International Performance Management Symposium (Canberra, March 2006). 70 See, for example, Ascon Contracting Ltd v Alfred McAlpine Construction Isle of Man Ltd (2000) 66 Con LR 119; (2000) 16 Const LJ 316 and Galaxy Builders Inc (2000) ASBCA Nos 50,018 and 50,136, in which C was not permitted to demonstrate that its schedule was not what it intended. See also, however, Fortec Constructors v United States (1985) 8 Cl Ct 490 at 505–06, 508 and JW Bateson Co Inc (1984) ASBCA No 27491, 84–3 BCA, 17,566 in which the court held that the C’s CPM schedule was unreliable and did not show what it intended and see also City Inn Ltd v Shepherd Construction Ltd [2007] ScotCS CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590, in which, at [96] the Court declined to take note of C’s revised schedule indicating its predicted timing, holding that it was an “internal document”, affirmed [2010] CSIH 68.

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16–076 The first issue to resolve for the party which claims that either the free float, or total float, is really its own time contingency is that, if the schedule uses the scheduling software’s default terms for the unallocated time of “free float” and “total float”, it will have to support an argument that either or both express terms should properly be construed to mean something else entirely. The second issue is that the explanation and justification for this must be found somewhere other than in the default set-up of the schedule. 16–077 So far as concerns claiming relief in time for a delay to a non-critical activity, there are some general philosophical problems to be overcome. Whether there should be compensation only in money, or only in time, or in both money and time, depends on many factors. However, there is clearly a difficulty in establishing, with any certainty, the extension of time which would give C the same degree of probability of timely completion after an event as it had before it, where such an event merely absorbed free float. 16–078 In practice, the question boils down to this: if C has clearly allowed free float in its schedule for an activity, or sequence of activities, to take longer than it will in fact take to complete, and D wishes to take advantage of that unallocated time to instigate changes that ipso facto absorb the free float, is D entitled to make use of this free float at no cost? 16–079 There are several ways of approaching this question. It can be considered in terms of value, that is, if the free float has a value, to whom is it valuable? Or, since the use of free float cannot directly affect the critical path and hence cannot directly affect completion, then its use by D does not cause an excusable delay and C is not entitled to compensation for the absorbed time. 16–080 Where a float-sharing clause has the effect of providing the free float for whomsoever uses it first, consideration must be given to the issue of disruption costs, or the loss or expense flowing from an imposed change absorbing free float. For example, D’s use of free float could result in C having to adopt inefficient labour, perform work out of sequence, or stack trades in such a way that a degree of productivity is sacrificed. The question then to be considered is whether, by virtue of the float-sharing clause, D can avoid compensating C for its disruption. The answer would seem to be that the float-sharing clause, which goes to the way in which time unallocated for use can be absorbed by the effect of imposed change, should probably not be construed so as to defeat compensation for delay to progress, or disruption without the clearest of contract provisions71. 16–081 In 1975, two cases decided by the US General Services Boards of Contract Appeals proved illuminating in this regard. In the first case72, the Board held that, although D did cause delay to progress, it was of no consequence since the delay did not affect the critical path. In the second case73, the Board rejected C’s claim for an extension of time, commenting that, although the activity in issue had been delayed by 45 days, C was not entitled to an extension of time because the 45-day delay occurred in the middle of a period of 160 days of float for that chain of activities, leaving 115 days of float remaining even after the occurrence of the event. These cases

71 The 2009 edition of the Irish government standard forms expressly excludes compensation for disruption. See, for example, IGBW/09 Cl.10.7.4. 72 Blackhawk Heating and Plumbing Co, Inc (1975) GSBCA No 2,432, 75–1 BCA (CCH), 11,261 (1976) GSBCA 76–1 55,577. 73 Dawson Construction Co (1975), GSBCA No 3,998, 75–2 BCA (CCH), 11,563.

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seemed to herald a shift of focus in US discourse on the subject to a CPM-based approach to delay analysis and away from “ownership” concepts. 16–082 The conduct of the parties during the execution of the project may also support the proposition that either one party, or the other has waived its rights or, alternatively, that their conduct supports the view that both parties interpreted unallocated free float as allocated time contingency. Typically, evidence of such conduct might be gleaned from progress reports, letters, or minutes of meetings. 16–083 For example, in a contract74 in which C’s progress had been delayed by the late diversion of a water main, which was at D’s risk as to time, it was recorded in its progress reports, that: “The construction of plant building was assessed to be approximately 36 days behind the approved design and construction schedule. While it is still within the available float of 46 days for this activity stream, progress on this work is of concern. Most of the delay can be attributed to difficulties in completion of the fresh water main diversion and this has been exacerbated by the recent episode with a Water Supply Department.”

16–084 That could be interpreted to mean that C accepted that the impact of D’s risk event legitimately could be absorbed within the available free float and that the free float does not belong entirely to C to use as its time contingency to the exclusion of D. 16–085 However, depending upon the circumstances and factual matrix underpinning the formation of the contract, it may be possible to support an argument that it is an implied term that one or other of the parties has the benefit of free float, as its time contingency under the contract. Such an argument may be supported by evidence, for example, of a course of previous dealing between the parties, which indicates how they have construed the free float, in the past. It might also be supported by evidence that, in a particular industry, it was conventional for C to retain the benefit of the free float, as its own time contingency. 16–086 On the other hand, it is anticipated by the US government contracts, the CMS, the recommendations of the SCL Protocol and the guidelines to the ECC2 and ECC3 forms that the free float and the total float, if any, should both be available to both C and D to use and absorb as required. However, in the United Kingdom, float ownership clauses are not included in any of the standard forms and in the Australian form AS212475, whilst the word “float” does not appear, except in the index, the following expression has been construed to mean that D owns any residual total float in the schedule76: “In determining whether [C] is, or will be delayed in achieving practical completion, regard shall not be had to whether [C] can reach practical completion by the date for practical completion without an extension of time.”

16–087 Where C’s schedule does not clearly indicate C’s intentions regarding the use of total float, the tender documents may give some indication as to what is intended by one or other of the parties. For example, D might state in its invitation to bid that “the period allocated for the construction of the works is 415 days”. This could be interpreted to mean that, although liquidated damages would not be

74 An unreported case of the previous author’s experience. 75 Cl.35.5. 76 J Hoyle, “The rainbow down under – part 2” [2002] ICLR 4 at 11.

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deducted until the 416th day had passed after commencement, any total float between the planned completion of work and the contract completion date could reasonably be taken up by D before C became entitled to an extension of time and C could not be liable in liquidated damages until the 416th day had passed. The expression “[C] is allowed 415 days in which to complete the works after the issue of the notice to commence”, would have a similar effect. Another possibility is where, for example, C offers, as a part of its tender “to complete the whole of the works within 415 days from the notice to commence”. If C then puts forward a schedule indicating completion in 390 days, it might reasonably be interpreted as an intention to maintain 25 days of unallocated time as its own time contingency. Clearly, C could not be liable in liquidated damages until after the 415 days (permitted by the contract) had passed.

Ad hoc creation of total float 16–088 Apart from the possibility of total float being positively created in the schedule as an implied contingency, ownership of float may also be brought into question as a result of advancement of the schedule ahead of planned progress during intermittent stages of the work. Whether, at common law, D is entitled to the benefit of ad hoc total float created during the course of the works is unclear. 16–089 In Twickenham Garden Developments77, the English courts thought that it was. In this case, where D had to terminate C’s employment for failing to “proceed regularly and diligently” with the contract work and C attacked the validity of the notices under a wide variety of heads, including an allegation that the CA, in coming to his conclusion that the works were not proceeding properly, had failed to take into consideration C’s right to an extension of time for excusable delays, Megarry J, after quoting the clause of the contract providing for relief 78, said: “If [C] is well ahead with his works and is then delayed by a strike, the [CA] may, nevertheless, reach the conclusion that completion of the works is not likely to be delayed beyond the date of completion If a strike occurs when 2/3 of the work has been completed in 1/2 the contract time, I do not think that on resuming work a few weeks later [C] is then entitled to slow down the work so as to last out the time until the date for completion (or beyond, if an extension of time is granted) if, thereby, he is failing to proceed with the work ‘regularly and diligently’.”79

16–090 A similar result, although based upon a contract with a float-sharing clause, was achieved in the US case of Gassman80, in which the Board of Contract Appeals found that C had: “commenced work on the caisson foundations several weeks before its planned start of that work due to ‘early’ completion of its mobilization and loading dock demolition. [C’s] completion of mobilization and demolition earlier than purportedly planned, reflected an ‘early finish date’ for activities on the project schedule, meaning there was ‘float’, ie, time between the early and late finish dates for those activities.”

77 The Mayor, Aldermen and Burgesses of the London Borough of Hounslow v Twickenham Garden Developments Ltd (1970) 7 BLR 89 at 113. 78 Which appears to be Cl.23 of JCT63. 79 The Mayor, Aldermen and Burgesses of the London Borough of Hounslow v Twickenham Garden Developments Ltd (1970) 7 BLR 89 at 113. 80 The Gassman Corporation (1999) ASBCA Nos 44975 and 44976.

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16–091 In this case in which, amongst other things, C claimed compensation for the erosion of its total float by D, the Board said: “While [C] will not be denied the benefit of completing early if it has planned its work reasonably to do so, there is no evidence in the record that [C] devoted any additional resources to mobilization, or demolition. In addition, [C’s] June 1990 initial CPM schedule submitted after completion of mobilization and demolition, and discovery of problems regarding caisson foundations, reveals no plan, or intent to rely upon ‘early’ finish dates and to complete the project several weeks early. We note that, if there had been such an intent, it would appear contrary to the contract clause providing that float is not for the exclusive benefit of either contracting party.” (internal citations omitted)

16–092 Whilst in Gassman the contract contained a float-sharing clause excluding ownership of total float by either party, in Bank of Victoria v Costain, where there was no such sharing agreement, the contrary proposition (that C owned the float it had created) seems to have been accepted. In that case, Gobbo J said: “where [C] has, by careful management, husbanded some saving in time it seems unlikely that [a CA] would be able, in effect, to deprive [C] of the benefit of this saving by allocating it only to the extra work. There is some support for this approach in the remarks of Vaughan Williams LJ in Wells v Army and Navy Cooperative Society.”81

16–093 In Glenlion82, HH Judge Fox-Andrews QC considered the effect under JCT63 of C’s schedule, which indicated a completion date before the contract completion date. The learned judge said83: “It is self evident that [C was] entitled to complete before the date of completion. And [C] is entitled to complete on an earlier date whether or not he produced a [schedule] with an earlier date and whether or not he was contractually bound to produce a [schedule]. It would follow that if he was entitled to complete before the date of completion he was entitled to carry out the works in such a way as to enable him to achieve the earlier completion date whether or not the works were [scheduled].”

16–094 The case appears to have turned on the question of whether the CA was under an obligation to provide information in order to enable C to complete the works before the contract completion date if that was what it had indicated on its schedule. The court held that the CA was not so obliged. However, as to whether the consequences of such a delay to progress would merely take up unused total float, or cause delay to completion, the judge said: “I found that a reasonable extension of time for completion of the works beyond the date for completion stated in the Appendix might be an unfair and unreasonable extension from an earlier date.”

16–095 Apart from extensions of time, the other issue that needs to be addressed is whether it can reasonably be implied that such a delay to an early planned completion date, not delaying the contract completion date, would warrant compensation for prolongation of the period of works. Whether it can reasonably be implied that such a delay to the planned date for completion would rank for compensation for prolongation 81 Commissioners of the State Bank of Victoria v Costain Australia Ltd (1983) 5 BCLRS 193. 82 Glenlion Construction Ltd v The Guinness Trust (1988) 39 BLR 89. 83 Glenlion Construction Ltd v The Guinness Trust (1988) 39 BLR 89 at 103.

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of the period of works prior to the contract completion date depends upon the justification of the early date for completion. In this regard, the SCL Protocol recommends: “If as a result of [a D’s cost risk event, C] is prevented from completing the works by [C’s] planned completion date (being a date earlier than the contract completion date), [C] should in principle be entitled to be paid the costs directly caused by the [D’s cost risk event], notwithstanding that there is no delay to the contract completion date (and therefore no entitlement to an extension of time), provided also that at the time they enter into the contract, [D] is aware of [C’s] intention to complete the works prior to the contract completion date, and that intention is realistic and achievable.”

16–096 The rationale for this appears to be that, whereas C has tendered upon carrying out the work over a fixed period, D is entitled to expect that C has anticipated that its time-related overheads will extend over that same period. Accordingly, where the parties are agreed upon a contract completion date, C will not be entitled to compensation for prolongation related to an earlier completion date, unless it can be shown that there is a collateral agreement to that effect, either expressly, or by implication.

Interpretation of total float as contingency 16–097 Whenever a schedule has no planned difference between the early and late start, or early and late finish dates, there is no total float in the schedule. Many schedules are presented like this. However, if the planned completion date is before the contract completion date, demonstrating an early completion, the whole of the work schedule is in total float. Then, as the project progresses and the total float decreases, so the probability of delay to completion of the works increases. 16–098 Whether total float can ever be construed as a time contingency depends upon the schedule in which it resides in relation to the terms of the contract under which the schedule was created and, in so far as the schedule is a reflection of C’s intent, any time contingency will be for whatever C intends such a time contingency to be used from time to time. Thus, such a time contingency, if any, will take priority over total float calculations, which can be absorbed by either party. 16–099 In Figure 16.5 no indication appears on the schedule to the effect that the finish date was anything other than the contract completion date. However, while the schedule illustrates a planned completion date of 17 June 2005, if the contract completion date had been 30 June 2005, then the period of time between the last activity and the contract completion date could be construed either as total float or as time contingency. How it is construed could be dependent upon, amongst other things, the way to which it was referred in a method statement, or illustrated on the schedule. In relation to the latter, there are at least six examples of possible configurations and interpretations: applied mandatory completion constraint; absence of any completion constraint; applied non-driving link; applied fixed lag; time contingency activity; and contract duration bar.

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Example 1 – absence of completion constraint on planned work [Please refer to Figure 16.7] 16–100 An indication on the schedule might be arrived at with a completion milestone with an early finish constraint for the contract completion date (activity ID CC), without any inhibiting constraint on the completion milestone for the planned work (activity ID3), as in Figure 16.7. This is a use of constraints, which is permitted by the CIOB Guide84. 16–101 The effect of this is to add nine days of total float to every activity in the longest path of the schedule, including commencement. The literal interpretation of this is that the whole of the schedule of works can shift by up to nine days in whole, or in part, without affecting the completion date. Thus, the effect of a D’s risk event delaying any activity in the longest path by up to nine days would not be likely to delay the completion date and, hence, would not rank for an extension of time. 16–102 Accordingly, it is suggested that, with a configuration such as this, the method statements should make it clear what is intended by the total float.

Example 2 – applied completion constraint upon planned work [Please refer to Figure 16.8] 16–103 Figure 16.8 indicates a similar completion milestone, with an early finish constraint for the contract completion date (activity ID CC), but with inhibiting mandatory completion constraint on the completion milestone for the planned work (activity ID3). This is a combination of constraints, which is forbidden by the CIOB Guide. 16–104 Accordingly, Figure 16.8 indicates that, notwithstanding that the contract completion date is indicated as 30 June 2005 and the date for completion is illustrated as 17 June 2005, there is no total float on the longest path to the date for completion and both paths’ float is calculated in relation to the date for completion, instead of the completion date. 16–105 The interpretation of this is ambiguous. On the one hand, there is no total float indicated as being available to the longest path and it might be interpreted that any shift in timing of any activity on this path will affect the date for completion. On the other hand, it is unclear as to what is to become of the nine days between the date for completion and the completion date. Whilst it is clear that D may not deduct liquidated damages until after 30 June, the ambiguity between the indication of zero total float and the apparent time available after the planned date for completion before the contract completion date leaves the status of a D’s time risk event affecting this path as unclear. This is a combination of constraints, which is forbidden by the CIOB Guide85. 16–106 It is suggested that, with a configuration such as this, the method statements should make it clear what is intended by the time between planned completion and contract completion.

Example 3 – non-driving link between applied constraints 16–107 The third possibility is also ambiguous for similar reasons. This involves a completion milestone with an early finish constraint for the contract completion date (activity ID CC) but with a late finish constraint on the completion milestone for the planned work (activity ID3) and a non-driving logical link between the two, as 84 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), paras 3.8.45 to 3.8.49. 85 See Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), paras 3.8.45 and 3.8.49.

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illustrated in Figure 16.9. This is also a combination of constraints, which is forbidden by the CIOB Guide86. 16–108 Whilst the non-driving link tends to suggest that the time between the date for completion and the completion date is there to be absorbed, the indication of zero total float on the path leading to the date for completion suggests that there is nothing to be absorbed. 16–109 Again, it is suggested that, with a configuration such as this, the method statements should make it clear what is intended by the time between the planned completion date and the contract completion date. [Please refer to Figure 16.9]

Example 4 – applied fixed lag between unconstrained milestones 16–110 At Figure 16.10, the completion milestone for the contract completion date (activity ID CC) and the completion milestone for the planned work (activity ID3) are both unconstrained, but separated by a driving lag, linking the two. This is a use of fixed lag, which is not recommended by the CIOB Guide87. This diagram indicates a contract completion date milestone allocated a fixed date of 30 June 2005, with a contiguous chain comprising activities and fixed lag from commencement to completion, without any total float. [Please refer to Figure 16.10] 16–111 Bearing in mind that the fixed lag is not technically related to the requirements of the activities to which it is applied (in fact it links the finish milestones indicating the finish of the works with the finish milestone of the contract period), the natural interpretation would seem to be that it forms a period of C’s time contingency. The natural interpretation of this is thus that the primary path through the road works is critical to completion and no D’s time risk event could affect that path without it also affecting the completion date. Thus, the effect of a D’s risk event delaying any activity on that path will be likely to delay the completion date and hence, warrant an extension of time. Where C illustrates that it does not intend to complete before the contract completion date, it seems that it could not reasonably be implied that a delay to the planned date for completion would rank for compensation for prolongation of the period of works prior to the contract completion date. 16–112 Accordingly, in order to avoid unnecessary disputes, it is suggested that, with a configuration such as this it is in the interests of both parties that the method statement makes it clear what is intended by the fixed lag.

Example 5 – time contingency activity 16–113 More obvious, perhaps, would be the replacement of the fixed lag with a time contingency activity, as in Figure 16.11. Here again, the completion milestone for the contract completion date (activity ID CC) and the completion milestone for the planned work (activity ID3) are both unconstrained; but, in this case, they are separated by contingency activity, linking the two. Provided also that the owner of the contingency period is identified, this is a use of contingency activities, which is recommended by the CIOB Guide88.

86 Chartered Institute Projects (Chichester: Wiley 87 Chartered Institute Projects (Chichester: Wiley 88 Chartered Institute Projects (Chichester: Wiley

of Building, Guide to Good Practice in the Management of Time in Complex Blackwell, 2010), paras 3.8.45 to 3.8.49. of Building, Guide to Good Practice in the Management of Time in Complex Blackwell, 2010), paras 3.8.45 to 3.8.49. of Building, Guide to Good Practice in the Management of Time in Complex Blackwell, 2010), paras 3.8.54 to 3.8.57.

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[Please refer to Figure 16.11] 16–114 In this diagram, the time between the date for completion and the completion date has unambiguously been taken up by C’s time contingency. There is thus no float available on the critical path and the entitlement will be as it was with the example of applied fixed lag.

Example 6 – contract duration bar 16–115 There is one other obvious possibility as to how the difference between the date for completion and the completion date could be accommodated on the schedule, and that is illustrated in Figure 16.12. [Please refer to Figure 16.12] 16–116 In this example, the completion milestone for the contract completion date (activity ID CC) is logically dependent upon the finish of an activity called “contract period” (activity ID CP). Both that milestone and the completion milestone for the planned work (activity ID3) are unconstrained and unlinked (although it would make no difference if, in this example, the completion milestones were linked with a nondriving lag). This “contract period” activity is a long duration activity, which is not recommended by the CIOB Guide89. 16–117 Here, the whole of the contract period is illustrated to be taken up by an activity bar called “contract period” (for this purpose it could also have been illustrated as a fixed lag90). This involves linking the commencement milestone to the contract completion date milestone with a fixed duration. 16–118 The fixed duration for the contract period tends to suggest that there is no unallocated time as total float between the date for commencement and the completion date. However, free float is illustrated between the last scheduled activity and the completion date, which is ambiguous. On the one hand, if C is allocated a particular contract period, it is entitled to use it and the mere fact of a unilaterally illustrated intention to complete earlier cannot reduce the time that contractually is available. On the other hand, the indication of quantifiable free float on the path leading to the date for completion other than the commencement milestone suggests that there is unallocated time to be absorbed before C may be entitled to an extension of time. 16–119 Accordingly, in order to avoid unnecessary disputes, it is suggested that, with a configuration such as this, it is in the interests of both parties that the method statement makes it clear what is intended by the free float.

Total float belongs to D 16–120 The essence of the argument in favour of D owning the total float is that the value of it, if any, has been included within C’s price, which D has agreed to pay. Thus, this argument proceeds on the basis that C’s schedule has been paid for by D, D has agreed to pay C’s cost of scheduling and C’s overheads during the duration of the contract period, and therefore D has already contracted to buy the total float and can use it as it wishes. 16–121 The difficulty with this is that, if it is right, it would not be too difficult for C to make sure that there was no total float at all. This could be achieved either by 89 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), paras 3.8.7 to 3.8.10. 90 Although this would not be compliant with the CIOB Guide either, see paras 3.8.42 to 3.8.44.

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the use of contingency periods or fixed lags calculated to absorb what would otherwise have been a period of total float, as illustrated above, or by the judicious use of resource levelling procedures. 16–122 It is generally for C to decide how it intends to plan the use of its resources and there is nothing to stop it, if it should so wish, from planning its resources at tender stage to expend only those resources that will ensure that the durations of all activities extend to the maximum time available, thereby eliminating any potential total float and making all paths critical. In such a situation, any delay on any path would demonstrate a delay to completion and present the rationale for a claim for both an extension of time and compensation for any consequential loss or expense.

Total float belongs to C 16–123 This argument depends upon the fact that C’s profit and overheads for a project are influenced by the efficiency with which its resources are applied and the duration over which they are planned to be executed. Probably one of the least attractive of arguments for C owning the float is that its schedule means what C says it means and, if C wants the word “float” to be interpreted as “C’s time contingency”, that is its right. This is usually supported by the assertion that, as it is C’s schedule, C can decide for itself what it says and how it is to be interpreted. 16–124 However, whilst the schedule might illustrate C’s intentions, it is paid for by D and can hardly be “owned” by C. It is normally the case that the specification, or bills of quantity (if not the contract itself), will contain D’s performance requirements for the schedule, for which C is required to price at the time of tender. Whilst the cost of scheduling, updating and providing records is seldom priced separately91 and is usually wrapped up in site, or head-office overheads, it is nevertheless paid for by D. 16–125 So long as it is specified to be provided to D and it is paid for by D, it is difficult to see how, in the absence of anything to the contrary, it can be implied from the genesis of the schedule that unallocated time in the schedule belongs to C. 16–126 On the other hand, it is often required by the contract, or specification that C should describe its schedule by submitting, in tandem with the schedule, a method statement describing it. If, in such a statement, C should refer to its intention to maintain the total float as its time contingency, then that may suffice. 16–127 Several early US decisions held that C owned the total float and, in a leading 1963 case92, the Armed Services Board of Contract Appeals held that C’s original cushion of time (which was not necessary for performance) should still be preserved when granting an extension of time for D-caused design defects. Whilst the Board did not employ CPM analysis, or speak in terms of float in reaching this result, it stated in clear terms that “regarding liquidated damages [C] is entitled to retain this cushion”. 16–128 In another early case, decided in 196793, the Board of Contract Appeals recognised C’s right to re-schedule, thereby giving to C the benefit of any float thereby created. The US Federal Courts have also treated the total float as owned by C. In a 91 But see the recommendations for change management contained in the CMS, which recommends that at tender such costs should be the subject of a provisional sum. See App.2 to the 4th edn hereof. 92 Heat Exchangers (1963) ASBCA No 8,705, 63–1 BCA (CCH), para.3,881. 93 Continental Consolidated Corporation, Eng (1967) BCA Nos 2,743, 2,766, 67–2 BCA (CCH) [6,624].

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case decided in 197294, for example, in considering the position of a management contract involving separate works contracts, the District Court stated that “total float may be used to schedule jobs for all contractors; free float belongs to one contractor for scheduling any one activity” and that “neither total float nor free float is to be used for changes”. 16–129 However, these cases were not based on CPM analysis and offered little by way of logical explanation. As a consequence, they were not widely followed95. As the CPM-based approach to delay analysis began to find more widespread acceptance in courts and tribunals, the traditional approach to the concept of float-ownership issues tended to be abandoned and, instead, tribunals focused upon whether the delay, when modelled on the CPM, affected the critical path of the project. 16–130 The contention that the total float belongs to C and it can use it as it wishes was expressly rejected in Ascon96. In this case, Ascon was the subcontractor (SC) for below ground concrete work, which had been delayed by ground water, which it was the duty of McAlpine (C) to prevent. In other words, the existence of ground water was an excusable event so far as the SC was concerned. The SC, however, had also been found to be in culpable delay because of a failure adequately to resource the work. The SC had claimed the benefit of float in the main contract to demonstrate that its culpable delays had not caused delay to the main contract. C had rejected this, claiming the float belonged to C to deal with it as it wished. HH Judge Hicks QC dealt with the point as follows: “I must deal with the point raised by [C] as to the effect of its main contract ‘float’, which would in whole, or in part pre-empt them. It does not seem to be in dispute that [C’s schedule] contained a ‘float’ of five weeks in the sense, as I understand it, that had work started on time and had all [sub-schedules] for subcontract works and for elements to be carried out by [C’s] own labour been fulfilled without slippage the main contract would have been completed five weeks early. [C’s] argument seems to be that it is entitled to the ‘benefit’, or ‘value’ of this float and can therefore use it at its option to ‘cancel’, or reduce delays for which it, or other subcontractors would be responsible in preference to those chargeable to the [SC]. In my judgment that argument is misconceived. The float is certainly of value to [C] in the sense that delays of up to that total amount, however caused, can be accommodated without involving him in liability for liquidated damages to [D] or, if he calculates his own prolongation costs from the contractual completion date (as [C] has here) rather than from the earlier date which might have been achieved, in any such costs. He cannot, however, while accepting that benefit as against [D], claim against subcontractors as if it did not exist. That is self-evident if total delays as against [sub-schedules] do not exceed the float. [C], not having suffered any loss of the above kinds, cannot recover from subcontractors the hypothetical loss he would have suffered had the float not existed, and that will be so whether the delay is wholly the fault of one subcontractor, or wholly that of [C] himself, or spread in varying degrees between several subcontractors and [C]. No doubt those different situations can be described, in a sense, as ones in which the ‘benefit’ of the float has accrued to the defaulting party, or parties, but no-one could suppose that [C] has, or should have, any power to alter the result so as to shift that ‘benefit’. The allocation should not be in the gift of [C].”97

16–131 In considering the effect of Cl.25 of JCT80 in regard to D’s time risk events that affected the critical path, or only affected activities with total float, in Malmaison98, 94 95 96 97 98

Natkin & Co v George A Fuller & Co, 347 F Supp 17 (WD Mo, 1972). JC Person, “Who owns the float?” (1991) 7 Construction Briefings 1. Ascon Contracting Ltd (1999) 66 Con LR 119; (2000) 16 Const LJ 316 at para.91. Ascon Contracting Ltd (1999) 66 Con LR 119; (2000) 16 Const LJ 316 at paras 91 to 93. Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 Con LR 32 at 38.

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Dyson J (as he then was) seemed to be in no doubt that C did not own the total float and that it was equally available to D, saying: “In the present case, [D] has what [counsel for D] calls both a negative and a positive defence to the extension of time claim. The negative defence amounts to saying that the variations and late information etc relied on by [C] did not cause any delay because the activities were not on the critical path, and on that account did not cause delay. The positive defence is that the true cause of the delay was other matters, which were not [D’s time risk events], and for which [C] was responsible. In my view, [D] is entitled to advance these other matters by way of defence to the extension of time claim. It is entitled to say (a) the alleged [D’s time risk event] was not likely to, or did not cause delay eg because the items of work affected were not on the critical path, and (b) the true cause of the admitted delay in respect of which the claim for an extension of time is advanced was something else.”

16–132 If the free and total float is to belong to C, it would thus seem that a modification to the standard forms of contract might be prudent, such that any effect on the float was to be compensated in time, irrespective of the effect on the critical path. A clause such as the following might have such a result: “free float and total float belong only to [C] and all excusable delays to progress shall be compensated by an extension of time. [C] will be entitled to an extension of time even if no critical activities are affected, and irrespective of whether such a delay to progress can be shown to have affected the completion date.”

16–133 Although not in the same terms, this would appear to be the effect of the provisions in the Australian form of contract C21/0399.

Total float belongs to the first to get to it “Today, managers, or executors of projects (usually contractors) no longer have exclusive use of the float resource. Almost all significant public procurements include contract clauses providing that the float is not for the exclusive benefit of any one party to the project. Typically, no time extensions are allowed until the float is exhausted on the activity in question. These clauses permit the individual who ‘gets to’ the float first to gain the benefit of the float.This also makes good sense when the causation principle of proximate cause is considered.”100

16–134 The argument that the float belongs to the project and is thus available to the first to take the benefit of it might equally well be expressed by saying that the party that delays the completion date of an activity that has no total float is liable for the result of that delay to progress on completion. The concept of usage of total float until it is exhausted, without any effect on time penalties, or extensions of time, seems to be a practical and realistic approach, which allows the delays to progress to be analysed in a chronological order without continually looking back to determine whether, when, and where portions of the total float were previously used. [Please refer to Figures 16.13 and 16.14] 16–135 The question “whose is the float to use?” becomes more difficult to answer when events, which cause both excusable and inexcusable delays, absorb the float in whole, or in part. If the event that causes excusable delay is chronologically before the event that is inexcusable and, as a result of the consumption of the float, C’s slow 99 See Ch.4, “Standard form provisions for time and cost”. 100 JM Wickwire, TJ Driscoll and S Hurlbut, Construction Scheduling – Preparation, Liability, and Claims (Wiley, 1991).

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progress then causes a delay to completion of the works beyond the completion date, should C be entitled to relief? C’s argument is that, if the second event (the event caused by its slow progress) had had the benefit of the float that D’s imposed change had already consumed, there would have been no inexcusable delay101. 16–136 Take, for example, Figure 16.13. This illustrates activity A, which has a duration of 30 days to completion, and activity B, which has ten days’ duration and ten days’ float to completion. If D imposes a change delaying the start of activity B by ten days, activity B necessarily slips by ten days and absorbs the ten days’ float (Figure 16.14). Although activity B is now a critical activity, it is completed by the completion date and no delay occurs to completion. If an extension of time is to be made only for events that delay completion, then clearly C should not receive an extension of time, because the delay to progress has not delayed completion. 16–137 Now, suppose that, instead of starting on activity B, immediately after D’s imposed change (which delayed the start of activity B by ten days), C delays the start by a further ten days (Figure 16.15). The result is that, because C delayed the start after D’s imposed change, activity B, completion of which is then on the critical path, is delayed by ten days. On the same premises as before, C should not receive an extension of time because it is the delay to progress by C, which, following on from D’s delay to progress, is the proximate cause of the delay to completion of the works beyond the completion date. In other words, but for C’s delay to progress, the work would still have been completed on time. [Please refer to Figures 16.15 and 16.16] 16–138 On the other hand, if on seeing that it has ten days of float available, C delays the start of activity B by ten days, this delay to progress on activity B takes up the available float, but does not delay completion. The completion of activity B is then put on the critical path. That much can be deduced from Figure 16.16. 16–139 Thus, when D subsequently imposes a change that delays the commencement of activity B by a further ten days, this has the effect of causing activity B to be completed after the completion date. It is therefore the imposed change that then causes completion to be delayed. Under these circumstances, C should receive an extension of time for D’s imposed change because, notwithstanding that it was originally in float, when the total float was absorbed, it became a critical activity and it was a critical activity when it was delayed by D. 16–140 Before passing on to consider the interrelationship of non-reimbursable delays with excusable delays, there is another point worth considering. That is whether, in the example above, it is necessary for C actually to have delayed progress by ten days before D imposes the change for C to become entitled to relief. In other words, does C obtain relief, merely by announcing that it intends to absorb the float, rather than having actually absorbed it? In so far as the form of contract requires C to warn D, or to give notice to D, of any delay to progress “likely to occur”, rather than incurred, it would seem that the likelihood of the absorption of the float would, in the event of a subsequent imposed delay by D, be sufficient to protect C’s right to an extension of time. It would also seem to follow that, even if there is not a contractual duty so to advise, advice to D that C expected a delay to progress to occur, which would absorb the float on a particular activity and thus render it critical to completion, would place a subsequent imposed change by D in the position of the cause of delay to completion,

101 See also Ch.18, “Concurrency, parallelism and pacing”.

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provided both events actually occurred. This would seem to be right, even if the action imposed by D actually preceded the event of which C gave advance warning, provided that the event, which C foresaw as rendering the activity critical to completion, could not subsequently be avoided. [Please refer to Figures 16.17 and 16.18] 16–141 The position now to be considered is when delay to progress caused by C’s own malfeasance combines with change imposed by D, which also causes delay (for which C is entitled to both relief from damages and compensation), but also combines with a neutral event (such as bad weather), where C, whilst being entitled to relief from liquidated damages by the terms of the contract, has assumed the risk of any financial loss102. 16–142 For the purposes of this example, activity A takes 30 days and finishes on the completion date. Activity B lasts ten days, has a direct start-to-start relationship with activity A and thus has 20 days of float to absorb before it can cause delay to completion (Figure 16.17). 16–143 In Figure 16.18, activity B is displaced by three events. The first is a ten-day suspension of the work for bad weather, which, because activity B originally had 20 days of total float, does not affect the completion date, and still leaves ten days of remaining total float. The subsequent delay of ten days caused by D’s imposed change, again, does not affect completion, because it only consumes the remaining ten days of total float. On the other hand, it does put the completion of activity B on the critical path. The final delay of ten days resulting from C’s own slow progress displaces activity B to beyond the original completion date, thereby causing ten days’ delay to completion. In this scenario, it seems that C’s delay, being the last proximate delay before the delay to completion occurred, should defeat C’s entitlement to an extension of time. [Please refer to Figure 16.19] 16–144 As to compensation for loss, or expense (if any), as bad weather is not a reimbursable event103, C must take the risk of the costs of any disruption caused. On the other hand, imposed changes are prima facie reimbursable events104 and, in so far as loss or expense is suffered as a result of activity B not taking place during the period of D’s imposed change, compensation for the consequential loss, or expense flowing from the disruption during that period, will be recoverable. 16–145 Figure 16.19 illustrates the first ten days of the total float for activity B as having been absorbed by C’s own slow progress. The result of this is to leave remaining another ten days of total float and no effect on completion. The second event is bad weather, which has the effect of suspending progress for a further ten days, absorbing the remainder of the total float and rendering completion of activity B critical to completion. 16–146 If nothing else happens, activity B can then still be completed within the ten remaining days before the completion date. The subsequent instruction by D to carry out a change, creating a further ten days’ delay, then pushes activity B beyond the completion date and is the proximate cause of delay to completion. For this, C should be relieved of liquidated damages by the award of an extension of time of ten days. 102 This appears to apply to all the standard forms of building contract except the NEC family of contracts, including ECC2 and ECC3, which provide that C should also receive financial compensation for the effect of bad weather. See Ch.4, “Standard form provisions for time and cost” at paras 4–121 to 4–143. 103 See Ch.4, “Standard form provisions for time and cost” at paras 4–121 to 4–143. 104 The terms of the contract form dictate what events are reimbursable under the contract. See Ch.12, “Variation and change”.

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16–147 Figure 16.20 illustrates the first ten days of the total float on activity B taken up by a change imposed by D that does not affect the completion date, because there is still ten days of total float remaining after the completion of the imposed change. Subsequently, C’s delay of ten days takes up the remaining total float and leaves the completion of activity B on the critical path so that any further delay in activity B will cause a delay to completion. The subsequent suspension of the progress of activity B due to bad weather then pushes activity B beyond the completion date, causing a delay to completion. Within this scenario, bad weather is the proximate cause of the delay, and that should relieve C of liquidated damages through the award of an extension of time. 16–148 However, unless the contract form also provides for compensation for bad weather105, this would not entitle C to recover the additional cost, if any, of completing activity B after the completion date. On the other hand, because imposed changes are prima facie reimbursable events106, in so far as loss or expense is suffered during the period of disruption as a result of activity B not taking place during the period of D’s imposed change, C will, in addition, be entitled to compensation for that consequential loss or expense. [Please refer to Figure 16.20] 16–149 Decisions by the US courts and Boards of Contract Appeals since 1974107 have held that, until the float is consumed and the project is consequentially delayed, the party that uses the float first has the benefit of it. In Weaver-Bailey108, the court considered claims about the availability of float as an expiring resource and rejected D’s argument that C’s failure to prosecute work during earlier times when float was available excused D from its responsibilities for changes resulting from increased work required later in the project, after the float had expired. 16–150 The facts of the case were that, as winter approached, C learned that the total amount of unclassified excavation it was required to carry out was not 132,000 cubic yards, but 186,695 cubic yards. C’s schedule was disrupted by the effect of the re-quantification of the mound of earthwork and it was forced to concentrate its efforts on completing the earthwork, instead of grading and finishing the slopes. C’s evidence was that it could have completed the finishing operations in about a month had the extra earthwork not been required but, once the winter weather set in, it was too late to do the final grading. This was not disputed. In dealing with D’s argument that no delay would have occurred if C had commenced the excavating earlier, the court said109: “the conclusions [D’s] claims expert draws from his critical path analyses reflect a misunderstanding of the concept of float time. To reiterate, a critical path activity is one which, if allowed to grow in duration at all, will cause the overall time required to complete the project to increase. By contrast, an activity with float time may grow in duration up to a certain point, without an adverse impact on the time required to complete the project. Consider the example of [C] who 105 See Ch.4, “Standard form provisions for time and cost” at paras 4–121 to 4–143. 106 See Ch.12, “Variation and change”. 107 Dawson Construction Co (1975) GSBCA No 3,998 75–2 BCA (CCH), [11,563]; Titan Pacific Construction Corp (1987) ASBCA Nos 24,148, 24,616, 26,692, 87–1 BCA (CCH) [19,626]; Williams Enterprises Inc v Strait Manufacturing & Welding Co, 728 F Supp 12 (DDC, 1990); Ealahan Electric Co (1990) DOTBCA No 1,959, 90–3 BCA (CCH) 23,177; Weaver-Bailey Contractors Inc v The United States, 19 Cl Ct 474 (1990) and Robglo, Inc (1990) VABCA Nos 2,879, 2,884. 108 Weaver-Bailey Contractors Inc v The United States, 19 Cl Ct 474 (1990); 36 Cont Cas Fed (CCH) [75,801]. 109 Although this is a long quotation, it is not easily available and it is considered worth reproducing in toto because it is particularly helpful in explaining the effect of change on float.

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committed himself to building a house, beginning on 1 January 1989. [C] has determined that he will need one year to complete the job. Pouring the foundation is a critical path activity because any increase in the amount of time required to complete the foundation will cause an increase in the amount of time needed to complete the house; work on the walls, floors, roof, and utilities cannot begin until the foundation is complete. Suppose that as part of the job, [C] promised to build a fence along two edges of the property, and that building the fence will take 20 days. No other work depends on the completion of the fence, so delaying work on the fence until 11 December 1989 will not put [C] in danger of late completion. In other words, building the fence is an activity with a lot of float time. However, float time is never unlimited. If on December 20 [C] has yet to begin the fence, or if there is more than 11 days’ worth of fencing work to be done as of December 20, then [C] will not finish the job on time. From the foregoing, one can make the following generalisation: regardless of whether an activity is on the critical path of a project, if the time required to complete the activity is greater than the time remaining to complete the project, then project completion will be delayed. Consider now the effect on our hypothetical contractor if on December 1, before fencing work had begun, [D] told [C] that he would like all four sides of the property to be fenced thereby doubling the fencing work. Clearly [C] could not complete the entire project by the end of the year, but through no fault of his own. The time required for the fencing portion of the job is now 40 days, and [C] has only 31 days left. [C] was in much the same position as our hypothetical contractor when it discovered in October that the unclassified excavation portion of the project had increased. It was progressing toward a late November, or early December completion, until the work was increased by 41%. The court does not see how [C] can be faulted for the way it handled the unclassified excavation. Once [D’s] underestimate was revealed, [C] acted reasonably under the newlyimposed time constraints. [C] does not have unlimited resources, and it concentrated its manpower in the areas which it thought needed the earliest attention.”110

110 Weaver-Bailey Contractors Inc v The United States, 19 Cl Ct 474 (1990) at 475 and 481–482.

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CHAPTER 17

Disruption to progress and lost productivity

Introduction Productivity Resource-based planning The importance of records Conditions causing lost productivity Staffing Variations Recovery and acceleration Errors and omissions Partial possession Adverse weather Loss of morale Extended working hours Reassignment of manpower Dilution of supervision Learning curve Logistics and site restrictions Ripple Trade stacking The analysis of lost productivity A worked example Planned versus actual Industry productivity norms versus actual Historic versus actual Benchmark data versus actual Actual impacted versus actual unimpacted The basic approach Modified measured mile approach Accounting for the effects of separate events Judicial consideration of the measured mile approach Expert opinion

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17–001 17–010 17–019 17–025 17–031 17–035 17–038 17–046 17–053 17–056 17–059 17–065 17–066 17–070 17–075 17–078 17–081 17–083 17–086 17–088 17–092 17–102 17–108 17–118 17–122 17–124 17–129 17–133 17–137 17–148 17–160

DISRUPTION TO PROGRESS AND LOST PRODUCTIVITY

Introduction “All too often in construction, the terms ‘productivity’ and ‘production’ are used interchangeably. This is, however, incorrect. Production is the measure of output (ie, things produced) whereas productivity is the measurement of the production.”1

17–001 Productivity is the measure of work that can be performed by a given resource. Where the works are planned by reference to the resources and productivity they are planned to achieve, identifying lost productivity, that is where productivity has fallen below that which was planned, is relatively simple. In the absence of a fully resourced schedule, however, identifying lost productivity caused by disruption to the resources and work in progress can be far from straightforward. 17–002 As with the word “delay”, “disruption” is a comparative term, which has no intrinsic meaning except by reference to a standard of performance against which it can be measured. In construction and engineering contracts, disruption is really no more than the difference between an intention and reality as to productivity, where the reality is a derogation from the intent. Disruption is not delay. Although disruption may cause delay, and it may be caused by delay, delay is not a precondition of disruption and, indeed, disruption may occur when the progress of the works is not only not delayed, but when the effect of an earlier delay is being mitigated, or recovered, or when the work is accelerated. In recognising this distinction, in Bell v US2, the court stated as follows: “There is a distinction between (1) a ‘delay’ claim; and (2) a ‘disruption’, or ‘cumulative impact’, claim. Although the two claim types often arise together in the same project, a ‘delay’ claim captures the time and cost of not being able to work, while a ‘disruption’ claim captures the cost of working less efficiently than planned.”

17–003 The SCL Protocol puts it as follows: “Disruption is often treated by the construction industry as if it were the same thing as delay. It is commonly spoken of together with delay, as in ‘delay and disruption’. Delay and disruption are two separate things. They have their normal everyday meanings. Delay is lateness (eg delayed completion equals late completion). Disruption is loss of productivity, disturbance, hindrance or interruption of progress. In the construction context, disrupted work is often work that is carried out less efficiently than it would have been had it not been for the cause of disruption. Disruption to construction work may lead to late completion of the work, but not necessarily so. It is possible for work to be disrupted and for the contract still to finish by the contract completion date. In this situation, [C] will not have a claim for an EOT, but it may have a claim for the cost of the reduced efficiency of its workforce.”3 1 American Association of Cost Engineers International, Estimating Lost Labor Productivity in Construction Claims, Recommended Practice No 25R-03 (2004). 2 Bell BCI Co v United States, Fed Cl No 03–1613C (filed 14 July 2006). 3 At para.1.19.2.

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17–004 In order to make good a claim for compensation arising out of lost productivity, C must prove no more and no less than it needs to prove with any other claim for reimbursement: 1. 2. 3.

liability; causation; and loss or expense suffered.

17–005 In Lisbon v US 4, the US Federal Court of Claims stated the principle thus: “[C] bears the burden of proving the fact of loss with certainty, as well as the burden of proving the amount of loss with sufficient certainty so that the determination of the amount of damages will be more than speculation.”

17–006 In Ascon5, the Court declined to entertain a claim by the subcontractor against C for lost productivity in a period over which an extension of time had been granted, which had been insufficiently particularised, saying: “[The SC’s expert witness’s] first item is for labour. He calculates it by assessing the full cost of the labour employed during the period of extension. [Counsel for C] submits that that is wrong in principle. I agree; the labour content of the contract works is not necessarily increased at all, let alone proportionately, by an extension of time. There may indeed be labour-related losses by reason of delay, for example because of down time, loss of productivity, repetition of tasks or other uneconomic working, but it is for [the SC] to establish and quantify specific claims for losses of that kind, if they have been suffered.”

17–007 In the urgency to arrive at a figure to be claimed, the need to prove liability and causation is sometimes forgotten. Whereas it is usually possible to find some way of calculating the reasonable cost of an event, which is at D’s risk, and which can be demonstrated to have adversely affected C’s progress, a calculation of costs that cannot be demonstrated to have been caused by D is useless. In the US case of Bay Construction6, for instance, C’s expert had produced an estimate of C’s losses, without demonstrating a causal nexus between the occurrence of a D’s risk item and lost productivity alleged to have been suffered. His estimate of lost productivity also relied upon references taken from “Means Estimating Guide”7 and to a type of analysis that he had wrongly referred to as the “measured mile” method. His evidence was rejected by the Board, which said: “[C] has the fundamental responsibility to prove by a preponderance of the evidence that [D’s] action caused its labour to be less efficient than planned as well as the extent of that impact. [C] wholly failed to present probative evidence of lost productivity. Again, [C’s expert’s] charts and summary conclusions that [C] had lost productivity because work was in some instance done out of sequence and piecemeal in some areas fall far short of the proof we expect for such cases. His attempt at quantification, applying two methods to price [C’s] alleged damages for what he said was [C’s] lost productivity was not compelling for many of the same reasons we articulated in our earlier discussions of his delay and suspension analysis. [C’s] lack of contemporaneous project documentation of the impact of the

4 Lisbon Contractors, Inc. v United States, (1987) 828 F 2d 759, 767. 5 Ascon Contracting Ltd v Alfred McAlpine Construction Isle of Man Ltd (1999) 66 Con LR 119; (2000) 16 Const LJ 316 at para.39. 6 Bay Construction Co (2002) VABCA Nos 5,594, 5,625–5,626, 5,628, 5,831. 7 RSMeans is a US supplier of construction cost information. A product line of Reed Construction Data.

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delays and its failure to proffer credible testimony, impeached the overall reliability of its evidence. While [C’s expert] was very willing to assume [D]-caused delay and interference, there was very little evidence in the record to back up his assumptions. He had even less professional experience analysing lost productivity than he had in delay and suspension analysis. Given the size and complexity of this project, the number and nature of changes reflected in the SAs were not so momentous as to impact the project in the significant and serious ways that [C] claims. As we recently stated in Clark Construction8, ‘[t]he after-the-fact, conclusory assessments of the [CA] or the opinions of its experts are not sufficient substitutes for [C’s] underlying obligation to contemporaneously document the severe adverse impact on labour efficiency it now claims resulted from the changes and RFIs’. We conclude that [C’s] evidence failed to provide proof of change to working conditions or loss of productivity. To the extent [C] or [D] raised other issues or arguments related to these appeals, we have fully reviewed and considered them and found them unpersuasive.”

17–008 The third factor, the loss and expense suffered, is the difference between the cost of performance of the work without any impact for which D is liable and the cost of the performance when affected by the effects of D’s cost risk event. In the US case of Centex Bateson9, the relationship was put as follows: “Impact costs are additional costs occurring as a result of the loss of productivity; loss of productivity is also termed inefficiency. Thus, impact costs are simply increased labour costs that stem from the disruption to labour productivity resulting from a change in working conditions caused by a contract change. Productivity is inversely proportional to the manhours necessary to produce a given unit of product. As is self-evident, if productivity declines the number of man-hours of labour to produce a given task will increase. If the number of man-hours increases, labour costs obviously increase.”

17–009 In Luria v US10, the Federal Court of Claims set out the principles upon which a calculation of loss could reasonably be acceptable, stating: “[T]he mere expression of an estimate as to the amount of productivity loss by an expert witness with nothing to support it will not establish the fundamental fact of resultant injury nor provide a sufficient basis for making a reasonably correct approximation of damages. Even if [C] has proved that its loss of efficiency was attributable largely to [D], its increased costs are subject to reduction if they include elements for which [D] is not responsible. Such elements could include inadequate supervision, incompetent personnel, non-availability of materials, and other similar factors.”

Productivity 17–010 Disruption will result in enhanced costs and may also cause delay when it causes a reduction in the rate of productivity which otherwise could have been achieved.

8 Clark Construction Group Inc (2000) VABCA No 5674, 00–1 BCA 30,870, in which the court relied on the decisions made in Fru-Con Construction Corporation v The United States (1999) 43 Fed Cl.306, affirmed (2000) 250 F 3d 762 (Fed Cir); Centex Bateson Construction Co (1998) VABCA Nos 4,613, 5,162–5,165, LEXIS 14, 99–1 BCA (CCH) 30,153, affirmed, Centex Bateson Construction Co v Togo D West, Jr, Secretary of Veterans Affairs (2000) 250 F 3d 761 (Fed Cir) and Triple “A” South (1994) 94–3 BCA 27,194. 9 Centex Bateson Construction Co (1998) VABCA Nos 4,613, 5,162–5,165, LEXIS 14, 99–1 BCA (CCH) 30,153, affirmed, Centex Bateson Construction Co v Togo D. West, Jr, Secretary of Veterans Affairs (2000) 250 F 3d 761 (Fed Cir). 10 Luria Brothers & Co v United States (1996) 369 F 2d 701, 713 (Ct Cl).

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Productivity in this context may be defined as “productive efficiency” and can be related to any measure of produced output (or “production”) per unit input. Economists11 have identified convenient measures of productivity as being: labour productivity; capital productivity; time productivity; total factor productivity, and value added total factor productivity. 17–011 These five indices can be calculated as shown in Figure 17.1. [Please refer to Figure 17.1] 17–012 It is significant to note that, of these indices, it is the value added total factor productivity (VATFP) that provides the truest measure of the particular worth of a process, and is analogous to the percentage return on an investment. Conversely, the other indices can be regarded as simplifications or approximations of VATFP. As Figure 17.1 illustrates, the output of the first four indices is measured in job-specific units (such as the number of beams, or segments produced) or quantities (such as the mass of steelwork, or volume of concrete). Input, on the other hand, is measured by the number of man-hours, machine-hours, or hours, or by the cost of labour, or capital employed. 17–013 Whilst VATFP is the measurement with the greatest theoretical legitimacy, productivity is most frequently represented by labour or plant productivity. This is understandable because man-hours, plant-hours and quantities are obtainable from site records, are practical and are easy to understand. It can be argued, moreover, that in many construction projects, save for the effect of intervening events12, machinery and equipment (“capital”) will generally tend to perform at a consistent rate. Thus it is likely to be only the human resources whose efficiency fluctuates to any significant extent. Accordingly, it will often be appropriate to take labour productivity as an approximation of true productivity. On the other hand, where there are capital-intensive processes involving significant machine-hours, for instance in earth movement, pile driving, or tunnelling, plant usage is likely to be a more relevant input measure than man-hours. 17–014 Unproductive working may occur as a result of a variety of circumstances for which C may bear the risk as to time and cost, or D may bear the risk as to time only, or as to both time and cost. For example, whereas (depending on the terms of the contract) the cost of lost productivity caused by weather may normally be at C’s risk, it may come to be at D’s risk if, as a result of an event at D’s risk as to cost, C has to work in adverse weather, which renders its work more difficult and time consuming. Sometimes, as a result of failing to update its schedule, or as a result of variations imposed upon it, the lost productivity can result from C, or its subcontractors becoming confused about how the works should be sequenced.

11 JG Lowe, “The measurement of productivity in the construction industry”, 1987 Construction Management and Economics, Vol.5, at pp.101–113. 12 In the majority of cases, machinery breakdown (at C’s risk) is likely to cause a complete cessation of work by that item of plant, or equipment and thus can relatively easily be separated from the effects of disruption caused by other events (at D’s risk).

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Illustration Facts: Collins/Snoops Associates Inc (CSA) agreed to perform $2.69m worth of plumbing, heating, and air conditioning mechanical work as part of the renovations at three Baltimore County school buildings. From the beginning, CSA’s progress was delayed, because the county failed timeously to reply to CSA’s requests for information, the county hindered CSA’s work by allowing public access to the schools during potential work hours and CSA’s unexpected discovery of asbestos in the school required CSA to suspend work until the asbestos was removed. On the other hand, there was also evidence that CSA was unduly slow in performing its work, largely because it failed to provide enough qualified manpower and to secure necessary equipment and materials. Furthermore, CSA’s own sub-contractors caused multiple delays. After CSA had completed only a portion of the specified mechanical work, the contractor (CJF) asserted that strict deadlines were required by the county. CJF terminated CSA and engaged a replacement firm to take over the mechanical work. Subsequently, CJF itself was terminated by the county, because the county was not satisfied with CJF’s progress. The trial court concluded that neither had CJF proved that CSA had failed to perform, nor had CSA proved that it was wrongfully terminated. Held, that there should be judgment in favour of CJF for all claims brought against CSA and judgment in favour of CSA for all claims brought against CJF. The trial court further found that CSA performed at a much slower pace than another electrical subcontractor on the same project. During the same periods that CSA claimed it could not work because of interference by school activities, that other electrical subcontractor was able to complete 78% of its work at one school, 58% at a second school, and 37% at the third. By contrast, CSA claimed it had only completed 15.2% of total work under its subcontract. The trial court found that the county considered CSA’s rate of progress unsatisfactory and that county officials had advised that staffing levels for mechanical activities were inadequate. Delays by CSA were not insignificant. To the contrary, the county was so dissatisfied with the lack of progress that the county terminated CJF’s employed. But CSA was only required to complete by the project’s completion date. According to the court, there was still time for CSA to complete within the project completion date: Collins/Snoops Associates Inc v CJF LLC13.

17–015 In calculating lost productivity, the way in which time is measured will be an important factor. For any worker, or piece of equipment, for instance, the time that it spends can be categorised in several ways14: 1. 2. 3.

total time; working time and non-working time; and productive (working) time and unproductive (working) time.

17–016 This can be illustrated as in Figure 17.2 in which total time is split between working time (where the resource is ordinarily available for working) and non-working time, and working time can then be further divided into value-adding, or “productive” time and non-value-adding, or “unproductive” time. [Please refer to Figure 17.2] 17–017 For a crane driver, for instance, hoisting beams into position would be an example of productive time. Climbing up to the crane’s cockpit would be an example of working, but unproductive time and taking a refreshment break would be classified as not-working time. 13 190 Md App 146, 988 A 2d 49 (2010). 14 See Dr H Lal, Quantifying and Managing Disruption Claims (Thomas Telford, 2003) p.95.

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17–018 The measurement of lost productivity can be difficult for a number of reasons, amongst which are: absence of defined planned productivity by reference to resources and intended production rate; failure to record contemporaneously the resources used and productivity actually achieved; failure to calculate lost productivity contemporaneously; lack of confidence in methods used to calculate lost productivity; and difficulty in establishing causation.

Resource-based planning 17–019 The primary problem with proof of disruption and consequent prolongation, or interruption of activity durations as a result of changed use of project resources, is that, in order to demonstrate that there has been a detrimental change to the use of resources, it is necessary first to be able to show how the particular resource would have been utilised, but for the disruption. 17–020 Resource-based planning may well be an advantage in even the simplest of construction projects. However, in major land clearance, some civil engineering, pipework and similar projects it is an essential management tool. The CIOB Guide advises15: “Work which can be carried out in defined sequences, over brief periods, requires a different approach to time management than work containing activities which may take several months to complete. The former can be managed by reference to the activity start, work in progress and completion date. However, the latter can only be managed from day to day by reference to the applied resources and productivity achieved. Resource-based planning will thus be necessary wherever productivity is more likely to affect completion than logical sequence. Typically this can be applicable to such activities as earth moving in large-scale projects, piling on open sites, pipe welding on large process plants and other linear projects. In this form of time management, the unit productivity of each resource is interpolated as the works proceed to provide the data for calculating the time which the activity will take to complete.”

17–021 In such projects, whilst there may be a logic to the sequence of activities, the activities themselves extend over large areas and, within broad limitations, can be carried out virtually anywhere, so long as they are carried out efficiently. The CIOB Guide advises16: “Although in building construction, work on site will generally follow activities of short duration in discrete areas which are, to a great extent, subject to a critical path and thus subject to critical path network, time modelling of complex major projects will often include a number of other construction works, some of which will be in the nature of civil engineering and/or mechanical engineering and will not necessarily be subject to the same type of time control. For example, in major land clearance, or cut and fill of land profiles, work may continue over a long period and may usefully follow some sequence (land will be dug out before depressions are filled), but not necessarily a sequence which is cogently linked from beginning to end of the operation as a whole. 15 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Wiley Blackwell, 2010), at para.3.7.2. 16 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010),at paras 3.5.2.3 to 3.5.2.6.

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Commonly, such a process may usefully be mapped out in what is referred to as a timechainage diagram which illustrates, in linear terms, where work is intended to be carried out. Although such figures may be logically linked to some extent, because they are drawn rather than calculated from a database, they do not commonly function as a time model and other methods must usually be used to manage time and predict the consequences of change. In such circumstances, where activities can be carried out over a long period in a multiplicity of areas, in any order (subject perhaps to limited sequences in any particular area), the time model will commonly focus on the management of resources and productivity instead of critical path sequences within the particular activity and critical path sequences between sections of the activity and the interface with the remainder of the works.”

17–022 The rate at which a particular resource can produce work under normal conditions is called the productivity quotient of the resource. It can vary according to the size of the labour gang or number of plant units in operation at any given time, together with the climatic conditions, space available, method of payment and numerous other factors. The productivity quotient of a particular resource can be determined in a number of ways, including: published output rates; historical data from other projects; benchmarking by sample or on the project; advice from specialists; and personal experience. 17–023 In regard to resource-based planning, the CIOB Guide advises that17: “in most construction projects, labour will be the most common variable across most types of work, but in earthworks, for example, machine type and numbers as well as the production capability of the processing plant, will be more relevant.”

At low and medium density there will often be insufficient data available to make precise computations of durations by reference to productivity and resource alone. At these densities, it is quite often the case that activities have a mixture of resources and other methods of estimation are therefore necessary. For example, estimation by reference to previous projects, experience, standard outputs and so on are acceptable at low and medium densities. At high density, the planned duration of an activity is a function of the quantity of work, the productivity quotient and the quantity of the resource type to be deployed, in the formula: Duration = {Quantity of Work Productivity Quotient Quantity of Resource}.

17–024 Wherever work is scheduled by reference to the resources to be used and the productivity to be expected, and where the work carried out is monitored and records kept of the resources actually used and the productivity actually achieved, the analysis of disruption to the resources and the effect of lost productivity can be calculated and the effects of disrupting events proved relatively easily.

17 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), para.3.5.1.

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The importance of records 17–025 The successful calculation of lost productivity caused by disruption is dependent upon records of how the work was actually performed. Without good quality as-built records, C will inevitably be faced with difficulties in establishing: the productivity it could have achieved when not disrupted; the productivity achieved when disrupted; the resources affected; the cost and time effect of the disruption; and a causal relationship between an event at D’s risk as to cost and the loss of productivity suffered. 17–026 Whereas in the United Kingdom courts and tribunals have sometimes been forgiving of contractors who have failed to keep records and, occasionally, have been willing to accept anecdotal evidence from those concerned with the project as proof of the cause of their alleged difficulties18, on the whole, the courts and Boards of Contract Appeals in the United States, whilst being prepared to adopt various methods of valuation, have tended to require more strict proof of liability and causation by reference to records. 17–027 Clark Construction19, for example, was a case concerning the construction of a hospital in West Palm Beach, Florida, in which the subcontractors and principal sub-subcontractor for the mechanical installations sought recovery from D in a nameborrowing20 action for the costs of their alleged lost productivity in carrying out the plumbing and ductwork installations. 17–028 In this case, C had originally planned to construct the superstructure proceeding horizontally with each floor in all three blocks before proceeding to the next floor. However, shortly after commencement, D failed to apply for a licence for the approved site dewatering system and the work was stopped by the water authority. In order to get on, C re-sequenced the job from the planned horizontal sequence to a vertical sequence and commenced vertical construction of the west tower, where the foundation was complete while, at the same time, with a limited dewatering system, continuing east and centre wing foundation work. 17–029 Whilst the SCs were handicapped by the change in sequence caused by D, C also failed to forewarn them of the re-sequencing and for the first year of their work on site they were not provided with C’s schedule. Both these failures also caused problems with materials, deliveries and sequencing. There were also various conflicts in the drawings, which became the subject of RFIs, inhibiting the subcontractors from completing their co-ordination drawings. 17–030 The SC presented its claim using three separate methodologies based upon hypothetical data. Declining to accept the SC’s calculations of what it thought it 18 See, for example, the discussion of the first instance decision of McAlpine Humberoak v McDermott (1992) 58 BLR 1 at 15–20; see also Ascon Contracting Ltd (1999) 66 Con LR 119; (2000) 16 Const LJ 316; Kvaerner Construction Ltd v Egger (Barony) Ltd (2000) QBD (TCC), Lawtel 8 September 2000, (unreported); Skanska Construction UK Ltd v Egger (Barony) Ltd [2002] EWHC 773 (TCC); Skanska Construction UK Ltd v Egger (Barony) Ltd [2004] EWHC 1748 (TCC); Great Eastern Hotel Co Ltd v John Laing Construction Ltd [2005] EWHC 181 (TCC) and City Inn Ltd v Shepherd Construction Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590, affirmed [2010] CSIH 68. 19 Clark Construction Group Inc (2000) VABCA No 5,674, 00–1 BCA 30,870. 20 Also known as a “pass-through” claim, a procedure whereby C agrees to permit a subcontractor to C to proceed in C’s name against D for compensation for losses suffered by the subcontractor.

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reasonably might have lost by way of productivity for which D rather than C or the SC itself was liable, the Board said: “The fact that proving the amount of productivity losses is recognised as being notoriously difficult does not abrogate [the SC’s] fundamental responsibility to prove by a preponderance of the evidence that [D’s] action caused its labour to be less efficient than planned and the extent of that impact [The SC] primarily relies on the testimony of [the SC’s and its sub-SC’s] project managers and its expert to prove that a large portion of this overrun is due to [D]-caused labour productivity losses. We consider the testimony of the project managers to be candid and forthright. However, [the SC] made little, if any, effort as we would ordinarily expect, to cite us to contemporaneous project records in support of the testimony. The record in this appeal is one of the largest ever submitted to this Board. It contains all daily reports by [D] and [C] and its SCs, all CPM updates, voluminous correspondence, and all payment requests. Given this voluminous body of evidence, the parties were reminded of the importance of directing the Board’s attention to the specific evidence that they believed supported their respective positions. The parties were instructed that it was their responsibility to provide proposed findings of all relevant facts specifically citing supporting appeal file or trial exhibits. [The SC] asserts here that [D] is liable for the loss of labour productivity resulting from it having to work in conditions where there was excessive water in the building and from [D’s] failure to timely respond to RFIs. Given the labour overrun that [the SC] knew had begun very early in the project, we find it difficult to believe that the contemporaneous documentation contained in the record would not provide relevant evidence supporting both the fact that an impact on productivity occurred and the extent of that impact. Therefore, in this circumstance, we make the inference that the contemporaneous project records do not support [the SC’s] position.”

Conditions causing lost productivity 17–031 Various attempts have been made to list exhaustively the causes of productivity loss on construction projects. The Association for the Advancement of Cost Engineers International has identified the following factors as contributing to lost productivity in construction21: absenteeism; acceleration (directed, or constructive); adverse, or unusually severe weather; availability of skilled labour; competition for labour; crowding of labour, or trade stacking; defective engineering, engineering recycle, or rework; dilution of supervision; excessive overtime; failure to co-ordinate trade contractors, subcontractors, or vendors; fatigue; labour relations and labour management factors; labour turnover; learning curve; material, tools and equipment shortages; over-manning; poor morale of labour; 21 American Association of Cost Engineers International, Estimating Lost Labor Productivity in Construction Claims, Recommended Practice No 25R-03 (2004) pp.4–7

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project management factors; out-of-sequence work; rework and errors; schedule compression; site, or work area access restrictions; site conditions; untimely approvals or responses; and variations, ripple impact, cumulative impact of multiple changes and rework. 17–032 It should be noted that these causes are not mutually exclusive and are often overlapping or interrelated. Furthermore, many of these factors will frequently arise as a secondary, or intermediate cause rather than a primary cause. A CA might, for instance, exercise a contractual power to order C to accelerate, which, although intended to result in an increase in overall production per unit-time, may well cause a decrease in C’s average productivity when measured in units of work per man-hour, or machinehour. The acceleration instruction can be considered a primary cause of the loss of productivity, the effects of which may entitle C to an extension of time or reimbursement of loss and/or expense incurred. The instruction may also, however, be found to trigger several secondary causes: for instance, a dilution of supervision, an excess of overtime work, over-manning and fatigue. Furthermore, for the purposes of demonstrating its entitlement to an extension of time, or to reimbursement, C, naturally, will not only need to link any resultant instance of lost productivity to a primary or secondary cause, but also to an event for which the contract gives the appropriate relief. 17–033 A more compendious classification of the causes of lost productivity is: staffing; variations; recovery and acceleration; errors and omissions; partial possession; adverse weather; loss of morale; extended working hours; dilution of supervision; learning curve; logistics and site restrictions; ripple effect; and trade stacking. 17–034 Each of these factors will now be addressed in turn.

Staffing 17–035 There is a practical limit to the number of workmen and quantity of equipment that can be used effectively on a site at any one time. In order to achieve a given level of productivity, a certain amount of skilled craftsmen, together with supporting labour and trainee or apprentice labour will usually be assumed. However, if the mix should change so that, for example, there are insufficient labourers to support the craftsmen, or insufficient craftsmen to direct the labourers and apprentices, the productivity of the gang can be expected to diminish.

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17–036 Where there is a high turnover of staff, a gang may not achieve its optimum productivity simply because of the learning curve of new additions, which can be expected to reduce the quantity of work performed in a given time unit. Absenteeism can be expected to have a similar effect because the optimum production rate will not be achievable with fewer resources, or a less efficient mix of skill and support. Labour added to existing work teams can also adversely affect labour rhythm and thereby reduce productivity. 17–037 Productivity can also be adversely affected when workers are indiscriminately added to work teams. Unplanned changes can create this situation by necessitating additional work within the same timescale. The AACE Recommended Practice expresses the problem with over-manning thus22: “Productivity losses may occur when [C] is required to or otherwise utilizes more personnel than originally planned or can be effectively managed. In these situations, productivity losses may occur because [C] may be forced to use unproductive labor due to a shortage of skilled labor; there may be a shortage of materials, tools, or equipment to support the additional labor; or [C] may not be able to effectively manage the labor due to a dilution of supervision.”

Variations 17–038 The effect of variations is probably the most common cause of lost productivity. That is so notwithstanding that it is a term of all the standard forms of contract that D may vary the work in numerous ways23. Notwithstanding that C is to be paid a fair valuation of its costs and may be entitled to more time if a variation is (at its lowest) likely to cause a delay to completion of the works beyond the completion date, C has an obligation to manage the integration of change on site. In this regard, the AACE Recommended Practice recognises that24: “All projects encounter some change during construction. This is to be expected. Some authors believe that 5–10% cost growth due to changes is the expected norm. However, major change (change well beyond the norm), change outside the anticipated scope of work (cardinal change), multiple changes, change’s impact on unchanged work, or the cumulative impact of changes may all impact productivity. The need to tear out work already in place, the delays attendant to changes, the need to replan and re-sequence work, for example, may also cause productivity to decline.” (internal references omitted)

17–039 Although the quantification of loss caused by variations is more often than not dealt with by estimation rather than by calculation, generally, a valuation of a variation should take into account all the effects of the variation. Thus, depending upon the particular conditions of contract, where a variation can be expected to cause some disruption to progress, it will be appropriate to include the estimated effect of loss of efficiency in the valuation of the variation. In this regard, the SCL Protocol recommends that: “Where practicable, the total likely effect of variations should be pre-agreed between [D, the CA and C], to arrive at if possible, a fixed price of a variation, to include not only the 22 American Association of Cost Engineers International, Estimating Lost Labor Productivity in Construction Claims, Recommended Practice No 25R-03 (2004). 23 See Ch.4, “Standard form provisions for time and cost” at paras 4–103 to 4–120. 24 American Association of Cost Engineers International, Estimating Lost Labor Productivity in Construction Claims, Recommended Practice No 25R-03 (2004).

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direct costs (labour, plant and materials) but also the time-related costs, and agreed extension of time and the necessary revisions to the [schedule]. It is not good practice to leave to be compensated separately at the end of the contract the prolongation and disruption element of a number of different variations or changes. This is likely to result in [C] presenting a global claim, which is a practice that is to be discouraged. Where it is not practicable to agree in advance the amounts for prolongation and disruption to be included in variations and sums for changed circumstances, then it is recommended that the parties to the contract do their best to agree the total amount payable as the consequence of the variations or changes separately as soon as possible after the variations are completed. Though some standard forms of contract have a provision that where a variation affects unvaried work, the affected unvaried work may be treated as varied, these provisions are rarely used. The use of these provisions is encouraged, in order to promote early agreement on the complete effect of the variation.”25

17–040 This extract draws attention to a number of significant characteristics of disruption to progress: 1.

2. 3.

it is possible to evaluate the estimated loss of efficiency likely to arise due to the disruptive effect of variations in advance of implementation of the varied work; disruptive events often cause disruption to work activities other than those directly impacted by the event; and disruption often arises as a result of the interaction of a number of causes.

17–041 In order to evaluate the estimated effects of variations in advance of implementation of varied work, it is first necessary to identify the planned activities that will be affected by the variation and the productivity of the resources required to complete these activities. In other words, it is necessary to determine a resourced, planned schedule for the work as envisaged immediately prior to receipt of the variation order. The activities and resources required for the varied work must also be ascertained, thus forming a revised schedule that will be implemented in response to the variation order. Comparison of the “before” and “after” scenarios can then be used to establish the proper valuation of the variation, including its consequential effects on resource efficiency and any potential loss of productivity. This approach is part of the procedure that should normally be undertaken in the valuation of varied works for most construction projects26. 17–042 Such a procedure, applied to the particular varied work, will normally enable identification of appropriate monetary compensation in respect of the changes to the varied work itself. However, if the full effect of the variation is to be evaluated, the activity and resource changes resulting from the variation should be considered, not in isolation, but as part of the schedule for the relevant work section, or the works as a whole. This requires the preparation of a fully resourced, planned schedule for the relevant work, into which the local changes arising from the variation can be impacted. Whilst this impacting is no different from the impacting of any other event upon the planned schedule, the inclusion of resource in the planned and revised schedule will enable evaluation of both the local and the wider, or “ripple” disruptive effects of the variation. 17–043 As to whether C is entitled to be compensated for the disruptive elements of a variation by reference to valuation, or cost, the SCL Protocol advises: 25 Society of Construction Law, Delay and Disruption Protocol (2002). 26 See Ch.10, “Project control”.

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“The tender allowances may be a useful reference point for the evaluation of prolongation and disruption caused by a variation, but only in those circumstances where the different conditions or circumstances under which the variations are carried out make it inappropriate to apply the contract rates or prices. Notwithstanding the advice of the Protocol, there is nothing to prevent the use of the tender allowances as a rough guide for the agreement of prolongation costs or for checking the recovery of prolongation costs through the value of varied work, if that is what the parties for convenience wish to do.”27

17–044 Frequently, the effects of disruption are seen in changes to the execution of works not directly affected by the principal change. For example, a contractor engaged in the construction of a series of motorway bridge structures may experience significant productivity losses in use of labour, plant and temporary materials if, during construction, progress of one of the structures is deferred by instruction pending design changes. The redeployment of resources resulting from such an instruction is likely to have an effect upon productivity at many locations other than the deferred structure and the use of temporary materials may need to be substantially re-planned as a result of such a change, resulting in reduced efficiency of material usage. By maintaining an updated, resourced works schedule, into which the changes caused by the variation can be meaningfully impacted, the full effects of such changes, including reduced productivity and loss of efficiency caused by disruption, can be appraised and valued, along with the direct costs of the variation. 17–045 On large construction projects, it is very common for a large number of variations to arise in a relatively short period and for the effect of each variation to interact with the effect of others. This interaction can be so complex that, without such resource-based planning and impacting, it can be virtually impossible to discern the individual disruptive effect of each individual change. Thus, although the changes to activities and resources caused by the variations must be impacted in such a way that the effects resulting from each variation remain discernible, it may be necessary to seek compensation in time and money in respect of appropriate groupings of causes where those effects interact28.

Recovery and acceleration 17–046 The AACE Recommended Practice advises that29: “The deliberate or unintentional speeding up of a project may result in lengthy periods of mandatory overtime, the addition of second shifts, or the addition of more labor beyond the saturation point of the site or that can be effectively managed or coordinated, all of which may have distinct impacts on productivity.”

17–047 The need to carry out two activities over the same time-frame instead of sequentially can arise as a result of added operations to a planned sequence of operations. Unless gradual and controlled implementation of additional operations is effected, there can be an adverse effect on the remaining activities. However, whilst there appears to be a widespread assumption that, when work is speeded up, it will lead to increased costs, this may not always be true. Take, for example, Figure 17.3. This illustrates a construction period, in which the fixed costs are distributed over a 12-month 27 At para.1.9.4. 28 See paras 17–088 to 17–162. 29 American Association of Cost Engineers International, Estimating Lost Labor Productivity in Construction Claims, Recommended Practice No 25R-03 (2004).

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construction period, in comparison to a reduced period of ten months. Whether the costs of the recovery, or acceleration, to achieve the latter, outweigh the fixed overheads that would have been incurred over the two months of the original extended construction period is not a matter of assumption, it is a matter of fact, which is to be proved in each particular case. 17–048 The amount of that increase in cost is not readily susceptible to quantification and the valuation of additional costs arising from accelerated working is often difficult. In this regard, the following three questions arise: What combination of resources and outputs leads to minimum duration and costs? If the duration of the contract is changed and costs increase, how much of the increase stems from the change in duration and how much from other causes? To what degree does quicker working result in cost savings? [Please refer to Figure 17.3] 17–049 Probably the greatest cause of increased unit costs due to shortened working periods is reduced labour productivity. There is a significant difference between the loss of productivity arising simply because big sites employ large workforces and that which arises because a compressed schedule demands over-manning. In the first case, a three-fold increase in the workforce causes a loss of productivity of some 15% and, in the second, the loss can be expected to be nearer 40%. These conclusions are supported by the finding that a reduction of two-thirds in the “comfortable” working space results in a loss of productivity of more than 40%30. 17–050 As the size of the labour force increases, it may be necessary either to import from further afield, or to accept a reduction in quality. Whilst labour-only subcontractors paid by the piece may cost more per man-hour than directly employed labour, the increase in cost may be offset by an increase in productivity of between 10% and 40%. 17–051 The adverse effects on labour productivity resulting from delays to progress that are outside C’s control are a common source of contention in retrospective delay analysis and the calculation of damages. However, whilst primarily a source of concern retrospectively, these considerations have great importance in the calculation of prospective allowances for the effect of change which is to be the subject of a collateral agreement31 and, indeed, in the initial planning of a project. 17–052 Acceleration by re-sequencing, which is not properly thought out in advance, can have a deleterious effect on productivity; the AACE Recommended Practice advises that32: “When there are delays early on in the project, the compression of the overall time-frame for later activities is often looked to as the way to make up for delays and finish the project on time. From a strict scheduling perspective this may be possible to do without accelerating individual work activities by utilizing float in the project’s overall schedule. However, on many projects, schedules are not fully resource loaded. As a consequence, a properly updated schedule reflecting the delays may show the project finishing on time, without shortening individual activities. It may result in overmanning of the work by [C] due to the shortening 30 RMW Horner and BT Talhouni, Effects of Accelerated Working, Delays and Disruption on Labour Productivity (Chartered Institute of Building, 1995). 31 ECC2 and ECC3 Cl.62; JCT80 and JCT98 Cl.13A; JCT05 Cl.5.3 and Sch.2, and GC/Works/1 and GC/Works/1/98. 32 American Association of Cost Engineers International, Estimating Lost Labor Productivity in Construction Claims, Recommended Practice No 25R-03 (2004).

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of the overall duration allowing [C] to complete the total remaining work. This is known as schedule compression. Schedule compression, when associated with overmanning often results in significant productivity losses due to dilution of supervision, shortages of materials, tools or equipment to support the additional labor, increased difficulty in planning and coordinating the work and shortages of skilled labor.” (internal references omitted)

Errors and omissions 17–053 Errors and omissions can adversely affect productivity, whether they are D’s responsibility, the CA’s, C’s, or an SC’s. For example, the AACE Recommended Practice advises that33: “Work that is not properly scheduled, shortage of critical construction equipment or labor, and incorrect mix of labor crews may result in decreased productivity because crews may not be able to work as efficiently as they would otherwise do. Improperly planned and implemented project initiation procedures may also lead to lost labor productivity. For example, mobilising labor prior to having access to site electrical power or prior to having adequate site parking can both impact early on labor productivity. Additionally, poor site layout can contribute to loss of productivity. If, for example, crews have to walk a long way to lunch rooms, tool cribs, laydown areas, washrooms, entrances and exits, etc, then productivity may suffer as a result. In design / build or EPC projects, mobilising to the field prematurely before engineering is sufficiently complete to support efficient work schedules may lead to rework and inefficiencies.”

17–054 Defective work, which is condemned and which then has to be taken out and done again, affects productivity, not just because of the essential rework but often because of the growth of a concomitant blame culture and consequential loss of morale as a result of getting it wrong. 17–055 When additional work is required because, for instance, an urgent variation is required to account for a suddenly discovered error, or omission in a design, productivity may decline because the labour loses confidence and becomes uncertain of what work needs to be done. This may also occur as a result of approval of submittals or responses to requests for information not being dealt with promptly.

Partial possession 17–056 An unplanned change that delays completion of the project could result in work having to be performed after the area is occupied by D’s materials, plant, or equipment on an informal basis or because of a more formal partial possession34. This can have adverse effects on productivity because of the need to work around D’s usage, additional security requirements, restrictions from certain areas, noise, or working time limitations. Access to the project areas can also become congested, or restricted at the time the work is scheduled in that area. Time in gaining access can be more costly and the effect on additional visitors to the area can complicate work patterns. 17–057 In Dubaldo v Montagno35, on appeal from the court of first instance, Gruendel J held that Dubaldo as subcontractor (SC) to Montagno, the contractor (C), suffered

33 American Association of Cost Engineers International, Estimating Lost Labor Productivity in Construction Claims, Recommended Practice No 25R-03 (2004). 34 See, for example, JCT05 Cl.2.33. 35 Dubaldo Electric, LLC v Montagno Construction, Inc [2010] AC 30063, Connecticut Law Journal, 23 February 2010.

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a 20% loss of productivity by D moving in to do its shop-fitting while the electrical installation works were still in progress. In this case, perhaps because it was also supported by other subcontractors, notwithstanding that all the evidence was anecdotal, this was accepted by the Court, which stated: “[The SC’s Director] testified that the fixturing created difficulties in completing the job. Specifically, he testified that much of the work performed by his company required the use of man lifts and that [D’s] fixturing impeded the effectiveness of those lifts because he was forced to operate around the fixturing. [The SC’s Director] further testified that such difficulties caused him to expend at least 1000 additional man hours and resulted in a 30 percent loss of efficiency, costing an extra $25,000 to $30,000. Zachary Welburn, an independent electrical contractor hired by [the SC] to work on the . . . project for two weeks in September, and owner of Welburn Electrical Contractors, LLC, testified that store fixturing was taking place the entire time he was on the job. That fixturing, Welburn testified, was in his way and required that he put more time into the job than he would have otherwise because he had to work around it. Finally, despite Globe’s long-standing relationship with [D], Marotti testified that fixturing of the store hampered his company’s performance by 30 percent to 50 percent. That fixturing, Marotti testified, made it difficult to maneuver in the store to do work. Marotti further testified that ‘everything in the whole store that we did was an issue because they were stocking the store. When you get 200 to 300 people in there and there’s truckloads coming in with pallets all over the place, [it makes working there difficult]’. Based upon the testimony of [the SC], Welburn and Marotti, which it deemed credible, the court [of first instance] found that [the SC] suffered a 20 percent loss of efficiency as a result of the fact that [D] began fixturing unreasonably early.”

17–058 Accordingly, where partial possession is required and C is likely to need access to adjacent areas, it would be prudent for C to make any agreement to partial possession conditional upon compensation for the loss of productivity likely to occur.

Adverse weather 17–059 The AACE Recommended Practice advises that36: “Some bad weather is to be expected on almost every project. But, pushing weather sensitive work from good weather periods into periods of bad weather, or encountering unusually severe weather, may impact productivity (eg, earth backfill and compaction operations pushed into wet weather periods).”

17–060 When disruption occurs through exceptionally adverse weather, under most standard forms of contract an extension of time may be granted, but C will not be entitled to compensation37. On the other hand, once progress has been delayed as a result of a D’s cost risk event, C may then become entitled to compensation for the effect of weather, as a result of lost productivity, irrespective of whether it is exceptionally adverse, so long as it is materially different from the weather conditions reasonably to be anticipated for that activity at the time of contract38. This is because, in this scenario, the lost productivity arises out of the consequential effects of a D’s cost risk event. Take, by way of example, summer and winter working. If C is forced to carry

36 American Association of Cost Engineers International, Estimating Lost Labor Productivity in Construction Claims, Recommended Practice No 25R-03 (2004). 37 But see the NEC family of contracts, which provide for compensation for every excusable event. 38 See, for example, E H Cardy & Son Ltd v Anthony Edward Vye Taylor (1994) 38 Con LR 79, per HH Judge Bowsher QC at 95.

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out an activity during a period of poor weather that would otherwise have been carried out in more hospitable conditions, it will reduce its productivity because: 1. 2. 3.

there is not as much daylight in the winter; excessively hot or cold conditions can induce lethargy and reduce morale; and/or excessively wet or windy conditions can render external work more difficult.

17–061 Delayed work may result in C’s having to perform work in the winter which was planned to be carried out in summer conditions, or vice versa, in high winds, high humidity, or other adverse weather conditions39. This will have the effect of reducing the efficiency of labour and add to the costs of operating and maintaining equipment. Furthermore, because of special problems that may arise in performing the work under adverse weather conditions, additional labour, material and equipment may be required in excess of that originally anticipated. Notwithstanding that most standard forms provide that the financial risk of adverse weather should be borne by C, those who find themselves delayed by seasonal weather may be entitled to recover the additional costs as well as time if they are able to show that, had it not been for an earlier delay caused by D, they would not have been affected by the weather of that season. In Cardy, when considering periods of loss caused by faulty design of a public house, HH Judge Bowsher QC observed that: “There was some delay due to inclement weather. If the design had been done properly in the first place, the work would not have gone into the period of inclement weather, nor would there have been any intervention of a Christmas break. The delay due to inclement weather, Christmas break, and redrawing were all results of the original bad design of the third party.”40

17–062 Again, in the US case of Williams v Strait 41, owing to the delay caused by collapse of a steel frame, C was forced to extend some of its work into the winter months and claimed all costs associated with protecting the structure during the 1985–1986 winter. C argued that the excessive costs incurred were the product of the delay to rendering the building weather-tight. D argued that, following the suspension of work, C had resumed in less than two weeks and that enclosing the structure was dependent upon the suspended precast erection, which could not have been completed before winter. The Court said: “The evidence presented, persuasively shows that costs arising from protecting the structure are valid. The steel frame erection was a critical path item; therefore any degree of delay directly affected the project schedule. The Court finds that the accident resulted solely from (the SC’s) action in the steel frame erection. Winter protection costs were associated with the collapse.”

17–063 In the Canadian case of Ellis Don42, the Court considered that the additional cost of pouring concrete in winter rather than during other seasons was allowable. In that case, where C contracted to construct a new car park in Toronto over a period of 52 weeks, but completion was delayed by 32 weeks, one of the causes of delay was D’s

39 In a case of the author’s experience concerning development in the Arctic Circle, unusually, the adverse weather was marginally above freezing conditions. This melted the permafrost and rendered the ground too soft for efficient working. 40 E H Cardy & Son Ltd v Anthony Edward Vye Taylor (1994) 38 Con LR 79, per Judge Bowsher, at 95. 41 Williams Enterprise Inc v The Strait Manufacturing & Welding Inc 728 F Supp 12 (DDC 1990). 42 Ellis Don Ltd v The Parking Authority of Toronto (1978) 28 BLR 98.

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failure to obtain an excavation permit, which delayed the site start. The initial period of delay was seven weeks, but C claimed the following consequential periods of delay to the works: Delay in obtaining the excavation permit seven weeks Consequent delay in commencing excavation 1.5 weeks Consequent delay in obtaining crane six weeks Consequent delay due to extension of work into a winter period three weeks Total delay: 17.5 weeks 17–064 Relying upon the English decision in Koufos v Czarnikow43, the judge said: “In my view the parties to the contract at the time the contract was entered into contemplated or should have contemplated that if [D] did not have available the necessary excavation permit until 8 weeks after [C] had need of it [C] would be delayed in carrying out its work, and that such delay would throw the subcontractors off [schedule] which would entail further delays and that such delays would cause [C] damages of the very type or nature it suffered.”44

Loss of morale 17–065 Workers who are happy and have pride in their work will be more motivated than those who are not and are thus more likely to work productively. Morale can have a profound effect upon the productivity of labour resources, and its loss can occur for a multitude of reasons. Uncertainty about how or where a job is to be performed, dissatisfaction, or lack of confidence about a job, the company, or the project itself, boredom, difficult relationships with co-workers, and extraneous factors personal to individual workers can all play a part in this regard. As it is entirely subjective and predominantly influenced by issues internal to C and its labour force, however, the effects of any morale loss will not only be difficult to quantify, but are also very likely to present problems in establishing that the losses were solely attributable to an event at the risk of D. Accordingly, any such claim would seem likely to succeed only in the most extraordinary circumstances.

Extended working hours 17–066 The AACE Recommended Practice advises that45: “Numerous studies over many years have consistently documented the fact that productivity typically declines as overtime work continues. The most commonly stated reasons for this result include fatigue, increased absenteeism, decreased morale, reduced supervision

43 Koufos v Czarnikow Ltd, the Heron II [1967] AC 350. 44 Ellis Don v The Parking Authority of Toronto (1978) 28 BLR 98 at 121, per O’Leary J. 45 American Association of Cost Engineers International, Estimating Lost Labor Productivity in Construction Claims, Recommended Practice No 25R-03 (2004).

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effectiveness, poor workmanship resulting in higher than normal rework, increased accidents, etc. One author has gone so far as to suggest that ‘on the average, no matter how many hours a week you work, you will only achieve fifty hours of results.’ The thought underlying this statement is that while overtime work will initially result in increased output, if it is continued for a prolonged period, the output may actually decline for the reasons stated earlier. Thus, long term overtime may lead to increased costs but decreased productivity. The effect of continued overtime work on labour productivity is, perhaps, one of the most studied productivity loss factors in the construction industry.” (internal references omitted)

17–067 Overtime may be required to complete the original contract work within the contract period because of a variation, either as a result of an instruction to accelerate, or an implied instruction to accelerate as a result of the failure of the CA to award an extension of time. 17–068 Where overtime is required in one part of the project, men working on another part of the project, which does not require overtime, may be expected to compete for some part of it. Competition for overtime may contribute to poor morale and attitude, thereby reducing the ultimate productivity and lowering efficiency. 17–069 Overtime breaks the established rhythm of a project and lowers work output and efficiency through physical fatigue. Workers who are tired also tend to make mistakes, resulting in rework and loss of morale; they also suffer from an enhanced risk of injury. The inverse relationship of cost to benefit from increased working hours is illustrated by the example of acceleration by increased working hours given previously46. There it was demonstrated that, on a progressively decreasing productivity over the time during which extended hours were worked, the saving varied between approximately 6% and 20% on time against an additional cost of between approximately 33% and 35%, depending upon which hours and days were worked.

Reassignment of manpower 17–070 Reassignment of the workforce is generally required when changes to work in progress come unexpectedly, when changes are major, or when a demand is made to expedite, or re-schedule completion of certain phases of the work. Productivity can decrease if sufficient time is not allowed to plan an orderly effort to ensure work proceeds smoothly and efficiently. 17–071 Loss of productivity tends to occur with fluctuations in labour moving on and off a work-face because of unexpected changes, excessive changes, or demand to expedite, or re-schedule completion of work phases and when there is insufficient opportunity to plan for orderly change. 17–072 Apart from the question of reallocation of labour employed at the work-face, it is entirely possible that disruption may involve managerial and other staff having to carry out different tasks, or to relocate from what would ordinarily be their day-to-day tasks. Irrespective of whether it is D’s, C’s or a subcontractor’s claim, whether such management time can properly form a head of damages depends largely upon what was the management’s ordinary work and in what way that was disrupted so as to cause a loss47. 17–073 In Bridge v Abbey Pynford48, in a contract under an exchange of letters, a 62 tonnes printing press was to be installed on new foundations in an empty factory 46 See Ch.11, “Mitigation, recovery and acceleration” at paras 11–177 to 11–188. 47 See Ch.21, “Damages”, throughout. 48 Bridge UK Com Ltd v Abbey Pynford Plc [2007] EWHC 728 (TCC).

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over a tendered period of ten days. Work started on 19 August 2002, but on 4 September it was discovered that the existing floor was not level and a shuttered, raised base would be required. On attending site to inspect prior to the installation of the press on 13 September, it was discovered that the raised base would render the printing machine inoperable. It was agreed that remedial work would be completed by 20 September, and D would move in on 23 September. On 24 September, it was discovered that the printer base was defective and would move under the weight of the press. Further remedial work was completed by 4 October and the press was eventually commissioned and ready for use by 28 October. On 14 November 2002, D’s “New Business Director”, who was the manager in charge of the project, wrote to C to say that D had incurred costs and losses as a direct result of C’s inability to complete the work on time and that he would be quantifying its losses. Negligence was ultimately admitted, but quantum and causation disputed in relation to D’s claims for, amongst other things, D’s manager’s time allocated to seeing that the repair work was correctly carried out. 17–074 In this case, Ramsey J had no difficulty in holding C liable for the costs of D’s management time as damages, notwithstanding that they had been no more than estimated, retrospectively, saying49: “At exhibit PR 33 to his witness statement [D’s manager] has set out a schedule of the time spent from 31 August 2002 to 30 April 2003. He says that he calculated that he was engaged for 128 hours in dealing with the problems caused by [C]. As he explained in evidence the hours were based on his assessment of the time he spent on various matters. That assessment was made retrospectively. He prepared it by looking through the various documents which record what happened. Such a method of retrospective assessment is, I consider, a valid method of calculation. I have been referred to the judgment of HH Judge Bowsher in Holman Group v Sherwood (Unreported, 7 November 2001)50 where he indicated that in the absence of records, evidence in the form of a reconstruction from memory was acceptable. I respectfully agree. However, it must be borne in mind that such an assessment is an approximation of the hours spent and may over-estimate or under-estimate the actual time which would have been recorded at the time. Some hours have been included for organising the outsourced work at [a subcontractor]. In addition, I consider that a discount should be applied to allow for the inherent uncertainty in this retrospective method. Overall, I consider that a discount of about 20% would be appropriate to allow both for the hours wrongly included for outsourcing to [the subcontractor] in August 2002 which I have disallowed and for the uncertainty arising from the method. The relevant hours spent by [D’s manager] were, therefore, I find 100 hours. I accept that the appropriate approach to the question of recovery of such management time is that set out by Gloster J. in R+V Versicherung51 and I respectfully adopt the approach. At para 77 Gloster J said that: ‘as a matter of principle, such head of loss (ie the costs of wasted staff time spent on the investigation and/or mitigation of the tort) is recoverable, notwithstanding that no additional expenditure “loss”, or loss of revenue or profit can be shown. However, this is subject to the proviso that it has to be demonstrated with sufficient certainty that the wasted time was indeed spent on investigating and/or mitigating the relevant tort; ie that the expenditure was directly attributable to the tort – see per Roxburgh LJ in British Motor Trades Association at 56952. This is perhaps simply another way of putting what Potter LJ said in Standard Chartered53 namely that to be able to recover one has to show some significant disruption to the business; in other words that staff have been 49 Bridge UK Com Ltd v Abbey Pynford Plc [2007] EWHC 728 at [122] to [128]. 50 Now reported at Horace Holman Group Ltd v Sherwood International Group Ltd [2001] All ER (D) 83 (Nov). 51 R+ V Versicherung AG v Risk Insurance and Reinsurance Solutions SA [2006] EWHC 42 (Comm). 52 British Motor Trade Association v Salvadori [1949] Ch 556; [1949] 1 All ER 208. 53 Standard Chartered Bank v Pakistan National Shipping Corp [2001] EWCA Civ 55; [2001] CLC 825.

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significantly diverted from their usual activities. Otherwise the alleged wasted expenditure on wages cannot be said to be “directly attributable” to the tort.’ In this case [D’s manager] states at paragraph 79 of his witness statement and I accept that [D] ‘suffered losses due to lost opportunities since I was the New Business Development Director at the time, and I was unable to leave the premises in order to attend to other responsibilities such as selling and marketing [D’s] business’. In his evidence [D’s Finance Director] explained that [D’s] turnover has increased from about £2 million in 2002 to an estimated £10 million this year. It is therefore clear, in my judgment that [D’s manager’s] time would have been spent in selling and marketing [D’s] business rather than being occupied in dealing with the problems for which [C] has accepted liability. As a result, I am therefore satisfied from [D’s manager’s] evidence that he spent time dealing with, investigating and mitigating the effect of the problems caused by [C]. That time amounted to 100 hours. [D’s manager] would otherwise have been selling and marketing [D’s] business during that time. On that basis [D] is entitled to recover for 100 hours of [D’s manager’s] time.”

Dilution of supervision 17–075 The AACE Recommended Practice describes the effect of dilution of supervision as54: “When crews are split up to perform base scope work and changed work in multiple locations or when work is continually changed or re-sequenced, field supervision is often unable to effectively perform their primary task – to see that crews work productively. Field supervision ends up spending more time planning and replanning than supervising. It is probable that productivity will decline because the right tools, materials and equipment may not be in the right place at the right time.”

17–076 It is foreseeable that, while the site agent is engaged in analysing a variation, organising and assigning labour, procuring additional materials and goods, equipment and tools, and so on, the productivity on the original works can adversely be affected. It is foreseeable that, for any given change, the site agent may have to: 1. 2. 3. 4. 5. 6.

analyse the content of the variation, stop and replan the affected work; estimate quantities, order and expedite delivery of materials, goods and equipment; incorporate changes into the as-planned schedule and method statement; instruct the foreman and ganger; supervise the work in progress; and revise any snagging lists, testing and commissioning procedures.

17–077 Accordingly, if management resources are not adequately increased in order to deal with changes, the works can be expected to be adversely affected.

Learning curve 17–078 “Learning curve” is the description of a cumulative productivity graph that illustrates increased productivity over time attributed to experience and increased knowledge and familiarity with the work type. Productivity losses can also occur on recommencement following identifiable suspensions of progress. In such circumstances, 54 American Association of Cost Engineers International, Estimating Lost Labor Productivity in Construction Claims, Recommended Practice No 25R-03 (2004).

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it is often necessary for the labour force to re-familiarise itself with the state of the work previously achieved and to develop afresh an efficient working method for the remainder. During this process, less work can be expected to be carried out than would otherwise be the case. The AACE Recommended Practice advises that55: “At the outset of any project, there is a typical learning curve while the labour crews become familiar with the project, its location, the quality standards imposed, laydown area locations, etc. This is to be expected and is typically included in as-bid costs. However, if the work of the project is shut down for some period of time and labour crews laid off, then when work recommences the labour crews brought back to the project may have to go through another learning curve. This is probably an unanticipated impact to labour productivity. If this happens more than once, then each time a work stoppage occurs another learning curve productivity loss impact may occur.”

17–079 According to scientific theory at least, a learning curve is a decaying exponential function, where every doubling of accumulated production is accompanied by a decrease in the time taken by a constant percentage56. For example, if a process with a 90% learning curve takes 100 minutes to produce a first unit, then the learning curve will predict that the second unit should take 90 minutes, the fourth unit should take 81 minutes (= 90% 6 90), the eighth should take 73 minutes and so on. Thus, whilst rapidly diminishing until it becomes increasingly indiscernible, the potential for learning curve improvements will in theory never reduce to zero, and there will always be at least some scope for additional learning, however small. Empirical studies57, furthermore, have shown that learning curve rates between 75% and 95% occur in most applications in the world at large, with this value being influenced by the relative proportions of human and machine labour, and the complexity of the tasks. 17–080 Whilst of great importance to the high-volume and highly repetitive processes of the manufacturing industry, in construction work, unless the work has an unusually high degree of repetition and uniformity58, learning curve effects are likely only to be of any significance in the initial stages of any activity, when the new workmen initially become oriented to the job, and its drawings, specifications, tool locations, work procedures and so on. As Thomas puts it: “Construction activities like masonry construction, reinforcement installation, steel erection, formwork installation, conduit installation, duct erection, and most other activities are simple enough that skilled craftsmen have little to learn. Improvements in productivity are [therefore] not the norm and for most construction task-level activities, one would expect to see little or no improvement through repetition.”59

Logistics and site restrictions 17–081 Difficult ground conditions such as saturated soil or those with a multitude of services to be avoided, necessarily reduce productivity. Restricted working hours, 55 American Association of Cost Engineers International, Estimating Lost Labor Productivity in Construction Claims, Recommended Practice No 25R-03 (2004). 56 See, for example, A Belkaoui, The Learning Curve – a management accounting tool (Quorum Books, 1991) p.6. 57 GM Peck, The Principles of Learning and Forgetting and Their Influence on Productivity and Cost (Australia: The Institution of Engineers, 1984). 58 Such exceptions may occur in civil engineering projects, when there are many similar components to be manufactured, for instance, the production of concrete roadway segments, or components of a railway. 59 Dr HR Thomas, “Construction learning curves: factual, or imagined?” Construction Claims Online (7 March 2005) http://www.constructionclaims.com (accessed July 2010).

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short possessions and inhospitable working hours all go to produce lower productivity than could normally be expected. The AACE Recommended Practice also recognises that60: “If a work site is remote, difficult to get to, or has inefficient or limited access then productivity may suffer because labor, equipment and materials may not be on site when and as needed to support efficient prosecution of the work. In addition, productivity losses may occur when access to work areas are delayed or late and [C] is required to do more work in a shorter period of time, which may result in overmanning, dilution of supervision and lack of co-ordination of the trades. If the project management team fails to get subcontractors, material or equipment to the right place at the right time, then productivity may decline as crews will not have the necessary resources to accomplish their work, various trades interfere with others or work is not available to the crews to perform. If material, tools or construction equipment are not available to a crew at the right location and time, then the crew’s productivity will probably suffer as they may be unable to proceed in an orderly, consistent manner. Similarly, if the wrong tools or improperly sized equipment is provided, productivity may also suffer.”

17–082 However, disruption can also occur because of problems in procurement and delivery of labour, materials and plant arising out of a variation. When access routes to the work-face are changed, there may also be additional travelling distances to be accommodated, resulting in lost working time.

Ripple 17–083 A variation issued to one works contractor or subcontractor can have an adverse effect on the work of other contractors. The other contractors may find themselves faced with additional costs simply because they have to change the schedule or sequence of operations, or it interrupts their workflow. 17–084 Ripple effect works both ways. Where C or C’s subcontractors are in delay, D’s consultants may reasonably be expected to be put to additional work which, in the event of a liquidated damages clause, must be taken into consideration in the calculation of the appropriate rate. However, where there is no such agreement, then it would appear that whether or not the consultants’ costs are recoverable may depend upon whether there are adequate records illustrating what work was done, by whom and when. For example, in Tate and Lyle v GLC61, in the process of constructing two piers, heavy deposits of silt formed, preventing access to the moorings of Tate and Lyle (C), which attempted to set off its costs against liability to pay corporation tax to D. Forbes J held that, although C could properly recover damages for the managerial and supervisory expenses directly attributable to D’s failure to dredge the silt once it had become deposited, C had kept no records of the time expended and, in those circumstances, C’s claim failed. 17–085 On the other hand, it seems plain that in both UK and US62 jurisdictions, in appropriate circumstances, provided that the facts are made out and liability and causation proved, the courts will be prepared to accept ex post facto estimates of the 60 American Association of Cost Engineers International, Estimating Lost Labor Productivity in Construction Claims, Recommended Practice No 25R-03 (2004). 61 Tate & Lyle Distribution v Greater London Council [1982] 1 WLR 149. 62 See the decision in Dubaldo Electric, LLC (2010) AC 30063, Connecticut Law Journal, 23 February 2010, referred to above at para.17–057.

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time lost and its cost. In Holman v Sherwood, Judge Bowsher made the position plain in saying63: “The case before me differs from the case before Forbes J in that while he had no evidence of the amount of time spent, there is before me evidence in the form of a reconstruction from memory of events from the past. I cannot and do not say, in the absence of records there is to be no recovery.”

Trade stacking 17–086 A change, if not properly integrated in the schedule, can transform an orderly, well-sequenced schedule into one in which many operations must be performed concurrently. The workmen of several trades could be crowded or “stacked” in a limited work area, creating a situation in which the work cannot be carried out in the most efficient sequence and thus cannot be done efficiently. A contractor that planned work in accordance with optimal outlays of cost and time, moreover, may find that, as a result of such poor sequencing, its ability to complete the project in such an optimal manner is severely compromised. In this regard, the AACE Recommended Practice recognises that64: “To achieve good productivity each member of a crew must have sufficient working space to perform their work without being interfered with by other craftsmen. When more labor is assigned to work in a fixed amount of space it is probable that interference may occur, thus decreasing productivity. Additionally, when multiple trades are assigned to work in the same area, the probability of interference rises and productivity may decline.”

17–087 Various empirical studies have been done in the United States to measure the likely effects of crowding and trade stacking, considering such variables as workforce size, area per worker, type of contract and ratio of actual to planned manpower65.

The analysis of lost productivity 17–088 Loss of productivity is a relative concept and calculation of lost productivity as a result of disruption must be based upon two measurements: namely the productivity that would have been, but for the disruption (that is, the “baseline”) and the productivity achieved as a result of the disruption (that is, the measure of achieved productivity against the baseline). In principle, unless a global approach is adopted66, the effect of events on productivity can be established by reference to either of the following baselines: planned productivity on the project; productivity expected to be achieved from a project specific benchmark study; productivity actually achieved when not disrupted by events at D’s risk; or productivity expected to be capable of being achieved according to data from other projects. 63 Horace Holman Group Ltd v Sherwood International Group Ltd [2001] All ER (D) 83 (Nov) at [73]. 64 American Association of Cost Engineers International, Estimating Lost Labor Productivity in Construction Claims, Recommended Practice No 25R-03 (2004). 65 See, for example the US Army Corps of Engineers, Modification Impact Evaluation Guide (1979). 66 For which see Ch.19, “Total time, total loss and global claims”, throughout.

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17–089 These alternatives give rise to the following alternative techniques for obtaining such a comparison: planned (undisrupted) versus actual (disrupted); historic (undisrupted – on other projects) versus actual (disrupted); industry productivity norms (undisrupted) versus actual (disrupted); benchmark study (undisrupted) versus actual (disrupted); and actual (undisrupted) versus actual (disrupted) – the “measured mile” approach. 17–090 Whenever proof is advanced on the basis of an impact on the planned level of productivity, the starting point is usually what productivity C reasonably planned to achieve. This should be a matter of fact and not a matter of opinion. When the claim is based upon what actually happened by reference to the as-built schedule, then this should also be a matter of fact67. It is only in the event that there is a lack of factual authority for the claim that opinion evidence is at all necessary. If it is absolutely necessary to use expert opinion to establish this, then, as a check, productivity rates established by the expert should be compared to rates actually experienced in an unimpacted period, or to productivity rates established on another similar project. 17–091 Whilst comparison with other projects of like kind may be accepted in certain circumstances, comparison with the productivity of another contractor on the site is not, however, appropriate. In Southern Comfort Builders68, the court rejected the measured mile analysis of lost productivity costs as not being an acceptable comparison where the expert, who had been unable to find an unimpacted period, had posed as its baseline the production achieved by another contractor on the same project performing similar work.

A worked example 17–092 Whereas a delay analysis essentially determines the additional time which C remained on site, a disruption analysis may not only have to make that calculation, but also a calculation of the loss of efficiency caused by disruption for the purposes of compensation. An idea of the likely effect of lost productivity on the cost and time of a project can be gleaned from a simple example of suspension of working time by the change in the siting of C’s site administration accommodation. For the purpose of this example, C is required to move its site administration huts from the position it is entitled to use to a position at the rear of the site camp. The effect of this is that, by benchmark measurement, it can be calculated that it takes an additional five minutes’ walking time from the site administration huts to the work-face than was the case with the original site establishment69. 67 In the Supreme Court of British Columbia, in rejecting expert opinion on the as-built record in The Foundation Co of Canada Ltd v United Grain Growers (1995) 25 CLR (2d) 1 (BC SC); (1996) 62 ACWS 3d 29, Brenner J said “I am of the view that the evidence of the people who actually did the job can be more compelling. These people were on the job each day and could, particularly with the assistance of their notes made at the time, explain what was happening.” 68 Southern Comfort Builders v United States (2005) 67 Fed Cl 124 at 150. 69 In practice, studies have suggested that when work in progress is interrupted for less than 15 minutes at a time, the resultant time effects can be regarded as statistically insignificant and inseparable from the fluctuations in productivity which can normally be expected. See, for example H Lal, Quantifying and Managing Disruption Claims (Thomas Telford, 2003); R D Logcher and WW Collins, “Management impacts on labor productivity” (1978) Proceedings of the ASCE Journal of Construction Division, Vol.104 at pp.447–461; GR Smith, HR Thomas and SC Thrun, “Pavement Operation Performance Management”, Proceedings of the 20th Annual Meeting of the Project Management Institute (Atlanta, 1989) at pp.425–430.

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17–093 For the purpose of the calculation, suppose that the workforce travels from the huts to the work-face and back three times per day, that is six journeys at five minutes each, thereby giving a time loss of 0.5 hours of productive time per day. 17–094 Using, for the purposes of this example, the road construction project to which reference has previously been made70, we can assume that during the final three weeks of work, the schedule of work to be achieved is as shown at Figure 17.4. 17–095 The loss of time is 0.5 hours per working day up until completion, not 0.5 hours per day for each man, or plant item on site. On the other hand, the cost which will be incurred for which no productivity will be achieved is 0.5 hours for each person, or item of plant on site on any working day the resource in question was actually working. Suppose that the workforce usually work ten hours per day and there are 17 working days left to complete the work. An extra 0.5 hours per day will thus add: 17 6 0.5 hours = 8.5 hours = (say) 1 day. 17–096 Accordingly, therefore, C has a prima facie entitlement to one working day’s prolongation costs, which is what it would be entitled to if the next consecutive day was a working day. However, because the work was scheduled to finish on Friday 17 June 2005, the additional day’s work cannot be achieved until the following Monday, and it will thus cause three days’ prolongation of overheads. 17–097 The cost of the lost productivity, on the other hand, amounts to the cost of 0.5 hours per day for each of the different labour and plant categories employed on the activities carried out on each day. For the purpose of this exercise, the notional labour resources for these activities are as set out in the table at Figure 17.5. [Please refer to Figures 17.4 and 17.5] 17–098 To calculate the reimbursable loss, it is necessary to apply the hours lost in relation to each grade of labour or plant in use to the corresponding cost rates on the relevant working days. For the purpose of this example, assume that the cost rate of all grades of labour, across the board, is £15 per hour. If that were to be adopted, it would result in a labour cost of: 896 hours 6 £15 = £13,440.

17–099 In addition, there will be lost plant usage time that, in the event of no machine operator overlap, will accrue at the rate of 0.5 hours per day per item of plant in use in relation to each day affected. 17–100 Finally, there will be the prolongation of overheads that, as previously identified, will amount to three days’ overheads (including the additional weekend). 17–101 This simple example demonstrates the additional complexity that lost productivity calculations bring to claims in respect of time and cost. Although this example is predicated on an instructed change in working conditions, a similar calculation will be required for any event that affects the workforce so as to interfere with the length of the working day, rather than the activities being carried out during the day. Restrictions imposed on the duration of the working day because of noise, or other contingencies, for example, could also be calculated in this manner.

70 See Ch.11, “Mitigation, recovery and acceleration”, paras 11–154 to 11–157 and Ch.16, “Float and time contingencies”, paras 16–013 to 16–030.

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Planned versus actual 17–102 The first port of call for a productivity baseline is often the planned schedule of work. The reasoning behind this is that, in the simplest analysis, if “A” days is the period of time planned for the activity and “B” days is the amount of time which has actually been expended upon that activity, then the effect of the claimed disruption is B–A days. Thus, when disruption occurs, the reasonableness, or otherwise of the asplanned schedule is often the starting point for consideration of how the proposed methodology has been affected by the disrupting event. 17–103 The planned versus actual analysis relies fundamentally on whether the durations of activities and quantities of resources as planned were reasonable at the time that the event happened. It is no use, for example, claiming that an activity that is scheduled to take ten weeks has taken 15 weeks to complete as a result of some alleged disruption if, when the projected ten-week period for the activity’s duration is calculated objectively, giving consideration to the resource requirements of the activity tasks, it can be demonstrated that, instead of being planned to take ten weeks as shown on the schedule, on the basis of the resources allocated to it at the time of tender, it should reasonably have been planned to take 15 weeks. Accordingly, both for the purposes of project planning and for retrospective delay analysis, evidence of a credible and logical approach to the calculation of activity durations relative to the resource demands and constraints can be vitally important. 17–104 This is particularly the case where change occurs. This can be illustrated by considering the example of a contract in which the foundations were originally designed to be shallow strip footings and, as a result of bad ground, were redesigned as deep trench fill, thereby requiring a shift from a labour-intensive to a plant-intensive method of working. C claimed that, instead of taking the 7.5 weeks to complete the excavation and concrete laying, it actually took 10.5 weeks. The analysis of this activity requires a calculation of the time it would reasonably take to carry out each process of work as follows: As-planned excavate the shallow trench; lay the thin strip of concrete foundation; and build 12 courses of brickwork to damp-proof course level. This had to be compared with the time it would take to: As-built dig a deep trench; fill with mass concrete; and build two courses of brickwork to damp-proof course level. 17–105 The labour content in the as-planned scheme is likely to be the higher of the two, but the cost of the as-built scheme is likely to be higher than that of the asplanned simply because of the amount of concrete required for the deep trench fill. Similarly, whilst the timing of the as-planned is likely to be driven by the allocation of labour resources and the speed at which those resources work, that of the as-built is more likely to be driven by considerations of plant availability. 17–106 At the time of tender, C may have based its tender prices and its project schedule on the durations and rates from several different sources of reference. In the event of a change for which C claims relief from, or entitlement to reimbursement of, loss or expense, it has to demonstrate that what it has done is different from that for

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which it tendered and that the durations and costs have changed as a result of the imposed change and not from the myriad other circumstances for which it is entitled neither to relief nor compensation. In this context, probative evidence is: proof that the durations and costs included in the original tender are reasonable or are otherwise comparable with the norm; proof that the durations and costs included in the short term, high density resourced schedule planned before the event occurred were not substantially different from those on which the tender was based; proof that the basis of those durations, productivity and costs have been properly calculated; and the source of the data upon which the calculation has been based. 17–107 C may be reluctant to disclose its in-house productivity guides on the basis that they are proprietary information upon which its success over its competitors is reliant. There may also be a reluctance to provide information about the make-up of tendered activity durations; however, if C wishes to make good its claim on this basis, it must show that it can properly justify its planned baseline productivity from which it claims the departure therefrom has been caused solely as a result of a D’s cost risk event.

Industry productivity norms versus actual 17–108 In the absence of basic planned resource and productivity data, evidence of standard industry productivity rates, or “norms”, might be adduced in support of estimates of lost productivity for the purposes of collateral agreements. However, in support of retrospective claims, proof that there were periods during which C met its planned productivity and resource utilisation rates, or a breakdown of the tender schedule indicating how durations have been derived from priced rates and schedule resources, will invariably be required. In the event that there are discrepancies between these rates and any corresponding “norms”, then it may be helpful to seek disclosure of the guides from which the data has been accumulated and an explanation as to how and where the difference lies between the basic standards and the durations stated in the tender schedule. 17–109 So, for example, if a standard productivity guide indicates that two plasterers and a labourer can execute 150m2 of plaster in a week and, for the purpose of the tender duration, C has included 200m2 per week and is claiming that, as a result of change, it can only manage 150m2 per week, it would be entirely proper to seek some clarification and proof of the reasonableness of the 200m2 per week upon which its tender was based. If the best rate of work which could reasonably have been achieved was never greater than 150m2 and that is the rate that has actually been achieved, then the effect of whatever the change was will be nil, instead of the 50m2 alleged by C71. Clearly, the extrapolation of the time effects of change must be related to a reasonable calculable basis and, if the basis upon which the claim is founded is at fault, then the result will also be at fault. 17–110 However, where C’s schedule was compiled without reference to resources and productivity data, or when, notwithstanding that activity durations were planned

71 The delaying effect will then be deduced to be caused by the loss of productivity as a result of matters within C’s control, for which it may not receive relief, or compensation.

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according to resources and productivity coefficients, the work carried out was so materially different from that planned that the planned data is no longer relevant, then other methods of establishing a baseline have to be explored. 17–111 Industry standards of the percentage loss that can reasonably be expected as a result of particular conditions in representative circumstances do not prove that the event alleged to have caused the lost productivity has occurred, nor that the event has caused the type or degree of lost productivity of the type described in the standards. 17–112 Research carried out predominantly by industry bodies in the United States, but also in the United Kingdom, has produced some guidelines as to what can be expected to be the effect of various contingencies on productivity72. The table from one such set of guidelines, which is produced by the Mechanical Contractors Association of America (MCAA), is set out at Figure 17.673. Guides such as these are generally satisfactory for planning purposes and for gauging appropriate contingency periods for maturation of foreseeable risks and can also be useful in the process of estimating the likely effect of a variation, or other event for the purposes of early warnings or collateral agreements. 17–113 However, it should be recognised that, when used in connection with the retrospective calculation of the cost of lost productivity, these figures are for guidance only. Individual cases will vary from the guide and will vary according to the particular contractor, trade, personnel and the particular type of activity concerned. The table covers a number of the most common conditions (in outline) that may be experienced. The values are a percentage to add on to labour costs for variations, or original, or estimated further contract durations for job activities. 17–114 Particular care should be exercised in using standard guides to make sure that the comparison is appropriate. Interestingly, in Clark Construction74, evidence on the source of the MCAA figures reproduced at Figure 17.6 was received from the MCAA Executive Vice President. The record shows that his evidence was that: “the productivity factors contained in the MCAA manual were developed by MCAA’s Management Methods Committee but are not based on any empirical study determining the specific factors or the percentages of loss associated with the individual factors. [The witness] stated that these factors are intended to be used in conjunction with the experience of the particular contractor seeking to use them because percentage of increased costs could well vary from contractor to contractor, crew to crew and job to job. The MCAA factors are widely used in the industry for estimating and productivity valuation purposes. In assessing productivity loss, the MCAA factors are generally used as a guideline as interpreted by experienced project personnel familiar with the specific circumstances of a particular job and contractor.”

17–115 In this case, the Board declined to accept the subcontractor’s calculations of lost productivity, which it remarked amounted to “an approximate overrun of bid labour hours of 42%, an extraordinary amount”. However, having discounted a number of claims because of concurrency, in which the SC had failed to separate the effect of 72 RMW Horner and BT Talhouni, Effects of Accelerated Working Delays and Disruption on Labour Productivity (Chartered Institute of Building, 1995); MCAA, Change Orders, Overtime and Productivity (1994). 73 MCAA Labor Estimating Manual: Appendix B, Factors Affecting Productivity. Other US studies include National Electrical Contractors Association (NECA) Manual of Labour Units (2003) and US Army Corps of Engineers, Modification Impact Evaluation Guide (Department of the Army, 1979). 74 Clark Construction Group Inc (2000) VABCA No 5674, 00–1 BCA 30,870.

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D’s risks from those borne by the SC or C and failed to provide any records identifying lost productivity, the Board observed: “The adverse impact on the productivity of [the SC’s and its sub-SC’s] labor stemming from the two conditions for which [D] is liable, the change in construction sequence and wet exterior site conditions, is clear from the record. In those circumstances, common sense tells us the causation is proven by [D’s] liability.”

17–116 In applying common sense to the analysis of lost productivity caused by what had been acknowledged to be D’s responsibility, and having declined to accept the calculation based upon the MCAA guide, the Board was then in the position of having to find some measure of the SC’s loss. The Board used what it considered to be the appropriate measure by MCAA standards to calculate C’s loss saying: “We have found that the change from a horizontal to vertical construction sequence caused by [D] would result in reduced productivity because of more difficult internal communication within the building and more difficult control of labor forces arrayed over different floors. We conclude that the applicable MCAA Factors are ‘Dilution of Supervision’ and ‘Site Access’. Reviewing the description of these factors in the MCAA manual we find them to be descriptive of the conditions resulting from the change in sequence, including the inability to prefabricate pipe and duct. Because the sequence change occurred early in the project permitting [the SC] and [its sub-SC] to adjust to the condition we will class the percentage of loss for both of these conditions as ‘Minor’. MCAA attributes a 10% loss of efficiency for a minor Dilution of Supervision Condition and a 5% loss of efficiency for a minor Site Access problem. Thus the productivity of [the SC and its sub-SC] installation labor was adversely impacted by a factor of 15%.”

17–117 There does not appear to be any comparable set of figures in the UK or Commonwealth jurisdictions, let alone any record of their being considered judicially.

Historic versus actual 17–118 Because of the complexity of large construction projects and the interrelationship of scheduled activities, there is generally a high probability that disruption to a particular activity will have an effect on several other activities. 17–119 If the entire project has been impacted by a series of disruptive events, it is not uncommon to find that it is impossible to find a period of time in which the works were not affected by one intervening event or another. Where there is no such period of unimpacted productivity to use as a baseline, and C or D have not kept adequate records of progress achieved and resources used, it has been accepted by the US courts75 that comparison of the productivity experienced on other similar projects may be used as a gauge. The cases suggest that, when comparing work periods from different projects, there is a greater chance of the data being accepted as comparable if: the the the the

type of work closely resembles the disrupted work; weather conditions are similar over the period in question; geographical area of construction is comparable76; and labour mix is comparable77.

75 Maryland Sanitary Manufacturing Corp v The United States (1951) 119 Ct Cl 100. 76 Rural should be compared with rural, as urban should with urban. 77 In the United States, it has also been held to be important to ensure that union projects are not compared with non-union projects, without making allowances for the different skill and productivity levels, see Clark Baridon Inc v Merritt Chapman and Scott Corp (1962) 311 F 2d 389 (4th Cir).

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17–120 In using such a comparison of other projects, whether for a single activity, or for durations over multiple trades and activities, it is also extremely important to examine in detail the history of the project in order to establish the effect, if any, on the project of extraordinary impacts, such as work stoppages, as these can lead to distortion. 17–121 In Clark Construction78, for example, the factual background of which has been referred to above, there were no records of undisrupted underground pipework and the SC’s work had been severely disrupted by C’s inability adequately to dewater the site. The SC attempted a proof by comparing the underground piping work for the hospital with the underground work for an adjacent nursing home, which had been constructed by the same contractor and subcontractor ten years earlier, because the nursing home underground piping installation had not been impacted by the dewatering problems it had suffered on the hospital and the nursing home was immediately adjacent to the main hospital building. However, the Board rejected the method of quantifying the disruption, saying: “Given the labour overrun that [the SC] knew had begun very early in the project, we find it difficult to believe that the contemporaneous documentation contained in the record would not provide relevant evidence supporting both the fact that an impact on productivity occurred and the extent of that impact. Therefore, in this circumstance, we make the inference that the contemporaneous project records do not support [the SC’s] position.”

Benchmark data versus actual 17–122 Benchmarking is a method for determining the amount of time model activities should reasonably take to accomplish in like conditions based on an analyst making sample observations as to how work is to be performed in sample or actually performed on site. It is a method of time allocation that has been used primarily in the manufacturing industries and was common in the middle of the last century. It is not widely used in construction, however, and has been severely criticised by some commentators79. 17–123 Notwithstanding the reservations expressed by some commentators, it is strongly recommended by the CIOB in its Guide80: “in order to identify the normal productivity rate for given work types the process will normally follow the following procedure: Identify the various activities comprised in the work and examine the relationship between them. If there was a reasonable degree of continuity between relevant activities, then the data can be taken together to represent the performance of that work type from beginning to end. If not, then the analysis will also provide information on the degree of productivity lost as a result of intermittent working (if any) by comparison between the best continuity achieved and that achieved during broken periods, absent any other affecting events. Identify the resources used throughout the various activities and establish whether there is any significant fluctuation between them in continuous and discontinuous

78 Clark Construction Group Inc (2000) VABCA No 5674, 00–1 BCA 30,870. 79 See Dr R Thomas, “Using productive time to calculate labour inefficiencies”, Construction Claims Online (10 January 2005), http://www.constructionclaims.com (accessed 19 July 2010). 80 Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010), paras 5.4.4.2 to 5.4.4.3.

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operative conditions. If the resources were constant, then whatever fluctuation is apparent in productivity will have been caused by something other than resources. The effect of any known event, such as the effect of a learning curve, or an intervening event, can then be isolated and filtered out and the remainder will represent the average normal achieved productivity for that work type. Where there are remaining fluctuations, the best achievable productivity and average productivity can be established relatively easily. Where there are fluctuating resources, then a separate analysis of achievable productivity should be made against each combination of resources in order to establish the effect of the different combinations on the average and best productivity in normal conditions. Where commonly occurring events have interfered with productivity, data for the effect of those on the selected work type can also be established on differing combinations of resources. The effect of different conditions on performance and the circumstances under which the work was carried out, are essential to the usefulness of the analysis of past performance on future planning, and for the best use of such records the data should be kept in a database, which can be searched, organised and filtered for future use. Typically, in relation to any search, the data retrievable should consist of values in at least the following data fields: job name; job type; country and region; date started, completed and construction period; design team; project-management team; construction-management team; activity type and whether it is a common activity, or with project-specific difficulties; activity duration of which data is measured; best working conditions, characteristics; best working weather conditions; best productivity achieved; average uninterrupted productivity achieved; average working conditions, characteristics; most productive resource combination; average resource combination; and effect on productivity of specific events (by type, eg multiple reissues of drawings).”

Actual impacted versus actual unimpacted 17–124 Whilst a comparison with planned data may frequently be the easiest approach for parties to adopt, the most widely accepted method for analysing productivity is that which is referred to as the “measured mile”, or “measured productivity”81 approach. As the SCL Protocol puts it82: “The most appropriate way to establish disruption is to apply a technique known as the ‘measured mile’. This compares the productivity on an un-impacted part of the contract with that achieved on the impacted part. Such a comparison factors out issues concerning unrealistic schedules and inefficient working. The comparison can be made on the manhours expended, or the units of work performed.”

81 JM Wickwire, IJ Driscoll and SB Hurlbut, Construction Scheduling: Preparation, Liability and Claims (John Wiley & Sons, 1991) pp.301–302. 82 Society of Construction Law, Delay and Disruption Protocol, p.31.

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17–125 In the words of Schwartzkopf: “The measured mile calculation is favoured because it considers only the actual effect of the alleged impact and thereby eliminates disputes over the validity of cost estimates, or factors that may have impacted productivity due to no fault of [D].”83

17–126 The nature of the approach was elaborated upon in the US cases of Clark Construction84, in which the Board described the method of analysis as follows: “A measured mile analysis compares work performed in one period not impacted by events causing a loss of productivity with the same, or comparable work performed in another period that was impacted by productivity-affecting events.”

17–127 In Lamb Engineering 85, the Board highlighted that the measured mile approach is most effective when the comparison periods are close in time, involve very similar types of work, and occur in the same contract so that like is compared with like: “As we understand it, a measured mile employs the rate of production achieved in a representative sample of actual operations to estimate the amount of effort which would have been required to perform work which cannot be directly measured. Its probative value necessarily depends upon the comparability of the circumstances surrounding the sample to the circumstances which would have prevailed for the work which could not be directly measured. In our opinion, its use is limited to circumstances where, as here, proof of actual costs of the work as contracted is not feasible.”

17–128 The measured mile tends to be particularly suited to situations in which the process to be analysed has a degree of continuity arising from a cyclical, or repetitive working pattern. Where an identifiable pattern is repeated, it is usually possible to apply such an approach involving the identification of the time taken to complete one or more cycles in undisrupted conditions as a baseline against that can be compared the productivity of identical work cycles in disrupted conditions. Typically, this will be applicable to such cyclical work as piling, multi-storey concrete frame construction, pipeline construction, tunnelling and road laying, mechanical and electrical installations and furniture fit-out, amongst others.

The basic approach 17–129 At its most basic, the measured mile approach entails the comparison, for a given productivity measurement, of productivity in a representative period of time where progress is undisrupted, with that in a comparative period where progress is disrupted by a known event. Figure 17.7, for instance, illustrates an undisrupted period “A” and a disrupted period “B” where a volume of excavation per unit time has been, during the latter period, adversely affected by a period of exceptionally wet weather. The inference might then be drawn that the additional time or cost to C that the water causes is proportionate to the reduction in average productivity during period “B”. Where an isolated activity is considered in this manner, it is important to recognise that productivity will normally vary throughout its duration as a result of any number of factors. 17–130 One of the attractive features of the measured mile approach is that it relies upon actual performance rather than planned performance. This also means, however, 83 W. Schwartzkopf, Calculating Lost Labor Productivity in Construction Claims (Aspen, 1995). 84 Clark Construction Group Inc (2000) VABCA No 5674, 00–1 BCA 30,870. 85 Lamb Engineering & Construction Co (1997) EBCA 97–2 BCA 29207.

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that the quality of C’s record keeping becomes of paramount importance. In the absence of good quality data from which inferences legitimately can be drawn, the measured mile can be little better than speculation86. In Southern Comfort Builders87 for example, the expert’s measured mile analysis was dismissed as being fundamentally flawed where, apart from other things, the value of the calculated lost productivity exceeded the total loss claimed to have been suffered. 17–131 Other limitations to the approach arise from the assumptions that need to be made in order to draw the necessary inferences. Such assumptions include: that there actually exists a representative period which can be used as a baseline and that that period is itself actually undisrupted; that there actually exists a single period that has been consistently disrupted by the event being analysed; and that the relative lack of productivity in the disrupted period is solely attributable to the event being analysed and not to other events. 17–132 If these standard requirements cannot easily be met then, in certain circumstances, it may be possible to undertake a modified measured mile approach by abstracting the effect of known disruptions to achieve a modified baseline. This method is discussed below.

Modified measured mile approach 17–133 When there is no single undisrupted and representative period of time to use as a baseline, what is sometimes referred to as the “modified measured mile”, or “baseline productivity” method might be used in place of a basic measured mile approach88. 17–134 In this method of analysis, instead of selecting a baseline comprised of a continuous set of data points, a baseline is achieved by isolating a non-continuous array of data points that are statistically most likely to represent undisrupted progress. Thomas, for instance, opines that “on all except the worst projects, one can generally find 10% of the reporting periods that are generally free from major disruptions”89. Accordingly, he suggests that an appropriate baseline can be generated by averaging productivity in the 10% of reporting periods with the highest unit output, and that a measured mile analysis be run from that90. 17–135 Such a technique is most likely to find application where there exists a highly repetitive process and where entitlement to extension of time, or reimbursement can be correlated to fall outside the realms of “reasonable foreseeability”. As was stated in the US case of Bat v Pike-Paschan91, for instance: “There is a range of reasonably expected adverse conditions in the performance of a construction contract within which there is no breach It is only to the extent that [D’s] lack 86 See for example, Centex Bateson Construction Co (1998) VABCA Nos 4,613, 5,162–5,165, LEXIS 14, 99–1 BCA (CCH) 30,153, affirmed, Centex Bateson Construction Co v Togo D. West, Jr, Secretary of Veterans Affairs (2000) 250 F 3d 761 (Fed Cir); Adams Construction Co (1997) VABCA No 4669, 97–1 BCA 28801; Fire Security Systems Inc (1991) VABCA Nos 2,107 et al, 91–2 BCA 23743. 87 Southern Comfort Builders v The United States (2005) 67 Fed Cl 124. 88 See, eg Dr H Thomas, “The baseline analysis”, Construction Claims Online (7 February 2005) http://www.constructionclaims.com (accessed 19 July 2010). 89 Dr H Thomas, “The baseline analysis”, Construction Claims Online (7 February 2005) http:// www.constructionclaims.com (accessed 19 July 2010). 90 Dr H Thomas, “The baseline analysis”, Construction Claims Online (7 February 2005) http:// www.constructionclaims.com (accessed 19 July 2010). 91 Bat Masonry Co Inc v Pike-Paschan Joint Venture IT, 842 F Supp 174, 182 (D Md 1993).

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of diligence as a general contractor caused these adverse conditions to move outside that expected range that [C] is entitled to recovery.”

17–136 In certain circumstances, then, all data points falling outside a certain statistical range may be assignable to a single cause for which D bears the risk, for instance unforeseeable ground conditions encountered during oil platform caisson drilling92. This array of data then forms the “disrupted” measurements for the purposes of applying the measured mile approach.

Accounting for the effects of separate events 17–137 When a number of events influence the rate of productivity within the baseline period, it may be possible to isolate some of the effects of those events and consider them separately by filtering the data. Filtering thus provides another means by which the basic measured mile approach might be modified. 17–138 Take, for example, the disruption that might occur in the boring of a tunnel in rock. In the absence of external factors, the productivity of a tunnel boring machine (TBM) is largely a function of the diameter of the tunnel it bores and the material through which it has to bore. For example, it might be established that, for the purpose of tender, four different types of rock are to be taken into account in proportions of 40% good, 30% very good, 20% poor and 10% very poor, each one likely to give a different rate of advance. It may be expected that there will be some water leakage that can be coped with by tunnelling uphill and allowing the water to drain by gravity, or it might be pumped. For the purpose of calculating the period of boring, it can be assumed that two gangs will work two 12-hour shifts on six days per week and that maintenance will be carried out on the seventh day. All this will be important in arriving at an average rate of advance that can be used to give an overall duration for the bore in relation to its length. 17–139 In fact, when the bore is executed, the ratio of the four differing grades of rock will never be the same as anticipated and may change from metre to metre through the tunnel, but may not be so substantially different, when taken in the round, as to be capable of being described as “unforeseeable ground conditions”, conditions that, for the purpose of this example, would be at D’s risk as to both time and cost. 17–140 On the other hand, if the proportion of soft, weak and blocky rock to hard rock is so substantially different as to amount to conditions that were not reasonably foreseeable, it can be expected to cause additional maintenance to be required, interruptions for propping and insertion of rock anchors, and there may be increased water to a level significantly higher than was expected, which in some rock conditions makes no substantial difference to progress but, in others, binds with the soft rock to jam the cutters. At the same time, there may be plant breakdowns caused by insufficient maintenance, which may or may not be associated with the ground conditions, together with absenteeism, strikes and accidents that prevent C from achieving its planned productivity. 17–141 In this example, there are likely to be multiple overlapping causes influencing the rate of productivity and so the calculation of lost productivity resulting from an event 92 See F Samelian, “The disruption and productivity baseline”, an occasional paper presented to the King’s College Construction Law Association Annual Conference (King’s College London, 2004). Referring to process control theories used in the manufacturing industry, Samelian suggests that data falling outside three standard deviations from the mean (or “six-sigma” spread) in such circumstances can be assigned to unforeseeable ground conditions.

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for which D takes the risk independently of the lost productivity for which C takes the risk is by no means easy, and will always to some degree be subjective. However, there are some basic procedures that can be adopted to identify the appropriate periods for measurement and to provide a logical and methodical analysis of cause and effect. For instance, the analyst can prepare a database of the boring records, identifying: the date and time of each shift; rock conditions encountered; water conditions encountered; other conditions encountered; the starting and finishing chainage of the drive; the labour force and plant on site; the periods during which the TBM was inoperable; the reason for suspension of the drive; maintenance carried out on each item of plant; and the occurrence of suspensions due to events and other non-working days. 17–142 C’s cumulative production (measured in metres advancement of the TBM) is plotted vertically against total time elapsed. Other relevant variables that have the potential to influence this measurement are the rock type encountered and the ingress of water; these are also plotted. [Please refer to Figure 17.8] 17–143 In this example, plotting the total work sequence allows periods of no advance to be assigned to five individual events that deprived C of working time. Once identified, these events can be separately analysed and, if they are at the contractual risk of D, appropriate claims made. 17–144 The next stage of the process is to identify stoppages within actual working time that are assignable to discrete events. This can be done first by “filtering out” non-working time; that is, changing the horizontal axis from total time to working time. Accordingly, the effect of such stoppages can then be ascertained. [Please refer to Figure 17.9] The steps involved are: identifying all discrete suspensions of work, or shifts when no advance was made; identifying the proximate and root causes of the stoppages; and identifying the alleged root cause of the lost advancement. 17–145 The discrete events shown in Figure 17.9 can then be filtered out again [Please refer to Figure 17.1]. When this has been done, all that should be left is the data indicating the differing degrees of progress achieved when there were no identifiable stoppages, or suspensions attributable to other discrete events. A basic measured mile analysis can then be undertaken on this remaining data, which will facilitate the identification of the following: the periods of time of high, average and low productivity; the prevailing conditions in the tunnel during each period; and a benchmark degree of progress achieved in conditions representative of those expected at the time of tender93. 93 This will not necessarily be the best productivity actually achieved, as that may have occurred in conditions which were significantly better than those that could reasonably have been expected.

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17–146 In other words, having established the degree of progress per shift that could have been achieved in representative conditions, this can then be compared (on a period-by-period basis) with the progress actually achieved in relation to the differing conditions and a degree of lost productivity equated with the changed conditions by inference. [Please refer to Figure 17.10] 17–147 In this example, the loss of productivity in period 2 is assignable to a combination of high water ingress and the predominantly “very hard” rock type that coincides with it. By extending the pitch line on the graph, moreover, it can be deduced that, if the cumulative advance against time had proceeded at the same relationship during the disrupted period as it had during the period taken as undisrupted by D’s risk events, the work would have been completed 47 days earlier. In other words, lost productivity as a result of D’s time and cost risk events caused 47 days’ prolongation of that activity.

Judicial consideration of the measured mile approach 17–148 There have been numerous US cases in which the Boards of Contract Appeals have considered versions of a measured mile analysis. In Centex Bateson94, for instance, having eliminated the likelihood of other causes, the court accepted that the productivity analysis offered was representative of the effect of those events for which D was liable. 17–149 In Lamb Engineering 95, in relation to the evidence taken in the measured mile calculation in order to ascertain that the calculations were reasonable, the Board observed: “This was a fixed price contract. [C] did not, and was not required to, maintain a job cost or change order accounting system. Nevertheless, because of the sequencing of work, the daily record of equipment usage, and the allocation of equipment usage to Mod. 3, which [C’s subcontractor] made in its daily reports, we conclude that equipment usage and labour could be allocated to various cost objectives with a reasonable degree of accuracy. [C’s expert] ‘coded’ every hour of equipment use and labour during the relevant period and in so doing assigned them to one of five categories. The categories included stripping, cut and fill, Mod. 3, and two categories of unimpacted activities. [C’s expert] testified that he did not use any of the categories upon which [C] based its claim as ‘default’ categories. Despite extensive discovery, [D] did not demonstrate he had done so When, as here, the work was not performed as contracted, the party with the burden of proof must rely upon a construct for the ‘would/should have cost’ half of the equation for computing increased costs. Typically, where the work cannot be unit costed, the party resorts to experts who attempt to reconstruct the work as it would/should have been performed ‘but for’ the event that altered it, and attempt to cost that reconstructed work and arrive at an estimate based upon data available. Here, [C’s expert] attempted to reconstruct the stripping and cut and fill phases as they would/should have been performed, had it not been for differing site conditions, by use of a so-called measured mile.”

17–150 The Board then went on to describe in some detail how C’s expert approached this task: “[C’s expert] developed and employed a measured mile in an attempt to show the productivity [C’s subcontractor] could have achieved if the site was as indicated and it had been

94 Centex Bateson Construction Co (1998) VABCA Nos 4,613, 5,162–5,165, LEXIS 14, 99–1 BCA (CCH) 30,153, affirmed Centex Bateson Construction Co v Togo D West, Jr, Secretary of Veterans Affairs (2000) 250 F 3d 761 (Fed Cir). 95 Lamb Engineering & Construction Co (1997) EBCA 97–2 BCA 29,207.

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able to use the scrapers as planned. His measured mile was based upon actual records kept of one scraper’s productivity for the first six days after the scrapers resumed operation on August 12. The scraper operator maintained records of the number of hours of operation and the number of cycles (cuts and fills) completed by his scraper each day. The scraper took an average of 5.44 minutes to complete a cycle although the daily average cycles per hour varied from a low of 8.35 cycles to a high of 12.91 cycles. The expert then ‘corrected’ the cycle time after consultation with [C’s subcontractor] by reducing it by one minute because of the conditions at the site when the cycles were recorded, thus increasing the productivity by approximately 20%. Since the capacity of the scrapers in question was established at 16.6 cu yds., the expert then calculated a rate of production of 224 cu.yds. per hour using the ‘corrected’ cycle times. He then, in separate calculations, divided the volume of material for the stripping phases and for the cut and fill phase, as taken off the topographic and grading drawings of the solicitation, and arrived at a calculated number of hours for each phase, which he testified [C’s subcontractor] should have taken to complete each of the two phases under the conditions indicated by the solicitation. He then prepared a separate composite hourly rate for each of the operations as planned, drawing from actual cost records, and multiplied the calculated number of hours for each phase by the relevant composite rate to arrive at a ‘but for’ cost for each. The expert appears to have been thorough in gathering and allocating the data necessary for his calculations and [D] did not successfully attack them. We conclude that the mechanics of the process he followed were essentially sound.”

17–151 Another good example of how the relationship of actual performance in differing periods of productivity can be used to establish a degree of performance actually attainable (against which a loss of performance can be inferred to have been caused by the effects of inefficient working96 and acceleration), appears from the US case of Danac97. This was a case concerning a contract to demolish 88 officers’ and airmen’s Wherry housing units and to renovate and upgrade 565 units into 21 different types of new housing, together with ancillary garage accommodation and related site work at Loring Air Force Base, Maine, for the US Air Force. 17–152 The contract divided the housing units into various heating zones, or “heat loops”. A heat loop contained an average of 25 housing units that received heat supplied by a single boiler room through piping unique to those units, with a common mechanical system. The contract contemplated that D would initially release five heat loops to C for renovation and that, as C completed a heat loop, D would release another. Many housing units were occupied and D had to decant the occupants to other locations before C could renovate their units. C planned to employ a small demolition crew, a framing crew, a mechanical crew, an electrical crew, as well as small crews for the other activities. C contemplated that the crews would follow each other through the units. When the crews completed a heat loop, C planned that they would move on to the next heat loop released by D. 17–153 In fact, the workflow was badly disrupted as a result of finding asbestos, hidden defects that had to be put right and additional work as a result of defective design. In order to demonstrate the effect on production of the disrupted workflow caused by out-of-sequence work, C’s expert used C’s as-planned schedule to establish

96 It is worth noting that, in this case, C scheduled its work using a bar chart, without any CPM analysis. The Board accepted that as the foundation for the calculations of costs, presumably because it was used only for the purpose of comparing efficient periods with inefficient periods and not in an attempt to prove the knock-on effect of a delay to progress on the critical path to completion. 97 Danac Inc (1997) ASBCA No 33,394, 97–2 BCA 29,184, affirmed (1998) 98–1 BCA 29,454.

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benchmarks. In addition to the as-planned schedule, he also developed an as-built schedule from weekly reports prepared by both parties during performance. 17–154 By comparing the as-planned and as-built schedules, C’s expert determined when C was achieving the productivity rate planned and when it was not. Among the expert’s conclusions were that C was achieving its planned productivity up to early November 1982, when it encountered differing site conditions and other problems. Thereafter, C was not able consistently to achieve its planned rate of housing unit completions until January 1984. However, from January 1984 until contract completion, C was successful in completing housing units at approximately the rate planned. 17–155 C’s expert then developed a computer model to perform a loss of efficiency study. He compared C’s expenditure of labour hours to the actual numbers of units completed. His premise was that, in an efficient project, the rate of actual labour hours expended, after an initial build-up, would closely parallel the rate of housing units completed. Treating those periods in which there was no such parallel as bad periods, he sought to demonstrate C’s loss of efficiency by comparing the labour hours expended in the bad period with those expended in the good period. 17–156 He identified the bad period as the time from the beginning of construction to December 1983 because, over this entire period, C had a high percentage of labour hours, but a low percentage of housing units completed. He identified the good period as the time from December 1983 to the end of construction in January 1985 because the rate of labour hours expended was less than the rate of housing units completed. He used this period as the baseline for measuring loss of efficiency in the bad period. Thereupon, C’s expert applied efficiency factors to the labour hours expended in the bad period to adjust the rate of actual labour hours expended so that it would “closely parallel” the rate of housing units completed. 17–157 The adjustments reflected C’s expert’s calculation that C experienced an average 55% loss of efficiency from the start of construction until August 1983, and a 25% loss of efficiency from August to December 1983. Considering inefficiencies attributable solely to out-of-sequence work, he determined that 500,000, or 83%, of C’s 603,570 labour hours were efficient, and that C experienced a loss of efficiency of 103,570, or 17%, of its total labour hours. 17–158 C’s expert also performed an analysis to support C’s inefficiency claim on behalf of its plumbing subcontractor. He extracted from the subcontractor’s invoices from the beginning of performance to November 1984 the amounts shown for the subcontractor’s actual labour expenditures. C’s expert then plotted the subcontractor’s labour expenditures to November 1984, as well as C’s labour hours for the same period. He superimposed the resulting curve for the subcontractor on the resulting curve for C, and both curves were closely parallel. He concluded from this relationship that the fact that the rate of subcontractor’s labour expenditure was very similar to that of C indicated that both C and the subcontractor experienced substantially the same loss of efficiency. 17–159 This was accepted by the Board as good evidence of the loss of efficiency suffered by C and its subcontractor as a result of the reimbursable delays to progress98.

98 See also L Davis, L Stipanowich and W Bauer, “Does the ‘Measured Mile’ measure up? When it has, when it hasn’t and what may happen under Daubert/Kumho” (2007) Construction Briefings (Thomson/West).

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Expert opinion 17–160 So far as activity durations are concerned, the scope for useful expert opinion is limited. It is always possible, of course, to use an expert in the calculation of construction durations and productivity to determine applicable “baseline” rates of work for the tender activity and the impacted activity99, but in general, courts and tribunals can be expected to require records to prove that productivity has in fact been lost as a result of a definable cause. In Fru-Con100, for example, the Board declined to accept expert evidence of the degree of productivity lost as a result of exceptionally hot weather, saying: “[C’s] attempt to provide missing productivity information through the testimony of its expert did not compensate. [C’s expert] focused his investigation on lost productivity. In [C’s expert’s] opinion, productivity will decrease with an increase in temperature and difficulty of the task. A typical loss of productivity due to increased temperatures would be approximately 20% to 30%. Small increases in temperature can have a significant effect on productivity once the temperature reaches a certain point. In his efficiency analysis, [C’s expert] focused on four factors: temperature, overtime, overcrowding, and difficulty of the work due to overbreak. Noting that the sum total effect of all four factors was greater than each individual factor and that other factors were not accounted for, but which would have had an impact, [C’s expert] concluded that [C] lost a minimum of 31,024 hours. [C’s expert’s] analysis did not account for instances in which [C] was inefficient or made an error resulting in delay, eg, the mitre gate skirt work and setting of the bulkheads. The court is unable to discern from [C’s expert’s] analysis a causal relationship between the weather and [C’s] loss of productivity. [C’s] loss of 31,024 man-hours appears to be the result of factors that were not included in [C’s expert’s] calculations. For example, [C’s expert] does not account for physical or mental fatigue or errors such as breach of the lock culvert. Most significantly, [C’s expert’s] analysis does not delimit a specific loss attributable to weather. Coupled with the lack of contemporaneous records, the lack of a specific loss due to weather precludes a finding in [C’s] favour. Having failed to establish that the delay was the fault of [D] or to prove its losses with sufficient certainty, [C] may not recover damages.”

17–161 Similarly, in Clark Construction, the Board rejected expert testimony of what lost productivity there might have been saying: “The after-the-fact, conclusory assessments of the project managers or the opinion of its experts are not sufficient substitutes for PKC’s underlying obligation to contemporaneously document the severe adverse impact on labour efficiency it now claims resulted from the changes and RFIs.”

17–162 In the circumstance where C advances its claim by pursuing a valuation of varied works, including the disruptive effects of the variation, the comments above in respect of the factual nature of the as-planned schedule remain pertinent. However, it may be entirely appropriate in this circumstance to seek expert opinion on the changes to the schedule that should rightly flow from the variation, and the disruptive effects on the works as a whole as this is a matter of opinion and not a matter of fact, and, under many standard contract forms, is the appropriate basis for valuing the varied works.

99 R Lane, “Cause–Effect Analysis for Delay and Disruption Claims” (1994) Construction Briefings, 2nd Series (Federal Publication Inc). 100 Fru-Con Construction Corp v The United States (1999) 44 Fed Cl 298 at 27.

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CHAPTER 18

Concurrency, parallelism and pacing

Concurrency Introduction The parties Entitlement Distinguishing a delay to progress from a delay to completion Distinguishing primary, secondary and tertiary causation Distinguishing concurrent and parallel delays Distinguishing concurrent and sequential delays Distinguishing concurrent and pacing delays to progress Distinguishing the timing of primary causes Legal concepts of relief and compensation Distinguishing delay and financial loss Concurrency and delay to progress Concurrent delays to progress Sequential delays to progress Parallel delays to progress Concurrency and extensions of time Concurrent delays to completion Sequential causes of delay to completion C must pay liquidated damages for all the delay to completion, if it cannot show for which part, if any, C is not responsible D is not entitled to any liquidated damages at all, because it is, at least in part, responsible C must pay all the liquidated damages, unless it can show for which part of the delay to completion D was responsible D is not entitled to any liquidated damages at all, unless it can show for which part of the delay to completion C is responsible Parallel causes of delay to completion Concurrency and prolongation Concurrent causes of prolongation Sequential causes of prolongation Parallel causes of prolongation Concurrency and pacing

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18–001 18–001 18–013 18–014 18–015 18–017 18–018 18–023 18–024 18–025 18–029 18–035 18–039 18–039 18–044 18–059 18–066 18–066 18–081 18–083 18–085 18–086 18–092 18–097 18–103 18–103 18–113 18–116 18–122

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Concurrency Introduction “First, different causes of delay may overlap, and this will be intellectually troublesome if one is an event justifying an extension and one not; eg information or access may not be available, but due to culpable delay or an event not justifying an extension, [C] would not have been able to take advantage of them if they had been.”1

18–001 “Concurrent” is usually defined as meaning “acting in conjunction”, “co-operating”, “occurring at the same time”, “existing together”, or “covering the same matters”: “[T]he term ‘concurrent’ appears to have a consistently understood meaning relating to the simultaneous impact or happening of disparate actions or actors. Notably, the dictionary definition of this term relates more to causative factors, rather than to effects or outcomes.”2

18–002 Concurrency, in its pure form, presents few difficulties. It is simply this: where two causes (one of which is the liability of one party and one the liability of the other) result in the same loss, liability either lies where it falls and neither party receives compensation, or some form of inferential machinery is employed in order to facilitate distribution of the loss between the parties3. In Henry Boot v CLNTDC, HH Judge Fay QC explained it thus: “There are cases where the loss should be shared, and there are cases where it should be wholly borne by [D]. There are also those cases which do not fall within either of these conditions and which are the fault of [C] where the loss of both parties is wholly borne by [C]. But in the cases where the fault is not that of [C] the scheme clearly is that in certain cases the loss is to be shared; the loss lies where it falls.”4

18–003 However, as a result of the various attempts of tribunals and courts to expand that simple compensation-related formula into ever more complicated time-related scenarios, that simple thesis has become more difficult to follow5. 18–004 When delay to progress, delay to completion, sequential delay, parallel delay, apportionment and pacing are added to the mix, just attempting to find a consistent theme in the way the principles of concurrency and non-concurrency are treated by courts and tribunals is a challenge; a challenge in which some courts and tribunals have been found wanting: “it is evident that the modern doctrine of concurrent delay is premised not on the equitable resolution of construction delays, but is instead based on past litigants’ failure or inability to effectively prove their cases and the older courts’ hostility toward liquidated damages, among other bases. Over time, these factors merged and evolved into the legal doctrine of ‘concurrent delay’. After several years, the later courts stopped delving into the ‘real’ analyses of these early courts, and instead rotely applied these early courts’ resolutions of concurrent delay as a ‘rule’ for resolving all overlapping construction delays.”6 1 I Duncan Wallace, QC (ed), Hudson’s Building and Engineering Contracts 10th edn, 1st Supplement (1979) p.639. 2 K Bidgood, James, Jr, S Reed, and J Taylor, “Cutting the knot on concurrent delay” (2008) Construction Briefings 2007–2. 3 See Ch.20, “Apportionment”, throughout. 4 Henry Boot Construction Ltd v Central Lancashire New Town Development Corporation (1980) 15 BLR 1 at 12. 5 But, for those who prefer to take a broader view of concurrency, see Dr F Mastrandrea, “Concurrent causation in construction claims” [2009] ICLR 75. 6 J Bidgood, Jr, S Reed, and J Taylor, “Cutting the knot on concurrent delay” (2008) Construction Briefings, 2007–2.

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18–005 By way of example, perhaps one of the least edifying examples of such confusion is found in City Inn v Shepherd 7, in which, amongst other things, the court referred to two parallel delays to progress at D’s risk, which occurred sequentially, as concurrent delays to completion, when opining: “none of the causes of delay can be regarded as a ‘dominant’ cause; each of them had a significant effect on the failure to complete timeously. Indeed, the lateness of the instructions relating to the gas venting scheme and the roof steelwork had a major effect on the progress of the works, to a substantially greater degree than the items involving contractor default. Consequently the case is one of true concurrent causes.”8

18–006 In this case, the court went on to attempt to apportion liability by reference not to value, dominance, but-for, breach, or any other established method but by reference to the quantity of claims made by either side9. 18–007 Accordingly, it is because of the surprisingly flexible use of the word “concurrency” in relation to delay-related scenarios that the application of concurrency theory has become probably the most conceptually challenging aspect of delay analysis. So, it has been said that: “Generally, the hope is that courts and decision makers will apply legal reasoning and analyses to disputes that reflect and appreciate this complexity. Unfortunately, the legal and industry understanding of these complex delay scenarios is often mired in the easily-applied ‘dogma’ of buzzwords like ‘concurrent delay’ and other similar concepts. The result of the routine application of this dogma, without consideration of its roots, often leads to results different to the reasonable commercial expectations of the parties and results that are often incomplete or simply inequitable.”10

18–008 Therefore it is, perhaps, unsurprising that, in the twenty-first century, some commentators have rejected the theory of concurrency in delay-related cases as historically redundant in favour of a more scientific approach to the proof of causation through schedule analysis11. 18–009 The last 20 years or so have seen increasing support for this view from the English courts12. Such a technical approach effectively puts paid to the confusion arising out of sequential, parallel, pacing and apportionment in relation to “concurrency” of delay, but does not dispose of concurrency entirely. Whilst the effect of various primary causes on delay to progress, the effect of secondary causation on completion and the loss and expense flowing therefrom should thus be a matter of calculation, from the factual records, 7 City Inn Ltd v Shepherd Construction Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590. This is a case which has been robustly criticised by J Winter, “Dominant cause and its relevance to concurrent delay”, Society of Construction Law Conference (London, 2008); see also the criticism by this author at 24 Const LJ 590. However, it is not wholly without support, see Dr F Mastrandrea, “Concurrent causation in construction claims” [2009] ICLR 75 and A Stephenson, “Concurrency, causation, common sense and compensation (part 1)” [2010] ICLR 166 and was affirmed by the Inner House [2010] CSIH 68. See also K Pickavence, “Delay analysis the application of common sense to facts and the curious case of City Inn Ltd v Shepherd Construction Ltd” (2011) 27 Const LJ 6. 8 City Inn Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590 at [157], affirmed [2010] CSIH 68. 9 See Ch.20, “Apportionment”, para.20–068. 10 J Bidgood, Jr, S Reed, and J Taylor, “Cutting the knot on concurrent delay” (2008) Construction Briefings 2007–2. 11 See Ch.15, “Forensic programme analysis”. 12 See, for example, John Barker Construction Ltd v London Portman Hotel Ltd [1996] 83 BLR 31, (1996) 12 Const LJ 277; Balfour Beatty Construction Ltd v London Borough of Lambeth [2002] EWHC 597 (TCC); [2002] BLR 288, 84 Con LR 1; (2002) 18 Const LJ 405; Mirant Asia-Pacific Construction (Hong Kong) Ltd v Ove Arup & Partners International Ltd [2007] EWHC 918 (TCC); Costain Ltd v Charles Haswell & Partners Ltd [2009] EWHC 3140 (TCC); [2010] TCLR 1.

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rather than inference from some “carefully chosen weasel words”13. In some cases, concurrency of primary causation will always remain to be resolved inferentially. 18–010 Take, for example, a scenario in which, primarily, C claims that conditions applied to approval of its design are changes at D’s risk, but D maintains that such changes are merely to secure compliance with the contract and are at C’s risk and, as a result, the design production is delayed. The effect of this is to cause a secondary delay to progress in the commencement and/or completion of the work on site dependent upon the design. CPM analysis will easily quantify the delay to progress caused, identify whether any part of such delay to progress was on the critical path and, hence, whether it contributed to delayed completion (the tertiary causation) and, if so, by how much. Having determined the periods and dates of the types of delay, if any, which were caused, it is relatively simple, by reference to C’s cost base, to attribute a value to the quantified delays to progress and prolongation. 18–011 On the other hand, no amount of technology, scientifically applied, is likely to help in determining at whose feet the additional design work and consequential delay to the completion of the design should properly wholly lie, or whether the additional design work required is in part a design change by D and in part a failure by C to carry out its obligations under the contract, or what proportion of both. For that, an inferential approach to concurrency is inevitably required. 18–012 Much has been written about concurrency. Amongst the reasons why, in the second decade of the twenty-first century, we still find that concurrency is so difficult to understand is because of the inconsistency in the treatment of the following issues: the parties; entitlement; distinguishing distinguishing distinguishing distinguishing distinguishing distinguishing distinguishing distinguishing

delay to progress from delay to completion; primary causation from secondary and tertiary causation; concurrent and parallel delays; concurrent and sequential delays; concurrent and pacing delays; timing of primary causes; the legal concepts of relief and compensation; and delay and loss.

The parties 18–013 In any question of concurrency, there must always be both D’s and C’s risks to be considered; one party must be liable for one cause and the other party liable for another cause of the same loss. If a single party is responsible for more than one cause of the loss then, whilst parallelism may be in issue, concurrency can never be. Similarly,

13 In their commentary on the effects of Wharf Properties Ltd v Eric Cumine Associates (1991) 52 BLR 1, a case before the Privy Council in which the claim was struck out because the pleadings did not show the necessary link between cause and effect, the editors of the Building Law Reports said: “ it seems that it will in future be necessary for [C] to be quite specific as to the delay which it is alleged was caused by an event such as a breach of contract, or an instruction giving rise to a variation it will mean that proper records will need to be kept, or good use will have to be made of existing records to provide the necessary detail. It will no longer be possible to call in an outsider who will simply list all the possible causes of complaint and then by use of a series of chosen ‘weasel’ words try to avoid having to give details of the consequences of those events”.

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rules as to contribution as between multiple tortfeasors for the same loss offer little to resolve the difficulties presented by concurrency in construction14.

Entitlement 18–014 There may be considerations of entitlement to consider concerning a right to compensation or to relief from liquidated damages, or both, and the differing ways in which concurrency can be construed to give entitlement to: only an extension of time; only compensation; and both an extension of time and compensation.

Distinguishing a delay to progress from a delay to completion 18–015 The word delay is not always used in the same way, by everybody, in the same context15. For instance, in the standard forms of contract and in many learned papers on the subject, the word “delay” can be found to be used interchangeably to mean: “a delay to progress”, which may affect both critical activities and activities in float and can only occur during the currency of the work, on days upon which it is intended to work; and “a delay to completion”, which can only occur after the date for completion has passed, which can only be caused by a preceding delay to progress, which was in whole, or in part on the critical path, and which is calculated by reference to calendar days16. 18–016 Unless the contract provides otherwise, the former, even if at D’s risk, only goes to reimbursement of C’s losses, whilst the latter may or may not give rise to compensation and may, or may not bring relief from liquidated damages, depending upon which party causes the delay to progress which delays completion the division of risk under the contract and the degree to which the delay to progress causes the whole or a part of the delay to completion after the completion date.

Distinguishing primary, secondary and tertiary causation 18–017 Primary causation is the event that causes a delay to progress. If it does not cause a delay to progress, although it may remain an event for which the contract provides relief or compensation, it will be of no effect in relation to compensation or relief from liquidated damages under the construction contract. Secondary causation is the delay to progress that may or may not cause quantifiable loss to be suffered, but does not normally provide relief from liquidated damages. Tertiary causation can only occur if the secondary delay to progress is on the critical path to completion and, hence, causes a delay to completion of the works and prolongation of C’s time-related overheads, and it may also give rise to relief from liquidated damages17. 14 A point reinforced by the Outer House in City Inn v Shepherd Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590, affirmed [2010] CSIH 68, in which, at [15] Lord Drummond Young said: “in the application of [JCT80, Cl.25, a D’s time-risk] event may still be taken into account even though it operates concurrently with another matter that is not a [D’s time-risk] event. In other words, the ‘but for’ rule of causation, that an event A will only be a clause of a result B if B would not have occurred but for A, has no application.” 15 See Ch.1, “Introduction and terminology”, at para.1–031. 16 See Ch.14, “Cause and effect”, at para.14–112. 17 See Ch.14, “Cause and effect”, at paras 14–021 to 14–069.

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Distinguishing concurrent and parallel delays 18–018 Concurrency, which requires at least two causes, one of which is the liability of one party and one the liability of another, is not always distinguished from parallelism, which is the term used to describe the responsibility of only one party for more than one cause of the same delay. 18–019 By way of example, JCT80 and JCT9818 use “concurrency” in relation to D’s liability for more than one cause, where the phenomenon would be better described as a “parallelism”. The relevant clauses19 state: “In respect of each and every [D’s time risk event] in the notice [C] shall estimate the extent, if any, of the expected delay in the completion of the works beyond the completion date resulting therefrom whether or not concurrently with delay resulting from any other [D’s time risk event].” (emphasis added)

18–020 Here, the word “therefrom”20 must logically relate to “each and every [D’s time risk event] in the notice”21. To put it another way, this clause does not require C to take into consideration in its estimate of the effect upon completion a delay to progress caused by C over the same period as the delay to progress caused by D, which both have the same effect upon completion (which is concurrency), but requires C to identify what would be likely to be the effect of any one D’s time risk event, independently of its identification of the likely effects of any other of D’s time risk event. In other words, it requires C not to take into consideration in its estimate what is more often referred to as “parallel delay to completion”, where there are two causes of delay to completion of the works beyond the completion date, both at D’s time risk. 18–021 The distinction between concurrency and parallelism was drawn, however, in the Brompton Hospital22 case, where the court observed: “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 [D] will not be responsible under the contract.”23

18–022 However, see also City Inn v Shepherd 24 in which, in relation to a JCT80 contract, the parties’ advocates and the court had used the expression “concurrency” not only to refer to D’s risk and C’s risk events occurring over the same time period, but also those delays to progress occurring sequentially, but having the same effect on completion (ie a concurrent effect), and parallel causes of delayed completion at D’s risk and parallel causes of delayed completion at C’s risk. This was a point noted by Lord Osborne in the Inner House, who remarked25: “One of the problems in using such expressions as ‘concurrent delay’ or ‘concurrent delaying events’ is that they may refer to a number of different situations. Confining attention for a moment to concurrent delaying events, which may be taken to mean relevant events and other events, or causes of delay, which are not relevant events, there would seem to be several 18 But not JCT05, which does not consider concurrency or parallelism. 19 Cll.25.2.2 and 25.2.2.2. 20 In Cl.25.2.2.2. 21 In Cl.25.2.2. 22 Royal Brompton Hospital NHS Trust v Frederick A Hammond (No 1) [2000] EWHC 39 (TCC); [2001] 76 Con LR 148. 23 Balfour Beatty Construction Ltd [2002] BLR 288 at [30] per Judge LLoyd QC. 24 City Inn Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590, affirmed [2010] CSIH 68. 25 City Inn Ltd v Shepherd Construction Ltd [2010] CSIH 68, per Lord Osborne, at [49].

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possibilities. Such events may be described as being concurrent if they occur in time in a way in which they have common features. One might describe events as concurrent on a strict approach only if they were contemporaneous or co-extensive, in the sense that they shared a starting point and an end point in time. Alternatively, events might be said to be concurrent only in the sense that for some part of their duration they overlapped in time. Yet again, events might be said to be concurrent if they possessed a common starting point or a common end point. It might also be possible to describe events as concurrent in the broad sense that they both possessed a causative influence upon some subsequent event, such as the completion of works, even though they did not overlap in time. In other words, they might also be said to be contributory to or co-operative in bringing about some subsequent event. It appears to me that one of the problems in the present case is that language such as that under consideration here has been used in different senses at different times. It therefore becomes important in the interests of clarity, to try to disentangle this confusion.”

Distinguishing concurrent and sequential delays 18–023 There are at least four possible scenarios to be considered in relation to concurrency of delay to progress and to completion26: 1. 2. 3. 4.

two primary causes actually operating at the same time, causing the delay to progress, which is likely to have an effect on completion27; two primary causes operating sequentially, causing the same amount of delay to progress, which is likely to have an effect on completion28; two primary causes operating sequentially, causing two separate sequential delays to progress, which are both likely to have the same effect on completion29; and two primary causes operating sequentially, causing two separate sequential delays to progress, each of which contributes to a part of the total delay to completion30.

Distinguishing concurrent and pacing delays to progress 18–024 Whilst concurrency occurs as a result of two independent acts, pacing occurs as a result of the conscious decision by one of the parties to reduce the pace of its work in order to keep pace with that of the other party. In other words, pacing occurs when a party decides to take up the float caused by a delay by the other party.

Distinguishing the timing of primary causes 18–025 There are a number of possibilities as to the timing of concurrency. In some schools of thought, a concurrent cause is the primary concept, in others it is a concurrent 26 See Essex Electro Engineers Inc v Richard J Danzig, Secretary of the Navy (2000) 224 F 3d 1283, 1295–96 (Fed Cir). 27 This is true concurrency of causation. 28 This seems not to have been considered judicially. 29 This is the example given by HH Judge Seymour QC in Royal Brompton Hospital NHS Trust [2000] EWHC 39 (TCC); [2001] 76 Con LR 148. 30 Whilst in this example, there is no concurrency of primary cause, or of secondary, or tertiary effect, in City Inn Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590, this scenario was also considered to constitute “concurrency”, a definition accepted on appeal where, in City Inn Ltd [2010] CSIH 68 at [49], Lord Osborne observed: “It might also be possible to describe events as concurrent in the broad sense that they both possessed a causative influence upon some subsequent event, such as the completion of works, even though they did not overlap in time. In other words, they might also be said to be contributory to or co-operative in bringing about some subsequent event.”

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effect of two causes, which is either a concurrent effect on progress, or a tertiary concurrent effect on completion. 18–026 There must be at least two causes; each of the causes in question can be: 1. 2. 3. 4.

one for which C has agreed to bear the risk of the effects of both time and cost; one for which D has agreed to bear the risk of both time and cost; one for which the parties have agreed to share the risk of both time and cost equally between them; or one for which one party has agreed to take the risk of time, whilst the other has agreed to bear the risk of cost.

18–027 The causes of the loss or expense, or the cause of the delay to progress (which causes delay to completion of the works beyond the date for completion) must be construed to cause the same loss, or expense, or (depending upon what is meant by concurrency) to cause the same delay to progress, or to cause the same delay to completion of the works, but each may affect: more than one activity in float; activities on more than one float path; activities on a critical path; activities on more than one critical path; and through lapse of time, an effect on float can be turned into an effect on the critical path and vice versa31. 18–028 In the American case of Wallace v US32, Allegra J identified that, whilst the law on concurrency was settled, the debate about sequential delay continued, saying: “Thornier issues are posed by concurrent or sequential delays – the first occurring where both parties are responsible for the same period of delay, the second, where one party and then the other cause different delays seriatim or intermittently. Concurrent delay is not fatal to [C’s] claim for additional time due to excusable delay, but precludes the recovery of delay damages. ‘If a period of delay can be attributed simultaneously to the actions of both [D] and [C],’ this court has stated, ‘there are said to be concurrent delays, and the result is an excusable but not a reimbursable delay’33. Summarizing the law on this point, the Federal Circuit, in Essex Electro Engineers recently reiterated that [C] ‘generally cannot recover for concurrent delays for the simple reason that no causal link can be shown: [D’s] act that delays part of the contract performance does not delay the general progress of the work when the prosecution of the work as a whole would have been delayed regardless of [D’s] act’34. A more heated debate surrounds the treatment of sequential delays, the law on which has aptly been described as ‘unsettled’.”

Legal concepts of relief and compensation 18–029 The common law rules that apply to recovery of losses suffered as a result of a delay to progress or prolongation are not the same as those that apply to securing 31 See, for example, John Barker Construction Ltd (1996) 83 BLR 31. 32 RP Wallace Inc v The United States (2004) No 96–222 C; (2005) 21 Const LJ 378. 33 Morganti National Inc (2001) 49 Fed Cl.110, affirmed (2002) 36 Fed 452; see also Weaver-Bailey Contractors Inc v The United States (1990) 19 Cl Ct 474, 476; Utley-James Inc (1985) 85–1 BCA 17,816, WL 13,874 (citing Dawson Construction Co (1975) 75–2 BCA 11,563, WL 1808). 34 Essex Electro Engineers Inc (2000) 224 F 3d 1283 (Fed Cir) at 1295.

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relief from liquidated damages for delay to completion of the works beyond the completion date. 18–030 Put simply, the general rule as to relief from liquidated damages is that, depending upon the form of contract, C may be entitled to relief for a delay to completion of the works beyond the completion date, caused by D’s risk as to time, which is no more than likely to occur in the future, and that may be so, notwithstanding that the delay to completion might be likely to occur, in any event, because of delay to progress caused by C over the same period. 18–031 On the other hand, the rule as to compensation is that C is entitled to compensation from D for the loss or expense it actually suffers as a result of an event at D’s cost risk alone. It is quantified in relation to the actual delay to progress or the actual prolongation of the contract. C is not entitled to any compensation for a delay to progress, or for prolongation that is not one for which D alone is responsible. 18–032 In the UK and other Commonwealth jurisdictions, it appears to be the case that, on the whole, if the period and quantum of loss can be broken down into distinct periods of liability, then C will be entitled to recover compensation only for the period and loss for which D is liable. If it cannot be broken down and quantified according to distinct periods and loss, then, in some circumstances, rather than see C out of pocket, the courts will attempt either to allocate the loss according to one or more principles of inferred causation (such as, for example, but-for, or dominant cause), or will attempt some other method of apportionment35. To a large extent, that also seems to be the case in the United States: “Today, in most jurisdictions in the U.S., if the court can ‘apportion’ the delay caused by each party, then these delays are not concurrent and each party may recover damages for the delay caused by the other. If the court cannot quantify and determine the causes of the delay, then these delays are concurrent and the court will not apportion damages for those periods, although it may grant an extension of time. Consequently, concurrent delay issues are primarily questions of fact in which the party seeking to recover damages bears the burden of allocating the delays so as to prove the absence of concurrent delay.” (internal references omitted, original emphasis)36

18–033 In the UK and other commonwealth jurisdictions, concurrency is usually advanced by D as a defence to a claim by C, and it then falls to C, by way of reply, to demonstrate that what it is claiming is not for a period or a loss for which C itself had any culpability. That would appear also to be true of the United States; for example, in MCI Constructors37, in considering the proof of prolongation costs, the District of Columbia Board of Contract Appeals said: “If we find that [C] cannot be charged with any concurrent critical path delay, then the record requires us to hold that [C] is entitled to recover its delay costs for a period of 252 days. To determine the issue of concurrency we must examine whether [C] is responsible for delays in the prosecution of its work and whether any such delays caused a concurrent critical path delay to project completion. [D] bears the burden of proving concurrency because it is in the nature of an affirmative defence to liability for delay damages. As in the case of demonstrating compensable delay, the party asserting a concurrent delay must show that the delay affects the critical path of performance”. (internal references omitted) 35 See Ch.20, “Apportionment”. 36 King and Spalding, “Selected principles of delay analysis”, an occasional paper, London Court of International Arbitration (2002). See also C Cavaleri, “Construction disputes in Denmark: the case of concurrent delay” (2015) 31 Const LJ 57. 37 MCI Constructors (1996) DCCAB No D-924, WL 331212.

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18–034 However, one distinction between the approaches of the United States and United Kingdom worth commenting upon is that in US government contracts the trend appears to be that, rather than wait for D to allege concurrency in defence to its claim, C will attempt to disprove concurrency in the process of making its claim: “Determining the cause and extent of delay events is a fact intensive process. In most significant litigation and arbitrations, the parties will engage [scheduling] experts to perform CPM analyses of the project schedules to determine the cause and extent of the delays. In cases involving U.S. government construction projects, a party claiming D-caused delay must present a CPM schedule analysis to show the absence of concurrent delay before it may recover delay damages.” (internal references omitted, original emphasis)38

Distinguishing delay and financial loss 18–035 Time and money are not the same. A finite sum of money can only be spent once; if it is not spent, it will remain; the more intensively it is spent, the quicker it will expire; it can be divided into smaller pots and distributed, but, in the end, all the separate pots will still add up to the original finite sum. 18–036 On the other hand, a finite amount of time will expire at a regular and consistent rate, whether it is used intensively, or not used at all. So, for example, once the contract period commences, that finite amount of time will expire day after day, until the contract completion date arrives. That is so, irrespective of what resources are available, or what work is done. 18–037 By way of example, C might have 1,000 men on site for a day, or one man on site for a day. The costs of the former may be 1,000 times greater than the latter but, so far as time is concerned, it is still only one day. Similarly, if C plans to work on a single activity for a single day, given the resources, it might equally well work on 1,000 activities in the same day. The costs will be dramatically different, as will the productivity; but, so far as time is concerned, it is still only one day. 18–038 An activity, or sequence of activities, taking up more time than planned may thus cause financial loss; but merely taking up time is not a loss in itself and any attempt to treat it as such will inevitably cause difficulties. For instance, a delay to progress is not likely to cost D anything, but notwithstanding that the delay to progress merely takes up available float and has no other time-related consequences C may well suffer loss and expense as a result of standing time and lost productivity. On the other hand, depending upon the resources applied, the overheads involved and predictable losses for non-completion, for a period of prolongation, C may wish to recover from D loss and expense amounting to several million pounds, but, although the period of delay to completion may be identical, the liquidated damages recoverable by D from C, for the same period, may be substantially less.

Concurrency and delay to progress Concurrent delays to progress 18–039 In this scenario, which might reasonably be termed “true concurrency”, D’s and C’s time risk events occur at the same time to cause a delay to progress over the 38 King and Spalding, “Selected principles of delay analysis”, an occasional paper, London Court of International Arbitration (2002).

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same time period, either of which, in the absence of the other, is likely to cause the same delay to completion of the works39.

Illustration Facts: Castle Inns Ltd (P) owned a property that was to be converted into licensed premises in two phases. P engaged Clark Contracts Ltd (D) for the first phase. Disputes arose between the parties, leading to two separate referrals to adjudication by D. P raised the present claim for loss of profit caused by the delay in opening the premises as the only remaining matter in dispute. Held, by Lord Drummond Young in the Outer House, that P had failed to establish any delay in completion of the phase 2 works by D; that P had failed to establish that D had caused any concurrent delay in the completion of the premises by other contractors on site; and that P had failed to establish the amount of any loss sustained as a result of the late opening of the premises: Castle Inns (Stirling) Ltd v Clark Contracts Ltd40.

18–040 The event at D’s risk as to time, as described in the contract, has to occur and to start to cause a delay to progress at the same time as the event occurs. The reason for this is that, if the two did not happen together, then the causative event at D’s risk, which predated the consequential delay to progress, would also predate C’s delay to progress and the sequential character of D’s act of causation and C’s delay to progress would render the effects separable41. Accordingly, this scenario cannot apply to instructed variations, the effect of which can be predicted and that only take effect on the progress of the works, if at all, when they are implemented on site, at some time in the future. 18–041 Events at D’s risk that might form the basis of concurrent delays to progress are thus such occasions as: suspensions of the works; failure to grant access; failure to provide information, goods, equipment and so on, in due time; and, oddly, perhaps the contractual suspension of the works by C, consequent upon a failure by D to make prompt payment, which is at D’s risk under the contract. If such suspension by C coincided in time with a failure to perform, which was also the responsibility of C, that might also constitute true concurrent delay to progress. 18–042 Given that this scenario only embraces situations where the two events are not only coincident in time, but also are genuinely independent of one another, it will be relatively rare in its occurrence. Apart from the limited nature of the occurrences, subject to appropriate records being available, that will also be because of the theoretically infinitely divisible nature of time. 18–043 In these circumstances, because under the standard forms of contract, D generally has no legitimate expectation of C performing any activity by any date42, and 39 “True concurrency” is the term used by the SCL Protocol, see Core Principle 1.4.4. 40 [2007] Adj LR 02/06. 41 See, for example, sequential delays to progress below at para.18–044. 42 But, see AS2124, Cl.33.2 and AS4000, Cl.32, which state that C may not depart from its schedule. See also the schedule as a contract document, Ch.7, “Planning and programming” at paras 7–222 to 7–227.

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does not levy liquidated damages for a failure to make due progress, it is only C who is likely to bear a loss or expense and who will lodge a claim for reimbursement. D’s defence is then that, since C would have suffered the same loss or expense, irrespective of D’s causative act or omission, C has only itself to blame and cannot recover from D, or, alternatively, C cannot demonstrate that it has suffered any loss or expense caused solely by D.

Sequential delays to progress 18–044 When, as the result of an event at D’s risk, delay to progress occurs and then, subsequently, C delays the progress of the works for a reason unconnected with D’s risk event, or vice versa, the effects of the two events are said to cause sequential delays to progress. Recognising the inherent nature of sequential delays, the simple distribution of the effects thereof and, thus, the importance of distinguishing sequential delay from concurrent delay was illustrated in Essex Electro43, in which, on appeal, the Federal Court said: “The final question in this case is how the overall delay in contract performance should be apportioned. A contractor seeking to prove [D’s] liability for a delay must establish the extent of the delay, [C’s] harm resulting from the delay, and the causal link between [D’s] wrongful acts and the delay. [C] generally cannot recover for concurrent delays for the simple reason that no causal link can be shown: [D’s] act that delays part of the contract performance does not delay ‘the general progress of the work’ when the ‘prosecution of the work as a whole’ would have been delayed regardless of [D’s] act. In recent cases, that principle has been characterized as requiring [D’s] act to ‘have affected activities on the critical path’. If the Board on remand finds that [D] acted unreasonably in responding to [C’s] submissions, the Board should then determine whether, as a result, [C] incurred delay to its overall contract performance. If, but for [D]-caused delay, the submissions would both have been approved prior to the date [C] actually began testing, the Board should find the delay in the testing to be attributable to [D]. The amount of any such overall delay chargeable to [D] should be equal to the period between the time both the submissions would have been approved absent culpable delay by [D] and the time [C] actually began testing. This inquiry requires the Board to focus on the overall effect that [D]-caused delay had on the beginning of testing, and not to focus on each discrete period of delay and then automatically treat as concurrent delay any period of [D]-caused delay during which [C] was causing unrelated delay. That type of instance-by-instance analysis of the delays could result in distortion of the proper measure of overall delay. The reason is that, in the absence of any [D]-caused delay, [C]’s unrelated delays might have been concurrent with each other (rather than concurrent with [D]-caused delays), so that the overall delay in contract completion would not have been as great.”

18–045 It is worth identifying, in passing, that, if either, or both delays to progress are on the critical path to completion at the time, a predictive, likely delay to completion will be evident and, if they continue to have effect through to completion, there will be an actual delay to the completion of the works and prolongation. However, for present purposes, focus must remain upon the sequential nature of the delays to progress. These are not concurrent delays to progress because, ipso facto, they do not occur over the same time period. 18–046 Because they do not occur at the same time, through the simple process of updating and impacting the planned schedule as the work proceeds, the timing of each event and the likely effect upon completion, of either, if any, can be identified by date and quantified. Similarly, if not carried out contemporaneously, the same analysis can be carried out retrospectively, provided that adequate progress records have been kept. 43 Essex Electro Engineers Inc (2000) 224 F 3d 1283, 1295–96 (Fed Cir).

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18–047 Having identified the precise timing and duration of the delay to progress caused by the event at D’s risk, the costs and expense suffered by C during that precise period can be quantified from its cost records. Similarly, if it should have a continuing effect upon completion, the resultant prolongation costs can also be quantified. 18–048 So far as concerns the possible effect upon completion, there are two possible scenarios: both activities occurring on the same critical path; or the second event occurring on a parallel critical path. 18–049 However, the result is the same: in the first scenario, the first delay to progress to occur changes the critical path to completion so that, when the second event occurs (which would otherwise have been on the critical path), it will be found to take up the float created by the preceding delay to progress. 18–050 In the second scenario, the position then is that, in the absence of either, the same delay to completion of the works would still be likely to occur, and whichever event was first initiated “causes” the completion of the works to be likely to be delayed and, if it has a continuing effect through to completion, actually causes prolongation of C’s overheads. 18–051 Thus, it does not matter whether C later delays the progress of the work, or that C’s later delay to progress may also have a continuing effect so as to delay completion of the works, or that the effective delay to completion of the works is the same. This is so, simply because the periods and durations of delay to progress, and hence the costs arising therefrom, are separate and identifiable. 18–052 Take, for example, the facts in Peak v McKinney44. This was a case between C and its subcontractor. When the facts, as set out by Salmon LJ45, are put into a schedule, it is apparent that every period of delay can be separately identified, sequentially, as in Figure 18.1. 18–053 One of these periods was expressly stated by His Lordship not to be the SC’s liability46. Salmon, Edmund Davies and Phillimore LJJ all invited the official referee to find that actions on the part of others were also not consequential upon the SC’s default and hence not its liability. Whilst there were extension of time provisions in the main contract between C and D, there were none (or none referred to) between C and the SC, or between the SC and D. Thus, this is not a case of extensions of time being apportionable where there are concurrent causes, but a question of what was a reasonable time to complete when time was at large in relation to the sequential periods for which the SC was liable47. If, on re-examination, the official referee were to have found, for example, that the following items were periods of delay, which had not been caused by the SC’s defective foundations: 1. 2. 3.

ground beams by Truscon; Liverpool CC delay in appointing expert; Liverpool CC delay in issuing instructions;

44 Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd (1970) 1 BLR 111. 45 Peak v McKinney (1970) 1 BLR 111 at 116–118. 46 Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd (1970) 1 BLR 111 at 119, “For example, the nine weeks’ delay by the corporation in accepting Mr Bullen’s recommendations of 24 May is to my mind inexcusable”, per Salmon LJ, at p.119. Identified in Figure 18.1, as “inexcusable delay by Liverpool CC”. 47 The editor grateful to Franco Mastrandrea for drawing this issue to his attention in his learned consideration of concurrency in “Concurrent causation in construction claims” [2009] ICLR 75. See also F Mastrandrea, “Concurrent delay: an alternative proposal for attributing responsibility” (2014) 30 Const LJ 173.

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4. 5.

delay to recommence construction; inexcusable delay by Liverpool CC,

then a simple analysis could quantify the proportion of the total delay attributable to the respective parties. [Please refer to Figure 18.2] 18–054 In order to arrive at the period of delay for which the SC was liable, all that would be necessary would be to set the durations of those five periods to zero duration and to recalculate the completion date by re-scheduling, as illustrated in Figure 18.2. This illustrates that, given that assumed liability in the list above, a reasonable date for the works to recommence would have been 9 March 1965, instead of when it actually did recommence on 11 November 1965. Under those circumstances, the SC’s liability would then have been for 268 days of the total 536 calendar during which the works were suspended for repairs. 18–055 The effect of sequential delays to progress was distinguished from concurrent delays to progress by HH Judge Seymour QC, in the Brompton Hospital case, taking first a delay to progress caused by C, followed by a delay to progress caused by D. In this case, Judge Seymour said: “However, it is, I think, necessary to be clear what one means by events operating concurrently. It does not mean, in my judgment, a situation in which, work already being delayed, let it be supposed, because [C] has had difficulty in obtaining sufficient labour, an event occurs which is a [D’s time risk event] and which, had [C] not been delayed, would have caused him to be delayed, but which in fact, by reason of the existing delay, made no difference. In such a situation although there is a [D’s time risk event], ‘the completion of the works is [not] likely to be delayed thereby beyond the completion date.’ The [D’s time risk event] simply has no effect upon the completion date. This situation obviously needs to be distinguished from a situation in which, as it were, the works are proceeding in a regular fashion and on [schedule], when two things happen, either of which, had it happened on its own, would have caused delay, and one is a [D’s time risk event], while the other is not. In such circumstances there is a real concurrency of causes of the delay.”48

18–056 However, a contrary view was taken by Lord Drummond Young in City Inn v Shepherd 49, where the Scottish Court expressed this view: “I have some difficulty with this distinction. It seems to turn upon the question whether the shortage of labour and the relevant event occurred simultaneously; or at least it assumes that the shortage of labour did not significantly predate the [D’s time risk] event. That, however, seems to me to be an arbitrary criterion. It should not matter whether the shortage of labour developed, for example, two days before or two days after the start of a substantial period of inclement weather; in either case the two matters operate concurrently to delay completion of the works. In my opinion both of these cases should be treated as involving concurrent causes, and they should be dealt with in the way indicated in clause 25.3.1 by granting such extension as the architect considers fair and reasonable.”

18–057 On appeal to the Inner House, Lord Osborne dealt with this particular point thus50: “It might also be possible to describe events as concurrent in the broad sense that they both possessed a causative influence upon some subsequent event, such as the completion

48 Royal Brompton Hospital [2000] EWHC 39 (TCC); [2001] 76 Con LR 148 at 31. 49 City Inn Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590 at [16], affirmed [2010] CSIH 68. See also D Barry, “Concurrent delay in construction law: Lord Drummond Young’s volte face” (2011) 27 Const LJ 165. 50 City Inn Ltd [2010] CSIH 68 at [49].

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of works, even though they did not overlap in time. In other words, they might also be said to be contributory to or co-operative in bringing about some subsequent event. It is in this sense that the use of the term concurrent is perhaps most likely to be of relevance in the application of clause 25.3 of the Standard Form conditions [JCT80].”

18–058 However, with respect to the Scottish courts, it could hardly be either fair or reasonable for the CA to grant an extension of time for a delay caused by an event that was at C’s risk. A similar view to that of Judge Seymour, on similar sequential delays to progress, was taken by the Australian courts in Turner v Coordinated Industries51, in which Rolf J trenchantly expressed the point thus: “It is necessary to determine what delay was caused and whether that delay, in truth, delayed [C]. [It] would be almost ludicrous, in the event of [C] having delayed by say six months and thereafter some requirement of [D] causing a further delay of say two weeks, if [D] could not recover liquidated damages for the six months less two weeks. I am assuming that the first delay was without [D’s] fault and the second delay was without [C’s] fault. In those circumstances it cannot be, in my opinion, that [C] can escape the consequences of delay for the period of months, although he is able to for the period of weeks”.

Parallel delays to progress 18–059 Two causes of delay to progress are said to be parallel causes when one party is liable for both. Thus, because, by definition, concurrency requires one cause to be at C’s risk and the other to be at D’s risk, parallel delays to progress cannot ever be concurrent delays to progress. 18–060 However, the challenge posed by parallel causes of a single delay to progress, is to resolve whether C is entitled to compensation, where one event at D’s risk is compensable, and the other is not, both of which cause the same delay to progress, and hence the same loss and/or expense. 18–061 Again, because otherwise effectively it will be possible to segregate them into sequential causes and hence separate the effects, parallelism occurs where the causative events and the consequential delay to progress occur simultaneously. 18–062 So, for example, compensable events at D’s risk that might form the basis of parallel delays to progress are thus such occasions as: instructed suspension of the works; failure to grant access; failure to provide information, goods, equipment and so on, in due time; and whilst those non-compensable risks will be such events as suspension of the works caused by: weather-related risks; strikes, lockouts and civil commotion; and force majeure. 18–063 The dilemma can be crystallised into this: if D fails to grant access by the due date, when C is ready and willing to commence work and has its plant and labour standing by, but on the same date a storm breaks out and prevents access to the site, is C entitled to compensation or not? 51 Turner Ltd v Coordinated Industries Pty Ltd (1995) 11 BCL 202 (confirmed on appeal); (1996) 12 BCL 33.

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18–064 If, during the period of delay to progress for which D bears the risk as to costs, another cause of the delay to progress is a neutral event, or its own malfeasance, for which C bears the risk of cost, then the rule is that C will be unable to recover for the financial effects of D’s cost risk event, unless it can separate in some way those costs flowing from the compensable event from those costs that are at its own risk. 18–065 If the contract does not state what is to happen in such circumstances, then courts and tribunals may address this issue by apportioning the loss, where they can52, but if they cannot, then the loss will lie where it falls, that is upon C.

Concurrency and extensions of time Concurrent delays to completion 18–066 There is really only one reason why C should be awarded more time: it is because the contract says that the event which has caused the delay to completion of the works beyond the completion date is an event for which D bears the time-related risk. Similarly, there is also only one thing that empowers D, or the CA acting on its behalf, to award an extension of time: it is a term of the contract that empowers D to grant more time for the event in question53. 18–067 The Australian form AS2124, in which the schedule is described as a “contract document”54 and C is under an obligation to follow it (in so far as that is possible)55, states that: “Where more than one event causes concurrent delays and the cause of at least one of those events, but not all of them, is not a [D’s time risk event], then to the extent that the delays are concurrent, [C] shall not be entitled to an extension of time for practical completion.”

18–068 Although the Australian form AS4000 might be considered an improvement upon the earlier AS2124 in relation to the way it deals with concurrent causes of delay it is phrased in such ambiguous terms that it is difficult to be sure of its intention56. It says: “When both qualifying and non-qualifying causes of delay overlap, the [CA] shall apportion the resulting delays to [completion] according to the respective causes’ contribution.”57

18–069 There is no definition of what is meant here by “causes of delay”, or “overlap” but, to the extent that “causes of delay” is taken to mean the “delays to progress” and “overlap” is taken to mean sequential, the point has been dealt with earlier58. There is also no indication of what is meant by “apportion”, or how it is to be accomplished, but in so far as overlap is taken to mean concurrent59, then this is an invitation to the 52 See Ch.20, “Apportionment”, throughout. 53 If there is not a term in the contract empowering D to grant more time for an event which amounts to an act of prevention, then C is no longer required to complete within the contract period and time becomes “at large”. See Ch.6, “Extensions of time and time at large”, at paras 6–106 to 6–173. 54 As to the schedule as a contract document, generally, see Ch.7, “Planning and programming”, at paras 7–222 to 7–247. 55 See AS2124 Cl.33.2 and AS4000 Cl.32. 56 Amongst other things, the form mentions concurrency in the index but, at the indexed clause, it contains no reference to concurrency but instead contains a reference to apportionment. 57 Cl.34.4. 58 See sequential delays to progress above at para.18–044. 59 “‘Overlap’ would certainly include occurrences of true concurrency”, see P Tobin, “Concurrent and sequential causes of delay” [2007] ICLR 142.

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CA to arrive at less than full liability for the effect of a D’s time risk event, when C is also in delay to progress at the same time as D, and where both delays to progress are on the critical path to completion. 18–070 In this regard, Tobin remarks: “the AS contracts, to a degree, can be considered to frame any slower-than-planned working, or culpable delay by C not as a ‘right’ of C’s, but as a ‘wrong’ in prima facie contravention of the contract. The argument that the contractual status of the schedules supports an approach of granting an extension of time to C in such circumstances therefore has no application in relation to the AS forms, and the status of schedules in those forms goes some way to justifying the different approach that they take to concurrency.”60

18–071 On the other hand, in Peak v McKinney61, Salmon LJ expressed the common law rule, as follows: “The liquidated damages clause contemplates a failure to complete on time due to the fault of [C]. It is inserted by [D] for his own protection; for it enables him to recover a fixed sum as compensation for delay instead of facing the difficulty and expense of proving the actual damage which the delay may have caused him. If the failure to complete on time is due to the fault of both [D] and [C], in my view, the clause does not bite. I cannot see how, in the ordinary course, [D] can insist on compliance with a condition if it is partly its own fault that it cannot be fulfilled.”62

18–072 Thus, in the absence of enforceable contractual terms to the contrary, at common law, the principle is that it would be inequitable for D to retain the benefit of liquidated damages if it had, by its own acts, caused the delay to completion of the works beyond the completion date for which the liquidated damages were taken, albeit that those acts were not the only cause. Thus, the provisions for an extension of time ensure that D’s entitlement to liquidated damages can be retained even when D is contributorily responsible for the delay to the completion of the works. By extending the period of completion for the results of those events for which D takes the risk, it can preserve C’s liability for those delays that are at C’s risk. 18–073 Prima facie, if completion is delayed, C is liable for liquidated damages, usually at a fixed rate of so much per day, or per week, or part thereof. On the other hand, if C can show that, to any extent, the delay is caused by a matter at D’s risk then, to that extent, it will be entitled to relief from those liquidated damages. The issue here is thus: where there are two causes of the delay to completion of the works beyond the completion date, does C have to pay liquidated damages? 18–074 Concurrency of delay to completion depends entirely upon the occurrence of two delays to progress, occurring at the same time, one at C’s risk and one at D’s risk, both on the critical path to completion. In the absence of these conditions, there cannot be the same delay to completion of the works caused by both events and the delay to completion (flowing from whatever delays to progress there were) can be isolated and traced separately, and the liability for liquidated damages appropriately allocated.

60 P Tobin, “Concurrent and sequential causes of delay” [2007] ICLR 142. See also M Cocklin, “International approaches to the legal analysis of concurrent delay: is there a solution for English law?” (2014) 30 Const LJ 41. 61 Peak Construction (Liverpool) Ltd (1970) 1 BLR 111 at 121. 62 See also Wells v Army & Navy Co-operative Society (1903) Construction Law Year Book, Vol.4, p.65 CA; Amalgamated Building Contractors v Waltham Holy Cross UDC [1952] 2 All ER 452 at 455; and Holme v Guppy (1838) 3 M & W 387.

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18–075 For there to be concurrency of delay to completion, the delay to progress at D’s risk and the delay to progress at C’s risk must combine, at the same time, to cause the same degree of delay to completion of the works; if they do not, then, to the extent that there is a difference between the timing of the two, that difference will not be concurrent, but each period will be attributable to a single cause, traced separately and allocated to the party liable for it63. 18–076 Concurrency of delay to completion of the works can be predicted, during the course of the works, or it can be deduced, retrospectively, after the completion of the works has been achieved. However, in either case, there are two possibilities as to how concurrency of delay to completion of the works can occur: two causal events occur to cause a single delay to progress, which occurs on the single critical path to completion; or two separate events each cause a different delay to progress, but over the same time-frame, on parallel critical paths to completion. 18–077 The important point here is that, for there to be concurrency of delay to completion of the works, in the absence of either cause, the same delay to completion would be likely to occur (prospectively), or would have occurred (retrospectively). Where there is concurrent delay to progress likely to cause a delay to completion, at common law, C will be entitled to relief for the whole period of concurrency and relieved of liability for liquidated damages. The general rule in these circumstances is that C must be given sufficient time to accommodate the effects of D’s time risk event and be relieved from liquidated damages for a commensurate period64. 18–078 In Malmaison65, Dyson J (as he then was) recorded the agreement of the parties in relation to concurrency as follows: “It is agreed that if there are two concurrent causes of delay, one of which is a [D’s time risk event], and the other is not, then [C] is entitled to an extension of time for the period of delay caused by the [D’s time risk event] notwithstanding the concurrent effect of the other event. Thus, to take a simple example, if no work is possible on a site for a week not only because of exceptionally inclement weather (a [D’s time risk event]), and if the failure to work during that week is likely to delay the works beyond the completion date by one week, then if he considers it fair and reasonable to do so, the [CA] is required to grant an extension of time of one week. He cannot refuse to do so on the grounds that the delay would have occurred in any event by reason of shortage of labour.”66

18–079 Whilst Dyson J added “if he considers it fair and reasonable to do so”, given that scenario, he gave no indication as to upon what grounds it could ever not be reasonable so to do. 18–080 Apart from the odd departure, the approach to extensions of time in the UK and other Commonwealth jurisdictions seems to be that, notwithstanding its own delay, C will still be entitled to an extension of time caused by D’s risks and this would also seem to be the rule in the United States. For example, in David Builders Inc67, C identified at a pre-commencement meeting what it said was an inconsistency in the contract documents in the specifications. This took 60 days to rationalise before the CA gave an

63 64 65 66 67

See sequential delay to completion below at para.18–081. Wells v Army and Navy Co-operative Society (1903) Construction Law Year Book Vol.4, p.65 CA. Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 Con LR 32. Henry Boot Construction v Malmaison Hotel (1999) 70 Con LR 32 at [10]. David Builders Inc (1998) ASBCA No 51262.

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instruction to vary the work but, during that same 60 days, C was also delayed as a result of its own fault in obtaining approval of numerous other submittals, including its quality control plan and for rough carpentry, concrete, turf and trees. The Board said: “Liquidated damages should not be assessed during any periods of excusable delay. [C] has the burden of proving that a particular action caused a delay to the completion of the project as a whole for remission of liquidated damages. [C] may provide persuasive evidence of what were critical activities and what was the proximate cause of delay in contract completion without CPM analysis. However, without specific proof, the Board cannot determine what effect delay to one item of work has to the project as a whole.”

Sequential causes of delay to completion 18–081 If delay to completion of the works can be broken down into being caused by different periods of delay to progress, then relief will be granted only upon that portion of the delay to completion of the works, after the completion date for which C is not culpable. 18–082 There have been four trends as to the burden of proof of the separability of the respective delays to progress causing delay to completion. They are that, notwithstanding that there are two separable delays to progress, both causing either the whole or a portion of delay to completion of the works: C must pay liquidated damages for all the delay to completion, if it cannot show for which part, if any, C is not responsible; D is not entitled to any liquidated damages at all, because it is, at least in part, responsible; C must pay all the liquidated damages, unless it can show for which part of the delay to completion D was responsible; and D is not entitled to any liquidated damages at all, unless it can show for which part of the delay to completion C is responsible.

C must pay liquidated damages for all the delay to completion, if it cannot show for which part, if any, C is not responsible 18–083 Over a hundred years ago, this argument was dismissed in the case of Wells v Army and Navy, in which Vaughan Williams LJ said: “In law, I wholly deny the proposition ‘Never mind how much delay there may be caused by the conduct of [D], [C] will not be relieved from penalties if he too has been guilty of delay in the execution of the works’. I do not accept that proposition in law.”68

18–084 However, it is possible to reverse that position, by express terms of the contract. See for example the Australian standard forms69.

D is not entitled to any liquidated damages at all, because it is, at least in part, responsible 18–085 In the United States, in Robinson v US70, C claimed that, since D had caused some of the delay to completion, the provision for liquidated damages became wholly 68 Wells v Army and Navy Co-operative Society (1903) Construction Law Yearbook Vol.4, p.65 CA, per Vaughan Williams LJ at p.70. 69 See paras 18–066 to 18–080 above. 70 Robinson v United States (1923) 261 US 486.

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inapplicable and was unenforceable. At first instance, the court rejected this argument and confirmed the allocation of liquidated damages to that part of the total delay to completion caused by C. This decision was upheld on appeal by the Supreme Court, which confirmed that, notwithstanding the sequential delay caused by D, the liquidated damages clause was enforceable, saying: “The fact that [D’s] action caused some of the delay presents no legal ground for denying it compensation for loss suffered wholly through the fault of [C]. Since [C] agreed to pay at a specified rate for each day’s delay not caused by [D], it was clearly the intention that it should pay for some days’ delay at that rate, even if it were relieved from paying for other days, because of [D’s] action. If it had appeared that the first 61 days’ delay had been due wholly to [C’s] fault, and [D] had caused the last 60 days’ delay, there could hardly be a contention that the provision for liquidated damages should not apply. Here the fault of the respective parties was not so clearly distributed in time, and it may have been difficult to determine, as a matter of fact, how much of the delay was attributable to each. But the Court of Claims has done so in this case. Its findings are specific and conclusive.”

C must pay all the liquidated damages, unless it can show for which part of the delay to completion D was responsible 18–086 In US government contracts, it would appear that D will be entitled to liquidated damages, unless C positively shows that it is not responsible for any part of the period of delay to completion of the works beyond the completion date71. This would also seem to be the default position under the standard forms of contract in UK and Commonwealth jurisdictions, in which, primarily, D is entitled to deduct liquidated damages for delay, unless C can show why it should be entitled to an extension of time. However, in US government contracts, C has positively to demonstrate the absence of concurrency, since otherwise it will be liable for liquidated damages, whereas in the UK and other Commonwealth jurisdictions, it is usually D who alleges concurrency in whole or in part as a defence to C’s claim for relief from liquidated damages. 18–087 Newport v US72 was a case in which the courts allowed D its liquidated damages on the ground that C could not establish for which part of the total delay D was liable, stating: “[i]f, as [C] contends, the work was delayed because of the failure of [D] to furnish certain parts, such delay ran concurrently with other delays for which [D] was not responsible and did not result to any appreciable extent in delaying the final completion [of the project].”73

18–088 A criticism of this approach has been made and it has been suggested by US lawyers that the reference to concurrency is: “founded on questionable precedent that should be revisited by courts going forward”74. 18–089 In Leighton v Stelux75, there was no reference to concurrency. C claimed an extension of time based upon the putative effect upon its original planned schedule of the failure of the CA to issue information on the date indicated on its original schedule. In this case, the Hong Kong Court of First Instance said that, by reference to the 71 See, for example, PJ Dick Inc v Principi (2003) 324 F 3d 1364, 1374–75 (Fed Cir); GEMS, Inc v United States (2003) 59 Fed CI 168, 230. 72 Newport News Shipbuilding & Dry Dock Co v United States (1934) Ct Cl 25. 73 Newport News Shipbuilding & Dry Dock Co v United States (1934) Ct Cl 25 at 36. 74 J Bidgood, Jr, S Reed and J Taylor, “Cutting the knot on concurrent delay” (2008) Construction Briefings 2007–2. 75 Leighton Contractors (Asia) Ltd v Stelux Holdings Ltd [2004] HKCFI 822; (2007) 1 Const LJ 70 at [24]–[25].

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records, on the date on which the information was originally planned to have been needed, C was in fact still involved in substructure works. Even by the time the information had been provided and the MVAC and electrical subcontracts awarded, C was only just ready to start (and had not yet commenced) construction of the basement slab, completion of which was a predecessor to the commencement of the works for which the information was required and thus the delayed information could not be shown to have delayed completion. The court observed: “In the actual circumstances of the case, looking prospectively from the time of [D’s] initial failure to provide information, [D’s] failing could not be causative of delay [to completion]. The late information could not cause actual delay [to progress], having regard to the state of the works at the time when the information ought to have been furnished originally.”

18–090 Which occurred first to cause the delay to progress, whether D’s time risk event, or C’s culpable event, can only be established by updating the schedule with the impact of all events and shifts in timing, sequentially, so as to identify the cause and effect of each event as it is initiated in fact, taking into account progress actually achieved in relation to the critical path as it changes76. In that way, the effect of the impact of each event is calculated in light of all those other matters preceding it (including slippages at C’s risk) that have caused a shift in the critical path. By tracing the effect from cause to effect, in this way, it is usually possible to separate what might at first appear to be concurrency of the secondary and tertiary effects into their sequential root causes and distribute the total period of delay to completion of the works amongst its several root causes. 18–091 Accordingly, sequential delays to progress can never be concurrent, in the sense of being inseparable in timing or the effect thereof.

D is not entitled to any liquidated damages at all, unless it can show for which part of the delay to completion C is responsible 18–092 In awarding a full extension of time to C, notwithstanding the evidence of events for which C was alleged to be responsible, this was the position adopted by HH Judge Wilcox in Egger77 and also Lord Drummond Young in City Inn78. 18–093 In practice, in the United Kingdom, it will often occur that D will deduct liquidated damages, but, in dispute resolution proceedings, C will claim relief for the whole of the period of delay to completion and leave D to demonstrate, by way of defence, that portion of the delay to completion of the works beyond the completion date for which C is responsible. 18–094 So far as C is concerned, it is irrelevant whether the delay to completion is as a result of a D’s time and cost risk event, or the result of an event for which D takes only the risk as to time. In Amalgamated Building v Waltham Holy Cross79, Denning LJ held: “where [C], near the end of the work, have overrun the contract time for six months without legitimate excuse. Now suppose a strike occurs and lasts a month. [C] can get an extension of time for that month.”

76 This is referred to as time impact analysis, or a “modelled/additive/multiple base” analysis. See Ch.15, “Forensic programme analysis” at paras 15–149 to 15–163. 77 Skanska Construction Ltd v Egger (Barony) Ltd [2004] EWHC 1748. 78 City Inn Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590. 79 Amalgamated Building Contractors Ltd v Waltham Holy Cross Urban District Council [1952] 2 All ER 452, 454,

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18–095 Similarly, in Walter Lawrence80, C was already behind schedule through its own fault when exceptionally inclement weather caused further delay. The CA took the view that, if C had not already been behind in its work, the inclement weather would have had less effect than it did. The court held that this was wrong in law. C was entitled to an extension of time for the effects of the inclement weather when it occurred, irrespective of whether or not C was at that time in delay through its own fault81. 18–096 The breaking down of a total period of delay to completion of the works into its constituent parts, showing which delay to progress caused which part of the delay to completion82, requires a scientific schedule analysis; it cannot successfully be achieved by inference83.

Parallel cause of delay to completion 18–097 In this scenario, there must be a delay to progress caused by an event that (at its lowest) is likely to cause a delay to completion of the works beyond the completion date, for which C is entitled to an extension of time; and another delay to progress caused by an event that (at its lowest) is not only likely to cause a delay to completion of the works beyond the completion date, but for which C is also entitled to compensation. 18–098 So far as concerns an extension of time, entitlement is not affected by whether or not a delay to completion of the works beyond the completion date is caused by an excusable delay, or an excusable and compensable delay, either acting sequentially, or concurrently, in whole or in part. Whatever the combination, C will be entitled to an extension of time for completion of the works beyond the completion date of the composite effect of the two delays to progress, provided that both were on the critical path to completion at the time of their occurrence84. To the extent that one or the other was not on the critical path to completion, D will be entitled to liquidated damages only to the extent that one can be traced to show that it was a cause of delay to completion. 18–099 Take the example of where D fails to grant access to a part of a site (an excusable and compensable event) for, say, ten days, but, over the same time-frame, for a period of eight days, there is bad weather (an excusable event) and both events act to cause delay to activities on one or more critical paths over the same time-frame. 18–100 So far as concerns extensions of time, the effect of the delay to access is a delay of ten days to completion and the effect of the bad weather, which occurs over the same time-frame, would be to delay the completion date by eight days only if the other event had not occurred or, to put it another way, the delay caused by bad weather causes eight days of delay to completion and the delay to the grant of access causes the completion date to be delayed by two days more. In this scenario, C will only be entitled to a ten-day extension of time as that is the period during which the completion date has been caused to be delayed.

80 Walter Lawrence & Son Ltd v Commercial Union Properties (UK) Ltd (1984) 4 Con LR 37. 81 On the other hand, neutral events are expressly excluded from the time risks borne by D, when C is in culpable delay to completion, under IFC84 and IFC98, Cl.2.3 and IFC2005, Cl.2.19.2. 82 See Ch.14, “Cause and effect”. 83 See Ch.20, “Apportionment”. 84 See also Ch.6, “Extensions of time and time at large”.

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18–101 So far as concerns compensation, since only the delay to the grant of access is compensable, C will be entitled to compensation for the delay to progress to the extent of ten days (if any loss or expense is suffered and it can be separated) and also to compensation for prolongation of overheads, for a like period. 18–102 If the losses cannot be separated, then C will be entitled to loss and expense and prolongation costs for two days (if any loss, or expense is suffered), being the degree to which the two events can be segregated.

Concurrency and prolongation Concurrent causes of prolongation 18–103 The line of reasoning followed in the previous section applies to time and relief from liquidated damages; it does not apply to compensation for loss or expense for delay to progress and/or prolongation. Time and money are treated differently in this regard. They do not have the same character and neither does one necessarily result in the other. 18–104 Compensation in damages must be paid to C for prolongation for the effects of any delay to progress, at D’s risk, which not only affects the critical path at the time, but also has a continuing effect past the completion date85, so that it actually prolongs the period over which C must expend its time-related costs86. 18–105 In effect, the causative events for which D bears the cost risk are those that, if the contract does not provide for compensation, would amount to a breach of contract for which C would be entitled to damages at common law87. In principle, they are not only matters for which C does not adopt the risk and over which C has no control, but also matters for which D positively adopts the risk, and which are within D’s control88. 18–106 Concurrency of prolongation can only be demonstrated retrospectively, after the completion of the works has been achieved. However, there are two possibilities as to how concurrent prolongation can occur: two causal events occur to cause a single delay to progress, which occurs on a single critical path to completion of the works; or two separate events each cause a different delay to progress, but over the same time-frame, on parallel critical paths to completion of the works. 18–107 The important point here is that, for there to be concurrent prolongation: in the absence of either cause, the same prolongation would have occurred. Where concurrent, C will not be entitled to compensation for the whole period of concurrent prolongation. The general rule in these circumstances is that C cannot recover from D any prolongation costs at all, unless it can show that C is not responsible for any of the costs it claims. 18–108 In the United States, it has been held that compensation for prolongation must be calculated by reference to the actual period of delay to progress, the knock-on 85 In other words, is not overcome by mitigation, recovery, or acceleration, or where overcome in part, will only be relevant to the extent that it is not overcome. 86 See Ch.4, “Standard form provisions for time and cost”. 87 London Borough of Merton v Stanley Hugh Leach Ltd (1985) 32 BLR 51, per Vinelott J at 108. 88 See Ch.4, “Standard form provisions for time and cost”.

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effect of which is the prolongation, so that the compensation claimed is related to the costs actually incurred by C as a result of D’s risks alone89. For example, in connection with a claim for recovery of prolongation costs, in Dawson90, the Board of Contract Appeals held that C must, by a preponderance of the evidence, show that the contract performance period was extended and that D’s cost risk event was the sole proximate cause of the extended performance, saying: “[C] must first show that there was a delay and that it was of an ‘unreasonable length of time’. Of course, where the delay is the result of defective specifications all delay time will be regarded as ‘unreasonable’. Second, the delay must have been proximately caused by [D’s] action or inaction. Third, [C] must show that the delay resulted in some injury. Fourth, and perhaps most crucial in the appeals before us, [C] must show that [D] was the ‘sole proximate cause’ of the delay and that there are no concurrent delays, which absent a ‘clear apportionment’, will defeat any recovery.”

18–109 Similarly, in the US case of Cottman91, the Board held that: “In order to recover [its costs], [C] has the burden of proving that the delay was proximately caused by [D’s] action or omission and that the delay caused it harm. Recovery is limited to delay periods where [D] is solely responsible for the delay, and the presence of a concurrent cause for which [C] is responsible frees [D] from any obligation to pay for delay during the period of concurrency.”

18–110 Further, in David Builders92, C had claimed for 60 days’ delay to progress causing prolongation but, during that same 60 days, C was also delayed as a result of its own fault in obtaining approval of numerous other submittals, including its quality control plan and for rough carpentry, concrete, turf and trees. In rejecting C’s claim for loss and expense, the Board concluded that: “When both parties contribute to the delay, neither can recover, unless there is in the proof a clear apportionment of the delay and expense attributable to each party. [D] does not deny that it was responsible for the 60-day delay. Instead, [D] asserts that [C] had concurrent delays and therefore is prevented from being compensated for the 60-day time extension. We find that [D] has succeeded in showing concurrency of at least 60 days to the extent of overcoming the presumption of delay cost entitlement. Accordingly, [C] is not entitled to compensation for the 60-day delay.”

18–111 In the Scottish case of John Doyle93, Lord Macfadyen distinguished the need to demonstrate that C’s loss had been caused by one or more events at D’s risk as to cost from the desirability of being able to demonstrate which of D’s risks established to be the cause had caused which proportion of the loss suffered. 18–112 Lord Macfadyen observed: “Ordinarily, in order to make a relevant claim for contractual loss and expense under a construction contract (or a common law claim for damages) [C] must aver: (1) (2) (3)

the occurrence of an event for which [D] bears legal responsibility, that he has suffered loss or incurred expense, and that the loss or expense was caused by the event.

89 Laburnum Construction Corp v United States (1963) 163 Ct Cl 339, F 2d 451. 90 Dawson Construction Co Inc (1993) VABCA Nos 3306 et al, 93–3 BCA 26,177. 91 Cottman Mechanical Contractors Inc (2000) ASBCA No 48,882. 92 David Builders Inc (1998) ASBCA No 51262. 93 John Doyle Construction Ltd v Laing Management (Scotland) Ltd [2002] ScotCS 110, per Lord Macfadyen.

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In some circumstances, relatively commonly in the context of construction contracts, a whole series of events occur which individually would form the basis of a claim for loss and expense. These events may inter-react with each other in very complex ways, so that it becomes very difficult, if not impossible, to identify what loss and expense each event has caused. The emergence of such a difficulty does not, however, absolve [C] from the need to aver and prove the causal connections between the events and the loss and expense. However, if all the events are events for which [D] is legally responsible, it is unnecessary to insist on proof of which loss has been caused by each event.”94

Sequential causes of prolongation 18–113 If C is to recover the costs arising out of D’s delay to progress, it must be able to separate these from those arising from the costs of the delay of its own making. This must be so, since otherwise the costs C suffers would have been suffered in any event and, if they would have been suffered in any event, they cannot be said to have been caused by D. 18–114 Compensation for the costs suffered as a result of delay to progress, causing prolongation of C’s overheads, is usually made by the reimbursement of loss or expense95 suffered during the period of the delay to progress, which caused the prolongation96. So, where concurrent causes of prolongation are alleged, if C wishes to recover compensation, it must be able to demonstrate that: the period of delay to progress for which it claims compensation is not the same period as the delay to progress for which it is responsible and hence, the costs are inherently separable; or C is able to segregate the losses over a single delay to progress to show that those costs for which D is responsible are separate from those caused by C’s culpability. 18–115 The former case is the most common form of segregation and is relatively easily established by the process of segregating delays to progress97. However, because there are two causes of the same delay giving rise to the costs, if C has a good cost control system and is able to segregate the financial effects of a single delay to progress, it should also be able to recover its costs. The important point is that C cannot recover costs for which it is itself responsible and it has a positive obligation to demonstrate that what it claims from D is not compensation for its own culpability.

Parallel cause of prolongation 18–116 In this scenario, there must be a delay to progress caused by an event which has a continuing effect so as to delay completion, and for which C is entitled to compensation; and another delay to progress caused by an event that also has a continuing effect so as to delay completion, for which C is also entitled to compensation. 18–117 In these circumstances, the general rule is that C will not be entitled to compensation for both the delays to completion unless it can segregate the losses caused by one event from the losses caused by the other. 94 John Doyle Construction Ltd [2002] ScotCS 110 at [35]. 95 Depending upon the contract, compensation may also be by means of damages at common law in contract, or tort. 96 See Ch.21, “Damages”. 97 See Ch.20, “Apportionment”.

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18–118 Unless the contract form also provides for financial compensation for what might otherwise be regarded as a neutral event98, compensation for prolongation will not be available for events such as exceptionally adverse weather, strikes, force majeure and so on. 18–119 The only significance, in so far as C’s right to compensation is concerned, is that it has actually suffered a loss or expense, as a result of the changed circumstances (for which D takes the risk as to cost) for which it is not otherwise compensated under the ordinary valuation rules of the contract. 18–120 Take the example of where D fails to grant access to a part of a site for, say, ten days (which is a compensable event), but, over the same time-frame, for a period of eight days there is bad weather (which is not a compensable event) and both events act to cause delay to activities on one or more critical paths by a like time. 18–121 The effect of the delay to access is a prolongation of ten days and the effect of the bad weather, which occurs over the same time-frame, would be a prolongation of eight days. In this scenario, C will only be entitled to two days’ compensation for prolongation, unless it can separate the losses flowing from the weather from those flowing from the access. If the delay to the access causes a delay to a different chain of activities to completion and the costs of that prolongation can be separated from the costs of the prolongation caused by the inclement weather, then C will be able to recover ten days’ prolongation costs. Otherwise, because the delay to the access only caused two days’ more prolongation than the inclement weather, C will only be able to recover two days of prolongation costs.

Concurrency and pacing 18–122 It is apparently common in the United States that, in reply to an allegation of concurrent delay, C may respond that C’s reduced resources, or absenteeism, were in response to D’s delaying event and thus not truly a concurrent delay. Rhetorically, “why hurry-up and wait?” D may be asked. In the United States, this is what is referred to as a “pacing delay”, the effect of which is said to defeat the defence of concurrency. However, because of its essential sequential nature, it is doubtful whether the facts of a pacing delay to progress could ever reasonably be construed as a concurrent delay to progress. 18–123 Pacing is a defence to an allegation of concurrency whereby, by virtue of its own culpable delay to progress, a party has disentitled itself to liquidated damages or to compensation for the period in which it was in delay. However, whereas concurrent delays are truly delays to progress which occur at the same time, the causes of which are independent of each other, a pacing delay to progress is consequent upon a previous delay caused by the other party and is thus both dependent and sequential. The theory is that, by demonstrating the dependency and hence the sequential timing, the allegation of concurrency is thereby disproved. 18–124 So for example, where C’s delay to progress is consequent upon D’s delay to progress (and, thus pacing is the explanation of C’s delay to progress for which it claims compensation), D cannot demonstrate that C’s delay to progress was concurrent so as to deny it compensation.

98 ECC2 and ECC3, for example. See Ch.4, “Standard form provisions for time and cost”.

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18–125 In Utley-James99, the General Services Board of Contract Appeals said: “if the job schedule was originally such that [C] needed certain widgets on hand by January 1, but because of a six-month delay attributable to [D], [C] re-scheduled the delivery for July 1, [D] cannot be heard to say the delays were concurrent because [C] would have had to wait six months for the widgets anyway. In such a situation there is no reason to doubt that [C] could have had the widgets on January 1 and proceeded on schedule absent [D]-caused delay.”

18–126 In reliance upon that case in MCI Constructors100, the District of Columbia Contract Appeals Board said: “We agree with [C] that the delays attributed to [C] by [D] were not critical path delays and generally come within the category of ‘why hurry up and wait’. ‘[W]here [D] causes delays to the critical path, it is permissible for [C] to relax its performance of its work to the extent that it does not impact project completion.’”

18–127 In relation to an allegation of concurrency, a response by C of pacing is not common in the United Kingdom. However, in GLC v Cleveland Bridge101, it was held in effect that C was entitled to pace the performance of the contract as it pleased, provided that the specified deadlines were complied with, and there could be no want of due diligence or expedition if that completion date was met. It is perhaps significant that, in this case, the court gauged the want of expedition by reference to the contract completion date, rather than to C’s schedule of future intentions. 18–128 Under the standard forms of contract generally, C is required to: “begin the construction of the works or section and regularly and diligently proceed with and complete the same on or before the relevant completion date.” (emphasis added)102

18–129 Twickenham Garden Developments103 was a case in which, under JCT63, containing similar phraseology, C’s employment had been terminated for a failure to proceed regularly and diligently. Megarry J rejected the idea that C was entitled to slow the pace of the works to take up whatever time was available, saying: “If [C] is well ahead with his works and is then delayed by a strike, the [CA] may, nevertheless, reach the conclusion that completion of the works is not likely to be delayed beyond the date of completion. If a strike occurs when 2/3 of the work has been completed in 1/2 the contract time, I do not think that on resuming work a few weeks later [C] is then entitled to slow down the work so as to last out the time until the date for completion (or beyond, if an extension of time is granted) if, thereby, he is failing to proceed with the work ‘regularly and diligently’.”104

18–130 This case was referred to by the Court of Appeal in West Faulkner Associates v Newham105, in which a CA defended itself against a charge of negligence for not terminating C’s employment when it was in culpable delay. In regard to the interpretation of the requirement to proceed regularly and diligently, Brown LJ said: 99 Utley-James Inc (1985) 85–1 GSBCA No 5,370, 85–1 BCA 17,816 at 89,109, WL 13,874, affirmed, Utley-James v United States (1988) 14 Cl Ct 804. 100 MCI Constructors (1996) DCCAB No D-924, WL 33,1212. 101 Greater London Council v Cleveland Bridge and Engineering Co (1986) 34 BLR 50. 102 See, for example, JCT05, at Cl.2.4. 103 Hounslow LBC v Twickenham Garden Developments Ltd (1970) 7 BLR 89. 104 Hounslow LBC (1970) 7 BLR 89 at 113. 105 West Faulkner Associates v The London Borough of Newham (1994) 42 Con LR 144, per Brown LJ at 154.

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“Although [C] must proceed both regularly and diligently with the works, and although each word imports into that obligation certain discrete concepts which would not otherwise inform it, there is a measure of overlap between them and it is thus unhelpful to seek to define two quite separate and distinct obligations. What particularly is supplied by the word ‘regularly’ is not least a requirement to attend for work on a regular daily basis with sufficient in the way of men, materials and plant to have the physical capacity to progress the works substantially in accordance with the contractual obligations. What in particular the word ‘diligently’ contributes to the concept is the need to apply that physical capacity industriously and efficiently towards that same end. Taken together the obligation upon the contractor is essentially to proceed continuously, industriously and efficiently with appropriate physical resources so as to progress the works steadily towards completion substantially in accordance with the contractual requirements as to time, sequence and quality of work.”

18–131 Thus it would appear that, under the JCT forms of contract, whilst C may not withdraw from the site without authority, there could be no reasonable objection to it adjusting its performance to meet its contractual obligation where the occurrence of an event at D’s risk, which is likely to delay completion, would not require C to be able to work towards an earlier date. 18–132 Pacing is clearly not a defence that can be argued by C alone; it is also available to D who, faced with C’s culpable delay to progress, is not bound to produce, for example, information according to a schedule that is no longer being followed106. However, pacing is not an argument available to a developer who, when the contractor is in culpable delay to completion of the works, issues instructions for additional work. In such situations, it is suggested that C should be entitled to the reasonable additional time necessary to execute the additional work107, which should be added to the contractual period for completion108. 18–133 Whilst not commonly expressly alleged in the UK and Commonwealth courts, it seems that in response to C’s claim for relief from liquidated damages, the implied response by D of pacing is more common. Thus, for example, when in response to culpable delay by C, D delays the release of information until C actually needs it, it has been held that such a responsive, pacing delay by D is an acceptable defence to C’s allegation of concurrent delay and, notwithstanding the delayed receipt of information, D may nevertheless make good its claim for liquidated damages. For instance, in GEH v Laing109, in regard to alleged compensable delay in the provision of informational packages for works contracts, Judge Wilcox said: “[C’s case] takes no account of the actual events which occurred on the project and gives rise to an hypothetical answer when the timing of design release is compared against the original construction [schedule]. Thus it would take no account of the fact that the design team would have been able to prioritise design and construction to fit this.”

18–134 The important constituent part of a pacing delay is thus one party’s conscious and reactive decision to adjust its productivity to be compatible with the degree of progress (referred to as the “parent delay”)110 forced upon it by the events at the other

106 See, for example, Leighton Contractors (Asia) Ltd [2004] HKCFI 822; (2007) 1 Const LJ 70. 107 See Society of Construction Law, Delay and Disruption Protocol (2002), s 1.4. 108 Balfour Beatty Building Ltd v Chestermount Properties Ltd (1993) 62 BLR 1. 109 Great Eastern Hotel Co Ltd v John Laing Construction Ltd [2005] EWHC 181 (TCC) at [184]. 110 American Association of Cost Engineers International, Forensic Schedule Analysis, Recommended Practice No 29R-03 (2009), p.93.

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party’s risk. By adjusting its productivity in this way, the reactive party mitigates its losses by reallocating its resources, or adjusts its sequence of work in order to render the work more cost effective. 18–135 The RP/FSA provides two examples of pacing delays by a subcontractor against a parent delay by C: 1.

2.

The pacing of electrical conduit first-fix when the duration of stud partitions is extended by delays. In such a case, because there is not enough work to sustain the continuous use of a full crew, the electrical subcontractor may reduce its work force and hence its productivity to keep pace with the partitioning. This might be achieved by temporarily leaving the site entirely, by reassigning some workers to other areas, or slowing the progress of the work by reducing the labour force111. The landscaping subcontractor who leaves the site and returns at a later time, because it is evident that the completion of the building is going to be delayed.

18–136 The RP/FSA remarks that, in the US and in some common law jurisdictions, C’s right to pace its work in reaction to a critical path delay is a generally accepted concept. However, it would perhaps be more accurate to say that, in the absence of contractual terms to the contrary, C may adopt whatever sequence, timing and resources it chooses112. 18–137 In practice, the proof that whatever is alleged to be a concurrent delay to progress (for which C is not entitled to compensation) is really a pacing delay (which would not so upset C’s entitlement arising out of the parent delay to progress), should consist of evidence to the effect that: 1. 2. 3. 4.

5.

primary causation, of a parent delay to progress, has been initiated113; the delay caused by the parent delay to progress was initiated chronologically earlier than the pacing delay114; the parent delay to progress has the effect of creating free float on the path on which the pacing delay to progress occurs; in the absence of the decision to pace the progress of the work in question, the pacing party had the resources available and could have completed the paced activity on time; and notice has been given to the parent party, that, because of the parent delay to progress, the pacing party intends to reallocate its resources and slow productivity in mitigation of its losses.

18–138 In the majority of situations that fall within condition 2 above, there will be a conceptual redundancy in mounting a pacing delay (as a reply to the defence of concurrency). That is because, in being reactive, the pacing delay must follow sequentially from the parent delay and, insofar as it occurs sequentially, logically, it can never be concurrent115. 111 American Association of Cost Engineers International, Forensic Schedule Analysis, Recommended Practice No 29R-03 (2009). Confusingly, whilst if it is a pacing delay, and hence reciprocal, and sequential, it cannot be concurrent, the RP/FSA observes that “although this is definitely pacing, it is not considered a pacing delay because it is usually not seen as a concurrent delay”. 112 But See AS2124, Cl.32.2 and AS4000, Cl.32 referred to earlier at paras 18–067 to 18–070, above. 113 See Ch.14, “Cause and effect”, at paras 14–025 to 14–069. 114 Ch.14, “Cause and effect”, at paras 14–070 to 14–106. 115 Although this is not a bar to concurrency which is universally accepted. See the references to City Inn Ltd above.

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18–139 As to condition 4 above, the RP/FSA remarks that: “Pacing is not realistic unless [C] can show that it had the ability to resume progress at a normal, un-paced rate. Implicit in [C’s] ability to show that it could have completed the schedule activity on-time if necessary is the fact that [C] was able to reasonably determine, or reliably approximate when the parent delay would end. Considering the typical realities of the types of projects in which delay issues arise, an exact determination is difficult. Therefore, while this should logically also be a required element of proof, realistically, the format and content of the analysis should not be held to the same rigorous test as [condition 1].”

18–140 In regard to condition 5 above, in so far as it is alleged, retrospectively, that the reaction was virtually instantaneous, contemporaneous notice of the reactively paced works may well be an important constituent of that proof. This is because the reply of an allegation of pacing will always be available to the unscrupulous with the benefit of hindsight, in an attempt to unhinge what would otherwise be a good defence to a financial claim for delay-related compensation116.

116 Unfortunately, the RP/FSA offers the extraordinary advice that, because contractors rarely give notices, notice should not be a condition precedent to entitlement. See American Association of Cost Engineers International, Forensic Schedule Analysis, Recommended Practice No 29R-03 (2009) p.96.

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CHAPTER 19

Total time, total loss and global claims

Introduction Total time claim Defence to a total time claim Total loss claim Defence to total loss claim Global claims Defence to a global claim

19–001 19–013 19–017 19–021 19–030 19–040 19–062

Introduction “The expression ‘total cost’ is adopted only for those claims where [C] alleges a number of legal bases for financial compensation and claims as the measure of this compensation the difference between its total cost of performing the contract and payments received under the contract1. By analogy, a ‘total time claim’2 is the name given to a claim in which a number of legal bases for a time extension are alleged and [C] seeks as a time extension the difference between the number of days which the project took to complete less the time, including extensions allowed, provided in the contract. It will be immediately apparent that a total cost/time claim is a particular, albeit a very common, and certainly the most controversial, form of global claim. A total cost claim is one where the composite sum sought is computed by reference to the amount of money required to ensure that the total money received is not less than the total money expended, or expected to be expended on the project. By analogy, a total time claim is one where the time extension sought is calculated by reference to the time required to ensure that the total time allowed under the contract including any time extensions is not less than the total time actually spent on the project.”3

19–001 In Doyle v Laing 4, Lord Macfadyen identified the problem with global claims as being that: “The logic of a global claim demands . . . that all the events which contribute to causing the global loss be events for which [D] is liable. If the causal events include events for which [D] bears no liability, the effect of upholding the global claim is to impose on [D] a liability which, in part, is not legally his. That is unjustified. A global claim, as such, must therefore 1 2 3 4

Boyajian v United States, 423 F 2d 1231, 1240 (Ct Cl 1970) at 1234. WRB Corporation v United States, 183 Ct Cl.409 (1968) at 427. The Honourable D Byrne, “Total costs and global claims” [1995] ICLR 531 at p.532. John Doyle Construction Ltd v Laing Management (Scotland) Ltd [2002] ScotCS 110 at [38].

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fail if any material contribution to the causation of the global loss is made by a factor, or factors for which [D] bears no legal liability.”5

19–002 On the other hand, a total time/cost claim is one in which all the delay, or cost, for which the claim is made is alleged to be caused by matters at D’s risk; there is no prima facie evidence that any of the delay, or cost, is caused by C, but C is simply unable to say how much time, or cost, has been caused by each event for which D is liable. 19–003 Historically, tribunals have been more willing to entertain total time, or total loss, claims quantified by inference, rather than by explicit proof, the inference being, that, in the absence of anything else that could have caused C’s delay or losses, D is liable. Thus, in Ipex v Melbourne Water, after the variety of events previously claimed had been reduced to one, Byrne J observed: “since there is only one event which is said to have brought about extra work, it is not a true global claim. It is more correctly described as a total time/cost claim.”6

19–004 The essential difference between a global claim and a total time or total loss claim is thus that a global claim does not seek to differentiate between separate causes of action between the parties on the basis of liability, asserting that, whatever the delay or loss was, it was all caused by unspecified events at D’s liability. A total time or loss claim on the other hand identifies that D was liable for every event for which relief or compensation is claimed and then infers that D is liable to relieve C for all the liquidated damages, or to compensate C for the total loss suffered by these various causal events, without separating the delay, or loss, caused by one of D’s events from that caused by another. It is thus apparent that, whenever a global claim is made, it encompasses by implication a total time and/or loss claim, but not all total loss claims sit under the umbrella of global claims. 19–005 The phraseology used to describe the various ways of pleading a case without particularisation in a global claim has given rise to much of the confusion about what is and is not acceptable in various jurisdictions. 19–006 In their commentary on the Privy Council decision in Wharf Properties7, the editors of the Building Law Reports refer to global claims as including total loss claims, but do not distinguish between the two, saying that global claims refer to those: “. . . where the connection between the matters complained of and their consequences whether in terms of time, or money are not fully spelled out.”8

19–007 Hudson9, similarly, used the two terms interchangeably, saying that: “Global claims may be defined as those where a global, or composite sum, however computed, is put forward as the measure of damage, or contractual compensation where there are two, or more separate matters of claim, or complaint, and where it is said to be impractical, or impossible to provide a breakdown, or sub-division of the sum claimed between those matters. ‘Total actual cost’, or ‘total cost’ are American expressions used . . . to describe those claims, whether in respect of one only, or more than one matter of complaint, where

5 John Doyle Construction Ltd [2002] ScotCS 110; [2002] BLR.393 at [36]. 6 Ipex ITG Pty Ltd v Melbourne Water Corporation (No 3) [2006] VSC 83 at [26] 7 Wharf Properties Ltd & The Wharf (Holdings) Ltd v Eric Cumine Associates (1991) 52 BLR 1 (PC) 8 Ibid., at p.5. 9 Duncan Wallace, I, QC (ed), Hudson’s Building and Engineering Contracts, 11th edn (London: Sweet & Maxwell, 2005) at p.1086.

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the alleged total costs of [C] . . . is [sic] compared with the contract value, or price, and the difference then put forward as representing the measure of damage, or additional cost caused by the one or more matters complained of. Where more than one separate matter is relied on, as is very often the case, a total cost claim will also, therefore, constitute a global claim as above defined.”

19–008 In the United States, the distinction between global claims and total loss claims has been more clearly drawn by the courts. In Sternberger v US10 (in which a contract for the supply of gun chargers and parts was in issue), C had presented a global claim for the costs of delays arising from excessive inspection, improper inspection and rejections, as well as extras arising out of changes in the specifications. C claimed that this was a total loss claim, in which it could not show the precise costs incurred as a result of the government actions complained of, but nevertheless claimed what it called a “jury verdict”11 for the total costs of the alleged government-caused delays and additional work combined. The Board rejected C’s claim on the grounds that C had not proved that D was liable for all the delay out of which C claimed that all the costs had arisen. On appeal, the US Court of Claims stated: “[C’s] evidence primarily took the form of an overall presentation, primarily presented through an expert witness, of what its costs should have been and what they actually were. The entire difference of $60,000 between estimated and actual costs (both estimates) was attributed to D’s termination, delays, changes and extras. [C] has thus combined the ‘jury verdict’ approach to damages with the ‘total cost’ method for the determination of damages, both discussed recently by this court in WRB Corporation et al. v US12. Both ‘jury verdict’ and ‘total cost’ standards are not favoured, and are permitted to be used to compute damages only upon strict conditions, recently stated by the court in WRB . . . Some of these conditions are that the nature of the losses must be such that they cannot be determined with reasonable accuracy; that a showing must be made that the tender – the basis for the estimate of what costs should have been – was realistic; that the actual costs must be reasonable; and, finally, that the additional costs must be attributable only to D’s changes and delays. These conditions are no more than just if [C] is to meet his essential burden of establishing the fundamental facts of liability, causation, and resultant injury.”13

Illustration Facts: The State of New York (the DOT) awarded a contract to reconstruct Route 9A in Manhattan to GII Industries (Grace). Grace’s bid consisted of an “A” portion of $43,744,312 and a “B” portion of 660 days with a $15,000 bonus, or penalty, for each day finished before, or after, the completion date. The project was intended to be completed in five sequential stages. During work on the first stage of the project, Grace struck a 68-inch by 43-inch elliptical pipe, which extended across the highway, but did not appear on the drawings, or site information, provided by the DOT. As a result of that pipe, the initial five-stage plan was modified and the project was eventually completed in 14 stages. The contract provided for extras, or additional costs, attributed to any delays, inefficiencies, or interference that resulted from a “Significant Change” in the character of the work. The modified restaging plan not only affected the manner in which Grace used its equipment

10 Joseph Sternberger, Trustee In Bankruptcy For Spenco, Inc v The United States, 401 F 2d 1012 (1968). 11 A “jury verdict” basis of claim in the United States appears to be a subjective assessment of loss. See Ch 20, “Apportionment” at paras 20–054 to 20–055. 12 183 Ct Cl 409, 425–426 (1968). 13 See also Wunderlich Contracting Co v United States, 351 F 2d 956, 968; 173 Ct Cl.180, 199 (1965).

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but also limited the contractor’s available workspace, forcing it to deviate from the original plan by restrictions. Restaging also increased the number of stages, forcing Grace to move more frequently to different segments of the project, leading to extra traffic cross-overs, which negatively impacted upon Grace’s efficiency. Held: that the restaging constituted a “significant change”, entitling Grace to additional compensation for the costs that it had incurred as a result of the restaging. The change in methodology of construction caused by the restaging was drastic. Not only were these stages smaller than the stages envisaged under the original contract, but also the order in which they were completed was completely different. Furthermore, the increased costs and inefficiencies caused by the restaging occurred throughout the project and, although the substantive tasks that Grace completed did not change due to the restaging, from a design and execution perspective, the restaged project was radically different from the original. The court found that the contractor completed the project in 2003, before it declared bankruptcy in December 2004 and, when it could not reach agreement with the DOT on the compensation it claimed it was owed for the additional work that it had performed, it filed an adversary proceeding against the DOT. The bankruptcy court permitted the contractor to recover its additional costs resulting from the out-of-sequence work using the total cost method: GII Industries Inc v New York State Department of Transportation14.

19–009 Global, total time and total loss claims create difficulties for both the parties and for the tribunal: 1.

2.

3.

for C, there is the problem of finding adequate records to particularise the causes of delay to completion and the quantification of loss caused by delay, disruption and prolongation, so that it can be seen that it is not a global claim; for D, there is the problem that, in the absence of such particularisation, there is always the possibility that C is in fact claiming against D for compensation for other delays or losses that are not at D’s risk as to time and/or cost; for the tribunal, there is the problem of securing not only that D can properly understand the case it has to answer, but also that it has a reasonable opportunity to defend against C’s unparticularised claims.

[Please refer to Figure 19.1] 19–010 In a typical unparticularised claim, C will say that it suffered delay and disruption, over a period of time in which a multiplicity of events adversely affected its productivity. The lost productivity was caused by constantly changing design information, late receipt of information, delayed responses to RFIs and submittals and so on, all of which caused C to spend more money than it contracted to spend in achieving completion as a result of those events for which D is liable. The claim is then summarised as a complex interaction of events in which it is impossible, or impractical, to say which drawing, or which late instruction, caused which proportion of the compensation claimed. From C’s point of view, provided it can be mounted, the beauty of a total loss claim is self-evident – it is very simple, quick and cheap to produce. It simply says “you have done all this to me and have caused me all this loss. I cannot separate the loss caused by one event from that caused by another but as you have caused everything, I do not have to separate them; please pay up.” This premise is summarily illustrated in the top bar of Figure 19.1.

14 Bankr, LEXIS 3663 (Bankr EDNY 30 September 2011).

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19–011 D believes that not all the delay and cost was caused by D alone and the inconvenience of what D conceives to be a global claim is then self-evident, (illustrated in the middle bar of Figure 19.1). On the one hand, D does not accept that C’s claim is a total loss claim, but in demonstrating that a not insubstantial part of the loss has been caused by events at C’s risk (or at least, by events for which C has not alleged that D is liable) and is thus, in reality, a global claim, D will also go to prove (by default) the amount for which C is properly entitled. Not only that, but in doing so D will have all the costs of putting together a detailed case that C would ordinarily have to bear15. It is often a difficult decision to make. D has to ask itself, “is it worth going to all the trouble to prove the inadequacy of the claim or, instead of paying the costs of mounting a defence that will only go to prove some of the claim anyway, should D pay enough to make C go away?” That is the crux of it. That is the power of a global claim and that is what the global C banks upon. 19–012 A successful attack on the total loss claim to show it is in fact a global claim, however, may well give the tribunal the information it needs in order to distinguish liability and give judgment for what actually is a modified total loss claim, estimating the loss that stems from causes at D’s liability alone (illustrated in the lower bar of Figure 19.1).

Total time claim 19–013 A total time claim is one in which C claims that all the delay to the completion of the works, howsoever caused, is caused by, and only by, events at D’s risk as to time. It is a very common way of presenting an extension of time claim and, unless D has kept good records during the course of the works and can thus put up prima facie evidence to show that some of the delay to progress that caused delay to completion must have been caused by matters not at D’s risk, D can be extremely vulnerable. 19–014 Total time claims are usually presented on the basis of as-planned versus as-built analysis16, in which the tribunal is invited to draw the inference that the only reason for the difference between the two is caused by matters at D’s risk, or as-planned impacted analysis17, in which only D’s delay events are impacted on the planned schedule, with the same implication. 19–015 In Lacaba Ahden18, C sought an extension of time for the erection of a dragline at a coal mine and served an expert report in response to a request for particulars of claim, in which it had alleged that part of the delay occurred because of a complex interaction between the causally significant events and their consequences. In referring to the total time claim as a “global case”, McMurdo J stated: “. . . it is in the context of the particular case that the balance must be struck between allowing [D] to know what case it has to meet and to be informed of any matter which, if unpleaded, would fairly take it by surprise. On the face of it [C’s] case is now supported by the evidence of an expert who has provided his opinion according to the requirements of expert witnesses. There is no proper basis for preventing [C] from presenting this ‘global case’.” 15 “[D] may then be left with burdens such as the shifting of the tactical or evidentiary onus of proof and lengthy preparation, but such burdens do not constitute an abuse of process”. Nauru Phosphate Royalties Trust v Matthew Hall Mechanical and Electrical Engineers Pty Ltd (1992) 10 BCL 179 per Smith J at p196. 16 See Ch. 14, ‘Cause and effect” at paras 14–232 to 14–252 and Ch.15, “Forensic programme analysis” at paras 15–061 to 15–068. 17 Ch.15, “Forensic programme analysis”, paras 15–077 to 15–116. 18 Lacaba Ahden Australia Pty Ltd v Bucyrus (Australia) Pty Ltd [2005] QSC 335, at [15].

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19–016 In a further application on the same matter19, in which D claimed that the expert report failed to explain the way in which each event had a causal effect on the date of practical completion, the judge declined to strike out the application on the basis that, if the trial judge accepted that D’s objections were well-founded, C would simply fail to prove its case. There was no unfairness to D in permitting the case to proceed, just because C thought it not a good proof.

Defence to a total time claim 19–017 The difficulty for D in defending a total time claim is that, on the one hand, the facts are likely to be in C’s hands and, on the other, in separating the effects of the various causes, D will produce for C a cogent and convincing proof of what is its proper entitlement to an extension of time20. 19–018 Before the invention of critical path analyses and databases, it may have been relatively easy to establish the impracticality of proving the time effect of each of D’s risk events and separating those from the time effect of C’s risk events, except by inference. We now live in a different age from that in which the majority of delay-related cases were decided. It is therefore suggested that the alleged “impracticality” of establishing the individual effect of D’s risk events and separating these from the effect of C’s risk events should no longer be accepted as a justification for a total time claim. 19–019 Many contractors that resort to total time claims are international contractors with international reputations and exceptionally competent management. In such cases, it is suggested that a tribunal should not be easily convinced that these parties do not know how to prove that they are entitled to more time for the work they have done. Indeed, in many cases, the absence of acceptable proof by way of competently updated network schedules and prompt notice will be breaches of contract on C’s part, for which it should not reasonably be entitled to benefit by putting forward a total time claim and, in effect, transferring the burden of proof of entitlement from C to D. 19–020 Some Ds, faced with such a claim, will take the view that, notwithstanding that C has refused to attempt to particularise its case more fully, rather than risk a “soft” tribunal, that will look at the pile of documents and think there is bound to be something in it, will set out to prove in what way C’s case includes matters for which C is liable. In principle, the defence to a total time claim is to take each alleged causal event at D’s risk and demonstrate to what extent, if any, it affected C’s intent at the time it occurred. This method is known as a time impact analysis21. In carrying out such an analysis, by way of defence to the claim, they will then demonstrate what C’s case actually amounts to. Whether that is ever a sensible course of action in any particular case is a matter for D’s commercial judgement, but such an approach has been known to deliver a successful outcome for D on many occasions.

Total loss claim “In what should only be rare cases where the financial consequences of the various causes of compensation are impossible to distinguish, so that an accurate apportionment of the compensation claimed cannot be made between the several causative events, then in this rare situation it is 19 Lacaba Ahden Australia Pty Ltd v Bucyrus (Australia) Pty Ltd [2006] QSC 147. 20 K Pickavance, “A case for the defence” (September 2006) Construction Journal, Royal Institution of Chartered Surveyors. 21 Ch.15, “Forensic programme analysis”, at paras 15–149 to 15–163.

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acceptable to quantify individually those items of the claim which can be dealt with in isolation and claim compensation for the remainder as a composite whole. [C] will nevertheless need to set out the details of the [D’s cost risk events] relied on and the compensation claimed with sufficient particularity so that [D] knows the case that is being made against it.” 22

19–021 The unparticularised claim for reimbursement is a total loss claim. This is also known in the United Kingdom as a “rolled-up claim” or “total cost” claim. In essence, a total loss claim relies upon the assumption that the costs claimed by way of reimbursement are not costs caused by anything for which C is responsible, but are caused solely by factors for which D is responsible. 19–022 Such a claim was held to be permissible where it was impracticable to disentangle that part of the loss that was attributable to each head of claim and the cost claimed had not been brought about by delay, or other conduct, of C. In John Holland v Kvaerner, Byrne J said23: “The logic of such a claim is this: [C] might reasonably have expected to perform the work for a particular sum, usually the contract price; [D] committed breaches of contract; the actual reasonable cost of the work was a sum greater than the expected cost. The logical consequence implicit in this is that [D’s] breaches caused that extra cost, or cost overrun. This implication is valid only so long as, and to the extent that, the three propositions are proved and a further unstated one is accepted: [D’s] breaches represent the only causally significant factor responsible for the difference between the expected cost and the actual cost . . . The unstated assumption underlying the inference may be further analysed. What is involved here is two things: first, the breaches of contract caused some extra cost; secondly, [C’s] cost overrun is this extra cost. . . . It is the second aspect of the unstated assumption . . . which is likely to cause the more obvious problem because it involves an allegation that the breaches of contract were the material cause of all of [C’s] cost overrun. This involves an assertion that, given that the breaches of contract caused some extra cost, they must have caused the whole of the extra cost because no other relevant cause was responsible for any part of it.”

19–023 The essential character of a total loss claim is thus that liability for the events giving rise to the claim is not in dispute, either because there was no other cause or, if there was, its extent has been otherwise separated from that for which it is alleged that D is liable and the effect of the several causal events is impossible, or impractical, to unravel on an event-by-event basis. 19–024 In relying on several decisions made around the same time, in Wunderlich Contracting Co v US24, the US court held that, in these circumstances: “[C] need not prove his damages with absolute certainty, or mathematical exactitude25. It is sufficient if he furnishes the court with a reasonable basis for computation, even though the result is only approximate26. Yet this leniency as to the actual mechanics of computation does not relieve [C] of his essential burden of establishing the fundamental facts of liability, causation, and resultant injury.”27

22 Society of Construction Law, Delay and Disruption Protocol (October 2002), at section 1.14. 23 John Holland Construction & Engineering Pty Ltd v Kvaerner R J Brown Pty Ltd (1996) 82 BLR 83, at paras 85E–86E. 24 Wunderlich Contracting Co v United States, 351 F 2d 956, 968, 173 Ct Cl 180, 199 (1965). 25 See also Dale Construction Co v United States, 168 Ct Cl.692 (1964) and Houston Ready-Cut House Co v United States, 119 Ct Cl.120, 96 F Supp 629 (1951). 26 See also F H McGraw & Co v United States, 131 Ct Cl 501, 511, 130 F Supp 394 (1955) and Locke v United States, 151 Ct Cl 262, 283 F 2d 521 (1960). 27 Wunderlich Contracting Co v United States, 351 F 2d 956, 968, 173 Ct Cl 180, 199 (1965).

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19–025 A similar ruling was given by the English courts, at around the same time, in J Crosby v Portland 28, in which C had not demonstrated that the damages it was claiming had been calculated in regard to each event for which it was entitled to compensation. This was a case under the fourth edition of the ICE form about the laying of a water main. The arbitrator made his award on a modified total loss basis, awarding lump-sum damages for nine discrete events, which had caused 31 weeks’ delay for which D was liable out of the total 46 weeks claimed. He explained in his award that: “As each matter occurred, its consequences were added to the cumulative consequences of the matters which had preceded it. The delay and disorganisation which ultimately resulted was cumulative and attributable to the combined effect of all these matters. It is therefore impracticable, if not impossible, to assess the additional expense caused by delay and disorganisation due to any one of these matters in isolation from the other matters.”29

19–026 In the Queen’s Bench Division of the High Court, Donaldson J said: “Since, however, the extent of the extra cost incurred depends upon an extremely complex interaction between the consequences of the various denials, suspensions and variations it may well be difficult, or even impossible to make an accurate apportionment of the total extra costs between the several causative events. An artificial apportionment could, of course, have been made, but why, they ask, should the arbitrator make such an apportionment which has no basis in reality? I can see no answer to this question. Extra costs are a factor common to all these clauses and so long as the arbitrator does not make any award which contains a profit element, and provided he ensures that there is no duplication, I can see no reason why he should not recognise the realities of the situation and make individual awards in respect of those parts of individual items of the claim which can be dealt with in isolation and a supplementary award in respect of the remainder of these claims as a composite whole.”30

19–027 This was followed some 20 years later by Merton v Leach31, which also pertained to a total loss claim under JCT63, concerning a contract for the construction of 287 new dwellings at Mitcham, in which D claimed that all the prolongation was the result of CA’s instructions. The arbitrator’s preliminary award was appealed under the Arbitration Act 1979. In this case, Vinelott J approved Donaldson J’s approach in Crosby and held that, where loss, or expense, arose as a result of a number of reimbursable events, each contributing towards a cumulative disruption cost, it was often wholly artificial to apportion the totality of the extra costs incurred between the various events which had contributed towards those costs. On the other hand, an application must be made in regard to each event which is alleged to be reimbursable and liability for that event proved. The judge summarised the position as follows: “Implicit in the reasoning of Donaldson J was first that a rolled up award can only be made in a case where the loss, or expense attributable to each head of claim cannot in reality be separated and, secondly, that a rolled up award can only be made where apart from that practical impossibility the conditions which had to be satisfied before an award can be made have been satisfied in relation to each head of claim.”32

19–028 An important point to note in regard to these two English cases is that neither was concerned with global claims that could not be particularised and in which 28 29 30 31 32

J Crosby & Sons Ltd v Portland Urban District Council (1967) 5 BLR 121. Ibid., at p.133. Ibid., at p.136. London Borough of Merton v Stanley Hugh Leach Ltd (1985) 32 BLR 51. Ibid., at p.102.

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there was alleged to be mixed liability and thus some sequential, or concurrent, delay, or disruption, causing costs for which D was not liable. Nevertheless, compensation was being claimed without distinguishing which events had given rise to which part of the total loss. These cases are only authority, in this regard, for the willingness of the courts to accept a total loss claim on the basis of an estimate of the loss suffered in relation to D’s proven liability. 19–029 Whilst, historically it may have been relatively easy to establish the impracticality of proving C’s actual costs incurred as a result of D’s risk events, we now live in different times. The record-keeping, accountancy and database facilities commonly available ought to render the impracticality of establishing the individual costs of D’s risks a formidable hurdle to clear. The more so for major contractors, which boast the high quality of their management expertise. In most cases, competent contractors keep records of the people they employ and of what they do for the money they are paid. They also keep records of their plant costs and when they are incurred, they programme the work and they know when their progress is being interfered with as a result of something for which D is responsible.

Defence to a total loss claim 19–030 Broad generalities and inferences of liability, for example, to the extent that, “because the CA made so many changes and as a result the contract took so much longer to complete than anticipated, D is therefore responsible for all the costs incurred over and above the tendered cost”, should not be sufficient to found a claim for compensation. D’s defence to a total loss claim is thus to have it particularised (usually on the basis of facts in C’s possession and control) to show that either: 1. 2.

more than an insignificant part of what is claimed is actually C’s liability either as to time-bearing, or other, costs and hence it is a global claim; or to demonstrate that the facts are, or should be, available by which C could properly quantify D’s liability33.

19–031 Thus, provided that D can demonstrate that any part of the loss for which C claims compensation does not comprise a cost caused by a D’s cost risk event, the total loss claim should fail. Accordingly, total loss claims are often difficult to prove and frequently easy to disprove. For example, in order to disprove that the difference between tendered costs and out-turn costs is not at D’s risk, it is only necessary to demonstrate with a reasonable probability the occurrence of any of the following during the time-frame in which C alleges it incurred the costs that it is alleged were caused by D: 1. an error in computation, or rate, in the pricing of C’s tender; 2. an incorrect assumption as to the labour, material, or plant, content of any item at the time of tender; 3. an incorrect assumption as to the site preliminary content, or cost of head office overhead, at the time of tender; 4. inflationary variations since tender that are at C’s risk; 5. variations in rates due to a change in purchasing strategy from that anticipated at the time of tender; 33 Refer to Figure 19.1.

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6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

errors and omissions from suppliers’, or subcontractors’, quotations; errors in invoicing; any defective work that had to be put right during the course of the contract; loss of productivity as a result of management errors or loss of morale; any poor time-keeping; any defects in materials, or goods, which had to be rectified during the course of the contract; any loss of productivity as a result of delay in delivery of materials; any loss of productivity as a result of absence, or breakdown, of plant; any loss of productivity as a result of gang-size inefficiency; or any loss of productivity as a result of any excusable delay which is not compensable.

19–032 If D can demonstrate that any of the above occurred in the same time periods during which C claims compensation, what is put forward as a “total loss” is in fact a global claim, which should fail. Anyone who is familiar with the construction industry will appreciate the exceptionally low level of success likely with such a claim. 19–033 In Wallace v US34 for example, the court declined to allow C to recover its prolongation costs over the period for which it had been awarded an extension of time for the reason that, whilst in concurrent delay to progress, C had failed to identify the costs of those events for which D was liable separately from those events for which C was liable. In this case, some evidence of: • • •

the causal event; the period of delay to completion caused thereby; and the costs flowing from that delay to completion, independently of any costs for which C is liable,

were said to be essential prerequisites of a successful claim for compensation. 19–034 TPS Inc35 was a case that concerned replacement of roofs, structural repairs and abatement of designated areas of asbestos and lead-based paint on nine buildings at the Key West Naval Air Station, Florida. It was a small project with a contract value of $274,257, to be started on 13 October 1995 and to be completed by 11 May 1996. However, following completion some seven months late, on 5 December 1996, C alleged its final costs were some three times its tendered costs at $721,593.88 and claimed the difference between that and the amount it had been paid under the contract as a total loss claim. 19–035 The Board found that there had actually been many delays for which C was liable. C had got off to a bad start, many submittals were late, or rejected for inadequacy and, by 6 December 1995, a third of the contract period had elapsed with no submittals approved and no work done. On 2 February 1996, D suspended work on 85% of the contract works, expecting the suspension to last until March 1996. In fact it continued until November 1996, when the work under the suspension order was taken out of the contract entirely. On 2 February 1996 C stopped work pending resolution of unforeseeable conditions that resulted in a change order for an agreed additional $44,000. However, C did not resume work for another two weeks and,

34 R P Wallace Inc v The United States, COFC No 96–222C (2004); (2005) 21 Const LJ 378. 35 TPS Inc, ASBCA No 52421 (2004).

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upon recommencement, work was performed sporadically on 60 working days, with low manning levels between 6 June 1996 and completion on 5 December 1996. 19–036 In its claim, C did not identify the direct costs incurred as a result of the suspensions of work, the direct costs of the change order, the costs of performing the terminated work prior to the termination, or the cost impact of the partial termination on the continued portion of the contract. 19–037 Whilst it had clearly identified much unresolved delay to progress of mixed liability, the Board did not reject the total loss claim as a global claim, which it was plainly entitled to do, but rejected it on the basis that C had failed to show the impracticability of proving directly the actual costs caused by D’s cost risk events. The Board said: “The direct costs of the two suspensions are identified in [C’s] own daily reports. [C] made a detailed estimate of the added cost of [the change order], and its own consultant testified that it could have tracked and recorded those costs during performance as they were incurred. The work performed on this contract was not complicated. The workers employed were few. On this record, [C] has failed to show that it was impracticable to prove directly the actual costs incurred for the two suspensions, or for the change order.”

19–038 Generally, the Boards of Contract Appeals and the Court of Claims in the United States have tended to disallow total cost claims based upon estimates, whenever they deem that C was, or should have been, capable of calculating its loss from records. On the other hand, in Grumman36, in which D objected to C’s method of computation of loss that sought to avoid taking into consideration bid inaccuracies, D alleged that: 1.

2.

3.

C was a major manufacturing concern, with a mature, sophisticated accounting system; even if the system could not attract all of the costs, it should have been able to master at least some of them, which would have yielded a more accurate quantification of damages than C presented to the Board; C knew shortly after D’s cost risk event that it was experiencing an impact and had plenty of time and opportunity to attempt to track its costs more accurately; and C retained experienced professionals to investigate the causes of C’s cost overruns at an early stage, not at, or near, the end of performance, as is typical. Those professionals could have taken action to track the additional costs and allocate responsibility for the costs contemporaneously.

19–039 However, in this case, the argument was not accepted. The Board concluded that the workmen on site would not necessarily know whether what they were doing amounted to a change so as to require the particular type of record-keeping it felt was necessary in order to come up with a calculated cost of the effect of the events at D’s liability. The Board said: “An early awareness of potential impact is not the same as the ability to collect separately the costs. Similarly, the early engagement of experienced professionals may not guarantee the result. On the other hand, the inability of an experienced professional to come up with the data might indicate that it could not reasonably be done. We are not prepared to fully subscribe to [C’s] claim that it would have had to assign a person to every [C’s] worker on the production floor and monitor the worker’s activities each day. However, we do think

36 Grumman Aerospace Corp (on behalf of Rohr Corp) (2011) 01–1 BCA 31,316.

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there is merit to the view that any type of charging system would have required the individual [C] worker to know what was a change and what was not a change and to record accurately the impact of the DCAS changes. For example, in the case of a withhold tag, a worker would have to know whether the discrepancy noted was a normal withhold tag or a tag resulting from a DCAS change. The workers or his supervisor would have to know how much time was caused by the change. A worker transferred from one cost center to another would have to know how less efficient he was in the new cost center versus his normal cost center. The problem is further complicated by the fact that there were numerous changes and they occurred at various times. Any system would have had to be kept current as new changes occurred. [D] says that [C] could have done more, but made a ‘private unilateral decision’ not to proceed that deprived [D] of the opportunity to consider contemporaneous cost information and assess it in light of the alleged flaws. Putting to one side its objections to the evidence that has been presented (which we will separately evaluate), [D] has not addressed the validity of the reasons [C] has advanced for impracticability. Given the nature, extent and timing of the DCAS-Santa Ana changes, we are satisfied that it was impracticable for [C] to prove the costs for the major assembly, common shops and services elements of its claims directly.”37

Global claims 19–040 The essential character of a global claim is that C claims that, for example, it was delayed by a multiplicity of variations, express and implied. Additionally, it may claim that some variations were made by the release of later drawings that were not identified as variations at the time. There were also late responses to requests for information and inadequate instructions, late approval of submittals and so on, all of which are claimed to have delayed and disrupted C’s work. Such allegations are sometimes coupled with an admission that C did not get on as well as it might have done and that there was some defective work, but that this either was a consequence of the effects of D’s time and cost risk events listed, or was otherwise inconsequential. The claim is then summarised as being a complex interaction of events in which it is impossible, or impractical, to say which drawing, or which late instruction, caused how much disruption, delay to progress, or delay to completion, but, whatever it was, it was D’s liability. 19–041 The problem facing the tribunal when presented with a global claim is that it cannot get to grips with the facts demonstrating that delay to progress and/or disruption have caused a delay to the completion of the works and have caused the costs alleged to have been suffered because C refuses to produce any linkage between them and rests its case on the plain assertion. 19–042 D may be strong and leave it to C to prove its case but, unfortunately, some courts and a few arbitrators will take the view that, for example, because C is a significant contractor, there have been many drawings issued and there were many variations, there must be something in the claim, otherwise C would not be pursuing it. It is that unsubstantiated underlying inference upon which C relies. 19–043 In Grumman Aerospace Corp in 1992, the UK courts demonstrated what was (in the opinion of the then learned editor of Hudson) a “much needed”38 tightened discipline in the particularisation of claims. ICI v Bovis39, McAlpine Humberoak40 and Mid 37 Grumman Aerospace Corp (2001) 01–1 BCA 31,316 at 90–91. 38 Duncan Wallace, I QC (ed), Hudson’s Building and Engineering Contracts, 11th edn (London: Sweet & Maxwell, 1995) at p.1068. 39 Imperial Chemical Industries plc v Bovis Construction Ltd (1992) 8 Const LJ 293. 40 McAlpine Humberoak Ltd v McDermott International Inc (No 1) (1992) 8 Const LJ 383.

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Glamorgan v Devonald Williams41 were all cases in which the courts appeared to have demonstrated that any leniency as to the calculation of the value of the claim by way of a total loss calculation did not relieve C of its essential evidential burden of establishing liability, causation and damage and would reject global claims. 19–044 In the ICI case, in relation to an unparticularised claim, HH Judge FoxAndrews QC stated: “[D’s] case is that the various events set out . . . all contributed to the sums claimed, with no actual apportionment being possible. However, as the total cost claims have in fact been paid, if any of the events is not proven at trial, the only consequence is that the actual sum paid will fall to be distributed between a lesser number of events, not that the total sum recoverable will be less. But I find that it is palpable nonsense that £840,000 could be the cost of repositioning a fire bell. It is important to appreciate that whilst a pleading may take a particular form where a number of interactive events give rise to delay and disruption, the same does not appear to me to apply to many of the items. . . . The financial consequences of each breach, where possible, must be pleaded and the necessary nexus shown. . . .”

19–045 In the Mid Glamorgan42 case, Mr Recorder Tackaberry QC summarised the principles to be adopted in dealing with the proof of causation and damages in delay and disruption claims as follows: 1. 2.

3.

4.

a proper cause of action must be pleaded; where specific events are relied upon as giving rise to a claim for moneys under the contract, then any preconditions which are made applicable to such claims by the terms of the relevant contract will have to be satisfied, and satisfied in respect of each of the causative events relied upon; when it comes to quantum, whether time-based, or not, and whether claimed under the contract, or by way of damages, then a proper nexus should be pleaded that relates each event relied upon to the money claimed; where, however, a claim is made for extra costs incurred through delay as a result of various events whose consequences have a complex interrelationship, which renders specific relation between the event and time and monetary consequence impossible and impracticable, it is possible to maintain a composite claim.

19–046 Mid Glamorgan43 and Wharf Properties44 were both cases in which the architect was being pursued for the recovery of increased development costs. It was alleged that, because of the numerous changes in the design and the numerous instructions and variations issued, completion had been delayed and the cost of the delay to completion should therefore be recoverable from the architect. In neither case was a causal connection between any of the architect’s acts, or omissions, and alleged delays pleaded and in both cases they came before the courts in an action for striking out. 19–047 Wharf Properties concerned the construction of a large development in Hong Kong known as “Harbour City”. In substance, the claim was that the CA had failed properly to manage, control, co-ordinate, supervise and administer C’s work. This failure had led to delay, loss of rent on the finished development and had caused D to make payments to C that it would not otherwise have had to make.

41 42 43 44

Mid Glamorgan County Council v J Devonald Williams and Partners (1992) 8 Const LJ 61. Mid Glamorgan (1992) 8 Const LJ 61. (1992) 8 Const LJ 62. BLR 72 (HKHC); 45 BLR 106 (HKCA) and 52 BLR 1 (PC).

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19–048 Originally, D claimed not only against the CA, but also against C, its principal SCs and the consulting engineers. All of the claims except those against the CA were settled and the proceedings were then reconstituted in an action between D and the CA, in which D sought to recover from the CA the sums that it had paid to the other parties to the dispute. 19–049 In the Mid Glamorgan case, D had engaged the CA to design and supervise alteration and extension works at the Rhondda College of Further Education. D claimed against the architects for damages arising out of the firm’s alleged failure to supply information timeously, their failure to warn D of shortcomings in their design and their failure to appoint an experienced project architect, all of which D claimed had delayed completion of the works. 19–050 In Wharf Properties, C’s case was struck out not only because the claim was unparticularised, but also because it still remained unparticularised after seven years of legal process, despite C having promised so to do. However, in Mid Glamorgan, there had been no such failure to comply with an order of the court, the claim was not struck out and C was permitted to amend its claim. Although the Recorder expressed some doubt as to the likelihood of success if the claim was not particularised in more detail, he did not feel that it was so unparticularised that it did “not provide an agenda for the trial”. The Recorder said: “Specific authority apart, I would have thought that the detail to be expected in the presentation of a case involved the reconciliation of two fairly straightforward propositions. On the one hand, [D] is entitled to know the case that will have to be met well in advance of the hearing at which that case will be argued. On the other hand, it is to be hoped that no [C] with a genuine complaint will be shut out from the seat of justice because the information which he needs to prosecute his claim is in the hands of another, or others. Particularly this must be so where the ‘other’ is [D]. In such a case the two propositions can be described as the opposite sides of the same coin. The more [C] is able, or forced to particularise his case, the more clearly [D] will be able to know the case that has to be met; and vice versa.”45

19–051 “A proper agenda for the trial” was what the Privy Council found lacking in Wharf Properties. Lord Oliver of Aylmerton in that case stated: “. . . [the CAs] are concerned at this stage not so much with quantification of the financial consequences the point with which the two cases [Crosby and Merton ] referred to were concerned, but with the specification of the factual consequences of the breaches pleaded in terms of periods of delay. The failure even to attempt to specify any discernible nexus between the wrong alleged and the consequent delay provides, to use [counsel’s] phrase, ‘no agenda’ for the trial.”46

19–052 His Lordship later added: “It is for [C] in an action to formulate his claim in an intelligible form and it does not lie in his mouth to assert that it is impossible for him to formulate it and that it should therefore be allowed to continue unspecified in the hope that, when it comes to trial, he may be able to reconstitute his case and make good what he then feels able to plead and substantiate.”47

19–053 In the case of ICI v Bovis48, disputes arose because the works cost a lot more and took much longer to complete than they should have done. C put forward a global 45 46 47 48

Mid Glamorgan County Council v J Devonald Williams and Partners (1992) 8 Const LJ 61 at p.62. Wharf Properties Ltd v Eric Cumine Associates (1991) 52 BLR 1 (PC) at p.21. Ibid. Imperial Chemical Industries plc v Bovis Construction (1992) 8 Const LJ 293.

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claim, ultimately amounting to some £25m. No attempt was made to link any particular breach by D, or others, to any pleaded defect or specific loss. After some procedural skirmishing, C served a Scott Schedule, supposedly in order to demonstrate by inference the causal connection between the alleged breach and the alleged loss. However, the judge found this to be inadequate and ordered that C should re-serve its Scott Schedule. After some delay, C served a more detailed schedule, but D were not satisfied with it and applied to have the claim struck out. HH Judge Fox-Andrews QC decided that both C and its legal advisers had made a great deal of effort to plead their case in the clearest possible way. Thus, although the judge found that the Scott Schedule was inadequate, rather than debar them from continuing with the claim, they were ordered to produce a better pleading. 19–054 In British Airways v McAlpine49, the claim was struck out at first instance, but reinstated by the Court of Appeal. This case arose out of an office development in Croydon, which was said to suffer from a variety of defects. The claim was for £3.1m, being the reduction in price which British Airways (D) said it was obliged to give by reason of the defects in the building. It could not, however, identify which of the alleged defects in the building had caused what part of that diminution in value and it was essentially on this basis that the claim was struck out at first instance. 19–055 In the Court of Appeal, Saville LJ (as he then was) said that although D’s claim was embarrassing (in the sense that it was open to further particularisation), it was not seriously prejudicial to McAlpine (C) , which was able to know the case they had to meet and thus they did not face an unfair hearing. His Lordship said: “To my mind it seems that in recent years there has been a tendency to forget the basic purpose and to seek particularisation even when it is not really required. This is not only costly in itself, but is calculated to lead to delay and to interlocutory battles in which the parties and the court pore over endless pages of pleadings to see whether, or not some particular point has, or has not been raised, or answered, when in truth each party knows perfectly well what case is made by the other and is able properly to be prepared to deal with it. Pleadings are not a game to be played at the expense of the litigants, nor an end in themselves, but a means to the end, and that end is to give each party a fair hearing. Each case must of course be looked at in the light of its own subject-matter and circumstances. [D’s] failure to provide proper particulars of the allegation that [C] was liable to [D] was embarrassing and [D] were unable in this respect to know what case they would have to meet. However, that failure could not reasonably justify the order striking out the action because the failure only related to the claim asserted by [D]; [D] had been willing to provide further particulars, if necessary, and it was not a case in which it could be said that [D’s] claims were fundamentally flawed in the sense that no further particulars could assist their case nor was it a case in which there had been an express refusal to provide particulars, or a contumelious disregard of court orders.”50

19–056 Whilst most decisions on global claims relate to their admissibility at interlocutory stages, in Banabelle Electrical51 the Court rejected the decision of a referee to the effect that all the causes of delay alleged by C had been the cause of all its loss, stating as follows: “. . . it is clear from the referee’s analysis that there were many factors leading to the delay, and consequent increased costs (through loss of productivity and increased supervision)

49 British Airways Pension Trustees Ltd (formerly British Airways Pension Fund Trustees Ltd) v Sir Robert McAlpine & Sons Ltd (1994) 72 BLR 26. 50 Ibid., at pp.33–34. 51 Banabelle Electrical v State of New South Wales [2005] NSWSC 714.

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that he purported to measure through his global methodology. The global methodology, by necessity, did not provide a separate measure of those costs that were compensable under [the contract], as incurred by reason of compliance with directions. The referee concluded that all the causes of delay were attributable to [D] . . .. Whether, or not that is correct, it does not follow that all those causes were compensable under [the contract]. . . . In this context, it is necessary to bear in mind that (for example) the trade contracts explicitly . . . excluded any entitlement to compensation for delay costs. Thus, even if the claim for damages for breach of the implied term had succeeded, it would not follow that [D] is liable because each and every one of the listed causes must be necessarily either an event under [the compensation clause], or an instance of a breach of the implied term. For this reason, the referee’s conclusion on the claim . . . must be rejected.”52

19–057 In Ipex v Melbourne53, under an agreement for call centre handling of helpdesk services, C alleged that it tendered for responding to approximately 433 calls per month, requiring it to provide labour at the rate of 10.16 “full time equivalent employees per annum”. However, C said it received many more calls and claimed that, as a result, this required a response equating to 21.69 full time equivalent employees per annum, at an additional cost of AUS$9,545,543,70, for which they claimed compensation. Byrne J observed that: “Most of [C’s] claims involve its unpleaded contentions that, as the number of calls increases, so too does the quantity of helpdesk services and the cost of providing them and, further, that the increase in [full time employees] and the consequent cost increase are directly proportional to the increase in the number of helpdesk calls. It is, as I have mentioned, a theoretical claim in the sense that no actual loss is alleged.”

19–058 He then added, by way of a footnote: “Although it is not a true global claim, the methodology of the causation and quantification in this case bears resemblance to those claims. The pleaders must, therefore, at every step expect to have to confront the judicial caution, even distrust, with which the methodology of those claims is received.”

19–059 Where the pleading was clear enough for D to understand it, the judge allowed the claim to proceed to trial. However, following the line adopted in Wharf Properties in which there had been a continuing failure to achieve a meaningful pleading and striking out those parts of the claim still unparticularised, Byrne J stated: “I have been critical in the past of the drafting techniques adopted by [C] in this pleading – of simply throwing at the reader a vast mass of material with little if any effort to relate any part of it to the allegation made. I remain critical: it is essential that the particulars contain assertions of fact which are related to the plea. It is not sufficient that [C] merely seek to justify them by saying that somewhere in this snowstorm of detail an informed reader may be able to find something which may be useful.”

19–060 In the United Kingdom, it seems that, although there has been much interlocutory activity in seeking to have global claims struck out as a matter of policy, the courts will allow global claims to proceed to trial, provided that C has made every effort to plead the claim fully and to explain wherever possible the linkage between an item claimed and a cause, or causes. However (as Mr Recorder Tackaberry QC noted

52 Ibid., at [88] to [90]. 53 Ipex ITG Pty Ltd v Melbourne Water Corporation (No 2) [2005] VSC 258.

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in the Mid Glamorgan case), asserting an unparticularised claim that is theoretically possible as a matter of fact and arguably sustainable in law may well be possible, but C “is pinning its colours to a case which creates evidential difficulties and is unlikely to be successful”54.

Illustration Facts: At first instance55 Akenhead J determined Walter Lilly’s applications for an extension of time (EoT) and loss and expense (l and e). He held that Walter Lilly was properly entitled to an EoT for the entire period sought, because none of the delays were its responsibility. He also awarded l and e, damages and interest of approximately £2m. Mackay sought permission to appeal on certain of the l and e issues. The basis of the first two grounds was that it was a condition precedent to Walter Lilly’s entitlement to recover l and e that it had complied with Cl.26.1.3 of the JCT standard form of building contract 1998 edition private without quantities (as amended). This provided as follows: “. . . the Contractor shall submit to the Architect or to the Quantity Surveyor such details of such loss and/or expense as are reasonably necessary for such ascertainment as aforesaid”. Mackay contended that Walter Lilly had failed to provide all the details necessary to prove its l and e and had therefore failed to comply with the condition precedent. Akenhead J rejected this argument, pointing to the fact that Cl.26.1.3 only required Walter Lilly to submit details that were “reasonably necessary”; Cl.26.1.3 not identifying the precise manner in which such details were to be provided. An offer to inspect records held at the contractor’s office might well suffice, it being only the “details” of the l and e that were required, not necessarily all the back-up information, which might support such detail. He held that Cl.26.1.3 should not be construed in a “penal” way against Walter Lilly, particularly bearing in mind that the grounds that gave rise to the right to claim l and e were entirely the fault (and at the risk of Mackay). He held that the architect, or quantity surveyor, carrying out the assessment must be placed in the position where they can be satisfied that some, or all, of the l and e claimed is likely to be, or has been, incurred, but they need not be certain about this. Akenhead J found that these requirements had been satisfied in this particular case. Held, by Aikens LJ that permission to appeal should be refused to Mackay; that, even if Akenhead’s construction of Cl.26.1.3 was incorrect, it would not be sufficient to support a finding that Walter Lilly had failed to comply with the condition precedent. In grounds of appeal 3 to 8 inclusive, Mackay argued that Akenhead J had held that the loss and expense claim was not a global claim (when it was) and that he had failed to deal with it in the correct way as if it were a global claim. As to loss and expense claims generally, Akenhead J had observed that such claims must be proved as a matter of fact and that a contractor must demonstrate that: (a) events occurred that entitled it to recover loss and expense; (b) those events caused delay and/or disruption; and (c) such delay and/or disruption caused it to suffer loss and/or damage. Subject to the particular contractual terms, a contractor need not prove that it is impossible to plead and prove cause and effect in the normal way, but merely, on the balance of probabilities, that such is the case. Contractors may prove such matters with whatever evidence satisfies the requisite standard of proof. There is nothing wrong in principle with a global claim, but there will be added evidential difficulties (because, for example, the contractor will have to prove that the loss which it incurred would not have been incurred in any event, say, because the tender was insufficiently well priced to have made some net return). The fact that one, or a series, of events caused, or contributed, to the global loss does not necessarily mean that the contractor can recover nothing. The global loss will be reduced by the sum that the contractor is not able to prove. There is no need for the court to go down the global cost route if the

54 (1992) 8 Const LJ 61 at p.72. 55 Walter Lilly and Co Ltd v Mackay [2012] EWHC 1773 (TCC); (2012) 28 Const LJ 622.

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actual cost attributable to individual loss-causing events can be reasonably, or practicably, determined, but that will not debar a contractor from pursuing a global cost approach. The court may be more sceptical of the claim if the global cost approach is deployed in this manner, the fact that the contractor may itself have created the impossibility of disentangling the costs not necessarily debarring the claim, unless the contract provides otherwise. Akenhead J concluded that Walter Lilly’s claim was not a global claim, because it had sought to identify the specific additional, or extended, resources and to link these to the specific events that it relied upon as having given rise to the need for the additional resources. In any event, even if it were a global claim, Walter Lilly’s tender had been reviewed at tender stage by Gardiner and Theobald (for Mackay) and, if its preliminaries had been significantly under-priced, that would almost certainly have been picked up by them. The remainder of the evidence was reviewed and supported the claims. Aikens LJ was satisfied in holding that Akenhead J had not erred in his analysis of the law relating to global claims, since he had reviewed the claims on the basis that they were not global claims, but also made specific findings of fact if they were to be treated as global claims and none of these findings of fact was challenged by Mackay on the application for permission to appeal. Aikens LJ therefore refused permission for these grounds of appeal. Akenhead J’s first instance decision provides valuable guidance on EoT claims, loss and expense claims and global claims generally and is worth reading in full (all 250 pages thereof!). Held, by Aikens LJ, that the applications for permission to appeal should be refused since there was nothing whatsoever in any of the three areas upon which permission to appeal was sought: Mackay v Walter Lilly and Co Ltd 56.

19–061 In the Australian case of Nauru Phosphate 57, D applied to the Supreme Court of Victoria to have either the arbitrator removed, or the case struck out for want of particularisation, where C had made no attempt to relate the matters complained of to their impact on the C’s work, nor on the loss of productivity alleged to have been suffered, nor any part of the global sum claimed, which (it had been accepted by the arbitrator) was impossible in the circumstances. In dismissing the application and apparently giving some encouragement to those wishing to put forward their claims on a global basis, Smith J observed that the UK authorities referred to by the applicant in this case: “. . . do not, in my view, purport to permit only the quantum to be dealt with in a global way. They permit a party to proceed with a global claim where it is not possible to spell out the interaction of events and their relationship to the quantum claimed – in other words the ‘nexus’.”58

Defence to a global claim “[A] global approach can hide a bogus claim. [D] argues that this claim is one such claim and points to a failure by [C] to complain about disruptions during the contract works. Global claims are difficult for the parties and the court to handle. To compel [C] to give particulars of ‘nexus’, or justify its inability to do so may reveal the bogus claim. If particulars are produced they may clarify issues and reduce the area of argument even if [C] can provide only alternative hypotheses. I can see no reason why, for example, a judge controlling a building cases list, or arbitrator could

56 [2013] EWCA Civ 142. 57 Nauru Phosphate Royalties Trust v Matthew Hall Mechanical and Electrical Engineers Pty Ltd (1994) BCL 179. 58 Ibid. at p.194.

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not require [C] to particularise the ‘nexus’, or justify its assertion that it is not possible to do so. Such directions would be justifiable on the grounds that they would assist in the management of the litigation.”59

19–062 Because D’s primary defence to a global claim is to particularise it (usually on the basis of facts in C’s possession and control) to show that more than an insignificant part of what is claimed is in fact C’s liability either as to time, or cost, much of the case law is in relation to procedural interlocutory hearings in which D has attempted to have C’s claim struck out for not providing a suitable agenda for trial. 19–063 Pre-action disclosure, which used to be common in criminal matters, but prior to the reform of the Civil Procedure Rules coming into effect, was not so common in civil matters, is perhaps the strongest response to a global claim. This is because a proper disclosure should either provide D with all the facts necessary to particularise such a claim if C wishes to, or to demonstrate that not all the liability for delay, or loss, flows from those events at D’s risk as to time, or cost, and to demonstrate that what is alleged cannot be proved. 19–064 Where C has suffered loss arising out of matters within its control, unless some way is found of separating the losses so caused from those caused by D, the resultant global claim should always fail. On the other hand, if C can segregate its claim into elements for which D is liable from those for which C is liable and hence convert the global claim into a total loss claim for the part for which D alone is liable, the courts will not insist upon C proving which individual loss was caused by which event and may, in some circumstances, accept the inference that the totality of the loss was caused by all the causes at D’s liability. 19–065 In the Scottish case of John Doyle60, Lord Macfadyen approved the concept of shifting a global claim into a total loss claim. In so doing, His Lordship distinguished the need to demonstrate that C’s loss had been caused by one or more events at D’s risk as to cost from the desirability of being able to demonstrate which of D’s risks had caused which proportion of the loss suffered. Lord Macfadyen observed: “Ordinarily, in order to make a relevant claim for contractual loss and expense under a construction contract (or a common law claim for damages) [C] must aver 1. 2. 3.

the occurrence of an event for which [D] bears legal responsibility, that he has suffered loss, or incurred expense, and that the loss, or expense was caused by the event.

In some circumstances, relatively commonly in the context of construction contracts, a whole series of events occur that individually would form the basis of a claim for loss and expense. These events may inter-react with each other in very complex ways, so that it becomes very difficult, if not impossible, to identify what loss and expense each event has caused. The emergence of such a difficulty does not, however, absolve [C] from the need to aver and prove the causal connections between the events and the loss and expense. However, if all the events are events for which [D] is legally responsible, it is unnecessary to insist on proof of which loss has been caused by each event61. The rigour of that analysis is in my view mitigated by two considerations. The first of these is that while, in the circumstances outlined, the global claim as such will fail, it does not follow that no claim will succeed. The fact that [C] has been driven (or chosen) to

59 Nauru Phosphate Royalties Trust v Matthew Hall Mechanical and Electrical Engineers Pty Ltd (1992) 10 BCL 179 at p.196. 60 John Doyle Construction Ltd v Laing Management (Scotland) Ltd [2002] ScotCS 110. 61 Ibid., at [35].

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advance a global claim because of the difficulty of relating each causative event to an individual sum of loss, or expense does not mean that after evidence has been led it will remain impossible to attribute individual sums of loss, or expense to individual causative events. The point is illustrated in certain of the American cases. The global claim may fail, but there may be in the evidence a sufficient basis to find causal connections between individual losses and individual events, or to make a rational apportionment of part of the global loss to the causative events for which [D] has been held responsible.”62

19–066 In John Doyle, in both the Outer House63 and on appeal to the Inner House64, the courts thought that, in spite of C’s express assertion that the foundation for its global claim was that all the events giving rise to the claim were D’s liability (and, as a matter of fact it was impossible, or impractical to separate them), if the court found that that was not so, it did not necessarily mean that no claim could succeed. It was felt that, where D, or the CA on its behalf, was clearly culpable, C should not be denied its claim if it were possible to convert it to a total loss claim by making a rational apportionment of part of the global claim. 19–067 The danger of this approach, as Winter points out, is that “The temptation is obvious – [C] can assert that everything was the responsibility of [D], and so he does not have to demonstrate cause and effect, or break down the quantum of his claim, safe in the knowledge that, even if he does not succeed in showing that everything was the responsibility of [D], the court will help him out by doing an apportionment from his total claim. Is this a correct, or prudent course of action?”65

19–068 In his trenchant criticism of this case, Winter makes the point thus: “if C by its pleaded case has found it impossible to separate the causes, upon what basis can the courts, or indeed any tribunal do so?” Having referred to the dicta in Merton, Crosby, Wharf Properties, and Mid Glamorgan, he concludes: “All of these eminent and experienced English judges were saying the same thing – the global award would only be made in respect of those parts of the claim which could not be dealt with in isolation, where it was impractical, if not impossible to value them individually. Lord Donaldson would surely be very surprised to learn that his decision had led to the situation where [C] is apparently justified in jumping straight to a global basis on all his heads of claim, without attempting to quantify (in terms of time and money) those heads which were capable of quantification. So it is respectfully suggested that John Doyle is not good English law to the extent that it appears to render it unnecessary to quantify heads of claim individually where it is possible to do so.”66 (emphasis in the original)

19–069 In analysing the impact of the John Doyle decision, Winter emphatically concluded as follows: “The writer does not suggest that global claims should automatically be dismissed outright, either at an interlocutory stage, or at trial. Such an approach would obviously be unjust and unnecessary. It is true that what is needed is a ‘commonsense approach’, which will lead to ‘defeating of unmeritorious inflated claims whilst insuring that the disinterested Defendant does not prosper merely because the project was highly 62 Ibid., at [38]. 63 [2002] BLR 3939. 64 [2004] BLR 295. 65 J Winter, “John Doyle v Laing Management: is it good English practice?” (2007) 23 Const LJ 89 (at p.92). 66 Ibid., at p.94.

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complicated or simply went very wrong indeed’67. But it is respectfully suggested that the barriers to entry for making a global claim should not be lowered by the English courts. To do so would result in an almost irresistible temptation to put a claim on a global basis, because the savings in time and effort for the claimant are very large, and the potential downsides very low. Operation of the John Doyle ‘safety net’ for failed global claims is fraught with difficulty, as discussed above. The option to dismiss a claim in its entirely should remain separately within the court Walter Lilly order to encourage every effort by claimants to properly particularise and prove their claims. Global claims are, and should remain, a risky enterprise.”

19–070 Mr Winter’s suggested “hard line” approach has now been fully vindicated by Akenhead J in the Walter Lilly case68. 19–071 As regards the position in Australia, Paul Tobin’s comprehensive 2007 article69 on the topic summarises the position in that jurisdiction and concludes70 as follows: “The preferred approach in Australia for determining extensions of time and awarding damages in situations of concurrent delay is uncertain. This is partially attributable to the confusion concerning the definition and categorisation of different types of concurrency. There is also no clearly binding judicial consideration of all relevant issues. The standards forms differ in these methodologies and either contain ambiguities or provide no guidance at all. Indeed, it is arguable that the regimes prescribed by some standards forms run the risk of invoking the prevention principle. However, the conceptual difficulties concerning concurrent delay are not insurmountable and this paper submits that the following approach would be appropriate in Australia (and in other jurisdictions where the law regarding concurrent delay is uncertain):

67 68 69 70

(1)

With respect to entitlement to extensions of time (and the liquidated damages that may be imposed if an extension is not granted): (a) In circumstances of sequential causes of delay with concurrent effect, each of the sequential causes should be analysed to determine if they occur on the critical path and have an actual impact on the date for completion and then each party is responsible for. If an owner-caused event actually delays the contractor, then an extension of time should be awarded regardless of whether a contractor event causes concurrent delay. (b) In circumstances of true concurrency of causes of delay the contractor should be entitled to an extension of time for the entire period because a failure to do so could be held to be contrary to the prevention principle and the imposition of any liquidated damages due to the failure to grant an extension of time for the whole period could be considered a penalty.

(2)

With respect to a contractor’s entitlement to damages for delay: (a) The contractor should first attempt to separate its damages and prove entitlement based on the effect of each owner-caused event. (b) If the contractor is not able to separate its losses, it may be appropriate in certain circumstances to apportion the contractor’s losses between the owner and contractor as opposed to allowing an ‘all or nothing’ entitlement. Such an approach would be consistent with the ‘common sense’ apportionment approach applied under contributory negligence and the recent amendments to proportionate liability legislation.”

Commentary by the editors of the Building Law Reports on Lord Macfadyen’s decision. See the illustration at para.19–060. “Concurrent and sequential causes of delay” [2007] ICLR 142. At p.166.

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19–072 Finally, in the extremely helpful appendix71 to their 2005 article72, Geoffrey Smith and James Perry summarise the court applied tests as follows: “Ordinary (UK) Test for Contractual Loss and Expense (Laing Management (Scotland) Ltd v John Doyle Construction Ltd, [2004] BLR 295 (Ct Sess). (1) (2) (3)

The occurrence of an event for which the defender bears legal responsibilities. That he has suffered loss or incurred expense, and That the loss or expense was caused by the event.

Total Cost Method Test (TCM) (US) (JD Hedin Const Co v. United States, 171 Ct Cl 86, 347 F 2d 235, 248 (1965); Hewitt Construction Co. ENGBCA Nos – 4596, 4597, 83–2 BCA I 16,816 at 83,643 (1983).) (1) (2) (3)

The nature of the losses makes it impossible or highly impractical to determine the amount with a reasonable degree of accuracy; The contractor’s bid or estimate was realistic; The contractor was not responsible for the added expenses.

The four-point test described above, which is applied to the plaintiff ’s factual evidence, is used to determine whether he has met the necessary level of proof required to prevail. The Doyle case does not discuss, however, an often used, and somewhat overlapping, threshold test which US courts and boards have also been known to apply. For a TCM claim to proceed it should satisfy the following three-point test: (1) (2) (3)

proper safeguards exist; there is no better method of proving costs, and there is some basis for determining a reasonable amount related to the entitlement.”73

71 At p.246. 72 The Evolution of Global Claims and Laing Management (Scotland) Ltd v John Doyle Construction Ltd [2005] ICLR 212. 73 Glasgow, Inc v Department of Transport. 108 Pa Comm 48,529 A 2d 576 (1987); United States ex rei United States Steel Corp v Construction Aggregates Corp 559 F Supp – 414 (ED ich 1983); WRB Corp v United States, 183 Ct Cl 409 (1968).

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Apportionment

Introduction Apportioning delay to completion Apportioning loss and/or expense Methods of apportionment of loss or expense The tortious solution The burden of proof approach The Devlin approach The dominant cause approach Jury verdict approach The modified “global claim” approach The “A/B estimates” approach The “delta estimates” approach The modified “total cost” approach The “City Inn” approach The net effect approach

20–001 20–013 20–032 20–037 20–040 20–042 20–043 20–046 20–054 20–056 20–058 20–062 20–064 20–068 20–071

Introduction “Socrates thought that if all our misfortunes were laid in one common heap, whence everyone must take an equal portion, most persons would be contented to take their own and depart.”1

20–001 Apportionment of some sort is necessary in many issues of causation. In its simplest form, it is no more than a mental process of rationalisation of facts, without which some issues could not be resolved at all. Take, for example, the following scenario. 20–002 The contract provides that, amongst other things, if C is caused delay by “errors or ambiguities in the description of the works”, then D must extend the date for completion by a fair and reasonable period. Shortly after commencement, an error in the setting out of the works is discovered. As a result, C has to carry out additional excavation and backfill and consolidation of the incorrect excavation, which delays the works. The setting-out error occurred because C did not use the “setting-out drawing” 1 J Bartlett, Familiar Quotations, 10th edn (1919). (Attributed to Plutarch (AD 46?–AD c 120), Consolation to Apollonius.)

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to set out the works, but instead used the “slab reinforcement drawing” for dimensions, on which, in error, an additional bay had been illustrated. The question arising is what caused the delay to the works? Was it caused by: the slab reinforcement drawing having incorrect dimensions and thus being an error in the description of the works for which D is liable; or C failing to exercise reasonable skill by using a drawing which was never intended for the purpose of setting out, for which C is liable? 20–003 Similar conflicts have been at the root of the case law on causation and apportionment throughout the twentieth century. Take, for example, Leyland v Norwich Union2, in which a ship was torpedoed by a German submarine and was subsequently taken to Le Havre for repair. Whilst it was in the deep-water harbour, a storm blew up and the ship was towed to anchorage near a breakwater, where it broke up and sank. The question here was, what caused the losses arising out of the ship sinking? Was it the war action, for which the owners were not insured, or the perils of the sea, for which they were insured? It was ultimately held that the ship sank because it was torpedoed and the associated losses were not recoverable from insurers. Lord Shaw said: “When various factors, or causes are concurrent and one has to be selected the choice falls upon the one to which may variously be ascribed the qualities of reality, predominance, efficiency.”3

20–004 In another shipping case, Yorkshire Dale Steam Ship4, the ship was wrecked partly because of an unusual tide, which took the ship too close to the rocks, and partly because the navigator had taken that route to avoid enemy submarines. There, causation was dealt with on the basis that: “one has to ask what was the effective and predominant cause of the accident that happened, whatever the nature of that accident may be”.

20–005 A number of logical processes have been established to rationalise such issues, including that referred to as the “but-for test” and the “common sense, dominant cause approach”. However, ultimately it is a matter of perception of the balance of evidence, lying in the mind of the decision maker. There is thus a continuing need for apportionment, in deciding what was the cause of the delay to progress, or a particular loss, or expense, in whole, or in part, at the macro level. The same cannot be said for apportionment of delay to completion, or to prolongation costs. 20–006 In the past, a process of apportionment has also been employed to resolve prolongation issues which, while dressed up to appear otherwise, have been, in fact, no more than global claims. Because of the unattractive prospect of having to prove losses using poor records, and the difficulty of demonstrating in the face of prima facie evidence of mixed liability that what is alleged to be a total loss claim is in fact concurrency, or a global claim, historically, other methods of separating the effect of the various risks have been recognised from time to time. The object of the exercise has then been to break down the facts into something less global and produce a method of calculating C’s losses. 2 Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd [1918] AC 350 HL. 3 Leyland v Norwich Union [1918] AC 350 HL. 4 Yorkshire Dale Steamship Co v Minister of War Transport [1942] AC 691 HL.

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20–007 However, as sensible as apportionment of a period of prolongation may once have seemed, developments in construction management should have rendered this twentieth-century temporal approach of less importance than it currently achieves. The increasing use and acceptance of CPM scheduling, coupled with adequate record keeping and better project control in the future5, should make it progressively easier for parties to differentiate between relative periods of delay to progress for which there is or is not entitlement to compensation, thus rendering relatively obsolete the rather esoteric examples of an inferential approach to causation of total loss that are here described. 20–008 Sequential delays to progress are inherently separable and, hence, the liability of each party, to the extent that each has caused separate degrees of delay to completion of the works, does not require apportionment of the period of delay to completion by inference6. Indeed, in such a situation, it has been argued that there is no room for inference as to periods of delay at all and that a purely technical proof, quantifying the net delay to completion caused by each party, is all that is required7. 20–009 At common law, in circumstances of true concurrency of delay to completion8, C is entitled to an extension of time for the whole period of delay to completion of the works beyond the completion date and D may not levy liquidated damages at all9. Accordingly, the issue of apportionment for the purposes of an extension of time arises only where either: there are two parallel causes of delay to progress, one at D’s risk as to both time and cost and thus compensable and one at D’s risk as to time only and thus not compensable, and where, in the absence of either, the same delay to progress on the critical path is caused, or the contract in question calls for apportionment, in the circumstances10. 20–010 As to apportionment for the purposes of compensation, C is only entitled to recover from D the loss it suffers as a result of the knock-on effect of a delay to progress caused by a D’s cost risk event and, if concurrent, and hence inseparable, the costs are irrecoverable. Otherwise, impliedly C would be compensated by D for a loss C would have suffered in any event as a result of an event not at D’s risk. Accordingly, it follows that, at common law, C is only entitled to compensation if either: C suffers loss, or expense as a result of a delay to progress caused by a D’s cost risk event;

5 See, for example, Society of Construction Law, Delay and Disruption Protocol (2002), The PFE Change Management Supplements (that for JCT 98 appears at App.2); and Chartered Institute of Building, Guide to Good Practice in the Management of Time in Complex Projects (Chichester: Wiley Blackwell, 2010). 6 See Ch.18, “Concurrency, parallelism and pacing” paras 18–081 to 18–096. 7 See, for example, John Barker Construction Ltd v London Portman Hotel Ltd [1996] 83 BLR 31; 50 Con LR 43; (1996) 12 Const LJ 277; Balfour Beatty Construction Ltd v London Borough of Lambeth [2002] EWHC 597 (TCC) [2002] BLR 288; Mirant Asia-Pacific Construction (Hong Kong) Ltd v Ove Arup & Partners International Ltd [2007] EWHC 918 (TCC); and Costain Ltd v Charles Haswell & Partners Ltd [2009] EWHC 3140 (TCC); [2010] TCLR 1. See, also J Bidgood Jr, S Reed and J Taylor, “Cutting the knot on concurrent delay” Construction Briefings, February 2007–2008. 8 In which a D’s risk event causes a delay to progress and, during the same time frame, an event at C’s risk causes a delay to progress, both of which are on the critical path to completion and, in the absence of either, the same delay to completion of the works would be caused. 9 See Ch.6, “Extensions of time and time large” paras 6–114 to 6–129 (prevention) and Ch 18, “Concurrency, parallelism and pacing”, throughout. 10 Consider AS4000 Cl.24.4 discussed above at paras 18–067 to 18–070.

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C suffers loss, or expense as a result of prolongation of its overheads beyond the contract completion date caused by a D’s cost risk event; or the contract in question calls for valuation, in the circumstances11. 20–011 The period of prolongation of C’s overheads is not necessarily co-extensive with an extension of time for delay to completion of the works beyond the completion date because: C may be entitled to relief from liquidated damages for the period by which the completion of the works is likely to be delayed beyond the completion date as a result of a delay to progress caused by a D’s time risk event. C may be only entitled to be compensated for loss and/or expense it actually suffers as a result of the prolongation that actually occurs beyond the completion date, caused by a D’s cost risk event. C may be granted an extension of time for the likely effect upon completion of the works beyond the completion date of a delay to progress caused by a D’s time risk event, but may suffer no additional costs because either it does not need the additional time granted, or it does not incur any loss, or expense additional to that which otherwise it would have incurred (in any event) as a result of its subsisting contractual obligations. C may have accelerated progress following a delay to progress caused by a D’s time risk event and completed by the contract completion date. Notwithstanding that an extension of time is then not necessary (because liquidated damages are not recoverable), entitlement to more time (ie the quantified extension of time which should have been awarded) arising out of the likely effect of the D’s time risk event on completion of the works beyond the completion date must first be established before such acceleration can be demonstrated. C may put into operation planned acceleration following a delay to progress caused by a D’s time risk event, which was wrongly not the subject of an extension of time. In the event that C failed to perform to its accelerated schedule in whole, or in part, the proof of entitlement to more time arising out of the effects of the D’s time risk event would be an essential prerequisite of compensation for the attempted acceleration12. The works may be taken over as complete (thus bringing an end to any liquidated damages), notwithstanding that, as a result of the knock-on effects of a delay to progress caused by a D’s cost risk event, the completion of the works has not yet been achieved, C’s losses and expenses continue to accumulate and for which C is entitled to compensation during the period until the works are actually completed. 20–012 In regard to compensation for prolongation during a period of concurrent delay to completion, described in point 3 above, in Wallace v US13 the position was explained thus: “The court need not tarry in respect of the remaining issue here – whether [C] is entitled to [compensation] for the 21 days that the court has concluded constitute a further period of excusable delay [for which C is entitled to an extension of time]. In fact, such damages 11 Consider the AIA forms and US government contracts, which refer to “equitable adjustment” referred to at para.1–016 and NZ03 which defines every D’s risk event as a variation to be valued. See Ch.12, “Variation and change” at paras 12–056 to 12–057. 12 See, for example, Motherwell Bridge Construction Ltd v Micafil Vacuumtechnik (2002) 81 Con LR 44. 13 RP Wallace Inc v The United States (2004) COFC No 96–222; (2005) 21 Const LJ 378.

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are not awardable for at least two reasons. First, there is clear indication that during the three-week period in which [C] had difficulty in identifying a window supplier, there was concurrent delay. Among other things, during the fall of 1993, when [C] encountered the delay in question, it failed to meet a number of contract deadlines, including that for submitting at least a dozen administrative and material submittals. Moreover, it also appears that during this same period, delay occurred because of the death of [C’s Director’s] grandmother. Accordingly, [C] cannot recover damages for this period because ‘prosecution of the work as a whole would have been delayed regardless of the [D’s] act’.” (internal citations omitted)

Apportioning delay to completion 20–013 The standard forms of construction contract generally provide that, if C is delayed in its completion, beyond the completion date, as a result of an event for which D bears the risk as to time14, C is entitled to an extension of time for performance15. Hence whether C is entitled to more time, is a question of causation16. If D’s risk event (at its lowest) is likely to cause the delay to completion of the works beyond the completion date, C is so entitled; if it is not, C is not so entitled. AS4000 appears to be the only form expressly to permit D to extend time for a period less than the effect of D’s risk event upon completion stating: “When both qualifying and non-qualifying causes of delay overlap, the [CA] shall apportion the resulting delays to [the works] according to the respective cause’s contribution. In assessing each [Extension of time] the [CA] shall disregard questions of whether: [the works] can nevertheless reach practical completion without an [extension of time]; or [C] can accelerate, but shall have regard to what prevention and mitigation of the delay has not been effected by the [C].”17

20–014 However, there is no definition of what is meant here by “causes of delay” and “delays to [the works]” and it is not clear whether the clause is intended to refer to delay to progress, or to delay to completion. It seems that, in order to give it effect, the “causes of delay” should be construed as delays to progress caused by C’s risks and D’s risks coinciding and “delays to [the works]” should be construed as a delay to completion of the works. 20–015 What is meant by “overlap” is also far from clear. If it is intended to refer only to delays to progress which are truly concurrent, it will be a rare occasion upon which the clause can be applied. However, if it is also intended to apply to sequential causes of delay to progress, which may not be wholly concurrent, such are inherently separable in their effects and the clause will only set out expressly what is necessarily implied18. 20–016 There is also no indication of what is meant by “apportion”, or how it is to be accomplished, but in so far as “overlap” is intended to mean truly concurrent19, then this is an invitation to the CA to arrive at less than full liability for the effect of

14 See Ch.4, “Standard form provisions for time and cost”. 15 See Ch.6, “Extensions of time and time at large”. 16 See Ch.14, “Cause and effect”. 17 Cl.34.4. 18 See Ch.18, “Concurrency, parallelism and pacing”. 19 “‘Overlap’ would certainly include occurrences of true concurrency” see P Tobin, “Concurrent and sequential causes of delay” [2007] ICLR 142.

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a D’s time risk event, when C is also in delay to progress at the same time as D, and where both delays to progress are on the critical path to completion. 20–017 Where a number of delays to progress have been caused by events at both parties’ risk, a number of commentators have thought it appropriate to apply the “dominant cause” theory to apportionment of extension of time. It is a common mistake but, except in relation to contracts that expressly require that approach to the rationalisation of competing causes of delay for the purposes of an extension of time20, the “dominant cause” theory has nothing to do with extensions of time and liquidated damages. It is a legal theory relevant to recovery of damages and not to relief from damages. 20–018 The point is illustrated by the case of Fairweather v Wandsworth21. In this case, the contract concerned the erection of 478 dwellings under JCT63. Long delays caused by strikes occurred and the CA granted an extension of 81 weeks under condition 23(d). The extent of the extension of time was not challenged, but C contended that 18 of the 81 weeks should be reallocated under condition 23(e), or (t) for which compensation for loss and expense would also be recoverable. The arbitrator found that: “It is possible to envisage circumstances where an event occurs on site which causes delay to the completion of the works and which could be ascribed to more than one of the eleven specified reasons but there is no mechanism in the conditions for allocating an extension between different heads so the extension must be granted in respect of the dominant reason. I accept [D’s] contention that faced with the events of this contract, nobody would say that the delays, which occurred in 1978 and 1979, were caused by reason of the [CA’s] instructions given in 1975 to 1977. I hold that the dominant cause of the delay was the strikes and combination of workmen.”22

20–019 On appeal, the case was heard by HH Judge Fox-Andrews QC, who, in relation to the facts under a JCT63 form of contract, considered the application of “dominant cause” to the separation of the effects of compensable and neutral D’s time risk events to be wrong in law: “‘Dominant’ has a number of meanings: ‘Ruling, prevailing, most influential’. On the assumption that condition 23 is not solely concerned with liquidated damages but also triggers and conditions a right for [C] to recover direct loss and expense where applicable under condition 24 then a [CA] and in his turn an arbitrator has the task of allocating, when the facts require it, the extension of time to the various heads. I do not consider that the dominant test is correct.”23

20–020 In Ascon24, in the absence of a cogent proof of entitlement to an extension of time, HH Judge Hicks QC relied “on his own devices”, as he put it, to apportion liability for delay to completion. In this case, McAlpine (C), did not keep the sea out

20 See comment on AS4000 in fn 10 above. 21 H Fairweather and Co Ltd v London Borough of Wandsworth (1987) 39 BLR 112. 22 Fairweather v Wandsworth (1987) 39 BLR 112. 23 Fairweather v Wandsworth (1987) 39 BLR 112 at 120. This case has had a mixed reaction. Whilst in Keating it is criticised as obiter and based on the ratio of cases that had nothing to do with the issue (at 212 and 213 fn 87), the learned editors of the Building Law Reports regard it as a “most instructive case” (at p.108). It is suggested that, because C is entitled to the same extension of time for any relevant event no matter what the cause and is entitled to that even if it is also in delay unless the contract provides otherwise, as is the case with NEC/SF99 and the JCT intermediate forms after the completion date (see Wells v Army and Navy Co-operative Society (1902) 76 LT 764 and Walter Lawrence & Son Ltd v Commercial Union Properties (UK) Ltd (1984) 4 Con LR 37), in regard to the relevance of “dominant cause” to extensions of time, the learned judge came to the correct conclusion. 24 Ascon Contracting Ltd v Alfred McAlpine Construction Isle of Man Ltd (1999) 66 Con LR 119; (2000) 16 Const LJ 316 at [22].

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of the excavations as required under the sub-contract but, over the same time period, Ascon (the SC) did not resource their work adequately and they also made mistakes that had to be put right. Thus, so far as concerns entitlement to an extension of time, the questions to be answered were: whether the delay to completion of the sub-structures was caused by the influx of seawater (for which C was responsible and which was therefore excusable), or under resourcing and/or poor work (for which the SC was responsible and which was not excusable); whether the delay to the substructure necessarily caused delay to the completion of the SC’s sub-contract (which also included the construction of columns and floor slabs); and whether the delay to the completion of the subcontractor’s subcontract caused delay to the completion of C’s main contract. 20–021 As to the burden of proof, Judge Hicks said: “it is [the SC] which is seeking an extension of time and must establish a quantified period of delay entitling it to that extension”.

20–022 In other words, the judge adopted the default common law position that the SC must pay all the liquidated damages, unless it can show for which part of the delay C was responsible. He then went on to dismiss the SC’s evidence of a quantified period of delay, saying that he found at least two gaping holes in the logic of its expert’s analysis, namely: the expert’s conclusion “simply does not follow” from the analysis it had performed; and “even in arithmetical terms the logic was flawed”. 20–023 The judge also rejected C’s evidence, saying: “there was no such specific evidence of a continuing causative chain carrying this delay through to completion, that was tacitly left to be inferred”.

20–024 This inference was considered by the judge to have been upset by the evidence of C’s own agent, who admitted in the witness box that, within a few months of completion of the SC’s sub-contract, the SC’s problems “were all behind us” and that the reasons for delay to the main contract after that were nothing to do with the SC, but caused by other matters entirely. 20–025 Thus, so far as liability for delay to completion was concerned, both parties had failed to prove their case and there the matter should have ended, but it did not. For the subcontractor, the judge said “taking into account on the one hand those reasons why there should be some extension and on the other hand the failure by [the SC], on whom the onus lies, to identify and prove a causative link between particular occasions of water ingress and specific periods of consequent delay, I have come to the conclusion the appropriate award is an extension of six days.”25

20–026 For C, he said that, notwithstanding the absence of any causative link, in his view the SC had delayed C’s completion by “1 ø weeks, say 8 days”26. 25 Ascon Contracting Ltd (1999) Con LR 119; (2000) 16 Const LJ at [23]. 26 This case has been criticised. See the commentary by this author at: (2000) 16 Const LJ 318.

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20–027 In City Inn v Shepherd27, a Scottish case, which has been heavily criticised28, Lord Drummond Young also dealt with apportionment of the effect of events for the purposes of an extension of time in which C claimed entitlement to an extension of time and compensation for the whole of the 11 weeks’ delay to completion and D denied that C had any entitlement to any extension at all. 20–028 The court’s arbitrary use of the terms “dominant”, “critical,” “critical path” and “concurrency” and omission of any reference to parallelism (of which there are many examples) render this case difficult to follow. However, in the Outer House, Lord Drummond Young felt that having determined sequential events to be concurrent, a fair and reasonable extension of time could then be arrived at by the CA making what he considered to be a fair apportionment between the parties of what he had found to be the total “concurrent” delay to completion. He said: “Where there is true concurrency between a [D’s time risk] event and a [C’s] default, in the sense that both existed simultaneously, regardless of which started first, it may be appropriate to apportion responsibility for the delay between the two causes; obviously, however, the basis for such apportionment must be fair and reasonable.”29

20–029 In reflecting upon Lord Drummond Young’s opinion, in the Inner House, Lord Osborne said: “What the Lord Ordinary appears to be saying in this passage is that what he calls true concurrency has a particular significance, in that it may give rise, in terms of clause 25, to a need to apportion responsibility for the delay between the two causes. What he means by true concurrency, in this context appears to be a situation in which a [D’s time risk] event and a [C’s] default event both existed simultaneously. However, in saying that, he seems to intend to refer to what might be called overlapping events, since he does not consider that coincidence of starting points, or, presumably, end points, is of importance. What he does not say, however, is that in circumstances where concurrent causes, in the broad sense, act together, ie. where two causes, neither of which is dominant, operate to cause delay beyond the completion date, an apportionment exercise might not equally be appropriate.”

20–030 The majority of the Inner House agreed. However in a dissenting opinion on whether there should be an apportionment in cases of concurrency, Lord Carloway said30: “But the exercise remains one of looking at the [D’s time risk] event and the effect it would have had on the original (or already altered) completion date. If a [D’s time risk] event occurs (no matter when), the fact that the works would have been delayed, in any event, because of a [C’s] default remains irrelevant. In that respect, the view of HHJ Seymour QC in [Brompton Hospital]31, that a [D’s time risk] event falls to be disregarded if a preexisting [C’s] default would nonetheless have caused the delay, appears to be in error. That may reflect how the law might regard causation operating in a situation of competing causes, but it is not what the contract envisages.”

27 City Inn Ltd v Shepherd Construction Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590, affirmed [2010] CSIH 68. 28 J Winter, “Dominant cause and its relevance to concurrent delay”, Society of Construction Law Conference (London, 2008) and see also the commentary by the previous author at (2008) 24 Const LJ 590. 29 City Inn Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590 at [18]. 30 City Inn Ltd [2010] CSIH 68 at [110]. 31 Royal Brompton Hospital NHS Trust v Hammond (No 7) [2001] 76 Con LR 148 at [31].

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20–031 Notwithstanding that the Scottish Courts’ view, that sequential delays fall to be considered as concurrent delays under JCT80, is in contrast to the opinions of the English courts (and, with respect, is thought to be wrong)32, the way Lord Drummond Young went about apportionment is novel and his method of reasoning should be set out33: “none of the causes of delay can be regarded as a ‘dominant’ cause; each of them had a significant effect on the failure to complete timeously. In a case such as the present where there is true concurrency between [D’s time risk events] and events that involve [C’s] default, apportionment will frequently be appropriate. In my opinion this is such a case. Apportionment enables the [CA] to reach a fair assessment of the extent to which completion has been delayed by [D’s time risk events] while at the same time taking into account the effect of other events which involve [C’s] default. Where the decision of the [CA] is challenged, the court must of course perform the same exercise. That leads on to the question of how the exercise of apportionment is carried out. That exercise is broadly similar to the apportionment of liability on account of contributory negligence or contribution among joint wrongdoers. In my opinion two main elements are important: the degree of culpability involved in each of the causes of the delay and the significance of each of the factors in causing the delay. In practice culpability is likely to be the less important of these two factors. Nevertheless, I think that in appropriate cases it is important to recognize that the seriousness of the [CA’s] failure to issue instructions or of [C’s] default may be a relevant consideration. The causative significance of each of the factors is likely to be more important. In this respect, two matters appear to me to be potentially important. The first of these is the length of the delay caused by each of the causative events; that will usually be a relatively straightforward factor. The second is the significance of each of the causative events for the works as a whole. Thus an event that only affects a small part of the building may be of lesser importance than an event whose effects run throughout the building or which has a significant effect on other operations. Ultimately, however, the question is one of judgment. In the present case [C has] established eleven matters that constitute [D’s time risk events]. These matters, and the extent to which they delayed completion, are as follows: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

Gas venting: 18 February (but concurrent with roof steelwork). Roof steelwork: 1 March. En suite fittings: 25 March. Bedhead lighting: 19 February (or 17 February according to Mr Whitaker). Trouser presses: 13 March. Central atrium beam encasement: 1 March. Fibre optic lighting: 15 March. External mounted floodlights: 31 March. Cooling to refuse room: 12 April. Trees: 19 March. External render: 8 March.

[D has] established two concurrent causes: the installation of the lifts, which delayed completion until 24 March, and the construction of the stair balustrades, which delayed completion until 12 April. The original completion date was 25 January 1999. On 4 June 1999 this was extended by [the CA] by four weeks, to 22 February. Practical completion was certified by [the CA] as having taken place on 29 March; that occurred retrospectively on 27 April. What actually happened on 29 March was that [D] took partial possession of certain parts of the works, with possession of other parts being taken subsequently, on 13 and 30 April. Thus construction continued well into April, and certainly until 12 or 13 April; work on the cooling to the refuse room and the stair balustrades continued until 12 April. [C] claim that they are entitled to an extension of time until 14 April, or 11 weeks in total. [D] claim that [C] 32 See Ch 18, “Concurrency, parallelism and pacing”, throughout. 33 City Inn Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590 at [157] to [161], affirmed [2010] CSIH 68.

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should have no extension, because none of the items relied on by them was on the critical path and none caused any delay to completion. I have already rejected the latter argument. Nevertheless, I consider that I must make some allowance for the lift installation and the construction of the stair balustrades, both of which delayed completion. That means that the period of 11 weeks claimed by [C] must be reduced. In considering the extent to which that period should be reduced, the matters referred to must be considered. I do not consider culpability to be a major factor; nevertheless, the sheer quantity of late instructions following [the replacement CA’s] appointment is I think significant; so is the fact that the failure to issue instructions occurred following requests for information which started (during the course of the works) on 7 October 1998. So far as the causative significance of each of the events is concerned, all caused some delay, although the delay resulting from the gas venting instruction was concurrent with 3½ weeks of the delay resulting from the late instruction relative to the roof steelwork. The two items that had the longest lasting effect were the cooling to the refuse room and the stair balustrades, both of which concluded on about 12 April. In relation to the causative significance of each of the events for the works as a whole, I must I think take account of the fact that items such as the en suite fittings, the bedhead lights and the trouser presses affected all of the bedrooms in the hotel. Finally, I must take account of the fact that the number of [D’s time risk events] is substantially greater than the number of items for which [C] are responsible; moreover some of them, notably the gas venting and roof steelwork instructions, related to important matters that had significant effects on the overall progress of the works. Taking all these circumstances into account, I am of opinion that the part of the total delay apportioned to [D’s time risk events] should be substantially greater than that apportioned to the two items for which [C] are responsible. I consider that a fair and reasonable result would be that [C] are entitled to an extension of time of nine weeks from the original completion date. On that basis I conclude that completion has been delayed beyond the completion date by [D’s time risk events] for a period of nine weeks, or until 29 March 1999.”

Apportioning loss and/or expense 20–032 The challenge in the first instance is to provide a justification for recovery of damages by the separation of delay to progress caused by D from that caused by C34. Separating those costs for which C is entitled to compensation from those for which it is not is secondary. Whilst admittedly achieving the first without also achieving the second may be a fruitless exercise, once liability has been separately identified, it should be well within the capacity of any competent quantum expert to analyse the costs C has actually incurred as a result of delay to progress, disruption, or prolongation of its overheads and to allocate these to the different schedule paths that represent the effects of the differing causes. That is the “net effect” approach that appears to be consistently adopted by courts and tribunals in the United States35. 20–033 However, the Scottish courts have recently been taking a more relaxed view and found ways to compensate C for its loss by apportionment of a global claim where competent project control and effective record keeping would have rendered such an inferential approach unnecessary. In John Doyle36, for example, Lord Macfadyen explained: “Failure to prove that a particular event for which [D] was liable played a part in causing the global loss will not have any adverse effect on the claim, provided the remaining events for which [D] was liable are proved to have caused the global loss. On the other hand, 34 See for example Smith v United States (1995) 34 Fed Cl.313 (Ct Fed Cl) in which C was unable to recover compensation when C was unable to separate its own delay from delay caused by D. 35 See, for example, Pathman Construction Co v Hi-Way Electric Co (1978) 382 NE 2d 453 (Ill App Ct), and Wilner v United States (1991) 23 Cl Ct 241. 36 John Doyle Construction Ltd v Laing Management (Scotland) Ltd [2002] 110, per Lord Macfadyen.

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proof that an event played a material part in causing the global loss, combined with failure to prove that that event was one for which [D] was responsible, will undermine the logic of the global claim. Moreover, [D] may set out to prove that, in addition to the factors for which he is liable founded on by [C], a material contribution to the causation of the global loss has been made by another factor or other factors for which he has no liability. If he succeeds in proving that, again the global claim will be undermined. The rigour of that analysis is in my view mitigated by two considerations. The first of these is that while, in the circumstances outlined, the global claim as such will fail, it does not follow that no claim will succeed. The fact that [C] has been driven (or chosen) to advance a global claim because of the difficulty of relating each causative event to an individual sum of loss or expense does not mean that after evidence has been led it will remain impossible to attribute individual sums of loss or expense to individual causative events. The point is illustrated in certain of the American cases. The global claim may fail, but there may be in the evidence a sufficient basis to find causal connections between individual losses and individual events, or to make a rational apportionment of part of the global loss to the causative events for which [D] has been held responsible.”

20–034 In another Scottish case, City Inn v Shepherd 37, Lord Drummond Young took a similar view, saying: “It will be apparent that I have rejected [D’s] argument that, if prolongation costs are caused both by [D’s] delay and by a concurrent [C’s] delay, [C] will not be entitled to recover such costs if he would have incurred them as a result of the [C’s] delay. That approach seems to be based on a rigidly logical application of the principles of causation as they apply in the general law of contract and delict. Under clause 26, however, as with clause 25, I am of opinion that such an approach is not appropriate; instead, the direct loss and expense sustained by [C] should be apportioned between the events for which [D] is responsible and the events for which [C] is responsible.”38

20–035 In that case, the judge went on to apportion the losses 11–2 on the basis that 11 events were caused by D and two by C39. 20–036 However, the only scenario in point here is that in which D has caused a reimbursable delay to progress, and there is a competing cause of the same delay to progress, which is not reimbursable, either because it is caused by a neutral event (or one for which C may not otherwise receive financial compensation), or it is caused by an event that is otherwise at C’s risk as to cost. The scenario will also apply to those circumstances in which the delay to progress is on the critical path and causes the completion to be prolonged.

Methods of apportionment of loss or expense 20–037 In the event that two or more causes contribute separately to the overall prolongation of the works, the costs may be separated mathematically by reference to cost data attributable to the individual delays to progress suffered, or by inference by one of the methods discussed below. Depending upon the facts available and the tribunal’s view of what is a satisfactory discharge of the burden of proof of loss, if C can separate its losses into the various component areas illustrated in Figure 20.4, there is then a number of ways in which it may be able to substantiate its claim. 37 City Inn Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590, affirmed [2010] CSIH 68. 38 City Inn Ltd [2007] ScotCS CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590 at [167], affirmed [2010] CSIH 68. 39 See paras 20–068 to 20–070, below.

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[Please refer to Figures 20.1 to 20.6 inclusive] 20–038 For the purpose of distinguishing the salient features of differing methods of apportionment, the following scenario is considered in which, in Figure 20.1, the delay to completion has been caused by period “A”. The time illustrated by period “A” has been taken up entirely by matters at D’s risk as to costs. Periods “B” and “C” were caused by defective work and losses of efficiency, for which D is not liable. Figure 20.2 illustrates a notional pattern of costs additional to those tendered, where the light grey areas represent the pattern of C’s additional total costs to complete over and above its tendered costs. 20–039 The currently applied methods of apportionment are: the “tortious” approach; the “burden of proof” approach; the “Devlin” approach; the “dominant cause” approach; the “net effect” approach; jury verdict approach; the modified “global claim” approach; the “A/B estimates” approach; the “delta estimates” approach; the modified “total cost” approach; the “City Inn” approach. Each of these will now be discussed, in turn.

The tortious solution 20–040 In the tortious solution, C recovers all its losses if the event in question caused, or materially contributed to, the loss it suffered. For claims in tort, it is important to ascertain that the breach of the duty of care in the tort of negligence was the cause of the loss, and also that the loss can be considered to have been reasonably foreseeable and not too remote. 20–041 The leading case in the tort of negligence dealing with issues of causation and foreseeability is The Wagon Mound40, which related to damage to a wharf due to a discharge of oil on to the surface of the water, which subsequently spread and was ignited by a spark from welding equipment. C’s claim in this instance failed on the ground that the damage to the wharf was considered too remote from the allegedly negligent use of the welding equipment. Whilst of general interest, it seems that cases involving allegations of breaches of duty in tort are not generally considered to be relevant in construction cases. This is because, whilst the object of the exercise in tort is to recover for pure economic loss, currently, except in limited circumstances (revolving around the tort of negligent misstatement), there appears to be little possibility of recovering for economic loss.

The burden of proof approach 20–042 If part of the damage is shown to be due to C’s own breach of contract, C must show how much of the damage is caused otherwise than by its own breach,

40 Overseas Tankship (UK) v Morts Dock & Engineering Co (The Wagon Mound) [1961] AC 388 (see, in particular, the judgment of Viscount Simonds).

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APPORTIONMENT

or else it can recover only nominal damages41. The standard of proof in civil actions in the United Kingdom is the “balance of probabilities”42. This basically means that, because the burden of proof (in this type of contractual claim) lies on the claimant, if C cannot remove the doubt that arises from the prospect that its own breach contributed to the loss, then its claim will not succeed.

The Devlin approach 20–043 If a loss is caused by one of two causes, both causes co-operating and both of approximately equal efficacy, the breach is sufficient to carry judgment for all the loss43. 20–044 The problem with adopting this approach is that, in concurrency, there is not one breach, but two causing the same loss. It is implicit that D is responsible for one cause and C is responsible for the other and it is impossible to give effect to this approach without also determining that one breach, or the other is the dominant cause. It is also argued by some that to adopt this approach would bring an absurd result44. 20–045 However this appears to have been the approach taken by HH Judge Wilcox in the Great Eastern Hotel case45. In holding that C was responsible to D for, amongst other things, the economic loss determined to have flowed from C’s breach in failing properly to update its schedule, the court held that: “If a breach of contract is one of the causes both co-operating and of equal efficiency in causing loss to the claimant the party responsible for breach is liable to the claimant for that loss. The contract breaker is liable for as long as his breach was an ‘effective cause’ of his loss46. The Court need not choose which cause was the more effective. The approach of Devlin J in Heskell was adopted by Steyn J (as he then was) in Banque Keyser v Skandia47 and accepted by the Court of Appeal48. Each claim or group of claims must be examined on their own facts and in the context of the specific contractual provisions such as variations which may give rise to a consideration of the comparative potency of causal events and to apportionment. In the absence of such provision the appropriate test is that if [D] prove that [C] were in breach and the proven breach materially contributed to the loss then it can recover the whole loss, even if there is another effective contributory cause provided that there is no double recovery.”

The dominant cause approach 20–046 Under this approach to separating the inseparable, C succeeds in recovering all its losses if it establishes that the cause for which D is responsible is the effective, dominant, cause of the loss it has suffered49. Which cause is dominant is a question of 41 Government of Ceylon v Chandris [1965] 3 All ER 48 at 57. 42 This is arguably the same as the US “preponderance of evidence” standard. 43 Heskell v Continental Express Ltd [1950] 1 All ER 1033 at 1048, per Devlin J. 44 See for example, A Williamson, QC, “Concurrency in Construction Delays”, an occasional paper (September 2005). 45 Great Eastern Hotel Co Ltd v John Laing Construction Ltd [2005] EWHC 181 at [314]–[315]. 46 See Heskell v Continental Express Ltd [1950] 1 All ER 1033 at 1047A. 47 Banque Keyser Ullmann SA v Skandia (UK) Insurance Co [1990] 1 QB 665 at 717. 48 Banque Keyser Ullmann v Skandia [1990] 1 QB 665 at 813A–814C. 49 Leyland v Norwich Union [1918] AC 350 HL at 370; Yorkshire Dale Steamship Co v Minister of War Transport [1942] AC 691 HL; Monarch Steam Ship Co v Karlshamns Oljefabriker [1949] AC 196 HL at 227; and Boiler Inspection and Insurance Co v Sherwin-Williams [1974] QB 57 CA.

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fact, which is not solved by the mere point of order in time50, but is to be decided by applying “common-sense standards”51. 20–047 In relation to delay-related compensation, determining what is the dominant cause of the delay that causes the loss, whilst stated to be a matter of the application of common sense to construction logic, may, in reality, be no more than the application of the tortious but-for test. For example, if costs are suffered because work is suspended on a Monday as a result of drawings not arriving in due time and, instead of arriving on Monday, they arrive the following Friday, then, without evidence to the contrary, it might reasonably be inferred that the costs of the suspension of work from Monday to Friday will have been caused by the absence of drawings. 20–048 Now if, on Tuesday, the work could not proceed also because the labour did not turn up, or materials did not arrive, that might not upset this presumption because, even if it had turned up, the subsisting (or “parent”, if a pacing consideration)52 delay in receiving design information would still prevent the work from proceeding and be the dominant cause of the loss (even if the labour had turned out, because the drawings were not available, the work could not proceed); however, the losses would be reduced to the degree that the labour or materials were not standing idle53. 20–049 However, supposing on Tuesday the building burnt down, could it then reasonably be said that on Wednesday the reason that C’s progress was disrupted was that the drawing information had not arrived? Or, is it more reasonable to say that, even if the drawings had been supplied, there was no building left to which the design could be applied? The fire would then be the cause of the losses. Common sense suggests that the former is not correct. 20–050 Suppose, then, the same fire does not burn the entire building to the ground, but merely damages a few rooms on the ground floor, whilst the design information that is lacking is required for work to the upper floor. Then, common sense suggests that, because the fire has not destroyed the relevant elements, the subsisting cause of disruption costs, whatever they are in relation to the upper floor layouts, is the absence of the design drawings. 20–051 Is this, then, the formula, the but-for test? If, when subsequent events are discounted, the work could have proceeded if the subsisting factor had not occurred, then the subsisting factor is the cause of the disruption costs. 20–052 Take, for example, disruption caused by D’s variation, which is both excusable and reimbursable, which prolongs completion but, during the period of prolongation of C’s overheads, another delay to progress is then caused by an event that is also excusable, but not reimbursable (such as exceptionally adverse weather) and that also affects productivity as a result of shorter working hours and intermittent working. The claim is usually put forward that, because C would not have suffered the poor conditions, but for D’s instructions for change, the costs incurred as a result of the loss of productivity brought on by the adverse weather are to be borne by D54. 20–053 Similarly, if the next logical activity in the sequence of construction is the completion of the design layout for wall partitions, which is delayed, then, for example, the late

50 Leyland v Norwich Union [1918] AC 350 HL at 363. 51 Galoo Ltd v Bright Grahame Murray [1994] 1 WLR 1360 CA. See also Ch.14, “Cause and effect”. 52 See Ch.18, “Concurrency, pacing and parallelism” at paras 18–122 to 18–140. 53 See, for example, Belleville Shoe Manufacturing Co (1995) ASBCA 46,036, 95–2 BCA 27,680 at 138,010 and ER Mitchell Construction Co Inc (1998) ASBCA 48,745, 98–1 BCA 29,632. 54 Walter Lawrence & Son Ltd v Commercial Union Properties (UK) Ltd (1984) 4 Con LR 37.

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delivery of door sets cannot logically be the cause of the disruption costs because, even if they had been delivered, without the layout of the walls, the door sets could not be installed. Similarly, if there is a delay in the delivery of the design of the wall layouts and the floor slab is condemned and has to be replaced, then, from the moment of the condemnation, the logical cause of the disruption costs in regard to that element can no longer be the failure to provide the design layout for the internal walls, but, logically, the cause of loss is then the absence of a floor upon which to put the walls, even if the designs were complete.

Jury verdict approach 20–054 In the United States, notwithstanding that they are generally dealt with by a court, or tribunal sitting alone, where unparticularised global claims have been permitted to go to trial, it seems that some have been decided on the basis of what is described as a “jury verdict”55. The inference to be drawn from the term is that, when faced with a global claim, a court just makes a subjective, impressionistic assessment (or “guess”) of damages in the same way that a jury might. “Jury verdict” is a North American method emanating from the US Federal Courts, of forming an opinion upon the basis of what the court, or tribunal, believes a jury would allow in all the circumstances. In effect, it simply amounts to an estimate of loss. It is generally used where injury has been proved to some extent but, through no fault of its own, C is unable to provide a proof of its quantum of loss56. 20–055 Civil jury trials (other than in some limited actions in tort) have been abandoned in virtually every common law jurisdiction outside the United States; this nomenclature is therefore unlikely ever to find favour elsewhere, but the method appears not to be substantially different from that advocated by the court in Doyle57.

The modified “global claim” approach 20–056 The modified global claim approach attempts to take out of the equation the cost centres attributable to known losses for which C is liable by deducting estimates of both tender errors and non-reimbursable costs from project costs, leaving a lump sum claim. In effect, this converts the global claim into a total loss claim. In Figure 20.458 C’s total costs incurred arise out of: the cost of the work as tendered; the unplanned costs that C failed to include in its tender (C’s underbidding costs); the cost of delay to progress in periods B and C (C’s delay costs); the cost of delay to progress in period A (D’s delay costs); the costs of prolongation caused by item 3 above (if any); and the costs of prolongation caused by item 4 above. 20–057 The modified global claim is based upon the difference between the tendered costs in item 1 and C’s total costs, less the estimated amount comprised in items 2, 3 and 5. 55 See, for example, Joseph Sternberger,Trustee In Bankruptcy For Spenco Inc v The United States (1968) 401 F 2d 1012. 56 J Hess, “Jury verdict method of proving damages”, Construction Briefings (Thomson/West, May 2007). 57 John Doyle Construction Ltd [2002] ScotCS 110; [2002] BLR 393. 58 See para.20–033, above.

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The “A/B estimates” approach 20–058 The A/B estimates approach is based on establishing a claim value through the development of independent estimates of damages. The “A” estimate is for an original element of work; the “B” estimate is for the element of work as changed. 20–059 In the scenario in Figures 20.1 to 20.4, the A/B estimates approach identifies the cost of the additional works in comparison to the cost of the works that should have been incurred. The “A” estimate is the cost of the work as tendered and the “B” estimate comprises the tendered costs plus the unplanned costs arising out of period “A”. 20–060 In other words, in so far as the total cost is made up of: 1. 2. 3. 4. 5. 6.

the cost of the work as tendered; the unplanned costs which C failed to include in its tender (C’s underbidding costs); the cost of delay to progress in periods B and C (C’s delay costs); the cost of delay to progress in period A (D’s delay costs); the costs of prolongation caused by item 3 above (if any); and the costs of prolongation caused by item 4 above.

20–061 The A/B estimates approach identifies A as item 1 and B as the composite of items 4 and 6 where A+B is said to equal C’s total recoverable costs. This method therefore does not fully attribute all the costs, but is a partially refined total loss claim.

The “delta estimates” approach 20–062 The delta estimates approach divides the claim into segments, with separate costs for each reimbursable impact, or event. One of the difficulties with this method is that it sometimes fails to demonstrate the relationship between the cost of the various components and the total cost overrun for the project. In applying this method to the scenario illustrated in Figures 20.1 to 20.4, the delta estimates approach would be based upon an estimate of the cost of each of the separate elements of claim that were alleged to comprise the costs of period A. The estimate would not normally deal with the quantification of the elements of cost comprised in: 1. 2. 3. 4.

the cost of the work as tendered; the unplanned costs which C failed to include in its tender (C’s underbidding costs); the cost of delay to progress in periods B and C (C’s delay costs); and the costs of prolongation caused by item 3 above (if any).

20–063 It is therefore difficult to demonstrate that what is included in the estimates is not also a part of the costs arising out of those four elements for which no estimate is provided.

The modified “total cost” approach 20–064 In Grumman59, it was accepted by the Board of Contract Appeals that the total cost method is to be used with “caution and only as a last resort”, because its application can “skew” an accurate computation of damages by, for example, taking as a cost baseline tendering inaccuracies which reduce C’s estimated costs, while

59 Grumman Aerospace Corp (on behalf of Rohr Corp) (2001) 01–1 BCA [31,316].

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measuring it against performance inefficiencies that can inflate C’s costs. The Board acknowledged that: “A ‘modified’ total cost methodology, however, seeks to allay some of the concerns with the total cost method by making appropriate adjustments to the claim to account for the inaccuracies and inefficiencies. And, if it is impracticable to prove actual losses directly, there is no impediment to an award on the basis of a properly modified total cost claim.”60

20–065 The modified total cost approach is based upon estimates relating to the entire cost spectrum. All potential cost components, including non-reimbursable inaccuracies in the original tender, contractor-caused execution errors and reimbursable claim costs are addressed and related to the total cost overrun experienced on the project. Save for proving the financial effect of D’s cost risk events directly from records, this is probably the most acceptable way of proving by inference the costs attributable to D. In effect, the modified total cost approach identifies each of the cost headings: 1. 2. 3. 4. 5. 6. 7.

the the the the the the the

cost of the work as tendered; unplanned costs which C failed to include in its tender; cost of delay to progress caused by C (period B); cost of delay to progress caused by C (period C); cost of delay to progress caused by D (period A); costs of prolongation caused by items 3 and 4 above (if any); and costs of prolongation caused by item 5 above.

20–066 The modified total cost claim is based upon items 5 and 7 only. The only way in which this differs from a claim where the costs are proved directly from cost data is that it is based upon estimates instead of from records. 20–067 In Servidone61, a US Federal Circuit Appeals Court reviewed a modified total cost determination by the Claims Court, which did not rely upon C’s tender as a baseline for its costs. In this case, the tender was considered unrealistically low. On the basis of the evidence in the case, the court made its own assessment of what would have been a reasonable bid and proceeded on that basis. It also considered the extent to which [C] was responsible for additional costs. The Appeals Court affirmed the Claims Court’s decision and, in quoting Boyajian v US62, observed that the total cost method was used: “‘only as a starting point’ with such adjustments thereafter made in such computations as allowances for various factors as to convince the court that the ultimate, reduced, figure fairly represented the increased costs [C] directly suffered from the particular action of [D] which was the subject of the complaint.”63

The “City Inn” approach 20–068 The “City Inn”64 method is to count up the number of claims made by D and C and apportion liability according to the number of claims made65. 60 Grumman (2001) 01–1 BCA at 88. 61 Servidone Construction Corp v United States (1991) 931 F 2d 860 (Fed Cir). 62 Boyajian v United States (1970) F 2d 1231, 1240 (Ct Cl). 63 Servidone (1991) 931 F2d 860 at 862 (Fed Cir). 64 City Inn Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590, affirmed [2010] CSIH 68. 65 This is a decision which has been robustly criticised by J Winter, “Dominant cause and its relevance to concurrent delay” (2008) Society of Construction Law Conference, London; see also the commentary on this case by this author at 24 Const LJ 590.

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20–069 City Inn v Shepherd is a Scottish case in which C claimed an extension of time and compensation for prolongation under an amended version of JCT80, based upon two events that were at C’s liability and 11 events at D’s liability, for which it claimed prolongation costs, but was unable to distinguish which events caused which losses. Lord Drummond Young, having apportioned entitlement to an extension of time for the 11 weeks’ delay to completion of the works according to the number of claims made (11 claims made by C, less two claims made by D, equals nine weeks’ extension of time for C!), said66: “I am of opinion that the claim for prolongation costs should follow the result of the claim for extension of time. In this respect the decision in Doyle v Laing67, may be relevant. In that case it is recognized at paragraphs [16]-[18] that in an appropriate case where loss is caused both by events for which [D] is responsible and events for which [C] is responsible it is possible to apportion the loss between the two causes. In my opinion that should be done in the present case. This is a case where delay has been caused by a number of different causes, most of which were the responsibility of [D], through the [CA], but two of which were the responsibility of [C]. It is accordingly necessary to apportion [D’s] prolongation costs between these two categories of cause. I consider that the same general considerations, the causative significance of each of the sources of delay and the degree of culpability in respect of each of those sources, must be balanced. On this basis, I am of opinion that the result of the exercise should be the same; I am unable to discover any reason for treating the two exercises under clause 25 and clause 26 on a different basis. I accordingly conclude that [C] are entitled to their prolongation costs for nine weeks. This amount has in fact been paid to them in consequence of the determination of the adjudicator. Consequently no further sum is due at this stage. It will be apparent that I have rejected [D’s] argument that, if prolongation costs are caused both by [a D-risk] delay and by a concurrent [C-risk] delay, [C] will not be entitled to recover such costs if he would have incurred them as a result of [a C-risk] delay. That approach seems to be based on a rigidly logical application of the principles of causation as they apply in the general law of contract and delict. Under clause 26, however, as with clause 25, I am of opinion that such an approach is not appropriate; instead, the direct loss and expense sustained by [C] should be apportioned between the events for which [D] is responsible and the events for which [C] is responsible.”

20–070 This is an unattractive approach to apportionment of loss for a number of reasons, amongst which are: where completion was delayed as a result of matters at both D’s and C’s risk, and C could not separate the effects of those for which it was liable from those for which it was not, it could not say that D was responsible for all the loss which it claimed and, if C could not do it, there was no basis on which the court could do it; and the futility of this approach can be demonstrated by D describing each part of the two events for which C was liable in increasingly smaller elements, separately, so as to find more than two issues for which C was to blame, with consequent reduction in D’s ultimate liability.

66 City Inn Ltd [2007] CSOH 190; [2008] BLR 269; (2008) 24 Const LJ 590 at [166] to [167]. 67 John Doyle Construction Ltd [2002] ScotCS 110; [2002] BLR 393.

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The net effect approach 20–071 The decision in Heller v Klingensmith68 recognised the differing characters of C’s and D’s losses in apportioning delay-related compensation. 20–072 In this case, the court found that C had delayed its subcontractor’s work in the completion of a parking garage, but that the subcontractor had contributed to the delays on the parking garage and caused delays on another aspect of the project. At first instance, the court held that the delays were concurrent and that neither could recover its losses. However, on appeal, the court said: “There is no doubt that if only one party had delayed, that party would have been liable to the other for damages. In a case like this, where each party delays the other, it follows that each should be able to recover to the extent of the injury caused by the other’s delay. Such a rule protects each party from losses due to the delay of the other throughout the period of performance. It also induces each party to avoid imposing such losses on the other at any time during the period of performance. In contrast, a rule precluding a party from recovering damages for delay, once the party itself delays, would leave the parties to a contract unnecessarily vulnerable to delay by the other. We see no wisdom in, nor authority for, such a rule of preclusion. Therefore, when both parties to a contract breach their contractual obligations by delaying performance, a court must assess the losses attributable to each party’s delay and apportion damages accordingly.”69 (internal citations omitted)

20–073 In enthusiastically endorsing this method of apportionment, Bidgood et al remark70: “While largely ignored by subsequent courts, the Heller decision contains language that would essentially gut the doctrine of concurrent delay and would resolve many of the inequities inherent in that rule. In essence, the case rejects the ‘day of delay’ set off imposed by the traditional cases on concurrent delay in favour of a ‘dollar for dollar’ netting out of delay damages. In effect, this rule would allow for the judicial resolution of delay claims, including the award of delay damages, even where the competing delays were truly concurrent. For example, where [D] suffers actual or liquidated damages in the amount of $500.00 for each day of delay, and [C] suffers $1000.00 in actual damages for each day of delay, a complete netting out of a 30 day concurrent delay between the two would leave [C] with an award of $15,000.00, as opposed to $0 and a schedule extension under the current framework. Of course, under the Heller framework the results could differ based on differing damages rates of the respective parties. However, in any event, under the Heller framework, the parties are getting the actual benefit of their bargains and no party who is at fault is relieved from liability simply because another party was concurrently at fault. While the concurrent delay doctrine has myriad cases supporting its application over the years, it simply cannot compete with the elegant and sensible result of the Heller scheme for apportioning delay damages.”

68 United States for Use and Benefit of Heller Elec Co, Inc v William F Klingensmith, Inc (1982) 670 F 2d 1227; 29 Cont Gas Fed (CCH) 82,194 (DC Cir). 69 Ibid., at 1230–1231. 70 J Bidgood, Jr, S Reed, L Steven and J Taylor, “Cutting the knot on concurrent delay” Construction Briefings, 2007–2 (February 2008).

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Damages

Introduction Entitlement to compensation Potential heads of claim Direct labour costs Non-productive overtime Staff costs Management costs Goods and materials Plant and equipment Loss of productivity Temporary works Preliminaries Head office costs Insurances Financing costs Profit on costs Loss of future profits Unabsorbed overheads Formula adjustments 1. The contractor has actually suffered loss, or expense 2. The loss or expense has not been recovered elsewhere 3. The loss or expense incurred during the period of delay has remained unabsorbed 4. It is impossible, or unreasonably burdensome, to calculate the loss or expense without resorting to a “formula” approach The Eichleay formula The Hudson formula The Emden formula Other formulae Quantum meruit Developer’s damages Liquidated damages Standard form provisions An exclusive remedy Penalties Failure to quantify Quantifying predictive loss Exclusion clauses

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21–001 21–013 21–040 21–042 21–053 21–058 21–068 21–074 21–079 21–089 21–098 21–100 21–111 21–117 21–119 21–138 21–140 21–146 21–159 21–172 21–174 21–175 21–176 21–185 21–188 21–189 21–190 21–192 21–211 21–224 21–225 21–228 21–232 21–242 21–247 21–264

DAMAGES

Introduction “According to the law of nature it is only fair that no one should become richer through damages and injuries suffered by another.”1

21–001 The recovery of damages in contract is intended, so far as it is possible, to put the claimant in the same position as it would have been had the contract been properly performed, or “. . . in the same position as he would have been in if he had not sustained the wrong for which he is now getting compensation, or reparation”2. 21–002 In construction contracts, the damages C may wish to recover are related to those costs generally referred to as “direct loss, or expense”3, but are in any event general costs which are not recovered from a strict pro rata adjustment of work rates for the effect of change. Nevertheless: “The requirements that the loss or expense should be ‘direct’, that it should not ‘be reimbursed by a payment under any other provision in [the] contract’ and that ‘the [CA] or quantity surveyor is to ascertain the amount of such loss or expense’, all suggest strongly that the amount of direct ‘loss or expense’ will not exceed what might have been recoverable as damages”4.

21–003 The rule as to what is recoverable as damages in contract is known as the rule in Hadley v Baxendale5. This is that: “Where two parties have made a contract, which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, ie, according to the usual course of things from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the probable result of the breach of it.”6

21–004 The first part of this formula, that is damages that arise naturally, according to the usual course of things, from the breach of contract itself, was referred to by Asquith LJ in the case of Victoria Laundry Ltd v Newman Ltd7 as comprising six propositions, which have been paraphrased in Keating8 as follows: “The aggrieved party is only entitled to recover such part of the loss actually resulting as may fairly and reasonably be considered as arising naturally, that is according to the usual course of things, from the breach of contract. The question is to be judged as at the time of the contract. In order to make the contract breaker liable it is not necessary that he should actually have asked himself what loss was liable to result from a breach of the kind which subsequently occurred. It suffices that, if he had considered the question, he would as a reasonable

1 Cicero, Marcus Tullius, Pomponius, (106–43BC). 2 Livingstone v Rawyards Coal Co (1850) 5 App Cas 25, per Lord Blackburn at p.39. 3 Eg, JCT80 and JCT98, Cl.26 and JCT09, Cl.4.23. 4 Alfred McAlpine Homes (North) Ltd v Property and Land Contractors Ltd (1995) 76 BLR 59, per HH Judge LLoyd QC, at p.87. 5 Hadley v Baxendale (1854) 9 Ex 341. 6 Ibid., at p.354, per Alderson B. 7 [1949] 2 KB 528. 8 Keating on Building Contracts (7th edn) at para.8–05 on p.236.

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man have concluded that the loss of the type in question, not necessarily the specific loss, was ‘liable to result’. The words ‘liable to result’ should be read in the sense conveyed by the expressions ‘a serious possibility’ and ‘a real danger’ and ‘not unlikely to occur’.”

21–005 Thus, those factors that fall within the first limb of the rule in Hadley v Baxendale are generally those which are comprised in a contractor’s direct costs. 21–006 In the Victoria Laundry9 case, a laundry company, intending to enlarge its business, ordered a boiler from the defendants, with delivery to be made on a certain date. Owing to the defendant’s default, delivery was several months late and, as a result, the laundry lost some lucrative contracts. It was held that although the defendants were not liable for the loss of profits on these particular contracts of which they had no knowledge, nevertheless they knew, or must be taken to have known from the circumstances and their position as engineers and businessmen, that there was bound to be business loss of some sort, and they were thus held liable for such loss on the basis of their actual or imputed knowledge. 21–007 The second limb of the rule in Hadley v Baxendale, ie “such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach of it” comprises indirect costs, and it is a rare claim in which the claimant does not make some sort of claim for the recovery of its lost profits, reduced bonding capacity, loss of interest on capital, or unproductive labour, or plant10. 21–008 In order to break down the facts of a particular contract claim into its constituent parts, it is necessary to go through a four-phase analysis. Thus, the prospective analyst must: 1. 2. 3. 4.

prepare a detailed analysis of the contract documents identifying the duties of the parties; identify the causes and extent of each delay to progress11, or disruption12 and the extent of any concurrency13; establish what was the active cause of the delay to progress, or disruption in each case; and, finally, calculate the increased cost caused by the party who is primarily responsible for each event.

21–009 The claimant has the burden of proving every element of its case including the damages that flow from the alleged breach. In an action for damages, C bears the burden of proving liability, causation and the amount of the damages incurred. The burden is on C to establish the proximate cause between the breach and the damages. If the loss caused by the breach cannot be isolated from that attributable to other factors recovery will be exceptionally difficult, if not impossible14. 9 [1949] 2 KB 528. 10 George A Smith and, David B Weekly, “Hard proof of soft damages” (1992) Construction Business Review 72. 11 See Ch.14, “Cause and effect”. 12 See Ch.17, “Disruption to progress and lost productivity”. 13 See Ch.18, “Concurrency, parallelism and pacing”. 14 See, for example, Masons v W D King [2003] EWHC 3124 (TCC), in which the court observed that there was no causal relationship between C’s breach in failure to accelerate the progress of the works pursuant to an instruction and the losses suffered by D when the work was not completed on time.

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Illustration Facts: Greenwich Millennium Village (GMV) was the owner of a residential development, which was subjected to two events of catastrophic flooding on the same day. The first flood was found to be caused by a crack caused by the over-tightening of a nut forming part of that system and the metal debris in the thread. The second flood was due to two causes, namely the installation of a non-return valve (NRV) (where none was specified) and an isolation valve (IV) having been left closed. Essex Services (ES) was the mechanical and electrical sub-contractor involved and Hoare Lea (HL) was the designer of the mechanical systems. Both had given collateral warranties to GMV and claims were made against them, both under the warranties and in negligence. ES sought to pass the claim against it down to its mechanical sub-subcontractor, HS Environmental Services (HSE), which, in turn, sought to pass liability down to the mechanical sub-sub-subcontractor Robson. Held, by Coulson J, that both ES and HL were jointly and severally liable to GMV for the relevant failures, with liability being apportioned as between them on a 60:40 basis; ES could pass on their liability to HSE, which was entitled to be indemnified by Robson because of the latter’s wrongful installation of the NRV; HSE had also made out their case that it was Robson which was responsible for the closed IV and so the indemnity would also attach to that failure: Greenwich Millennium Village Ltd v Essex Services Group plc15.

21–010 C is entitled only to reimbursement of those additional costs, or the loss which it has actually suffered. The duty of the CA under JCT80, JCT9816 and JCT0917, for example, is to “ascertain the direct loss, or expense which has been or is being incurred” for which C is entitled to compensation: “‘to ascertain’ means ‘to find out for certain’18 and it does not therefore connote as much use of judgement, or the formation of an opinion as had ‘assess’, or ‘evaluate’ been used. It thus appears to preclude making general assessments as have at times to be done in quantifying damages recoverable for breach of contract . . ..”19

21–011 It seems that the same principles that apply to the identification of causation in breach of contract cases should also apply to those instances where direct loss or expense needs to be identified. It was argued in Wraight20 that the words “direct loss, or damage” in JCT6321 should be interpreted as referring only to “direct” losses and thus any losses to be regarded as indirect, or consequential should be ignored. In that case Megaw J held that: “In my judgement, the position is this: prima facie, [C] are entitled to recover, as being direct loss, or damage, those sums of money which they would have made if the contract had been performed, less the money which has been saved to them because of the disappearance of their contractual obligations . . . .”22 15 [2013] EWHC 3059 (TCC). 16 Cl.26. 17 Cl.4.3. 18 The footnote to Judge LLoyd’s decision reads: “It is defined in the Oxford English Dictionary (2nd edn) as ‘to find, or learn for a certainty by experiment, examination,, or investigation, to make sure of, to get to know’ and this is stated to be the only current use of the word.” 19 (1995) 76 BLR 59 per HHJ LLoyd QC at p.88. 20 Wraight Ltd v PH & T (Holdings) Ltd (1968) 13 BLR 26. 21 JCT63, Cl.24. 22 (1980) 13 BLR 26 at p.6.

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21–012 In so far as the work on site is not carried out by C itself, but carried out by subcontractors, or under a management contract where C then has to rely, to a great extent, upon information provided by the subcontractors, or works contractors to prove that it has a case at all, the presentation of proof can become significantly more complex.

Entitlement to compensation 21–013 If the progress of the works is interfered with, or the duration of the project should be prolonged by D, those costs that will be recoverable by C include: 1.

Direct costs incurred for the duration of a delay to progress including: (i) incremental costs (eg, labour and equipment); (ii) lost efficiency costs (eg, additional labour and equipment costs incurred because of the decreased productivity resulting from disruption, demobilisation and remobilisation); (iii) premium wages for working overtime, or multiple shifts;

2.

Direct costs incurred during a prolonged construction period, including: (i) additional site preliminaries and overheads; and (ii) extended head office overheads.

3.

Indirect costs, incurred during a prolonged construction period including: (i) lost profits; (ii) unearned overheads; and (iii) reduced bonding capacity.

21–014 From D’s point of view, if C should not complete the works by the due date, D can be expected to incur: 1.

Direct costs, including: (i) loss of the investment value of rent; (ii) extended financing costs; (iii) storage costs; (iv) rent of alternative premises; (v) extended head office overheads; (vi) salaries and wages of unproductive staff; (vii) costs of retaining architects, engineers and other consultants for the delay period; and (viii) interest and financing expenses.

2.

Indirect costs, including: (i) compensation for delay payable to other directly employed contractors; (ii) lost profits; (iii) cost escalation; (iv) asset depreciation; and (v) inconvenience, discomfort and distress23.

23 Generally only affecting people in their domestic capacity and not commercially.

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21–015 As it is more common practice to deal with D’s potential heads of claim by reference to liquidated damages, they will be dealt with under that heading. There is no good reason why C’s potential losses should not also be dealt with in the same way, and that is what the SCL Protocol recommends, advising that: “Arguments about proof of loss could be reduced, or avoided altogether if the contract contained an agreed amount per day that can be applied to each day of prolongation. This is the reverse of the normal [developer’s] liquidated damages provision. It may be necessary to have a number of different agreed amounts to be applied depending on the stage in the project where the delay occurs. One method of fixing the figure(s) would be for [C] to price a schedule of rates with indicative quantities at tender stage.”24

21–016 The 2009 edition of the Irish government standard forms of contract appears to be the first standard form to adopt the SCL Protocol’s recommendations for liquidated and ascertained compensation for delay caused by D. In these forms, D has the option of either permitting compensation to be valued at cost or by reference to a tendered daily rate25. 21–017 Where C is required to tender its daily rate for delay costs they may be required to be a single rate, or separate daily rates for delay caused over a number of separate periods, or portions of the works at D’s discretion. However, whichever way it is priced, these forms only provide for compensation to be paid for delay to completion occurring as a result of a compensation event causing delay to completion beyond the contingency periods specified26. 21–018 However, that is not the way most contracts are currently written and, in the absence of such provisions, C must generally prove its losses. 21–019 Events giving rise to a right to compensation have nothing to do with delay to completion for which C may be granted relief from liquidated damages. Thus: 1.

2.

3.

4.

24 25 26 27

A delay to progress caused by D to an activity which is in float, and so cannot affect the completion date and be the subject of an extension of time, may nevertheless cause C to suffer loss and/or expense, but not prolongation costs. Where completion is delayed beyond the certified completion date so that, notwithstanding that liquidated damages have ceased to be deductible, C may nevertheless continue to suffer prolongation costs while the works are completed in fact. In many forms of contract the clauses that provide for C to be granted an extension of time are not the same as those that provide for C to be reimbursed its losses27. It is thus foreseeable that, under those forms, C may be granted an extension of time, but will not be able to recover its losses incurred during the period of prolongation. In many forms of contract, C is entitled to an extension of time for the likely effect of an event on completion (the entitlement to relief arises before the liquidated damages become deductible); however, C can never be reimbursed loss, or expense that it has not actually suffered.

Society of Construction Law, Delay and Disruption Protocol (2002), at para.1.8.5. See, for example, Sch.1 to IGBW/09, at Section K. As to which, see the commentary at paragraph [?] supra. See, for example, the JCT family of forms.

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21–020 There is really only one reason why C should be compensated by the reimbursement of loss or expense, and that is that it has actually suffered loss or expense as a direct result of D’s act or omission for which the contract identifies that D is at risk as to cost. It is not enough that a delay to progress has occurred and/or it is also at D’s risk. 21–021 Whether or not delays impact upon the critical path is of primary importance in evaluating C’s right to more time to complete. In particular, this means that C will not be entitled to an extension of time for an excusable delay unless the delay extends the duration of the critical path and thereby the overall project completion. Nevertheless, C may be entitled to recover the costs it has incurred in relation to non-critical path work activities in so far as the delay to progress affects the cost of its performance. For example, a delay to progress in perimeter fencing resulting from defective design may not delay the completion date for the project, but may have increased C’s time-related costs for the process of managing the necessary changes and interfered with other trades. In these cases C should be entitled to recover its additional costs despite the fact that the overall project completion date is still the contract period28. Often these delay-related costs are for loss of productivity, delay to progress, or other such direct costs arising out of the way the work is carried out. 21–022 On the other hand, in relation to prolongation of working time, on both sides of the Atlantic it has been held that, where D prevents completion on time, in the absence of an enforceable exclusion clause29, it cannot expunge its liability merely by granting an extension of time and paying for the direct costs calculated by reference to the rules for valuing variations under the contract. D must compensate C for the indirect as well as the direct costs of the extended performance period, including the value of idle labour and equipment. 21–023 In the US case of Freeman Darling Inc30, the Board held that in computing the costs caused by delay it is correct to concentrate on the particular period of performance that was primarily impacted by the delaying event. Accordingly, whilst unabsorbed overheads may properly be calculated by reference to the period of delay to completion, prolongation costs should be calculated over the additional time period directly caused by the event, that is the delay to progress caused by the event, and not the consequential effect on completion caused by the delay to progress. 21–024 In principle, C must demonstrate how it has quantified the loss it has suffered under the various heads of claim. For the most part, it can do that by identifying and recording the labour, plant, materials and administrative costs incurred in relation to the activities carried out, or the durations of stoppages, and relate relatively precisely what it has incurred to the reimbursement claimed. 21–025 As recently as the 1980s it was unusual to find that cost data was organised in such a manner as to demonstrate what had been incurred with sufficient accounting detail to prove the nexus of causation between liability, breach and loss and also to

28 In Ascon Contracting Ltd v Alfred McAlpine Construction Isle of Man Ltd (1999) 66 Con LR 119, HH Judge Hicks QC expressed the view (obiter) that “six subcontractors, each responsible for a week’s delay, will have caused no loss if there is six weeks’ float”. It is respectfully observed that this is not necessarily correct because loss could be caused by disruption to progress that did not affect the completion date. 29 Below at para.21–266. 30 GSBCA No 7,112, 89–2 BCA (CCH) at para.21,882.

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provide an accurate measure of the loss suffered31. However, technology has improved to such an extent that it is now uncommon not to see accounting systems in place that have the capability of providing a more sophisticated level of cost information and detail32. 21–026 In the latter part of the twentieth century, computerised accounting software tended to be “profit and loss” orientated. Their sorting methods, allocation of cost and indexation were all driven to satisfy the needs of auditing accountants with little thought for job costings. On the other hand, modern construction accounting software not only satisfies auditing requirements, but also provides the flexibility for costs on a projectby-project basis to be recorded in such a way that the losses flowing from particular events can be traced. 21–027 In many cases, the costs that we are concerned with here will be the timerelated costs rather than the work-related costs. However, distinguishing the two is not always straightforward. Mastrandrea gives the example of insurances that are usually calculated by reference to turnover, but that, in some circumstances, may be timerelated33 and cranage, in relation to which he says: “Whilst, ordinarily, mobile cranes are less likely to be time-sensitive than tower cranes in that they are likely to be required and brought to site for specific items of works, this is a matter which may be highly conditioned by the relevant facts. Thus, it may be that, because the works have been delayed, the tower crane – which would otherwise have been dedicated to the erection of steelwork on a particular phase of the project – is being used to load out other plant and materials to and from another part of the project and that the mobile cranes are therefore used to install the relevant steelwork. In those circumstances it may nevertheless be appropriate to treat the costs of the mobile cranes as time-sensitive.”

21–028 Provided C can demonstrate that it is entitled to recover the costs it has incurred as a result of D’s act, or omission, and that it has actually suffered loss as a result of one, or the other, then it can recover its costs, but it must be able to determine the amount. Accordingly, it is apparent that the difficulty the industry faces in this is not in the availability of suitable tracking software, but in the routines, controls, recording processes and disciplines that must be in place if the data is ever to be captured in the first place34. 21–029 The importance of clearly identifying, as a matter of fact, the costs that actually flow from a particular event cannot be emphasised too strongly. The consequences of getting it wrong are graphically illustrated by the judgment of Lloyd LJ in the case of McAlpine Humberoak Ltd v McDermott International Incorporated35, in which the Court of Appeal considered a subcontractor’s claim for additional costs arising out of the construction of a deck structure for a North Sea oil rig. In his conclusions Lloyd LJ said: “One cannot help admiring the way in which [the expert] set about his task. It may be that there was no other way in which it could have been done. But it suffers from two major

31 KR Nielsen and PD Galloway, “Proof Development for Construction Litigation” (1984) 1 American Journal of Trial Advocacy 433. 32 See below 33 Dr Franco Mastrandrea, “The evaluation of preliminaries (or site overheads) in construction prolongation claims” [2009] ICLR 429 at [434]. 34 See Ch.13, “Getting at the Facts of Delay”. 35 (1992) 8 Const LJ 383.

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defects. So far as the first stage of the calculation is concerned, [the expert’s] approach assumed that if one man was working for one day on a particular VO, the whole contract was held up for that day. The point can be illustrated by VO 64, described by [D’s counsel] as the reductio ad absurdum of [the expert’s] method. The claim was for £39, being the cost of an inspector carrying out a lamination check on one of the secondary tees on W3. The inspection was carried out on May 12, 1982. It took no more than an hour. Yet [the expert] has allowed a whole day’s delay to the whole of the work. The second, and even more serious defect relates to the second stage of the calculation. It assumes that the whole of the workforce planned for a particular activity was engaged continuously on that activity from the day it started until the day it finished. This was hardly likely to be so, quite apart from the labour difficulties which [C] suffered in phases 2 and 3 of the contract and the decision by [C] towards the end of the contract to run down the labour force. By reason of these defects, we conclude that [C] did not prove, or indeed come near to proving, on the evidence which they called at the trial that the delay in delivery of W3 and W4 was due to the revised drawings, VOs and late response to TQs36. Further, they never came near to proving that the indirect costs resulting from these matters amounted to £2,020,198. The very fact that the total entitlement claimed by [C] on the basis of [the expert’s] evidence came to £1m more than their actual costs should surely have put the judge and his assessors on enquiry. The truth is that [the expert’s] calculation provided no support for the judge’s conclusion that [C’s] costs were fair and reasonable.”37

21–030 The identification of which events are likely to cause damage and the types of damage that are likely to flow from the event are the precursors to the calculation of cost escalation. The logic of this can be explained by reference to diagrams. 21–031 The examples referred to below illustrate the three component parts of the costs of a simple project lasting 12 months. For the purposes of these diagrams, the “head office overheads” directly referable to the project, “labour and material costs” and “preliminaries” costs, are assumed to be uniformly distributed over the total contract period. Whilst, in practice, this would be unrealistic, the uniformity serves to simplify the figures and make the comparison easier to appreciate. [Please refer to Figures 21.1 to 21.12 inclusive] Figure 21.1 illustrates an undisturbed schedule, on which there are no imposed changes, no delays and nothing that affects C’s productivity. Figure 21.2 illustrates a disruption to C’s working schedule caused by reduced productivity in months 2 and 3. During those periods it is, in effect, working behind schedule. Only by increasing its resources in months 5 and 6 does it overcome the difficulty. In this example there has been no change in the preliminaries and no change in the head office overheads. Figure 21.3 illustrates the same difficulties with the labour force with the same result. However, in this figure there has been an increase in the use of head office overhead resources and an actual increase in preliminaries costs in the fourth month in order to get to grips with the problem on site. Additionally, increased preliminaries in supervision have continued throughout the period of recovery demonstrating an increased preliminaries initially in the fifth and sixth month. Figure 21.4 illustrates the effect on a smoothly running project of the imposition of additional work in the fifth and sixth month. This increases the labour and materials costs in relation to the additional work. However, for the purposes of this

36 Technical queries. 37 McAlpine Humberoak Ltd v McDermott International Incorporated (No 1) (1992) 8 Const LJ 383 at pp.397–398.

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example the additional work is carried out in parallel with that which remains. It is an additional resource added to those that were scheduled to carry out the contract works. It has not had any effect on either preliminaries or on the head office overheads. Thus, C is entitled simply to a cost adjustment for the direct costs of the work itself. There will be no loss and expense arising out of either disruption or extended working. Figure 21.5 illustrates the same additional work, although to accommodate the additional work it has been necessary to increase the preliminaries (perhaps in supervision). This would rank as an expense that would be reimbursable as a part of the cost of the variation and, in so far as it could be demonstrated to be separable from the general preliminaries that were being incurred in any event, prima facie it would be recoverable. Figure 21.6 illustrates exactly the same additional work, but in this case it also causes an increased head office overhead. In the same way this would be reimbursable and, provided it could be separated from the general overheads, it would also be recoverable. Figure 21.7 illustrates the same scenario described in Figure 18.2, to which has been added a reimbursable event. However, the increased site-referable head office overheads and the increased preliminaries are the same as they were without the additional work and, prima facie, the increased overheads that were generated by C’s attempt to overcome the poor productivity on site, are not recoverable as a result of the imposition of additional work. 21–032 The difficulty in proving this, of course, is in separating those resources that were applied to overcome C’s own culpability from those that have been applied to overcome the effect of additional work. If it can be demonstrated that the additional preliminaries that were imposed at the same time as the additional work was carried out would not have been incurred, but for the additional work, then prima facie it will be recoverable. 21–033 Change does not always increase site, or head office overheads. It is perfectly feasible for change to be implemented without any increase and for the only costs incurred to be the costs recovered in the course of ordinary valuation of labour materials and plant. However, if the change takes place at a time when the overhead resources are increased, the presumption that the one is connected to the other can only be upset by rigorous investigation: see Figure 21.8. 21–034 Figure 21.9 illustrates the problem of increased resources from both overcoming C’s own culpability and to accommodate additional work. Whilst there is an increased site presence to accommodate the accelerated working to overcome C’s own culpability, there is now also an increased site presence to accommodate the additional management required to carry out the additional work at the same time. So far as the preliminaries are concerned38, provided that C keeps good records, it will not be very difficult to separate one from the other and to demonstrate which costs flow from which event. 21–035 As to the site-referable head office overheads, it can be seen that the increase in head office overheads are in two separate periods, one before the additional work was instructed, and the other contemporaneous with the performance of the additional work. It should thus be possible to separate those two periods of cost and to produce a persuasive argument as to which costs followed which event.

38 See para. 21–031.

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21–036 In all the previous examples the delays have been to progress only and the costs have arisen only out of disruption to the progress of the work. There has been no effect on the completion of the work. In other words, whilst the project costs have increased proportionately to the disruption, they have been absorbed over the same period as was originally intended by the construction contract. 21–037 In Figure 21.10 the effect of the reduced productivity in months 2 and 3 has resulted in extended completion in months 13, 14 and 15. The effect of this is to extend the site-referable head office overheads and the preliminaries during months 13 to 15 to accommodate the continued working necessary to overcome the effects of the earlier reduced productivity. In so far as those head office overheads and preliminaries are necessary to accommodate the extended resources incurred to overcome C’s own lack of productivity, the effect (in Figure 21.11) of additional work being imposed during months 5, 6 and 7, which increased the labour resources on the site, cannot clearly be demonstrated to have caused the extended working. Under these circumstances it would be difficult for C to recover its extended overheads because they were in any case incurred in connection with carrying out the works that it was contracted to carry out. In other words, C has not suffered any loss directly flowing from the imposed additional work. C’s loss flows from its own lack of productivity early on in the project that has served to extend the contract period. 21–038 In Figure 21.12, the lack of good progress in months 2 and 3 has been accommodated by C through recovery in months 5 and 6. Then, the imposition of additional work in months 9, 10 and 11 serves to extend the contract period with the result that the extended head office overheads and preliminaries in months 13, 14 and 15 flow not from the need for C to carry out the original contract works, but from the extended working period caused by the additional work imposed in months 9, 10 and 11. Under these circumstances, the extended head office overheads and the extended preliminaries incurred as a result of extra work will prima facie be recoverable as delay costs flowing from the additional work. 21–039 The figures mentioned above illustrate graphically how important it is to be able to separate the administrative and supportive costs that are attracted by D’s cost risk events. In the event that those costs cannot be separated from C’s own costs, then if C suffers delayed progress as a result of its own mistakes it will be virtually impossible for it to demonstrate that the costs incurred flow from the imposed change rather than from its own culpability. In such a case C would find it extremely difficult to prove its loss and recover costs39. Since damages must be verifiable and proven with reasonable certainty, the input of the damages expert, or forensic quantity surveyor, or cost engineer then becomes critical to the success or failure of the claim.

Potential heads of claim 21–040 In the event of the occurrence of a D’s cost risk event, provided the costs can be proved to have been incurred as a result of the event, prima facie they will be recoverable.

39 See Ch.18, “Concurrency, parallelism and pacing”.

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21–041 However, whilst delay and disruption can and often does occur as a result of acts and omissions at the liability of both C and D, the occurrence of loss alone will not normally be sufficient to found liability. In the Laburnum case40, for example, it was found that an allowance for the costs resulting from complete or partial idleness of C’s labour during periods of delay to progress caused by factors at D’s risk was recoverable, but the burden of identifying the costs caused during the particular period of D’s liability fell on C. The US Court of Claims stated that, whilst the total period of delay to completion was eight months, only two months of that could be ascribed to the fault of D; other factors at C’s risk caused the remaining delay to completion. The proper measure of damages in a case such as this was to permit C to recover its costs during the period of delay caused by D only. Therefore C should recover only its costs resulting from the complete or partial idleness of its workforce during the periods of compensable delay caused by D, including an allowance for its indirect costs.

Direct labour costs 21–042 Labour costs can escalate not only because of non-productive overtime and travelling time owing to the need for men to work longer hours or travel greater distances than was anticipated at the time of tender, but also as a result of wage awards. 21–043 Whilst currently not a significant or topical issue in the United Kingdom, delay to the original completion date can take the contract into a period of different trade labour agreement. The effect of this may be that a higher wage rate can be incurred from that which was in effect during the period in which the work was originally scheduled to be executed. However, to be recoverable, the increase in costs must be one for which the contract provides reimbursement. That will normally be an increase that C had no choice but to incur. In other words, C cannot recover voluntary increases in its outlay. 21–044 In William Sindall Ltd v North West Thames RHA41, the House of Lords, by a unanimous decision, decided that increases in payments made under a bonus scheme established in accordance with the rules and decisions of the National Joint Council for the Building Industry (NJCBI) were not recoverable under Cl.31A of JCT63. 21–045 Whilst the bonus scheme itself was established by the NJCBI, the payments themselves were not recoverable because: 1. 2.

the amount of bonus was not established by the NJCBI; and the decision as to whether C established a bonus scheme was voluntary.

21–046 On the other hand, it was held that, whilst Cl.31A of JCT63 provided that C was deemed to have based its tender on “rates of wages and other emoluments and expenses” payable in accordance with the rules, or decisions of the National Joint Council, where such rates were increased as a result of a decision by the NJCBI, then such increases were recoverable. 21–047 It seems that, if enhanced labour rates arising out of a national working rule agreement are to be recoverable, they must also be incurred in relation to a contract

40 (1964) 163 Ct Cl 339. 41 (1977) 4 BLR 151 (QB).

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of employment and not a contract for labour-only work by self-employed labourers, because self-employed persons do not come within the expression “workpeople” who are paid under, or in accordance with the rules of the NJCBI. In JC & Sons Ltd v Southwark London Borough Council42, C claimed that it was entitled to be paid price increases for self-employed building workers engaged by it to work on the site in carrying out the works. Clause 31A of the contract provided that C could recover any increases in rates of wages, etc, that were payable by C “to, or in respect of workpeople engaged upon, or in connection with the works in accordance with the rules, or decisions of the NJCBI”. By Cl.31D(6)(c), “workpeople” were defined as persons whose rates of wages and other emoluments are governed by the rules, or decisions, or agreements of the NJCBI. 21–048 Mustill J refused to grant a declaration that C was entitled to recover the increased cost of self-employed labour. He considered that the express words of the clause referred to “workpeople” and to amounts payable “in accordance with the rules, etc of the NJCBI”, but self-employed persons failed to come within those provisions. However, as they were self-employed, having obtained D’s authority to sub-let the portion of the works carried out by the self-employed labour, Cl.31C could then assist. Under that clause, if C had passed on to the subcontractor provisions to the like effect as Cl.31A, then payments of increases under NJCBI rules, etc, to such subcontractors would be reimbursable to C by D under Cl.31C. 21–049 In Ferguson v Dawson43, it was held that, when considering the status of an operative on a piece-work basis44, the question whether it was self-employed or an employee of C was not to be determined by the label attached to the transaction by the parties, but by the realities of the case. In that case an operative who had sustained an injury on site sued C for breach of statutory duty. That statutory duty was only owed to employees (under reg 3(1)(a) of the Construction (Working Places) Regulations 1966). The Court of Appeal found on the facts that the true relationship between the parties was one of master and servant, and accordingly the operative’s claim succeeded. However, it has been established that the “master and servant” test no longer has the same force in determining the existence of a contract of employment, although it provides useful indication in difficult cases45. Although that decision was concerned with breach of statutory duty, it is clear that, notwithstanding the label put on its engagement by the parties, it is general authority for the proposition that in a typical piece-work situation the operative was to be regarded as an employee of C. 21–050 Apart from general increases in the rates for labour from time to time, increased labour costs may be incurred simply as a result of change affecting how the cost of the work is calculated. For example, a very common occurrence in a disrupted project, which generally causes significant additional costs, is the hike in the cost of disrupted work as a result of a rate for labour only moving from a piece-work rate to a day rate, eg £4.00 per m2 of plaster to £80 per day for plastering. 21–051 Similarly, where, as a result of delay, labour moves from summer conditions of ten hours per day to winter conditions46 of eight hours per day, the non-productive

42 The Times, 16 April 1981. 43 [1976] 3 All ER 817. 44 Commonly known as “on the lump”. 45 See eg Hall v Lorimar [1994] 1 All ER 250, per Nolan LJ. 46 Or, into conditions of adverse weather where the proportion of productive to non-productive time also changes significantly.

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travelling time has to be recovered over a reduced period, thereby increasing the productive rate per hour. 21–052 In the US case of Williams v Strait47, C was entitled to recover increased labour costs arising from the fact that a new contract with employees came into effect during the construction project as a result of delay occasioned by negligence of a subcontractor that had resulted in the collapse of a steel frame. The court said: “This claim refers to the escalation in man-hours and the elevated wages [C] had to absorb for the time period subsequent to the collapse. [The witness] explained labour escalation as: labour escalation is not increased labour, it’s not additional people, it’s the escalation on the man-hours, so if a man is making ten dollars an hour and he has to increase to eleven dollars an hour at some future point in time if not for the delay . . . he could have been doing certain work at ten dollars an hour as opposed to eleven dollars an hour, so therefore that’s a one-dollar increase per man hour that this guy had to put in at a later period of time when, if not for the delay, he should have been able to put it in earlier, prior to the increase in the hourly wage . . ..”

Non-productive overtime 21–053 Contractors often calculate overall increases in their labour costs by using multiple causes of lost productivity, such as excessive and sustained overtime, stacking of trades, overcrowding, the effect of multiple changes and extreme temperatures. In principle, each of these causes of productivity loss is then calculated and the calculated loss from each cause is totalled to yield an overall productivity loss claim. 21–054 However, the problem with such a calculation is that there is often little correlation between the calculations and the conclusions drawn from them. The sum of the parts may yield a result in labour hours claimed that is greater than the actual overrun experienced. There is also a tendency for contractors to change the “labour-mix” from all skilled (eg approved electrician) to semi-skilled (eg apprentice) which may, for the purposes of the calculation, significantly increase the labour hours expended without increasing the actual cost to C. Without checking the detail of the labour as planned and as used, or conducting a different type of analysis, such as a measured mile calculation48, it is difficult to expose this. D should be sceptical if such multiple productivity loss calculations are used and should insist on a review of C’s job cost and labour reports to evaluate the actual variance between the contract budget man-hours and actual labour man-hours for individual work activities. 21–055 Overtime costs should be calculated directly from time sheets. However, the additional cost to the job of overtime worked at ten hours per day on six days per week, as opposed to eight hours per day on five days per week, can be calculated in a number of ways49. The following four examples illustrate the relationship between overtime and the increasing ratio of inefficiency during consecutive overtime periods, based on the assumption that there were 20,000 man-hours worked at a normal composite rate of £20 per hour and overtime at double rate with a presumed level of inefficiency due to extended overtime working.

47 Williams Enterprises Inc v The Strait Manufacturing & Welding Inc, 728 F Supp 12 (DDC 1990). 48 See Ch.17, “Disruption to progress and lost productivity”. 49 Mechanical Contractors Association of America, Change Orders, Overtime and Productivity (Mechanical Contractors Association of America, 1994).

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Example 1(A) 6 days × 10 hours Thus, this comprises: Ordinary time Overtime 40 hours at ordinary time 20 hours’ overtime Thus: 60 hours worked 80/60 However, 6 days/10 hours/day Therefore, 1.33/0.83 20,000 man-hours @ £20.00 × 1.6 multiplier Less original cost Increased cost

= 60 man-hours = = = = = = = = = = = =

40 hours 20 hours 40 hours’ pay 40 hours’ pay 80 hours’ pay 1.33 multiplier, without loss of efficiency 17% inefficiency 1.6 multiplier £400,000 £640,000 £400,000 £240,000

Therefore, £240,000 is the additional cost of a ten-hour working day six days per week instead of an eight-hour day five days per week. Example 1(B) Another way to calculate Example 1 on the basis of the same basic assumptions: 60 hours worked 80/60 6 days/10 hours/day

= 80 hours’ pay = 1.33 multiplier without loss of efficiency = 17% inefficiency50

5051

Therefore, C must work 20,000/0.83, or 24,096 man-hours to equal 20,000 man-hours’ production. Therefore, 24,096 × £26.6051 Less

= £640,954 total cost (at 10 hours/day/6 days/week) £400,000 total cost (at 8 hours/day/5 days/week) = £240,954 increased labour cost

Therefore, £240,954 is the additional cost of ten hours per day on six days per week instead of regular time of eight hours per day for five days per week. Example 2 With the above assumptions, this example demonstrates the additional cost of five days per week at ten hours per day and one day per week at eight hours per day.

50 Ibid. 51 £20/hr × 1.33 to allow for non-productive overtime.

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Regular time of 10 hour/5 days and 1 day at 8 hours Total time = 58 man-hours Ordinary time = 40 hours’ pay Overtime = 18 hours (36 hours’ pay) Therefore, 58 hours worked = 76 hours’ pay 76/58 = 1.31 multiplier if no loss of efficiency. Therefore, £20.00 × 1.31 However, 8 hours/day 6 days/week and 6 days/week at 10 hours/day

= £26.20 per man-hour adjusted rate = 4% inefficiency = 17% inefficiency

Therefore, approximate inefficiency rate is ⅚ of the difference between 4% and 17% + 4% = 14.83% Therefore, C must work 20,000/0.8517 Therefore, 23,482 × £26.20 day at 8 hours Less Total cost of 5 days at 8 hours

= 23,482 man-hours to equal 20,000 man-hours’ production = £615,228 total cost for 5 days at 10 hours/day and 1 day at 8 hours £400,000 = £215,228 increased labour cost

Therefore, £215,228 is the additional cost of five days at ten hours per day and one day at eight hours per day. Example 3 On the assumption that overtime for weekend working is double time and for weekdays overtime is time and a half, the question arises as to the additional cost to the job on the basis of six days at ten hours per day instead of five days at eight hours per day:52 10 hours/day at 6 days/week Normal time 10 hours at 1.5 multiplier 10 hours at double time Total 60 hours worked 75/60 without loss of efficiency Therefore, £20.00 × 1.25 However, 10 hours/day 6 days/week Therefore, C must work 20,000/0.83 Therefore, 24,096 × £25.00

= = = = = = = = =

60 man-hours 40 hours 15 hours 20 hours 75 hours payable 1.25 multiplier £25.00 man-hour adjusted rate 17% inefficiency52 24,096 man-hours to equal 20,000 man-hours’ productivity. = £602,400 total cost at 10 hours per day 6 days per week

52 Ibid.

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Less Increased labour cost

£400,000 total cost at 5 hours per day 8 days per week = £202,400

21–056 Therefore, the additional cost of five days at ten hours per day and one day at eight hours per day instead of five days at eight hours per day is £202,400. 21–057 In order to obtain a final enhanced labour cost, increases in taxes and insurance would have to be added to the calculated labour cost.

Staff costs “Staff in preliminaries is a category of resources whose expenditure, for the purposes of classification, often lies somewhere between that for personnel involved at the physical workface (whose involvement would ordinarily be dictated by the volume of work to be carried out) and that for personnel involved in the general administration and management of the broader business of [C] (whose involvement would ordinarily constitute fixed overhead expenditure.”53

21–058 Staffing costs will usually form an item of preliminaries54 or site-related costs and will include those costs for the day-to-day management of the site as a whole, including general foremen, trades foremen, non-working charge hands, etc, ie those whose daily activities involve supervisory, or non-productive work. Some evidence will be required to show the apportionment between productive and non-productive time. 21–059 The costs will include: 1. 2. 3. 4. 5. 6.

basic salary, bonuses etc; overtime payments; contributory pension payments (both employers’ and employees’ contributions) and company pension payments, if applicable; holidays with pay; travelling expenses; and provision of cars, vans, etc, or car allowances.

21–060 On large projects, staff costs and directly-employed attendant labour are usually the most significant monthly cost incurred. In the event of a claim for reimbursement of such costs, care should be taken to analyse the functions of staff (and any direct labour maintained on site) to establish that the tasks undertaken are related to the compensable event and not to other work or to other projects. 21–061 If costs for staff who are not permanently based on site are to be recovered as part of the site establishment costs, then appropriate time sheets need to be kept to justify their inclusion in site establishment costs as opposed to general overhead costs. Similarly, the same requirement as to time sheets applies to staff who are permanently based at one site, but who are concurrently involved in more than one project. 21–062 If additional supervisory staff is fully employed on the project for a period of time, the costs in connection with his or her employment should be easily extracted from the prime cost ledger. However, the increased partial cost of staff (which would 53 Dr Franco Mastrandrea, “The evaluation of preliminaries (or site overheads) in construction prolongation claims” [2009] ICLR 429, at [447]. 54 See below at para. 21–100.

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have spent only part of its time managing the project in question, but which, by virtue of the disruption, was more heavily involved) should probably be charged on a pro rata basis, as a separate head of claim55. The statement of events, or the preamble to the statement of claim, should indicate the tender allowance and the actual involvements. The following serves as an example: “The tender allowance for the contracts engineer was one day per week and this proved sufficient during the original contract period. Subsequently, due to the disruption of activities ‘y’ and ‘z’ it became necessary for the contracts engineer to relinquish his duties on all other projects and devote the whole of his time to this project. The additional involvement was four days per week for the period from 1 July to 14 February, a period of 33 weeks.”56

21–063 It is important that all such statements are numbered, to facilitate reference to them in the calculations, and accompanied by the evidential nexus for the increased involvement. The cost of additional staff may be calculated using the formula: Employment cost (£ per annum) × additional time in weeks (o r days) Weeks (or days in year ) 21–064 Applying the formula to supervisory staff in the example given above and assuming: employment cost working year working week additional days/week additional weeks

= = = = =

£15,000 pa 46 weeks 5 days 4 days 33 weeks

The calculation would be: £15,000 × 4 days × 33 weeks = £8,608.70 46 weeks × 5 days 21–065 Occasional supervisory visits during the extended contract period may be calculated in a similar manner to that described above, or on a “cost per visit” basis57. For example, the following calculations might show the charge for supervisor’s time: 1 day per visit travelling: 150 miles at £0.25/mile cost per visit 35 visits at £97.50

= = = =

£60.00 £37.50 £97.50 £3,412.50

55 See below at para. 21–058. 56 Based on a suggestion by James Franks. 57 James Franks, “Building Sub-Contractors’ Claims – Avoidance or Submission?” (1986) Studies in Contractual Claims 10 (Chartered Institute of Building).

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21–066 When assessing the “employment cost” of the contracts engineers, care must be taken to ensure that all costs in connection with their employment are included in the claim. 21–067 On complex projects, great care is needed to distinguish activity-related costs from company-related, site-related and part-site, or zone-related establishment costs from activity-related costs. It is now common, particularly on larger projects, for many administrative costs to be incurred at site level. For example, an accountant, whose responsibilities may have related to company work, when site-based and doing site work, may be properly recovered as a site-related overhead.

Management costs “The expenditure of managerial time in remedying an actionable wrong can properly form the subject-matter of a head of special damage.”58

21–068 In giving leave to defend an action in damages for the recovery of management time spent in pursuing outstanding professional fees, in Clancy Consulting v Derwent Holdings, Coulson J reflected that: “claims of this sort. . .are not always easy to establish. They require two things, above all: first, they require a proper causal link between the cost incurred and the alleged default on the part of the defendant; and, secondly, they require proof of the extent to which the ordinary trading routine of the claimant was disturbed.”59.

21–069 In Tate and Lyle v Greater London Council60, on a claim for, inter alia, damages for negligence and nuisance that resulted in siltation of the plaintiffs’ jetties on the River Thames, the defendants were held liable and damages were agreed subject to one issue. C claimed that it “had expended managerial and supervisory resources in attending to the problems created by the infringement of [its] rights”. It claimed this at 2.5% of the total loss and damage. The action had started in the Admiralty Division of the High Court where it was claimed there that there was a practice of allowing, without quantification, 1% of any collision damage as “compensation for disturbance and loss . . . over-head charges, expenses of staff and equipment and so forth thrown away” on the basis of what Lord Wright said in The Liesbosch: “For [D] it was claimed that there was no such rule in the Queen’s Bench Division and that such damages were only recoverable if quantified by acceptable evidence. But it is for [C] to produce evidence as to the actual loss incurred and percentage figures are unacceptable, as being ‘pure speculation’ as to quantum. [C] must prove his damage in the same way as he must prove any other essential ingredient of his case.”61

21–070 This case was referred to by HH Judge LLoyd QC in McAlpine Homes62, saying: “The problem, it seems to me, resolves itself into two constituents: 1.

58 59 60 61 62

Is there any warrant for suggesting that managerial time, which otherwise might have been engaged on the trading activities of the company, had to be employed

Tate & Lyle v Greater London Council [1983] 1 All ER 1159. Clancy Consulting Ltd v Derwent Holdings Ltd [2010] EWHC 762 (TCC) at [42]. [1992] 1 WLR 149. [1933] AC 449 at p.468, per Lord Wright. (1995) 76 BLR 59 at p.82.

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2.

on the initiation and supervision of remedial work (excluding anything which might properly be regarded as preparation for litigation)? and If so, could this reasonably be the subject of evidence, or is it so difficult to quantify that the application of some suitable rule of thumb is justified?”

21–071 Judge LLoyd found that managerial time had indeed been expended. He said: “I have no doubt that the expenditure of managerial time in remedying an actionable wrong done to a trading concern can properly form the subject-matter of a head of special damage. In such a case as this it would be wholly unrealistic to assume that no such managerial time was in fact expended. I would also accept that it must be extremely difficult to quantify, but modern office arrangements permit the recording of the time spent by managerial staff on particular projects.”63

21–072 However, because of the absence of a good set of records, C was unable to prove its alleged loss and failed in its action. In considering the difficulty of quantifying partly used managerial time as a loss, in Admiral Management Services, Brunton J (as he then was) said64: “Of course, it may be difficult to quantify any loss of revenue or business consequential on the diversion of employee time to dealing with a tort or breach of contract suffered by an employer. It may be that the cost of employee time may be taken as an approximation for the loss of revenue involved; but, if so, the claim remains a claim for loss of revenue rather than a claim for expenditure occasioned by the tort or breach of contract. If damages were to be awarded where no additional employee costs had been incurred, and no revenue lost, the employer would make a profit out of the tort or breach of contract in question. Both parties referred me to the judgment of Forbes J in [Tate & Lyle v GLC] in which he rejected a claim for damages for management time spent in attending to the problems caused by the defendants’ negligence and nuisance. The claim was rejected, not on the ground that management time spent in addressing a problem caused by the defendants’ tort was irrecoverable, but on the ground that the plaintiffs had failed to prove their loss. The judgment does not address the question whether the diversion of management time in that case led to a loss of revenue. Either the point was not taken by the defendants, or it was not addressed by the judge in view of his decision to reject the claim.”

21–073 In the more recent case of Bridge v Abbey Pynford65, concerning the delayed installation of a printing press, Ramsey J had no difficulty in holding C liable for the costs of D’s management time as damages, notwithstanding that they had been no more than estimated, retrospectively, saying66: “. . . it must be borne in mind that such an assessment is an approximation of the hours spent and may over-estimate or under-estimate the actual time which would have been recorded at the time. Some hours have been included for organising the outsourced work at [a subcontractor]. In addition, I consider that a discount should be applied to allow for the inherent uncertainty in this retrospective method. Overall, I consider that a discount of about 20% would be appropriate to allow both for the hours wrongly included for outsourcing to [the subcontractor] in August 2002 which I have disallowed and for the uncertainty arising from the method. The relevant hours spent by [D’s manager] were, therefore, I find 100 hours.

63 64 WLR 65 66

Ibid., at p.83. Admiral Management Services Ltd v Para-Protect Ltd (Ch D) [2002] EWHC 233 (Ch); [2002] 1 2722, at [87]. Bridge UK.Com Ltd v Abbey Pynford Plc [2007] EWHC 728 (TCC). Ibid., at [122] to [128].

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I accept that the appropriate approach to the question of recovery of such management time is that set out by Gloster J in R+ V Versicherung67 and I respectfully adopt the approach. At para 77 Gloster J said that: ‘as a matter of principle, such head of loss (ie the costs of wasted staff time spent on the investigation and/or mitigation of the tort) is recoverable, notwithstanding that no additional expenditure “loss”, or loss of revenue or profit can be shown. However, this is subject to the proviso that it has to be demonstrated with sufficient certainty that the wasted time was indeed spent on investigating and/or mitigating the relevant tort; ie that the expenditure was directly attributable to the tort – see per Roxburgh LJ in British Motor Trades Association68. This is perhaps simply another way of putting what Potter LJ said in Standard Chartered69 namely that to be able to recover one has to show some significant disruption to the business; in other words that staff have been significantly diverted from their usual activities. Otherwise the alleged wasted expenditure on wages cannot be said to be “directly attributable” to the tort’. In this case [D’s manager] states at paragraph 79 of his witness statement and I accept that [D] ‘suffered losses due to lost opportunities since I was the New Business Development Director at the time, and I was unable to leave the premises in order to attend to other responsibilities such as selling and marketing the Claimant’s business’. In his evidence [D’s Finance Director] explained that [D’s] turnover has increased from about £2 million in 2002 to an estimated £10 million this year. It is therefore clear, in my judgment that [D’s manager’s] time would have been spent in selling and marketing [D’s] business than being occupied in dealing with the problems for which the [C] has accepted liability. As a result, I am therefore satisfied from [D’s manager’s] evidence that he spent time dealing with, investigating and mitigating the effect of the problems caused by [C]. That time amounted to 100 hours. [D’s manager] would otherwise have been selling and marketing [D’s] business during that time. On that basis [D] is entitled to recover for 100 hours of [D’s manager’s] time.”

Goods and materials “. . .it is unusual to see the cost of materials as the foundation for delay (or disruption) claims. Related claims are sometimes advanced, eg, extended storage charges for, or deterioration of, materials because of delays, or costs associated with the need to provide unexpected, increase or extend storage arrangements because of a postponement, suspension, denial of storage facilities anticipated or other breach of contract.”70

21–074 Whilst labour may be described as the most variable ingredient in the computation of losses, material is the most visible. Because of that visibility, the material content of claims is frequently less controversial than other constituents. 21–075 As an example of an increased material costs claim, the losses arising from reinforcement bars arriving on site wrongly configured due to an incorrect reinforcement schedule might be considered. In this scenario, rather than wait for correctly configured reinforcement to be delivered to site, C might choose to mitigate the anticipated delay by ordering additional straight bars and then bending and cutting on site these straight bars together with some of those wrongly delivered. Such measures necessitate a complex interaction between resources71. The decision to site-bend and

67 R+V Versicherung AG v Risk Insurance and Reinsurance Solutions SA [2006] EWHC 42 (Comm). 68 British Motor Trade Association v Salvadori [1949] Ch 556; [1949] 1 All ER 208 at 569. 69 Standard Chartered Bank v Pakistan National Shipping Corporation [2001] EWCA Civ 55, [2001] CLC 825. 70 Dr Franco Mastrandrea, “The evaluation of preliminaries (or site overheads) in construction prolongation claims” [2009] ICLR 429, at [457]. 71 See Ch.11, “Mitigation, recovery and acceleration”.

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cut to save time brings with it the need to separate labour, plant and material resources between those costs that would have been incurred anyway from those flowing solely from the event. 21–076 If C has not kept good records, and is thus unable to isolate additional costs, it generally follows that the claim will be presented on the basis that the additional cost is represented by the actual costs less the allowance in the tender. Inevitably, this means that C’s rates for materials and wastage must be scrutinised for reasonableness. Unless such an exercise is undertaken it is far too easy to come to the wrong conclusion as to the reason for increased material costs. 21–077 The starting point should be a comparison of the tender and prime cost ledger for the goods and materials concerned. This may show some loss, in which case an abstract of material contained in the prime cost ledger should be prepared, which identifies the quantities of all relevant items. 21–078 The materials, delivery schedules, delivery notes and invoices should provide sufficient information. Other items, such as double handling, wastage, and damage to materials, have to be dealt with on an ad hoc basis.

Plant and equipment 21–079 Plant and equipment costs usually form the next largest direct cost after labour costs. Additional plant and equipment costs can be incurred as a result of the need for: 1. 2.

additional plant and equipment to deal with a change in the quantity or type of work; or plant and equipment required to remain on site for a longer period of time than originally anticipated.

21–080 Rental of equipment may be prolonged or increased as a result of a delay to progress. There appears to be authority in the United States for allowing some cost in respect of plant owned by C taking into account its diminution in value due to use, additional maintenance costs and so on. The application of those costs to a notional rental value, in effect produces a formula adjustment72. 21–081 In Williams v Strait 73 it was held that C, who did not show when each piece of equipment arrived at and left the construction site, could not recover for extended equipment hire costs. The court said: “[C] argues that . . . although the actual arrival and departure dates of each piece of equipment are not available . . . it is entitled to reimbursement for its continued ownership expenses, namely, depreciation, insurance taxes and storage, relying on the proposition that it is required to prove only the fact of damage and to establish a reasonable estimate of them. This Court finds that although [C] is not required to prove with accuracy the amount of damages, it failed to establish a reasonable estimate for such items. [C] omits a crucial element in its damage calculation for these items, namely when each piece of equipment arrived and left the site. Moreover, it is quite possible that these same items were used in some other aspect of the construction subsequent to the steel frame collapse. It is unclear from the evidence presented that these items were used solely for the purpose of the erection of the structural steel frame.”

72 Brand Investments Co v United States, 102 Ct Cl 40, 324 US 850. 73 F Supp 12 (DDC 1990).

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21–082 Where the plant is owned by C, then the costs recoverable in the event of a prolongation claim being successfully pursued may be limited to the “depreciation costs” of the plant during the period of prolongation, as was established in Sunley v Cunard White Star74. On the other hand, where the plant is hired in, then invoices from the plant hire company will be required. In such a case, it will be necessary to examine the conditions of hire to establish whether, or not the rates include the driver, fuel, and so on, and how matters such as standing time, guaranteed minimum hire periods, etc are dealt with. 21–083 Where a claim for reimbursement of additional costs arising out of the intermittent use of plant is concerned75, the claim must usually form a separate head supported by the appropriate factual evidence and causal nexus. 21–084 It is common for contractors to claim for loss and expense in respect of plant by reference to rates of hire charge regardless of whether the plant was hired or owned. However, this may not be sustainable when C owns the plant and thus has not incurred the hire charge76. 21–085 In Laburnum Construction Corporation v United States77, the fair rental value of equipment owned by C rendered idle by delays attributable to D was held by the US Court of Claims to be a proper basis for a claim for damages. However, in this case it was held that the value should be reduced by 50% to reflect the absence of ordinary wear and tear. 21–086 On the other hand, calculations by means of a notional rental value was expressly rejected by HH Judge LLoyd QC in McAlpine Homes v Property and Land 78. In this case, the arbitrator had found that: “Although these items of plant have always been separated from the JCB [a reference to the preceding claim for Plant which had been hired by C], I find no difference in principle between JCBs and whackers, dumpers, mixers and stihl saws. These are all items of plant which would normally be hired by a small contractor, as opposed to barrows, picks, shovels, drills and the like, which I regard as being small tools essential to a builder’s trade. I consider it fortuitous for [D] that the whacker, dumper, stihl saws and mixer were owned by [C]. Had they not owned this equipment then it would have been perfectly reasonable for it to have been hired, as they hired the JCB. The arguments advanced in respect of notional depreciation are not relevant. As with the JCB, the piecemeal nature of the works occasioned by the random sequencing of operations would justify the need for the equipment to be readily available, and I am satisfied that these items of plant were required to progress the works during the period of the overrun. I consider that the rates claimed for the specific items of plant are very reasonable. Reference to the RICS Schedule of Basic Plant Charges further supports [C’s] evidence. It is also significant that in the explanatory notes to these schedules it is confirmed that ‘the rates apply to plant and machinery already on site, whether hired or owned by [C]’. I consider that [D] has benefited from [C’s] ownership of the tools and that the rates charged are more than reasonable.”

21–087 On appeal, Judge LLoyd dealt with this as follows: “From the award it appears that the arbitrator regarded the fact that [C] owned the small plant as ‘fortuitous’, and, on the basis that, if the plant had not been owned by [C], the

74 Sunley & Co Ltd v Cunard White Star Ltd [1940] 1 KB 740. 75 For example, the increased use of mobile cranage to supplement a tower crane where the overlap of trades caused by delayed activities diminishes the availability of the tower crane. 76 Alfred McAlpine Homes (North) Ltd v Property and Land Contractors Ltd (1995) 76 BLR 59, per Judge LLoyd at p.92. 77 (1964) 163 Ct Cl 339. 78 Alfred McAlpine Homes (North) Ltd v Property and Land Contractors Ltd (1995) 76 BLR 59 at p.90.

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plant would have been hired by [C], dismissed arguments about valuing the claim in terms of depreciation. Instead the arbitrator valued the claim by reference to what he regarded as reasonable hire charges . . . . . . In my judgement, the arbitrator interpreted clause 26.1 incorrectly as permitting him to award as an ascertainment of direct loss or expense an amount which might have been the loss or expense suffered or incurred by [C] had it not owned the plant but had hired it but which was not in fact its actual loss or expense since it owned the plant and had not hired it . . . Where plant is owned by [C] which would not have been hired or which was not able to be hired out the ascertainment of loss and expense must be on the basis of the true cost to [C] and must not be hypothetical or notional amounts. An ascertainment needs to take account of the substantiated cost of capital and depreciation but will (or may) not include elements which are included in hire rates and which are calculated, for example, on the basis that the plant will be remunerative for only some of time and other times be off hire . . . The question of law implicit in this part of the appeal will therefore be answered as follows: ‘. . . in ascertaining direct loss or expense under clause 26 of the JCT conditions in respect of plant owned by [C] the actual loss or expense incurred by [C] must be ascertained and not any hypothetical loss or expense that might have been incurred whether by way of assumed or typical hire charges or otherwise . . .’.”79

21–088 Apart from plant invoices, plant allocation sheets giving details of the item of plant used on site, including the element of work engaged upon, time worked on each element, relocation from one part of the site to the other and standing time, are a useful source of cost information.

Loss of productivity 21–089 Losses are often incurred through C’s failure to achieve levels of productivity that C anticipated at the time of tender80. 21–090 When work is subcontracted, there are two problems to be overcome. 1. 2.

the loss will not be C’s, it will be its subcontractor’s, and only in the event that C pays its subcontractor will it have a loss. in the event that C incurs a loss through additional payments to its subcontractor, it has to be able to show that that the payment was reasonably made in compensation of the subcontractor’s loss, and not gratuitously81.

21–091 Ultimately, it will be for the subcontractor to prove its loss of productivity, but many contractors are understandably reluctant to enlist the help of their subcontractors in proving their claim lest they be left with a disputed payment to a subcontractor which they cannot recover. 21–092 At its simplest, loss of productivity may be calculated by assessing the ratio or quotient of labour to materials in the tender and comparing it with the ratio in the work as executed. If the tender was prepared by building up the tender sum and adding together the sums for labour, plant and materials in a tender summary, the sums included are readily ascertained82. 79 Ibid. 80 See also Ch.17, “Disruption to progress and lost productivity”. 81 See, for example, P & O Developments Ltd v The Guy’s and St Thomas’s NHS Trust [1999] 1 BLR 3 and The Royal Brompton Hospital NHS Trust v Frederick A Hammond (No 1) [2000] EWHC 39 (TCC); [1999] 4 BLR 162; [2001] 76 Con LR 148 (CA). 82 J Franks, “Building Sub-Contractors’ Claims – Avoidance, or Submission?” 1986 Studies in Contractual Claims 10 (Chartered Institute of Building).

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21–093 By way of example, suppose, for instance, that the tender summary for a project indicated that the sums included were: labour costs materials costs giving a ratio of labour/materials

= £38,000 = £50,000 = 43.18% − 56.82%

21–094 If the prime cost ledger at completion of contract records: labour costs

= £75,000

materials costs

= £63,000

The final ratio of labour to materials costs = 54.38% − 46.65% 21–095 The higher labour ratio may be related to the estimated labour cost included in the tender. It will be seen that a loss on the original work value may be calculated as: 54.38 × £38, 000 − £38, 000 = £9, 856.42 43.18 21–096 The calculated sum relates to the tender sum and it does not take into account any variations that may have occurred during the course of the subcontract works that could alter the labour ratio. These should be dealt with separately. 21–097 It will be appreciated that the ratios based on the prime cost ledger at the completion of the contract must be regarded as merely indicative. They do, however, provide a simple basis of calculation that, in the absence of a better method83, enables C to demonstrate that it is in loss and that its records show a different picture from that which it anticipated at the time of tender.

Temporary works 21–098 By the nature of temporary works, the recovery of the cost arising out of delays or disruption to the contract will be referable to a combination of labour, plant and material resources. 21–099 Because bills of quantities will not usually quantify temporary works in detail, the eligibility of any such claim will be dependent, in the first instance, on showing that the original allowance for such works was reasonable and was consistent with C’s method statement. Typically, a claim for recovery of enhanced costs arising out of temporary works might comprise a claim for the costs of propping or unplanned sheet metal piling as a method of support because of unforeseeably difficult ground conditions.

Preliminaries 21–100 In the United Kingdom, site establishment costs (commonly referred to in the United States as “field office” costs) are generally referred to as “preliminaries”. 83 See Ch.17, “Disruption to progress and lost productivity”.

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These are not activity-related costs, but include those heads of cost that, whilst specific to a particular contract site, are not related directly to particular activities carried out on the site. In Wetherspoon v CRC84, which concerned an appeal against an assessment of corporation tax for expenditure on fitting out and refurbishing public houses, the tribunal observed: “Preliminaries generally refers to [C’s] necessary costs which are not usually tangibly reflected in the finished works as opposed to costs directly related to the quantity of items of work, ie materials, tradesmen and site labour, tools and small plant. Costs concerned with the works as a whole are preliminaries being commonly referred to as [C’s] site-related overheads. Preliminaries costs are incurred on every construction contract although for a simple contract a lump sum may be agreed without identifying preliminaries. For more complex projects, such as the [public house] refurbishment, the tender document usually requires preliminaries to be identified separately. Irrespective of [C’s] pricing policy, the cost of preliminaries or overheads are integral parts of the construction costs85. It is clear that the expression “preliminaries” is not a precise expression. Items which might be treated as preliminaries in one contract or tender might not be so treated in another. While some costs, such as portable toilets, are not capable of meaningful attribution to measured work, other costs may be capable of meaningful attribution, albeit with varying degrees of difficulty. All, however, will be integral parts of the construction costs of the measured work to the extent that they can be properly apportioned to such work. A cost properly attributable to one item of work cannot properly be apportioned among the whole.”86

21–101 Although, in the past, what has been meant by preliminaries has thus largely differed from project to project, from 1 May 2009, in the United Kingdom, the RICS “New Rules of Measurement – Order of Cost Estimating and Elemental Cost Planning” (NRM) has taken effect to bring cost-estimating procedures in the United Kingdom in line with the RIBA Plan of Work and the OGC Gateway project management processes. Under this guide to good practice, “preliminaries” is defined as including: “[C’s] costs associated with management and staff, site establishment, temporary services, security, safety and environmental protection, control and protection, common user mechanical plant, common user temporary works, the maintenance of site records, completion and post-completion requirements, cleaning, fees and charges, sites services and insurances, bonds, guarantees and warranties.”

21–102 Outside the RICS’s NRM, costs under the heading of preliminaries may reasonably include such things as: 1. salaries, or wages, of: 1.1. site agent; 1.2. timekeepers; 1.3. record keepers; 1.4. schedulers; 1.5. material checkers; 1.6. watchmen; 1.7. cleaners; 1.8. hoist and crane operators; and 1.9. project staff;

84 J D Wetherspoon Plc v The Commissioners For Her Majesty’s Revenue & Customs [2007] UKSPC SPC00657. 85 Ibid., at [82]. 86 Ibid., at [85].

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2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19.

rubbish chutes and skips; CA’s office; clerk of works’ office; site offices; workmen’s sheds; tool sheds; material storage containers; safety requirements; site engineering; temporary enclosures; hoardings and protection; scaffolding; bonding costs; heating for site offices and sheds; electricity for the works; water for the works; telephones; and fixed damage and other site-related plant.

21–103 These costs will include “hard” site costs, related to the site as a whole, such as the costs of providing lighting and power and site telephones etc, which can be demonstrated by means of invoiced costs, as well as those “soft” costs that must be calculated by reference to their value to the job, such as management and plant. Whilst invoices for fuel, electricity, and water usage should easily be available, if the power source is temporary generators, then invoices for the hire of the generators should be provided, together with the costs of any attendance. 21–104 The costs of site accommodation will include the site office, storage sheds, mess rooms, clerk of works’ office, toilets, etc for which invoices will be required in support of the claim for reimbursement. If any of these items are owned by C then, normally, the recoverable costs will be limited to the value of depreciation. 21–105 Ancillary costs such as cleaning out, provision of welfare facilities, and so on should also be identified. Any labour involved in providing health and welfare or security facilities should be identified and costed in the same manner as for supervisory staff. However, if outside agencies are employed to undertake security, then relevant invoices should be available to support the appropriate cost claim. 21–106 Because they appear to be easier to identify and recover as project-related costs than as administrative costs87, there now seems to be a tendency in the industry to allocate visiting staff costs to project costs whereas, in the 1970s, they were generally thought to be part of the administrative overhead of the company. 21–107 However, where the valuation of a cost risk event is concerned, it does not necessarily follow that staff costs are recoverable against a particular event simply because the staff are referred to as “resident”, or recorded as allocated to that project. Irrespective of how a particular company accounts for the costs of its staff, C must prove the losses that are claimed to flow from the event, and time-records of staff for which costs are claimed should be an essential part of that proof.

87 Because of the notorious difficulty of identification, such costs are sometimes recovered on the basis of a formula adjustment.

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21–108 Site overheads was considered by the US court in Williams v Strait88, in which it was described thus: “This claim pertains to [C’s] costs for remaining on the site beyond the time the project would have been completed. But for the delay caused by [the SC’s] negligent construction, [C] would have finished the project on schedule and moved on to another project. Therefore the costs for remaining on the site are reimbursable. This includes the required on-site management, temporary electricity, telephones, trailer, clean-up, and other regular construction project needs. [The SC] argues that if the delay alleged to have been caused by the accident were not concurrent with other delays, the theory underlying this element of damage would be sound, and this would be an appropriate recovery. Since the delay was not concurrent with any others, [the SCs] were solely responsible and liable to [C] for the delay. These costs . . . are recoverable by [C].”

21–109 Simply because C’s overheads will not normally be the same throughout the contract period, it is generally unacceptable to calculate C’s overheads as a whole and then to distribute them equally over the whole of the contract period to arrive at an average cost per week or per day. For example, a delay to progress at the beginning and end of the work will be likely to attract fewer preliminaries than a delay to progress at mid-contract when such things as cranage, scaffolding, enhanced supervision and subcontractors hutting will also be required. So, for example, in Ascon HH Judge Hicks QC observed: “The second main ground of attack was [C’s expert’s] use of average figures, derived from the whole contract period. It was said that the cost of site staff, for example, should be taken as at the periods of delay, at or near the beginning of the contract period, when staffing was at a low level. There is some force in this criticism in principle, but neither [D’s expert] nor anyone else has provided me with any calculation on the basis which [D’s counsel] says should have been adopted. Moreover [D’s counsel’s] own suggestion of deriving a daily rate from the tender preliminaries itself adopts the “average” approach. I do not therefore make any exact arithmetical adjustment to [C’s expert’s] figures on this score, but I take it into account in my final assessment89.”

21–110 It is thus necessary to allocate the overheads to windows or watersheds of time90, which, depending upon the granularity available, may accord with monthly or fortnightly valuations, or consist of longer periods. Once particular overheads have been isolated to particular periods, it is usually a simple matter of computation to determine a daily overhead rate per unit period for the general site costs for the duration of the project. The daily overhead rate per period can then be multiplied by the number of days’ delay to progress in each period to ascertain the increase in overhead attributable to the causal event.

Head office costs 21–111 Heads of cost under the title of head office overheads are likely to include such things as: 1. rent; 2. insurance; 88 F Supp 12 (DDC 1990). 89 Ascon Contracting Ltd v Alfred McAlpine Construction Isle of Man Ltd (1999) 66 Con LR 119; (2000) 16 Const LJ 316; (2000) CILL 1583, at para.43. 90 See Ch.14, “Cause and effect”.

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3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

heat; power; water; depreciation; general office consumables; head office staff; car fleet and transport; bank charges, legal and other professional fees; and office equipment leasing costs.

21–112 One of the constituent parts of C’s costs is obviously that of running its business. The special problem associated with claiming reimbursement of such costs is that, not only are they not activity-related so that they cannot be directly related to a delayed activity, but also they are not job-specific and so cannot be directly related to a particular project. Yet they still represent costs that have to be met by earnings from the construction projects carried out. This head of claim, otherwise known in the United Kingdom as “head office” overheads and, in the United States, as “home-office” overheads, includes all those costs that, whilst not being activity- or site-related, are related to running the business of the company as a whole. 21–113 Head office overheads can properly form a head of claim in two ways: 1. 2.

as additional costs directly incurred as a result of some compensable event; and as costs necessarily incurred in running the company which have not been recovered through other work because of a delay to completion and the diminution of turnover (often referred to as unabsorbed overheads)91.

21–114 Contractors generally make allowances in their tenders for the recovery of the cost of head office overheads by reference to their projected overheads and projected turnover. In other words, on any particular contract, C will typically allow for this by a percentage uplift to the projected job-related costs. Some contractors and subcontractors apply different overhead percentages to different resources. For example, contractors may apply a different overhead percentage to direct labour than to subcontract labour costs and then distinguish between labour, plant and materials in regard to the applied uplift. 21–115 By contrast with the manner in which the costs are calculated at tender stage (ie turnover-related as a percentage of the contract value), when it comes to claims, additional overhead claims are almost always calculated on a time-related basis. Contractors will often calculate their extended head office overhead costs based on the number of days of delay derived from a schedule analysis and a daily rate for each day of delay to completion. 21–116 Once an overhead has been allocated to the particular contract in question, it is usually a simple matter of computation to determine a daily overhead rate for the duration of the project. The daily overhead rate can then be multiplied by the number of days’ delay to progress caused to ascertain the increase in head office overheads attributable to the causal event.

91 See para. 21–111 et seq.

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Insurances 21–117 In the US case of Williams v Strait92, delay was caused by the collapse of steelwork, and C was entitled to recover the increased cost of an insurance premium during the period of delay. Having heard the evidence of, amongst others, C’s insurers (as experts), the court said: “The impact of the Coolidge accident was not recorded in underwriting data until 1985 and it was the principal cause for the effective termination of insurance by Continental at the end of calendar year 1985. This termination ended a 40-year relationship between Continental and [C]. Forced to enter into a tight market and obtain coverage on short notice in 1985, [the expert] testified that as a result of the accident, [C] was required to pay $45,000 additional for similar insurance coverage in 1986, notwithstanding a substantial drop in payroll from $5.8 million in 1985 to $3.7 million in 1986. He also testified that such an increase would continue to have a similar impact on [C’s] insurance costs for at least 3 years . . . .”

21–118 Insurance costs are generally turnover-related rather than time-related although that may not always be so. In Mirant v Ove Arup93 Mirant (as C), claimed against Ove Arup (as D) the cost of extended insurance for the delay to completion which it alleged had been caused by D’s negligent design of foundations. Although in this case the claim was rejected on its facts, it is clear that a prolongation of the contract period could, but will not necessarily, increase the cost of insurances.

Financing costs 21–119 Additional costs will flow from C having to finance retentions, uncertified increased costs and overheads for a longer period of time than would normally have been the case if they had been certified and paid promptly. In principle, financing costs can be incurred over four different periods, each having different rates, or methods of calculation and different rules as to recovery. 21–120 Figure 21.13 illustrates each of these periods in which the rules regarding the first three will usually be dependent upon statute or the terms of the contract. If interest is not paid voluntarily, or paid promptly in accordance with a judgment, or an arbitrator’s award, then the final period of interest will be that upon the award, or judgment and from the date of the award, or judgment until payment. [Please refer to Figure 21.13] 21–121 In F G Minter Ltd v Welsh Health Technical Services Organisation94, the Court of Appeal considered whether the words “direct loss or expense”95 included interest that C had paid on capital borrowed as a result of the events specified in those clauses and interest that C had been prevented from earning on its capital in consequence of those events during the periods: 1. 2.

between the loss, or expense being incurred and the making of a written application for reimbursement; during the period of ascertainment; and/or

92 F Supp 12 (DDC 1990). 93 Mirant Asia-Pacific Construction (Hong Kong) Ltd v Ove Arup & Partners International Ltd [2007] EWHC 918 (TCC). 94 (1980) 13 BLR 1. 95 In Cll.11(6) and 24(1) of JCT63.

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3.

between the time of completed ascertainment and the issue of the certificate describing the amount thereby ascertained.

21–122 First, the court had to consider whether, in principle, interest or finance charges incurred by C were too remote to come within the phrase “direct loss or expense”. Ackner LJ cited, as an example, the consequences of C’s complying with a variation where there is primary loss and expense incurred (eg the payment of machinery hired which has remained idle while the variation instruction is carried out), and there may then be a secondary loss (the expense of raising the necessary capital through a bank overdraft, or the drawing of money from C’s deposit account, thereby losing the interest it was earning) in order to meet the primary expense96. 21–123 In acknowledging C’s need to borrow capital to pay wages and hire charges, and locking up in plant, labour and materials capital that it would have invested elsewhere, Stephenson LJ said: “The loss of the interest which he has to pay on the capital he is forced to borrow and on the capital which he is not free to invest would be recoverable for [D’s] breach of contract within the first rule in Hadley v Baxendale, without resorting to the second, and would accordingly be a direct loss, if an authorised variation of the works, or the regular progress of the works having been materially affected by an event specified in clause 24(1)97, has involved [C] in that loss.”98

21–124 The court decided that the loss referred to was not simply some loss, or expense past, or future of which the CA was being given warning in the application, but the loss to be included in the certificate. This was the effect of the words in the clause of “loss or expense having been incurred”, and it was “the amount of such loss or expense” that the CA has to ascertain and certify. It followed therefore that the loss or expense to be ascertained and certified by the CA was that incurred by C by the time it made its application; that application, having regard to the wording of Cl.11(6), could not require the ascertainment of both the loss or expense incurred up to the date of the application and that which would be incurred thereafter. 22–125 In this regard Stephenson LJ said: “I do not think that today we should allow medieval abhorrence of usury to make us shrink from implying a promise to pay interest in a contract if by refusing to imply it we thereby deprive a party of what the contract appears on its natural interpretation to give him. There should be no presumption in favour of an anomaly and an anachronism.”99

21–126 Because of the particular wording of JCT63, the court held that C could only recover financing charges for the period between the loss, or expense being incurred and the making of a written application for reimbursement. In other words to recover all its financing costs, C would have to make repeated requests for reimbursement. His Lordship added: “I respectfully agree with the judge that the [CA] would be exceeding his powers were he to take into account further financial charges or other losses accruing during these two periods (the items 1 and 2 on the previous page) however long, and such further charges and losses would be recoverable only, if at all, under a subsequent application or subsequent

96 97 98 99

FG Minter Ltd v Welsh Health Technical Services Organisation (1980) 13 BLR 1 at p.22. Now JCT80, Cl.26.2. (1980) 13 BLR 1 at p.15. Ibid., at p.17.

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applications although he might obtain [D’s] approval to waiving the required applications or extending the time for making them. But again I feel bound to differ from the judge’s conclusion that they are therefore not direct losses or expenses and are therefore not recoverable at all. I appreciate that a series of successive applications may increase the burden of the [CA’s] labours, and that burden may be further increased by delay on the part of [C] . . . in providing information which he reasonably requires either for forming his opinion and for ascertaining amounts under those clauses. But contractors have a duty under Clause 30(5) (b) of the main contract (not altered by an additional duty imposed by an amendment to clause 30) to send him ‘all documents necessary for the purposes of the computations required’ by the conditions of contract.”100

21–127 His Lordship then went on to draw a distinction between JCT63 and JCT80 with regard to the need for subsequent applications: “It is, I suspect, to meet the difficulties created by that amendment and by the need for successive applications that [JCT80] has been redrafted . . . to require applications to be made ‘as soon as it has become, or should reasonably have become apparent to [C] that the regular progress of the works or any part thereof has been or is likely to be affected’ by specified events (including instructions requiring variation) and to state ‘that he has incurred or is likely to incur direct loss or expense’; and also to require the [CA] to ascertain ‘the amount of such loss or expense which has been or is being incurred by [C]’.”101

21–128 In the case of Rees and Kirby Ltd v Swansea City Council102, it was contended by D’s counsel that the claim should have been allowed on the basis of simple interest only and not compound interest. However, the Court of Appeal confirmed that financing costs should be calculated at compound interest, with periodic rests taken into account where that was the way they had been incurred. Goff LJ said: “there remains to be considered the question whether [C] are entitled to recover their financing charges only on the basis of simple interest or whether they are entitled to assess their claim on the basis of compound interest calculated at quarterly risks as they have done . . . it is notorious that banks do themselves when calculating interest on overdrafts operate on the basis of periodic rests on the basis of the principle stated in the Court of Appeal in Minter’s case, which we here have to apply, I for my part can see no reason why that fact should not be taken into account when calculating [C’s] claim for loss or expense in the present case.”103

21–129 The court held that, in calculating financing costs, the following should be taken into account: 1. 2. 3.

100 101 102 103 104

the appropriate rate of interest is that which was actually paid by C (provided it is not unreasonable); where C pays well above market rates, the appropriate rates are those “at which contractors in general borrow money”104; the cost of finance shall be calculated on the basis charged by C’s own bank, using the same rates and rests, ie providing for recovery of those interest charges actually incurred;

Ibid., at p.19, per Stephenson LJ. Ibid., at p.20. (1985) 30 BLR 1. Ibid., at p.23. Tate & Lyle v Greater London Council [1983] 1 All ER 1159.

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4.

5.

where C is self-financed or financed from within its own corporate group, the appropriate rate of interest is that earned by C (or its group) on monies it has placed on deposit; and account should be taken of actual negative cash flows by way of primary expense, ie expenses which are incurred progressively.

21–130 In Morgan Grenfell Ltd and Sunderland Borough Council v Seven Seas Dredging Ltd105, a case under ICE (5th edition), it was argued that, whilst the CA was required to form an opinion as to the amount shown in C’s statement which is due and then to issue a certificate for that amount, if the CA failed to form an opinion or, having formed an opinion omitted a sum from the certificate, interest should be payable. If, on the other hand, the CA formed an opinion that no sums were due and therefore, under Cl.60(6), there was nothing to certify, this did not constitute a failure to certify and therefore there would be no interest due. 21–131 HH Judge Newey QC considered that, in the absence of wording concerning the CA forming an opinion, words to that effect would have to be implied. In determining whether a sum should have been certified, the arbitrator could not be expected to consider whether it was issued bona fide. He was to decide only whether it was correct and, if not, to correct it. Following the Seven Seas decision, the subsequently published ICE6 expanded the wording of Cl.60(6) of the fifth edition, making it clear that interest is payable on under-certification. 21–132 The JCT contracts do not contain similar provisions and under these forms of contract it would appear that interest is not recoverable on under-certified valuations. In Lubenham Fidelities and Investment Co Ltd v South Pembrokeshire District Council106, for instance, a CA deducted liquidated damages from the face of a certificate. This was regarded as an under-certification, but the judge found that this did not constitute a breach of contract by D, and C was not entitled to damages or interest on uncertified amounts. 21–133 The Late Payment of Commercial Debts (Interest) Act 1998, which came into effect in August 2002, provides an implied term into every relevant contract that every qualifying debt carries simple interest at 8% above the official dealing rate from the date at which the debt should have been paid until the date upon which payment is made, or the debt otherwise extinguished, and any terms providing a less substantial compensation are void of effect. 21–134 The Late Payment of Commercial Debts (Interest) Act 1998 implies terms for payment of statutory interest into contracts for the sale of supply of goods or services where the purchaser and the supplier are each acting in the course of a business, other than contracts that are expressly accepted. Any contract terms that purport to exclude the right to statutory interest are excluded unless there is a substantial remedy for late payment of the debt. 21–135 The Regulations came into force on 16 March 2013 , in response to the Late Payment Directive (2011/7/EU) and apply to commercial contracts made on, or after, 16 March 2013 for the supply of goods or services, unless excepted. Where a public authority purchases goods or services, interest will start to run on outstanding payments from 30 days after the latest of receiving the supplier’s invoice, receiving the goods or services and verification or acceptance of the goods or services (where 105 (1991) 49 BLR 31. 106 (1986) 33 BLR 39.

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provided for by statute, or contract). The same rules apply to a business purchasing goods or services, where the parties have not agreed a due date for payment. However, a business and a supplier can agree a due date for payment of up to 60 days after the latest of the events referred to above. Providing the extension is not “grossly unfair” to the supplier, the parties can agree to extend the due date for payment beyond that. If a public authority or business purchaser agrees an earlier due date for payment with a supplier, interest will run from that date. 21–136 Defaulting purchasers will be liable to pay interest at a rate that provides a “substantial contractual remedy”, together with fixed sums for compensation for late payment (currently £40 for a debt less than £1,000, £70 for a debt exceeding £1,000 but less than £10,000 and £100 for a debt exceeding £10,000). That fixed sum compensation has generally been understood as being compensation for debt recovery efforts made by the creditor. However, the Regulations provide that: “If the reasonable costs of the supplier in recovering the debt are not met by the fixed sum, the supplier shall also be entitled to a sum equivalent to the difference between the fixed sum and those costs. Any attempt to exclude, or limit this right is made subject to the reasonableness test under the Unfair Contract Terms Act 1977.”

Illustration Facts: Yuanda (UK) Co Ltd (C) entered into a trade contract with WW Gear Construction Ltd (D) for the provision of curtain walling for a new hotel. The contract was based upon a standard JCT trade contract with amendments and contemplated interest charges on late payments by D at a 0.5% rate over base, whereas C was to bear the legal and professional costs of both parties should the case be referred to adjudication. C alleged that the adjudication and interest provisions were void because they were inconsistent with s 108 of the Housing Grants, Construction and Regeneration Act 1996 (the HGCRA), s 9 of the Late Payment of Commercial Debts (Interest) Act 1998 (the 1998 Act) and s 3(1) of the Unfair Contract Terms Act 1977 (the 1977 Act). D refuted these arguments contending that this was an international supply contract under the meaning of s 26 of the HGCRA and not subject to its provisions because essential elements of the curtain walling were manufactured in China. Held, by Edwards-Stuart J, that: (1) the adjudication provision as to costs conflicted with the requirements of s 108 of the HGCRA and the adjudication provisions should be replaced in their entirety by Part 1 of the statutory Scheme for Construction Contracts: Bridgeway Construction Ltd v Tolent Construction Ltd107, doubted; (2) D had not dealt on C’s written standard terms and the contract was an international supply contract under the HGCRA; (3) the interest provision was void because 0.5% over base could not be regarded as a substantial remedy within the meaning of the 1998 Act and should be replaced by the statutory rate of 8% over base: Yuanda (UK) Co Ltd v WW Gear Construction Ltd108.

21–137 Since the enactment of the Arbitration Act 1996, the question of whether interest forms part of financing costs and overheads on the one hand, or as damages on the other, is no longer significant, because the Act empowers arbitrators to award interest at compound rates as special damages. In the light of the House of Lords

107 [2000] CILL 1662. 108 [2010] EWHC 720 (TCC).

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decision in Sempra Metals v IRC109 it would appear that debt, damages and restitutionary claims may now all be made together, based upon compound interest and rolled up together110.

Profit on costs “If [C] is entitled to damages for loss of income to cover head office overheads, why should he not also be entitled to damages for loss of income that would result in normal profit on costs?”111

21–138 A percentile increase on valuation of the gross cost of change, for profit on costs, is a normal method of valuation of variations in the construction industry. On the other hand, whether unearned profits can be recovered as part of a claim for reimbursement of delay-related losses depends largely upon whether the law of the jurisdiction concerned considers the head of claim to be sufficiently proximate to the cause of delay. 21–139 In the United States, under the revised “suspension of work” clause for government contracts, no profit may be allowed in compensation for suspension of work or delay. On the other hand, an increase in costs resulting from variation pursuant to a valuation clause in the contract may include an allowance for profit. In the US case of Laburnum Construction Corporation v The United States112, it was held that, because of the excusable delays caused by D: “The cost to [C] of the wrongful delay was not necessarily the amount of such overall net loss since this assumes, without proof, that [C] would simply have broken even in the absence of the delays. Such a method of determining the cost of delay denies the possibility of any profit to [C] simply because [D] has delayed the work.”

Loss of future profits 21–140 For a sum in respect of potential future profits to be recoverable, there must be a causal connection between the subject-matter of D’s risk event and the impact on potential new work so as to show that the reduction in turnover was reasonably foreseeable as a result of the event. In the US case of Lewis Jorge v Pomona113, for example, whereas at trial C was awarded just over $3m for lost future profits, and this was affirmed by the Court of Appeal, the decision was overturned by the Supreme Court of California, observing that, because at the time of contract D had no knowledge of C’s financial position or what criteria the bonding company used to evaluate C’s bonding limits, D could not have foreseen that C’s termination would to lead to a reduction of C’s bonding capacity and, in turn, for C to lose the opportunity to bid for future contracts. On the other hand, it is generally recognised that, when a project is delayed, or progress disrupted, there may be a consequential impact on C’s ability to obtain new work. 109 Sempra Metals Ltd (formerly Metallgesellschaft Ltd) v Commissioners of Inland Revenue [2007] UKHL 34, [2008] 1 AC 561, [2007] 4 All ER 657. 110 Judge A Thornton, QC, “Compound interest and financing claims: the Sempra Metals revolution” (2008) Society of Construction Law, London. 111 Ellis Don Ltd v The Parking Authority of Toronto (1978) 28 BLR 98 at p.127, per O’Leary J. 112 (1964) 163 Ct Cl 339. 113 Lewis Jorge Construction Management, Inc. v Pomona Unified School District, (2004) 34 Cal 4th 960

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21–141 In the unreported case of Wylie v Gerald Smith and Partners114, D recovered from her architects £500,000 in profits that she was held to have been likely to have made, but for design defects causing the occupancy rate of a nursing home to be reduced from the predicted 95% to around 35%. HH Judge Mackay had no difficulty in finding that D was entitled to compensation for lost future profits notwithstanding that the damages could not be calculated with any accuracy because of the possibility of future events not at the CA’s risk affecting such profits. 21–142 A typical contractor’s lost profits scenario might be one in which C is a specialist in healthcare work and, because of its reputation in the healthcare industry, it secured a predictable proportion of contracts tendered for a number of repeat contracts by negotiation. When a particular project goes sour as a result of a number of difficulties (some of which are not at C’s risk) and D terminates C’s employment under the contract, word of the termination spreads among the healthcare industry and C quickly finds itself left off tender lists, or unable to make the “short list” for projects with those developers with which C formerly had a good relationship. 21–143 The termination adversely affects C’s ability to obtain new, negotiated healthcare projects at levels it had previously achieved. C’s management is forced to re-focus marketing efforts away from negotiated healthcare work and move toward competitively tendered work and other commercial and industrial projects. These efforts are ultimately successful; however, though C’s levels of new work and hence its profits remain depressed for a period of time115. In a claim for compensation, C claims it has suffered damage to its reputation resulting from what C believes to be the wrongful and unjustified termination. The evidence will have to show that the termination was specifically mentioned as a reason why C failed to obtain some of the contracts, whereas, in others, whilst the termination may not have been specifically mentioned, C’s management has other cogent reasons to believe the termination to be a significant issue. 21–144 The importance of being able to demonstrate not only a downturn in business, but also a direct causal connection between that loss and the breach, is illustrated by the case of Williams v Strait116. The action arose out of the construction of a new gymnasium at the Coolidge High School in Washington, DC in which a steel tower, which was almost completed, collapsed, causing 25 tons of steel to fall nearly 50 feet to the ground below. The accident was highly dramatic and featured prominently in reports in the newspapers and on television. However, in holding that C had not demonstrated any damage to its business reputation the district court said: “[The witness] testified that while damage to reputation was not likely to affect the company’s ability to win public bidding jobs based on lowest responsive bidder, it could substantially impact [C’s] ability to obtain construction management work, a significant area of the company’s activity. [C] also testified that the company had been unable to win such awards in the Washington D.C. area after receiving a joint venture award to build the Union Station renovation project prior to the Coolidge collapse. [C] further produced a certified statement showing an average annual expenditure of about $40,000 on advertising and charitable contributions made to maintain the good name of the company. Based on the limited testimony of [the witness], the Court denies the request for damage to reputation. His testimony lacked sufficiency as to any proof which could be directly attributable to loss

114 115 (1992) 116

Beryl Wylie v Gerald R Smith (1995, unreported) Liverpool Commercial Court. Based upon a scenario posed by G A Smith and D B Weekly, in “Hard Proof of Soft Damages” Construction Business Review 72. 728 F Supp 12 (DDC 1990).

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of reputation arising from the accident. In the absence of such specificity and preciseness, the Court declines to speculate and award such damages.”

21–145 In order to demonstrate the loss, the data should be organised to demonstrate sales or contracting patterns by type of project for both pre-and post-dispute periods as follows: 1. 2. 3. 4. 5. 6. 7. 8. 9.

from the business plan, marketing, sales and contracting financial records, define the unique revenue-producing elements of work affected by the dispute; define the geographic marketing, sales and contracting area; demonstrate the market potential for sales and contracting before and after the dispute; calculate from records the contract award “hit rate” as a percentage of proposals, or bids by both value and number for the years of analysis; determine, if data is not available, the size of the market for post-dispute periods using appropriate linear regression analyses; determine pre-dispute actual market share as a percentage; determine the post-dispute market share; calculate the variance between anticipated post-dispute contracts (using value or number of contracts multiplied by average contract value); and establish from pre-dispute audited corporate financial records the average profit from the contracts, or business.

If there is a discernible variation in trend, then the appropriate data can be used to predict variance from the average in the post-dispute period. In general this must be supported by the appropriate expert evidence.

Unabsorbed overheads “[C] should make all reasonable efforts to demonstrate through records the head office overheads that it has failed to recover. If it is not otherwise feasible to quantify the unabsorbed overheads, formulae may be used (with caution) to quantify unabsorbed overheads once it has been successfully demonstrated that overheads have remained unabsorbed as a result of [a D’s cost risk event]. The burden of proving that it is has unabsorbed overheads always rests with [C]. A formula just serves as a tool for the quantification of the loss.”117

21–146 The theory of compensation for what is known as “unabsorbed overheads” is that, in the event that a particular project is delayed so that it takes longer to complete than was originally intended, the head office costs incurred over that extended period must be earned by the project itself118. 21–147 In the case of West v All State Boiler119, the US Court of Appeals for the Federal Circuit explained the rationale of this head of claim thus: “. . . [C] is injured only when it cannot reallocate that portion of its indirect costs to an alternative or substitutional contract, and thereby those costs are unabsorbed. When [C] is able to reallocate its indirect expenses to a contract it obtains beyond the work it performs in the ordinary course of business, however, it sustains no injury and therefore compensation . . . is not justified. This alternative or substitutional work we will hereafter call a 117 Society of Construction Law, Delay and Disruption Protocol (2002) at para.1.16.5. 118 See JF Finnegan v Sheffield City Council (1988) 43 BLR 124. 119 West v All State Boiler Inc, 96–1093, 1094 (1998).

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‘replacement’ contract. Such a replacement contract might be a contract different in size or duration from [C’s] ordinary type of work (for example, a $100,000 contract by [C] who normally obtains multi-million dollar contracts), or a contract for a different type of work (for example, a repair contract rather than new construction). The critical factor, then, is not whether [C] was able to obtain or to continue work on other or additional projects but rather its ability to obtain a replacement contract to absorb the indirect costs that would otherwise be unabsorbed solely as a result of a [D] suspension on one contract . . . .”

21–148 The acceptability of a claim for recovery of unabsorbed overheads was also recognised by the UK courts in the decision in JF Finnegan Ltd v Sheffield City Council120, in which HH Sir William Stabb QC observed that: “It is generally accepted that, on principle, [C] who is delayed in completing a contract due to the default of [D], may properly have a claim for head office or off-site overheads during the period of delay, on the basis that the workforce, but for the delay, might have had the opportunity of being employed on another contract which would have had the effect of funding the overheads during the overrun period.”

21–149 This principle was approved in the Canadian case of Shore & Horwitz Construction Co. Ltd v Franki of Canada and was also applied by Mr Recorder Percival QC in Whittal Builders Co Ltd v Chester-le-Street District Council121. In McAlpine Homes122, in summarising the observations in Ruxley, Tate & Lyle and Keating, Judge LLoyd QC said, in regard to unabsorbed overheads that such claims suppose: “. . . that there may be some loss as a result of the event complained of so that, in the case of delay to the completion of a construction contract, there will be some under recovery towards the cost of fixed overheads as a result of the reduced volume of work occasioned by the delay, but this state of affairs must of course be established as a matter of fact. If [C’s] overall business is not diminished during the period of delay so that whether, for example, as a result of an increase in the volume of work on the contract in question arising from variations etc, . . . there will be a commensurate contribution towards the overheads which offsets any supposed loss, or if, as a result of other work, there is no reduction in overall turnover so that the cost of the fixed overheads continues to be met from other sources, there will be no loss attributable to the delay . . . this aspect is brought out in the comparable proposition that [C] has to show that there were no means of reducing the unrecovered cost of the fixed overheads in the circumstances in which he found himself as a result of the events giving rise to the delay. Where [C] is busy and is taking on work all the time it will probably not be possible to demonstrate the effect to which I have referred. Furthermore, it has to be borne in mind that as certain overheads are incurred through thick and thin, so [C’s] head office staff may not always be constantly occupied because of, for example, the seasonal or cyclical nature of business in the construction industry.”123

21–150 Similarly in the more recent US case of Jackson Construction v United States124, the court said that: “The purpose of awarding home office overhead damages is to compensate [C] for those time-related-general and administrative costs that it incurs to stay in business, ie, costs that [C] cannot simply reduce or eliminate during periods of inactivity on a construction project125. Typical home office overhead costs include salaries of upper-level management, home office rent, general taxes and insurance, accounting and payroll costs, maintenance and

120 121 122 123 124 125

(1988) 43 BLR 124 at p.134. (1995) 12 Const LJ 356. Property and Land Contractors Ltd v Alfred McAlpine Homes (North) Ltd (1995) 76 BLR 59. Ibid., at p.87. Jackson Construction Co Inc v The United States, Case No 97–31C (15 September 2004). See Interstate Gen Gov’t Contractors Inc v West, 12 F 3d 1053, 1058 (Fed Cir 1993) at 1058.

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utilities, depreciation, and other fixed costs that are necessary to manage a business126. Every contractor relies on receiving a steady stream of income from its various contracts not only to cover the direct costs associated with those contracts but also to cover its overhead costs. If [D] disrupts [C’s] stream of income on a contract and C cannot find replacement work, then [D] is liable for [C’s] lost overhead.”

21–151 In BV Construction127, it was held that because C was performing work on other contracts at the time of the suspension did not mean that is was not impractical to take on other work since performing on more than one job at a time was C’s way of conducting its business. However, in West v All State Boiler128, D claimed that the test should not be one of “not impractical to take on other work”, but “impossible to take on other work”. In rejecting this contention, the Federal Court of Appeals said: “A healthy contractor may well be simultaneously engaged in multiple contracts, at different phases of performance. A [D]-imposed suspension during performance of one contract will not necessarily affect [C’s] ability to obtain and perform others . . . It would be senseless to allow only the most and least successful contractors to recover indirect costs when [D] suspends performance of a contract and requires [C] to stand by during the suspension, while providing a majority of contractors with no avenue for relief. A requirement that [C] show the impossibility of taking on any additional work solely because of [D’s] acts would run counter to public policy as well as industry practice. Thus, we conclude [D] can rebut [C’s] prima facie case for entitlement to Eichleay formula damages by showing it was not impractical for [C] to obtain other work.”

21–152 In Kansas City Bridge Co v Kansas City Structural Sheet Co129, it was decided that the claim would only succeed if C could show that, but for the delay, it would have obtained other work sufficient to absorb the overhead expense. Thus, the necessary ingredient to make the overhead recoverable is the ability to show there were other contracts available for which C did not tender because of the scarcity of resources, or which, when tendered for, it did not obtain because resources were committed to the project that was delayed. It follows that where C habitually subcontracts the work to others, it will be difficult, if not impossible, to demonstrate that, because of the delayed completion, C could not find other subcontractors to carry out other projects. Accordingly, the underlying principle in the majority of unabsorbed overheads claims is that C, having been delayed on site, has been prevented from moving its resources onto other work from which a contribution to the cost of head office would normally have been made. 21–153 In the US case of PJ Dick130, it was accepted that a valid claim for unabsorbed overheads could be made for a period of suspension during the course of the works provided that C could demonstrate that: 1. 2. 3.

126 127 128 129 130

the suspension cause by D was substantial and of indefinite duration; throughout the period of suspension, C was ready to resume work on the contract immediately and at full productivity; and the suspension was much, if not all, of the contract work.

See Melka Marine Inc v United States, 187 F 3d 1370, 1375 (1999). BV Construction Inc, ASBCA Nos 47766, 49337, 50553. West v All State Boiler Inc, (1998) 96–1093, 1094. SW 2d 370 (Mo 1980). PJ Dick Inc v Principi, 324 F 3d 1371 (2003).

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21–154 In the US case of TPS Inc131, D suspended work on 85% of the contract works expecting the suspension to last until March 1996. In fact it continued until November 1996, when the work under the suspension order was taken out of the contract under a “termination for convenience” clause132. C sought recovery of unabsorbed overheads calculated by reference formula adjustment133 for 200 days of alleged “standby” by its subcontractors from the date of suspension until the work was taken out of the contract. In rejecting the claim for unabsorbed overheads the Board said: “[C] must show, among other things, that ‘much, if not all’ of the work on the contract was suspended, and that it was required to hold itself ready during the suspension period ‘to resume work on the contract at full speed as well as immediately,’ when the suspension was lifted. Assuming arguendo that the two suspensions amounted to a suspension of ‘much, if not all,’ of the contract work, there is no evidence that [C] was required to be ready to resume full work immediately when the suspensions were ended. There was no such express requirement in the 2 February 1996 suspension order, and [C] did not in fact, resume full work immediately when the suspension on Building A-634 was ended by Modification P00001 on 24 May 1996.”

21–155 A further problem with the use of the formula method of recovery of unabsorbed overheads is that it normally takes no account of intermittency of the level of activity on site during the period of delay. For example, if work is the subject of delay because C is awaiting the CA’s instructions, C may be able to allocate its site resources to other contracts. When the instructions arrive it brings the resources back to site. In this set of circumstances the use of a formula method for calculating head office overheads may over-compensate the contractor. 21–156 In Packard Construction134, C claimed 88 days of compensable delay, unabsorbed overhead and additional direct costs incident to performing work on the water main and water distribution system under a contract to build an Imagery and Analysis Facility at Fort Bragg, NC. Whilst there was no suspension as such and C continued work, albeit slowly during the period in which D’s risks event occurred, the Board found ten days during which little work was done for which it could allocate unabsorbed overheads saying: “While the record shows [D]-caused work delay that extended performance of the contract, [C] has failed to show it was on ‘stand-by’ throughout the claimed delay period. To establish ‘stand-by,’ [C] must show it was precluded from performing much, if not all, contract work. The record shows that [C] was performing significant and substantial amounts of contract work during most of the claimed delay period. Accordingly, [C] has not shown that it was on ‘stand-by’ throughout the delay period. On the other hand . . .. it is clear that during early July 2002, [C] performed little, if any, contract work while awaiting [D’s] direction on water line discrepancies. [C] has shown that it was effectively on ‘stand-by’ on the following days: July 2, 3, 5, 8, 10, 12, 14, 16, 25, and 26. [C] has made out a prima facie case of recovery of unabsorbed overhead for these days, and [D] has not shown that [C] was able to take on additional work to mitigate its damages. We conclude that [C] is entitled to recover its unabsorbed overhead for these 10 days at the daily home office overhead rate of $607.00.”

131 TPS Inc, ASBCA No 52421 (2004). 132 A clause that gives D the right to terminate the contract if it believes it is in its best interests to do so and to pay C in accordance with a formula rather than face damages for breach. 133 In this case C used the Eichleay formula, see paras 21–185 to 21–187. 134 Packard Construction Corporation, (2009) ASBCA 55383.

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21–157 In PJ Dick v United States135, the United States Federal Court of Appeals said that, in evaluating C’s claim for unabsorbed overheads, the following questions should be asked: 1. 2.

3. 4.

5. 6.

Was there a delay to progress caused by D’s cost risk event that was not concurrent with another delay caused by some other source? Did C demonstrate that it incurred additional overhead (ie, was the original time-frame for completion extended, or did C establish entitlement to costs arising out of delay to an early completion date? Did the CA issue a suspension or other order expressly putting C on standby? If not, can C prove there was a delay of indefinite duration during which it could not bill substantial amounts of work on the contract and at the end of which it was required to be able to return to work on the contract at full speed and immediately? Can D show that it was not impractical for C to take replacement work (ie, a new contract) and thereby mitigate its damages? If D can show it was not impractical, can C demonstrate that it was impractical for it to obtain sufficient replacement work?

21–158 It has also been established in the US courts that, notwithstanding that C actually finishes on time, or in advance of the completion date, where it has suffered delay to progress caused by a D’s cost risk event, C can still recover unabsorbed overheads, but only if it first proves: 1. 2. 3.

that it intended to finish early; that it was capable of finishing early; and that it would have actually finished early, but for D’s actions136.

Formula adjustments 21–159 Contrary to the rule of recovery of earned overheads, in that they should normally be recovered over the period of the delay to progress that has caused then, in the case of unabsorbed overheads, the appropriate period is that during which completion is extended in this regard. In West v All State Boiler137, C also claimed that it should have been entitled to recover its overheads for the 58-day period of delay to progress caused by D’s suspension of the works rather than the 22-day delay to completion it caused. Contrary to the rule of recovery of earned overheads, in that they should normally be recovered over the period of the delay to progress that has caused them, in the case of unabsorbed overheads, the appropriate period for recovery is that during which completion is extended in this regard. The court observed: “It is not, however, the length of the suspension itself that justifies recovery; rather, it is the resulting uncertainty as to the additional time that will be necessary to complete performance of the contract that causes the injury for which the Eichleay formula is designed to compensate [C]. Our case law is quite clear that recovery under the Eichleay formula is an extraordinary remedy designed to compensate [C] for unabsorbed overhead costs that accrue 135 PJ Dick Inc v Principi, 324 F 3d 1371 at 1373 (2003). 136 See Interstate General Government Contractors v West, 12 F 3d 1053 at 1058–1059 (Fed Cir 1993); Wickham Contracting Co v United States, 12 F 3d 1574, 1582 (Fed Cir 1994) and Weaver-Bailey Contractors Inc v United States, 19 Cl Ct 474, 479 (1990). 137 West v All State Boiler Inc, (1998) 96–1093, 1094.

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when contract completion requires more time than originally anticipated because of a government-caused delay. [C’s] estimate of its costs necessarily includes its overhead costs, which it calculates on the basis of the time required to perform the contract. Where performance of a contract has been delayed, the overhead expenses of performing that contract continue for the additional time. A portion of the total overhead for that additional period accordingly is allocable as a cost of performing that contract . . . We believe Eichleay recovery makes better sense if it is awarded for the period of time by which overall performance is extended, rather than the period of the suspension.”

21–160 It is not unusual to find this head of cost calculated by reference to formula adjustments. In Williams v Strait138, C was entitled to recover reduced head office overhead costs and field office overhead costs, but was required to show that actual damage was necessarily suffered because the reimbursable delay made it impractical to undertake the performance of other work. In adopting what is called Eichleay formula139 as a basis of calculation, the court said: “Although some courts have determined that a contractual delay does not immediately entitle [C] to recover home office overhead costs140 if the delay is such that [C] can neither reduce home office overhead costs nor take on new work to absorb these costs, [C] will inevitably suffer losses of this kind141. [C] must show that actual damage was necessarily suffered because the nature of the delay made it impractical ‘to undertake the performance of other work’142, or to reduce its home office personnel or facilities. Generally, this requirement is met by showing that the delay was sudden and of unpredictable duration.”

In this case the court held that “[C] must show that actual damage was necessarily suffered”143. In Sunley v Cunard White Star144, similarly, the King’s Bench Division of the English High Court stressed that there must be actual evidence of loss before this element could be awarded as damages. 21–161 There was a serious challenge to the use of formulae adjustments in 1978 in Berkeley Industries v City of New York145, where the Eichleay formula was rejected by the court, saying that the formula produced a figure with only a “chance relationship to actual damages”. The court was evidently saying that to succeed it is necessary to demonstrate a link between the sum of money calculated using the formula and actual loss. However, in the Capital Electric case146 in 1984, it was held that C could recover head office overheads using the Eichleay formula. In both cases the courts considered that they should not assume that, simply because a delay occurs, a contractor is entitled to a head office overhead recovery.

138 F Supp 12 (DDC 1990). 139 See below at paras 21–185 et seq. 140 See Cornell, 626 F 2d at 994 (DC Cir 1980); Massman Construction Co v Tennessee Valley Authority, 769 F 2d 1114, 1125 (6th Cir 1985). 141 George Hyman Construction v Washington Metro Transit Authority, 621 F Supp 898 (DDC 1985); see also Capital Electric Co v United States, 729 F 2d 743, 744 (Fed Cir 1984). 142 WG Cornell v Ceramic Coating Co (1980) 626 F 2d at 994. 143 In AEC Corporation Inc, ASBCA Nos 45,713 and 46,348, for example, C’s claim for recovery of unabsorbed overheads was rejected because D was able to show that C had taken on additional work during the period of suspension resulting in the substitution of sufficient revenue for both the interrupted contract as well as C’s other work in progress. 144 [1940] 1 KB 740. 145 Berkeley Industries Inc v City of New York, 45 NY 2d 683, 385 NE 2d 281, 412 NYS 2d 589 (1978). 146 F 2d 743 (1984).

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21–162 An unusual aspect of the Capital Electric case147 was that the court considered that the Eichleay formula could be used if C could demonstrate that, due to the overrun, it was prevented from obtaining any further bonding. In other words, no more bonding could be obtained until the bond relating to the contract, which was the subject of delay, had been released. The court, however, rejected the argument that C must prove that if there had been no delay it would have obtained other work. In practical terms the court considered that, if C submits that due to the uncertainty surrounding the delays it was not practical to take on other work, the burden of proof shifts to D to prove that delays did not cause C any loss148. 21–163 On appeal in St Modwen Developments v Bowmer and Kirkland Ltd149, however, the Court of Appeal rejected an argument that, by accepting a formula adjustment without first seeking proof of loss, the arbitrator had erred in law and came to a conclusion to which no reasonable arbitrator could come. In that case it appeared that the arbitrator had based his decision on the experts’ reports in which, apparently without enquiry, they had taken it for granted that some damages had in fact been suffered and then, through their reports, agreed that a formula adjustment was an acceptable method of calculation of the assumed loss. However, this is an unusual case and one that is unlikely to be followed on principle. 21–164 It is important that the delay to completion for which C seeks compensation as a result of D’s cost risk event is not concurrent with any delay for which C is liable. In Jackson v United States, the court observed: “While most contractors maintain cost records that allow them to determine the correct amount of daily contract overhead, contractors cannot recover Eichleay damages unless they also provide the Court with a basis for quantifying the number of days of delay. As with any other delay claim, [C] cannot recover damages for delays unless it proves by a preponderance of the evidence: 1. 2.

the number of days of delay to progress attributable to [D’s] wrongful actions; and that these delays to progress were on the project’s critical path150.

Although [C] is not required to present a detailed critical path analysis, [C] must provide the Court with some basis upon which to quantify the delay. ‘The mere allegation that delays caused work to be disrupted, or performed out of sequence, or caused costs to be increased, will not satisfy [C’s] burden of proof ’.”151

21–165 When D employs its own workforce, the reality of the situation may very well be that the delay stops any prospect of the workforce being available to work on other projects. That in turn increases the overheads of the delayed project. JF Finnegan v Sheffield City Council152 tends to support the general proposition that such a situation can found a good claim. 21–166 However, irrespective of how an item is priced, in making an overhead recovery claim, C must first show that a loss has in fact been suffered. It is always a

147 F 2d 743, 744 (1984). 148 It is not too difficult to demonstrate this premise when C conducts its business by carrying out the majority of site work by subcontract labour and principal site management staff are only recruited once the project is secured. 149 (1996) CILL 1203. 150 See, eg, Commercial Contractors Inc v United States, 29 Fed Cl 654, 662 (1993) (quoting Youngdale & Sons Constr Co v United States, 27 Fed Cl 516, 550 (1993)). 151 Ibid. 152 (1988) 43 BLR 124 at pp.134–135, per Sir William Stabb QC reviewing the authorities.

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possibility that the totality of C’s overhead is referable to a site-based delay, but it does not follow automatically. C’s total overhead will not be applicable where a significant amount of the overhead is referable to what in effect is a separate business, ie manufacturing as opposed to site installation. It should be remembered that many businesses have more than one string to their bow. A business that is involved in property development, general construction and product manufacturing, which has suffered a delay in its construction activities, would be wrong to apply the totality of its overhead on, say, an Emden formula basis to the period of delay. It would be absurd, for example, indiscriminately to apply C’s overhead percentage to the prolongation of site activity when the majority of the referable head office overhead is incurred in and related not to C’s site involvement, but to the manufacture of a specialist product (eg, a steelwork company, or curtain walling company). In those circumstances, C’s overhead must be carefully analysed and segregated before it can be appropriately applied. Similarly, a specialist subcontractor, which has a manufacturing arm, eg a curtain walling contractor, is likely to expend the majority of its overhead in the control of its manufacturing base whilst the site content of its works represents a small percentage of the contract value. In such a case, the use of formula-based calculations of recoverable overhead in their traditional format would be inappropriate. 21–167 In summary, it would seem that, if a formula method of evaluation is employed, the following matters should be taken into account: 1. 2. 3. 4. 5.

the state of the market at the time of the delay asking the question, and specifically whether, on a balance of probabilities, C could have obtained other work; whether either C or the subcontractor was in the process of winding down its business, or indeed in receivership; deduction for additional overheads recovered by way of the measurement items in the final account; the level of resources retained on site during the period of delay; and head office staff and resources included as heads of recovery elsewhere in the claim.

21–168 In Property and Land Contractors Ltd v Alfred McAlpine Homes (North) Ltd153, HH Judge LLoyd QC considered the appropriateness of formula adjustments. In this C was engaged under a JCT80 contract to build 22 houses at Shipton, England, but which were then postponed. A claim was made for loss and expense under Cl.26 of the contract. The dispute went to arbitration and, in the first interim award, the arbitrator found that the contractors were not entitled to recover loss of overhead under the Eichleay formula154, but they were entitled to recover on the basis of overhead actually expended and not recovered during the period of delay. They were awarded £59,661.68 as additional head office overheads incurred and not recovered elsewhere. 21–169 By comparison with the huge volume of commentary on formula adjustments in the United States, there are very few English decisions on their applicability in the United Kingdom. The Hudson formula155 obtained the approval of the court in JF Finnegan Ltd v Sheffield City Council156. However, the facts of this case were somewhat 153 154 155 156

(1995) 76 BLR 59. See paras. 21–185 below. See para. 21–188 below. (1988) 43 BLR 124.

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unusual in that C asserted that it was its policy to carry out only one contract at a time and the arbitrator’s findings were not entirely clear as to the extent to which this was found as fact. The judgment is accordingly of more interest for its survey of the subject than for its application on the particular facts. In general terms, the approach of the court seems to have been to support the view that formulae are appropriate in some circumstances, but not to relieve C of the need to show that it has suffered at least some loss in terms of overheads and by reason of delay. There are, however, important caveats, and reference is made to Sunley v Cunard White Star157, which stressed that there must be actual evidence of loss before the court before this element could be awarded as damages158. 21–170 It has been judicially recognised on both sides of the Atlantic that a formula adjustment of the allocation of head office costs does not automatically flow from an incidence of delay to completion159: “There may then be more acceptable ways of proving the loss than by means of a formula. If a formula is to be adopted, it would presumably be on the basis that the court was satisfied that [C] had suffered a real loss and was doing its best on the evidence available to quantify it. It may be that a formula would not be adopted where better proof of actual loss could have been provided but [C] failed to provide it.”160

21–171 Before C can go on to determine a method of computation or calculation of such damages, it must first show that: 1. 2. 3. 4.

it has actually suffered loss or expense; the loss or expense has not been recovered elsewhere161; the loss or expense incurred during the period of delay has remained unabsorbed162; and it is not possible, or it is unreasonably burdensome, to calculate the loss or expense without resorting to a “formula” approach163.

Each of these items can now be considered.

1. The contractor has actually suffered loss, or expense 21–172 This is generally demonstrated by showing that the nature of the delay made it impractical for C “to undertake the performance of other work”, or “to (cut back on) home office facilities”164, for example, during a suspension of work of uncertain duration, being required to remain ready to continue165. As has already been pointed

157 [1940] 1 KB 740. 158 For this reason, it seems that St Modwen Developments v Bowmer and Kirkland Ltd (1996) CILL 1203 was incorrectly decided. 159 Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528; and JF Finnegan v Sheffield City Council (1988) 43 BLR 130. 160 S Furst, QC and V Ramsey, QC (eds), Keating on Building Contracts, 7th edn (London: Sweet & Maxwell, 2001) at para.8–69, p.268. 161 Duncan Wallace, I, QC (ed), Hudson’s Building and Engineering Contracts, 11th edn, London: Sweet & Maxwell, 1995) at p.1073. 162 Vitex Manufacturing Corporation v Caribtex Corporation, 377 F 2d 795 at pp.798–799, per Stanley CJ. 163 Duncan Wallace, I, QC (ed), Hudson’s Building and Engineering Contracts, 11th edn (London: Sweet & Maxwell, 1995) at p.1074. 164 Eichleay Corp, ASBCA No 5,183, 60–2, BCA para.2,688 at para.15,117. 165 Altmayer v Johnson, 79 F 3d 1129 (Fed Cir 1996), 15 FPD para.26, 20 CC para.271.

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out, this may be demonstrated by evidence that the delay to progress was sudden or of unpredictable duration166. 21–173 In Property and Land Contractors Ltd v Alfred McAlpine Homes (North) Ltd167, it was held that, where C conducted only one contract at a time, the extension of the contract period would attract compensation for unabsorbed overheads. On the other hand, where C subcontracts the majority of its work to labour only, or to materials and labour subcontractors, it is difficult to conceive of a delay to completion, or disruption situation that would prevent it from taking on other work.

2. The loss or expense has not been recovered elsewhere 21–174 The US courts have rejected a formula adjustment where it has been demonstrated that the allocated overhead was recovered during the original contract period through valuations.

3. The loss or expense incurred during the period of delay has remained unabsorbed 21–175 Proof should distinguish excessive management time from that which would normally be expended on such a project, including diversion of upper-management time from pursuit of new revenue-producing work168.

4. It is impossible, or unreasonably burdensome, to calculate the loss or expense without resorting to a “formula” approach 21–176 Where it opts for proof of quantum by formula adjustment, C must provide a cogent explanation of why it is impossible to extract this data from its accounts and demonstrate how a formula can produce a fair estimate of its losses169. In the event that a formula adjustment is adopted, there are three well-known formulae to choose from (and a few that are not so well known), each with its own advantages and disadvantages. 21–177 In Finnegan170, C did not use one of the well-known formulae, but presented its claim on the basis of a formula of its own. HH Sir William Stabb QC, rejecting this, said: “I confess that I consider [C’s] method of calculation of the overheads on the basis of a notional contract valued by uplifting the value of the direct cost by the constant of 3.51 as being too speculative and I infinitely prefer the Hudson formula which, in my judgement, is the right one to apply in this case, that is to say, overhead and profit percentage based upon a fair annual average, multiplied by the contract sum and the period of delay in weeks, divided by the contract period.”171

21–178 It was apparently not argued that the Hudson formula might have been equally inappropriate. The Hudson formula requires less data about the company’s 166 Capital Electric Co v United States, 729 F 2d 743, 744 (Fed Cir 1984). 167 (1995) 76 BLR 59. 168 K R Nielsen and P D Galloway, “Proof development for construction litigation” (1984) 7 American Journal of Trial Advocacy 433. 169 Tate & Lyle v Greater London Council [1982] 1 WLR 149 at p.152, per Forbes J (QBD). 170 JF Finnegan v Sheffield City Council (1988) 43 BLR 124. 171 Ibid., at p.136.

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finances than either Eichleay or Emden172. There do not appear to be any cases in the English courts where the court’s views on the use of the Eichleay formula has been reported, although it has been accepted in the Canadian courts173 and it was remarked upon by HH Judge LLoyd QC in McAlpine Homes174 as having been the preferred method in that case and accepted as an appropriate method of calculation by the arbitrator. 21–179 In McAlpine Homes, Judge LLoyd was asked to consider whether the arbitrator had misdirected himself in allowing a formula adjustment and in preferring a formula based on Eichleay rather than Emden. He said175: “The theory is that because the period of delay is uncertain and thus [C] can take no steps to reduce its head office expenditure and other overhead costs and cannot obtain additional work there are no means whereby [C] can avoid incurring the continuing head office expenditure, notwithstanding the reduction in turnover as a result of the suspension or delay to the progress of the work. This type of loss (sometimes called a claim for ‘unabsorbed overheads’) is, however, to be contrasted with the loss that may occur if there is a prolongation of the contract period which results in [C] allocating more overhead expenditure to the project than was to have been contemplated at the date of contract. The latter might perhaps be best described as ‘additional overheads’ and will, of course, be subject to proof that the additional expenditure was in fact incurred.”

21–180 Furthermore, the Emden formula, in common with the Hudson formula176 and with its US counterpart the Eichleay formula, is dependent upon various assumptions about circumstances that are not always present and that, if not present, will undermine the basis for the use of a formula. For example, the Hudson formula makes it clear that an element of restraint is required, ie in relation to profit, that there was profit capable of being earned elsewhere and there was no change in the market thereafter affecting profitability of the work. It must also be established that [C] was unable to deploy resources elsewhere and had no possibility of recovering the cost of the overheads from other sources, eg from an increased volume of the work. Thus, such formulae are likely to be of value only if the event causing delay is (or has the characteristics of) a breach of contract. 21–181 The basic difference between the Hudson and Emden formulae is simply that Hudson requires an extrapolation based on the percentage of overheads built into the contract price, whereas Emden uses the percentage of overheads applicable at the appropriate time as shown by C’s accounts. Emden is clearly a more empirical approach requiring more actual data177. In preferring Emden to Hudson, Mr Recorder Percival QC, in the case of Whittal Builders Co Ltd v Chester-Le-Street178, said: “Lastly, I come to overheads and profit. What has to be calculated here is the contribution to off-site overheads and profit which [C] might reasonably have expected to earn with 172 See para. 21–189 below. 173 Shore and Horwitz Construction Co Ltd v Franki of Canada Ltd (1964) SCR 589; JF Finnegan v Sheffield City Council (1988) 43 BLR 130; and see Ellis Don v The Parking Authority of Toronto (1978) 28 BLR 98. 174 Alfred McAlpine Homes (North) Ltd v Property and Land Contractors Ltd (1995) 76 BLR 59 at p.87. 175 Ibid., at p.80. 176 See Duncan Wallace, I, QC (ed), Hudson’s Building and Engineering Contracts, 11th edn (London: Sweet & Maxwell, 1995), paras 58.182 et seq. 177 Whatever cynics might have us believe about statistics. 178 (1985) 12 Const LJ 356 at p.363.

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these resources if not deprived of them. The percentage to be taken for overheads and profits for this purpose is not therefore the percentage allowed by [C] in compiling the price for this particular contract, which may have been larger or smaller than his usual percentage and may or may not have been realised. It is not that percentage that one has to take for this purpose but the average percentage earned by [C] on his turnover as shown by [C’s] accounts.”

21–182 When applying the Hudson or Emden formulae, it has usually been the practice for courts to deduct from the resultant sum any additional overheads recovered by way of variations for additional work in the final account. In the United States this practice was approved in the Federal Court of Appeals case of Capital Electrics v United States179. 21–183 Finally, it is observed that, in relation to the use of formulae for the calculation of unabsorbed overheads, the SCL Protocol advises that: “The CA or, in the event of a dispute, the person deciding the dispute, should not be absolutely bound by the results of a formula calculation. It is possible that the use of a particular formula will produce an anomalous result because of a particular input into it. It is suggested that the result of the use of one formula be cross-checked using another formula.”180

21–184 If, owing to the inability to provide the necessary sort of evidence, the formula methods are not applicable, for example where a contractor or subcontractor is deliberately reducing its turnover because of a financial recession, or is in receivership, other methods of calculating head-office overheads may need to be considered. Contractors and subcontractors who may be experiencing difficulty due to recession in establishing an entitlement to a claim for head office overheads using one of the formula methods should introduce proper procedures for recording time spent by head office personnel.

The Eichleay formula 21–185 The most commonly used formula for adjusting the allocation of head office costs to delay in the United States is that known as the “Eichleay formula”. This formula was first adopted by the US Armed Services Board of Contract Appeals in the eponymous case of Eichleay Corp181. Although the Eichleay formula fell into disfavour in the mid-1970s182, it appears to have enjoyed a rebirth in the United States in the

179 Capital Electric Co v The United States, 729 F 2d 743 (Fed Cir 1984). 180 A spreadsheet is available on http://www.eotprotocol.com for this purpose. 181 Eichleay Corp ASBCA No 5,183, 60–2 BCA para.12,688 at para.13,573 aff ’d 61–1 BCA para.12,894 and approved in Capital Electric Co v United States, 729 F 2d 743 (Fed Cir 1984) and, more recently, Interstate General Government Contractors Inc v West, ASBCA No 43,369, 92–2 BCA para.124,956 aff’d by the US Court of Appeals, Federal Circuit: 12 F 3d 1053 (Fed Cir 1993) and Wickham Contracting Co Inc, GSBCA No 8,675, 92–3 BCA 125,040 at 124,815, also aff ’d by the Court of Appeals for the Federal Circuit: 12 F 3d 1574 (Fed Cir 1994). On the other hand, the Eichleay formula has been criticised elsewhere in the US and called “a species of damnum absque injuria”, see Berkeley Industries Inc v City of New York 385 NE 2d 281 (1978) at p.284. 182 R F Cushman and D A Carpenter, Proving and Pricing Construction Claims (Wiley Law Publications, 1990).

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mid-to-late 1980s, when it was accepted in a number of cases183. In the Williams v Strait case184, it was said in evidence for C that: “in a delay situation we always rely upon the Eichleay formula for the quantification of extra home office overhead that, essentially, is unabsorbed because of delay”. 21–186 This formula is based upon allocating a percentage of the company’s total overheads for the contract period to the contract in question. The process is to allocate the overheads by means of a comparison of the contract sum and the total turnover for the company during the contract period. In simple terms, if the contract sum is £1m, the total turnover for the contract period is £10m and the contract period one year, some 10% of the company’s total overheads for the contract period are allocated to the contract. This lump sum based upon a one-year contract period is converted to a daily rate. Each day of overrun that is the subject of the claim is then multiplied by the daily rate. 21–187 Calculating extended head office overhead costs by using the Eichleay formula involves the following tripartite calculation: Stage 1 Total contract sum × Total overhead for total = Overhead allocatable Total revenue for contract period Stage 2 Allocatable overhead = Daily contract overhead Total period of performance days Stage 3 Daily contract overhead × Period of delay in days = Amount recoverable Hudson notes that whilst this is technically a more thorough method of computation, it only takes account of fixed overheads and takes no account of profit185. The Society of Construction Law Protocol advises that: “. . . in relation to the Eichleay formula, if a significant proportion (more than, say, 10%) of the final contract valuation is made up of the value of variations, then it will be necessary to make an adjustment to the input into the formula, to take account of the fact that the variations themselves are likely to contain a contribution to head office overheads and profit.”186

183 Capital Electric Co v United States, 729 F 2d 743 (Fed Cir 1984); George Hyman Construction Co v Washington Metropolitan Area Transit Authority, 816 F 2d 753 (1987); Nebraska Public Power Distribution v Austin Power Inc, 773 F 2d 960 (8th Cir 1985); Excavation Construction Inc v WMATA, 624 F Supp 582 (DDC 1984); Golf Landscaping Inc v Century Construction Co, 39 Wash. App 895, 696 P 2d 590 (1985). 184 Williams Enterprises Inc v The Strait Manufacturing & Welding Inc and Others, 728 F Supp 12 (DDC 1990). 185 Duncan Wallace, I QC (ed), Hudson’s Building and Engineering Contracts, 11th edn (London: Sweet & Maxwell, 1995) at p.1077. 186 Society of Construction Law, Delay and Disruption Protocol (2002) at para.1.16.8.

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The Hudson formula 21–188 The “Hudson formula” was first described in Hudson’s Building and Engineering Contracts (10th edition)187 in 1970 as being a suitable method of calculating an appropriate percentage addition to overheads. Head office profit percentage Contract sum × Period of delay (in weeks) × 100 Contract period (e.g., in weeks) = Amou nt recoverable The Society of Construction Law Protocol advises that: “The use of the Hudson’s formula is not supported. This is because it is dependent on the adequacy or otherwise of the tender in question, and because the calculation is derived from a number which in itself contains an element of head office overheads and profit, so there is double counting.”188

The Emden formula 21–189 The Emden formula derives from another book on contract law: Emden’s Construction Law189. It contains two stages of computation as follows: Stage 1 Total company overhead cost + profit =H Total revenue of company Stage 2 H Contract sum × × Period of delay = Amount recoverable 100 Contract period (in weeks)

Other formulae 21–190 A formula for the recovery of unabsorbed overheads, accepted by the US courts in Lilly Ames Co v United States190, uses an element of actual project cost and is said to produce a ratio that is consistent and reliable over time191. Again, this is a two-stage calculation: Stage 1 Total overhead for contract (all projects) = General labour overhead ratio Total labour cost for conttract period (all projects) 187 Duncan Wallace, I, QC (ed), Hudson’s Building and Engineering Contracts, 11th edn (London: Sweet & Maxwell, 1995) at p.578. 188 Society of Construction Law, Delay and Disruption Protocol (2002) at para.1.16.7. 189 Butterworths (updated). 190 F 2d 630 (Ct Cl 1961). 191 K R Nielsen and P D Galloway, “Proof Development for Construction Litigation” (1984) 7 American Journal of Trial Advocacy 433.

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Stage 2 Labour overhead ratio ×

Labour cost = Overhead attributable to the delay during period of delay

21–191 However, this sort of calculation could only be considered when the predominance of overhead cost is directly related to the labour costs, and where C’s business is almost exclusively undertaken by directly employed personnel without the use of subcontract labour.

Quantum meruit 21–192 Quantum meruit means “how much it has earned”, or “what the job is worth”192. So far as concerns delay and disruption, payment on a quantum meruit may arise: 1. 2.

where there is no contract at all; and where changes are made under a contract to a degree which renders the work carried out substantially different from that contracted for.

Illustration Facts: Charles Lissack (C) claimed that he had made an oral agreement regarding development opportunities, which entitled him to a 25% share in the net profits derived by Manhattan Loft Corporation Ltd (D) from the St Pancras Chambers development and claimed an account. In the alternative, C claimed a restitutionary entitlement (by way of quantum meruit) for his services in “introducing the St Pancras opportunity” and that this quantum meruit should be assessed as a percentage of the profit thereof which constituted residential apartments. D contended that there was no oral agreement and that C would only have been entitled to remuneration if he had been obliged to do further work and not just for “introducing” an opportunity and that the project carried out by D was a different opportunity from the one C had introduced. Held, by Roth J, that no such oral agreement was made and that, since the St Pancras project carried out by D was fundamentally different from the opportunity introduced by C, the claim in contract and the alternative quantum meruit claim should be dismissed: Lissack v Manhattan Loft Corporation Ltd193.

21–193 The doctrine of quantum meruit has rarely been held to apply to construction contracts194 so as to have the effect of setting aside C’s method of pricing because: 1.

the cost of building work is notoriously difficult to estimate (unless one knows C’s organisation, methods and intentions in detail) and C is in a far better position to estimate the cost than D; and

192 The Oxford English Dictionary defines quantum meruit as follows: “A reasonable sum of money to be paid for services rendered, or work done, when the amount due is not stipulated in a legally enforceable contract.” 193 [2013] EWHC 128 (Ch). 194 MF Levine and JH Williams, “Restitutionary quantum meruit – the crossroads” (1992) 8 Const LJ 244.

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2.

unless C makes a stand, or protests, it is difficult to contend in building or engineering contracts that the work has so changed as to entitle C to recover otherwise than in accordance with the contract.

Illustration Facts: Robert Taylor (C) pleaded loss and damage against his employer, Motability Finance Ltd (D). C argued that the D’s decision to cap special bonuses to only 50% was irrational and/or in bad faith and, in consequence, a breach of the implied contractual term of trust and confidence. D applied for an order for summary judgment under CPR rule 24.2, on the basis that the claim had no real prospect of success; alternatively, that the claim should be struck out under CPR rule 3.4 as disclosing no reasonable grounds for bringing the same. Held, by Cooke J, that a statement of case may not be struck out if it raises a serious live issue of fact, which can only be determined by hearing oral evidence; that the respondent to an application under CPR 24.2 does not have to show that his case will probably succeed at trial, but only that he has a “real prospect” of success; the application for summary judgment would be granted in this case, since the facts of the case were extremely clear; that, considering that C originally entered into a contract with a discretionary bonus based upon performance with a maximum of 30%, the later establishment of an additional special project bonus with a cap of 50% and an increase of the ordinary bonus to 50%, it was impossible to see how it could be a breach of the implied term of trust and confidence to award a quantum meruit bonus to C above and beyond the terms of the schemes then current. Not only, therefore, should this plea, if it was to be advanced, appear in the re-amended particulars of claim, but it disclosed no reasonable ground for bringing the claim and had no realistic prospects of success: Taylor v Motability Finance Ltd195.

21–194 In principle, restitutionary quantum meruit is based upon the avoidance of what, in equity, is referred to as “unjust enrichment”. It appears that, in order to succeed in a claim for restitutionary quantum meruit, C must establish: 1. 2. 3. 4.

there is no valid contract in existence; work has been performed conferring a benefit on to D without C being paid as agreed; the benefit conferred was not intended as a gift; and the benefit has been accepted by D at the expense of C.

If there is a valid agreement in existence, a claim for restitutionary quantum meruit will not succeed as the terms and conditions of the contract will prevail in determining the rights and liabilities of the parties196.

Illustrations (1)

Facts: The claimant trader of oil and gas products, Proton Energy Group (PEG), asserted that a contract had been entered into with the defendant petroleum refining company, Orlen Lietuva (OL). A dispute arose as to whether the dealings between the parties in fact gave rise to a contract and whether, if they did, what the terms

195 [2004] EWHC 2619 (Comm). 196 Ibid.

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(2)

were, and, if that contract were broken, what (if any) damages should be paid. Held, by Mackie J, that there was a contract between the parties that OL had repudiated; and that OL should pay damages to PEG: Proton Energy Group SA v Orlen Lietuva197. Facts: Michael Samen (D) hired Vitpol Building Service (C) to carry out building works. Although there was no contract in place at the start, thereafter there were negotiations between the parties as to price, workscope and contract terms. C argued that the parties had agreed upon the incorporation of Joint Contracts Tribunal (JCT) Intermediate Form (the IF Form) into the contract. D denied this. C stopped work and commenced the pre-action protocol process and, eight months later, sought a declaration from the court under CPR Part 8. The pre-action protocol was almost complete by the time of the application and the C had not given D any warning regarding its intention to make a Part 8 application. Held, by Coulson J, that the TCC has jurisdiction to decide a dispute upon the existence and terms of a contract in circumstances where the court’s decision will determine whether or not C has the right to adjudicate. The court concluded that the guidance in the Second Edition of the TCC Guide (the TCC Guide) (particularly at sub-section 9.4 thereof), simply amounts to guidance and does not limit the jurisdiction of the TCC to hear an application under CPR Part 8: Vitpol Building Services v Michael Samen198.

21–195 Most claims for restitutionary quantum meruit are based upon the absence of a formal contract, but the notion that, in a commercial situation, on the one hand D should not expect to receive a benefit without paying for it, and on the other hand that C should be able to expect to be paid for a benefit conferred. However, in Mowlem plc v Phi Group Ltd199, restitutionary quantum meruit was declined on the basis that C had carried out the work gratuitously for its subcontractor without any legitimate expectation of payment. In this case, in which C had subcontracted the design and construction of earthworks to its subcontractor, C had to supply free-issue fill of a particular type to be incorporated within the earthworks. The original fill was found not to be suitable for the earthworks so C supplied additional fill of a different kind. C claimed for payment for the additional fill on a quantum meruit basis. The claim failed in arbitration on the ground that C could show no legal basis for the claim. C appealed, stating that the arbitrator had erred in law. It was held that the arbitrator’s decision was correct as there was no implied term of payment in the contract and C was not entitled to restitution. 21–196 In the case of British Steel Corporation v Cleveland Bridge and Engineering Co Ltd200, C was required to fabricate steel work for the construction of a bank in Saudi Arabia incorporating cast steel nodes. British Steel was asked to supply the nodes. After protracted negotiations Cleveland Bridge wrote to British Steel and said: “. . . it is the intention of [C] to enter into a subcontract with your company . . . we request that you proceed immediately with the works pending the preparation and issuing to you of the official form of subcontract.”

197 198 199 200

[2013] EWHC 2872 (Comm). [2008] EWHC 2283 (TCC). Mowlem plc v Phi Group Ltd [2004] BLR 421. [1984] 1 All ER 504.

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21–197 No formal contract was ever signed. The steel was delivered. C refused to pay, saying that late delivery had caused them loss and that such late delivery was a breach of contract. The supplier claimed that there could be no contractual delivery date as there was no contract. 21–198 Following the principle laid down in the case of William Lacey (Hounslow) Ltd v Davis201, where Barry J held that the supplier was entitled to remuneration on a quantum meruit basis for the work done at the request of C that went beyond the original tender, it was held that there was no contract and that the supplier was entitled to recover on a quantum meruit for work performed in anticipation of a contract. Goff J said: “Both parties confidently expected a form of contract to eventuate. In these circumstances, to expedite performance under that anticipated contract, one requested the other to commence the contract work, and the other complied with that request. If thereafter, as anticipated, a contract was entered into, the work done as requested would be treated as having been performed under that contract; if, contrary to that expectation, no contract was entered into, then the performance of the work is not referable to any contract the terms of which can be ascertained, and the law simply imposes an obligation on the party who made the request to pay a reasonable sum for such work as having been done pursuant to that request, such an obligation sounding in quasi contract or, as we now say, restitution. Consistently with that solution, the party making the request may find himself liable to pay for work which he would not have had to pay for as such if the anticipated contract had come into existence, for example preparatory work which will, if the contract is made, be allowed for in the price of the finished work.”202

21–199 Whether C’s unsatisfactory performance should be taken into account in determining the quantum meruit was considered in the Court of Appeal in Crown House Engineering Ltd v AMEC Projects Ltd203. Slade LJ said in that case that in defence of a claim based on quantum meruit D may properly assert that the value of such services might be reduced because of late or otherwise unsatisfactory performance that had exposed it to greater expense or claims by third parties. 21–200 It seems that quantum meruit cannot be claimed if, by its actions, C demonstrates its willingness to be bound by a contract: “As regards quantum meruit where there are two parties who are under contract quantum meruit must be a new contract, and in order to have a new contract you must get rid of the old contract.”204

21–201 In this regard, it will thus be difficult for C to contend that the contract has no application to the work actually done if it receives payment from time to time based on a certificate issued under the contract. In the Canadian case of Morrison-Knudsen Co Incorporated v British Columbia Hydro and Power Authority205, where C was involved in the construction of a hydroelectric dam and D committed several breaches of contract, including failure to pay for work that had been accelerated, the court held that these amounted to fundamental breaches. However, because C continued to work,

201 202 203 204 205

[1957] 1 WLR 932. [1984] 1 All ER 504 at p.511. (1990) 48 BLR 32. The Orlanda [1919] 2 KB 728 at p.730, per Lord Dunedin. (1978) 85 DLR (3d) 176.

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completed the project and then claimed payment under it, the court held that where a repudiatory breach occurs during a contract: 1.

2.

C can elect to affirm the breach, or to treat it as discharging the contract. In the latter case C can either claim for damages for the breach of contract, or can sue on the basis of quantum meruit. If C affirms the contract then it cannot claim up on a quantum meruit. If the breach did not occur until after completion, or C does not become aware of the breach until after completion, or C does not become aware that the breach is fundamental until after completion, then it cannot recover on a quantum meruit. Once it has completed performance its rights are limited to those to which it is entitled under the contract for which it will have an adequate remedy, being to sue for damages for breach.

21–202 In Sopov v Kane206, Sopov (as D) failed to make two interim payments, Kane (as C) suspended the works, D threatened to call on C’s bank guarantees and C, claiming that that was a repudiation, removed all his plant and materials from the site, terminated the contract and sued for compensation by quantum meruit207. At first instance HH Warren CJ construed the valuation on a quantum meruit valuation in relation to the rights of the parties under the contract saying: “[W]hile I accept that by the innocent party electing, as a remedy, to sue on a quantum meruit, as opposed to suing for damages for breach of contract, a different result may emerge; I nevertheless do not consider that restitutionary remedies should be seen as subverting the bargains made between contracting parties and thereby overthrowing the contractual allocation of risk. To do so, in my view, represents a backward step and misconstrues the real purpose of restitutionary remedies208. . . .[T]he influence of the contract cannot disappear entirely, even if the contract itself no longer exists.”209

The Court of Appeal of the Supreme Court of Victoria held that this was the wrong approach and that quantum meruit necessarily assumes the absence of a contract and must take no account of the balance of any risk structure under one, saying: “With great respect, we do not think that this view can be sustained. It is because the quantum meruit remedy rests on the fiction of the contract’s having ceased to exist ab initio that the contract can have no ‘continuing influence’ when the value of the work is being assessed on a quantum meruit. It is because this alternative remedy does ignore the bargain which the parties struck, and does ignore the rights accrued under the contract up to the date of termination, that the availability of quantum meruit in the alternative is now seen as anomalous. But, for reasons we have already given, those incongruities are as entrenched as the remedy itself. It is true that the contract price is relevant on a quantum meruit, but not because of any ‘continuing influence’ of the contract. The price is merely a piece of evidence, showing what value the parties attributed – at a particular time – to the work which the builder was agreeing to perform.”210

21–203 Accordingly, the Court of Appeal held that, so far as concerns valuation by quantum meruit, the contract price does not impose a ceiling on the amount recoverable (although it might be a guide to the reasonableness of the amount claimed)211, it 206 207 208 209 210 211

Sopov v Kane Constructions Pty Ltd (No 2) [2009] VSCA 141; [2009] 1 BLR 468. Kane Constructions Pty Ltd v Sopov (2006) 22 BCL 92, 148; [2005] VSC 237, [856]. Ibid., at [26]. Ibid., at [28]. Sopov v Kane Constructions Pty Ltd (No 2) [2009] VSCA 141; [2009] 1 BLR 468, at [21]. Ibid., at [24].

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is not the best evidence of the benefits conferred212 and the appropriate basis is of valuation by reference to the evidence of costs actually incurred213, together with an allowance for profit and overheads214.

Illustration Facts: C and the two Ds were partners for the development of student accommodation in the United Kingdom. They later sought to establish a joint venture with Alumno Development Limited (ADL), for which they appointed Safeharbor Capital Partners LLP as their nominee (Safeharbor). On each project, Safeharbor and the outside investors that it attracted would receive a preferential payment of 18% of any profit, plus 70% of the balance of such profit, which would be split between Safeharbor and the investors 30/70. The profits of Safeharbor were originally equally divided between the three men, but this was later altered and C also received an unspecified “priority” payment. No provision for any payment to C for his role in negotiating the deal with ADL was agreed. C raised certain concerns regarding the honesty and integrity of ADL’s management and sought to terminate his involvement with Safeharbor and ADL with immediate effect. He obtained permission to serve outside the jurisdiction in the United States for valuation of the services provided by him to the benefit of the Ds on the basis of a quantum meruit. The Ds sought to set aside the ex parte order which granted permission to serve outside the jurisdiction. Held, by Donaldson J, that, when, as a result of the wrongful termination, or repudiation, of an agreement, a claimant has failed to complete his contractual performance, he has consequently not reached a point where counter-performance by the defendant has become due; that, when the claimant has so performed, he is entitled under the contract to payment or a remedy in damages; that the claim therefore had no reasonable prospect of success and accordingly the permission to serve the proceedings outside the jurisdiction would be set aside: Elek v Bar-Tur215.

21–204 Where the work provided for in the original contract is altered by variations, it may be altered so greatly that it can no longer be regarded as work done under the contract. In such circumstances the rule is that the contract has been abandoned to the extent of the extra work, and C may be able to recover payment for all that work done under a claim for quantum meruit216. Alternatively, if the additional work falls outside that contemplated by the original contract, that work too may be claimed on a quantum meruit basis. 21–205 In Bush v Trustees of Port and Town of Whitehaven217, C tendered in June to lay certain water mains and divert certain streams in Cumberland, England, within four months, on the understanding that work would commence immediately. However, C was not given full possession of the site until October and what was supposed to be a summer operation had, by then, become a winter operation. The court held that the circumstances contemplated by the contract, which gave C no extra money, or time extensions other than those given by the CA, had so changed that the contract ceased to be applicable and C was entitled to be paid on a quantum meruit basis. 212 213 214 215 216 217

Ibid., at [26]. Ibid., at [30]. Ibid., at [33] to [39]. [2013] EWHC 207 (Ch). See also Ch.12, “Variation and change”. (1988) 52 JP 392.

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21–206 However, this was criticised by the House of Lords in Davis Contractors Ltd v Fareham UDC in which Viscount Simonds said218: “I do emphatically say that it cannot, in the light of later authority, be used to support the proposition that where, without the default of either party, there has been an unexpected turn of events, which renders the contract more onerous than the parties had contemplated, that is by itself a ground for relieving a party of the obligation he has undertaken”219.

21–207 Thus, it would appear that if the performance of the contract merely becomes more expensive, or different from that anticipated, this will not amount to frustration220 and that in order for a change in circumstances to give rise to a quantum meruit, the change must be of such an order that it must amount to a frustration of the contract. 21–208 In Kitsons Insulation Contractors Ltd v Balfour Beatty Building Ltd221, the court had to decide whether a letter of intent sent by C to a subcontractor created a contract. C was appointed main contractor for Phase 1 of the White City Development for the BBC in London. The subcontractor submitted a tender to C on 28 October 1987 in the sum of £1,109,303 for the design, manufacture, supply and installation of modular toilet units and accessories. In the period that followed, a large number of variations were made by C to the details of the work required by them and, as a result, the subcontractor revised its tender to £1,179,379. 21–209 C sent a letter of intent to the subcontractor, dated 23 March 1988, saying that they intended to enter into a subcontract using the standard subcontract DOM/2 (1981 edition), amended to suit C’s particular requirements, which was to be forwarded in due course. The approximate subcontract amount was £1,162,451 less 2.5% discount on a fixed-price lump-sum basis. The letter of intent requested the subcontractor to accept the letter as authority to proceed with the subcontract works. As requested, the subcontractor signed and returned the letter as acknowledgement of receipt and then commenced work. It was not until 22 August 1988 that C drew up and submitted a formal subcontract for signature. Accompanying the subcontract was a letter indicating an acceptance of the subcontractor’s offer. The letter went on to say that payment was not to be made until the subcontract had been signed and returned. The subcontractor did not sign and return the subcontract because: 1. 2.

the amount in the subcontract included a number of variations not provided for in the price; and its contract schedule for interim valuations and payments had not been included in the subcontract.

Payments were subsequently made to the subcontractor amounting to £992,767 based on the subcontract conditions DOM/2 with C’s amendments. The subcontractor claimed that the amount paid was £660,000 short of a reasonable amount, that no binding subcontract had been concluded and that they were entitled to be paid on a quantum meruit basis. 21–210 The court held that no contract had been concluded as the parties had not arrived at the stage where it could be said that full agreement had been reached between

218 219 220 221

[1956] AC 696. Ibid., at p.716. Tsakiroglou and Co v Noblee Thorl GmbH [1962] AC 93; [1961] 2 WLR 633. (1991) 8-CLD–05–04 (QB).

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them. It was considered that the matters outstanding, in particular the method of payment, were too significant for a contract to come into being and the subcontractor was entitled to be paid on a quantum meruit basis.

Developer’s damages 21–211 D is just as likely as C to suffer losses or increased costs when a project is delayed in its completion. Whether D seeks to protect its position by liquidated damages provisions, relies on its right to prove its losses after a breach, or seeks some other way of protecting its position is often a matter of contract and commercial policy. 21–212 It is not unusual, for example, for highways authorities to provide for C to “rent” the lanes from D for the work it is to carry out. The rental may come into being on the contract completion date and be applicable only if the highway is still occupied by [C] after the contract completion date222. The effect of an extended contract period is then a payment of rent for the incomplete lanes rather than liquidated damages or general damages at common law. Whilst not unusual in highways work, it is not common to see this approach to site rentals in construction, but in principle, there is no reason why it could not be, particularly in regard to public contracts for such things as schools, hospitals and similar projects for which liquidated damages are notoriously difficult to calculate. 21–213 Performance bonds have also been successfully applied to construction works. This is a mechanism whereby a third party provides a cash fund to be drawn by D either on breach or, more normally, on demand. Although typical performance bonds expressly exclude damages that C is obliged to pay, there is no reason in principle why they could not be used instead of liquidated damages if suitably drafted. On the other hand, in order to provide a bond, C would have to be able to secure its value and providing such security against future losses could be a serious financial problem. 21–214 In the event that C is in breach by failing to complete the work and/or by performing defective work, D has two alternative methods of recovering its losses in damages. They can be measured and calculated as its actual losses actually incurred and proved after the event, or, alternatively, they can be estimated in advance and liquidated as a fixed sum per period.

Illustrations (1)

Facts: Acker Construction LLC (A) entered into two written contracts, the first being to build a total of seven chicken houses for Sharon Wadkins (R1) for $390,340. The second contract was for the completion of three chicken houses for $292,755. Both contracts stated that A would not be liable for any consequential damages arising as a result of any defect in products, or workmanship. R1 assigned the contracts to Hanh Billy Tran (R2), who purchased the land upon which the chicken houses were to be built. A obtained a lien on the property, followed by proceedings against R2 to recover $68,307 due under the contracts. R1 counterclaimed for breach of contract, asserting that A had failed to complete the project on time. R1 alleged that, instead of building the four chicken houses to completion (whilst the additional three chicken houses were built), A worked on all seven houses at one time and did not complete them for almost ten months, depriving R1 and R2 of expected income whilst the additional three houses were built. R1 sought

222 See, for example, Texas Department of Transportation, Accelerated Construction Strategies (2003).

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(2)

(3)

damages for the cost of repairs and for the loss of income. The jury found that $34,716.00 of the $136,614 judgment for R1 was attributable to the cost of repairs and $33,951.00 was attributed to lost profits. A argued that the lost profits comprised consequential damages and were not within their reasonable contemplation. A further contended that R1’s lost profit damages were based upon speculation; that his business was a new type of project that had never been done before; and that R1’s calculations (which were based upon a first year in business) were inadequate because they did not cover a sufficient period of time. Held, that the jury had before it evidence of a reasonable time-frame in which the houses could have been completed. In addition, on the facts of this case, the lost profit damages were not consequential damages, which were damages, loss or injury that did not flow directly and immediately from the act of the party, but only formed certain of the consequences or result of such act. Lost profits have been held to be consequential damages when they did not flow directly and immediately from the breach. Loss profits are not always consequential damages; sometimes, they are the natural and proximate result of a breach of contract. In this case, the evidence of lost profit damages offered by the owner was sufficiently reliable and there was substantial evidence to support the jury’s award of lost profit damages: Acker Construction LLC v Tran223. Facts: John Grimes Partnership Ltd (JGP) was engaged by Mr Gubbins (the respondent) to design the road and drainage for a residential development and to obtain approval from the local authority. JGP eventually did so 15 months after the agreed date and was found to be in breach of contract because of that delay. The period of delay coincided with the drop in the property market in 2007–2008 and Mr Gubbins was awarded damages against JGP for diminution in value of the development during the period of delay. JGP argued that the loss was “too remote”. Held, by King LJ, that the judge at first instance was correct to find that there was nothing to take this case out of the conventional approach to remoteness of damage in contract cases: John Grimes Partnership Ltd v Gubbins224. Facts: Mr and Mrs Stephen West (the Wests) engaged Ian Finlay and Associates (IFA) as their architects in respect of works to the ground and lower floor of their house. After the works were complete, the Wests found extensive damp in the basement, because no proper waterproofing had been carried out by the contractor. Serious problems were discovered with the mechanical and electrical services and these had to be taken out and replaced. New floor slabs installed by the contractor were also defective and these had to be removed and replaced. The Wests moved to alternative accommodation for some 20 months whilst the remedial works were carried out. The contractor (Armour) became insolvent. The Wests claimed against IFA for negligent advice in relation to the treatment of the lower ground floor and for failing properly to carry out inspections of the works. IFA had the benefit of a net contribution clause in their appointment. Held, by Stuart–Smith J, that, had IFA raised the issue of damp with the Wests, they would have informed IFA about these matters and it was likely that, once informed, IFA would have concluded that the existing damp could have been dealt with by localised patch repairs and recommended that they allow £5,000 by way of provisional sum for the work; that, in relation to the floor slabs, it is not ordinarily expected of an architect for them to be carrying around a ruler and measuring every dimension; rather, about which they had some particular reason for concern. IFA were not therefore in breach of their duties in this regard. The Wests’ borrowing costs to fund the remedial works were awarded, along with various damages for inconvenience, distress and discomfort: West v Ian Finlay and Associates225.

223 (2012) Ark App 214, 2012 Ark App LEXIS 318 (2012). 224 [2013] EWCA Civ 37. 225 [2013] EWHC 868 (TCC).

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21–215 The remedy of liquidated damages is not available to D if the project is not completed on time as a result of its own actions226. In such a case, unless there is power to extend the contract period, time will be at large and there will be no date from which liquidated damages can run227 and for liquidated damages to bite, there must be an enforceable date for completion from which they can be calculated. However, this is not the case where D claims damages at common law. In McAlpine Humberoak228, the Court of Appeal considered the construction of a deck structure for a North Sea oil rig. When D gave instructions whilst C was in culpable delay, it was claimed that the effect was to put time at large and defeat D’s claim to damages: “Even if [D] were in a position to claim liquidated damages (which they are not) we doubt if the argument would prevail, at any rate so far as the period prior to June 11 is concerned229 . . . Here, as we have said, [D] are claiming unliquidated damages. Obviously they cannot recover damages for any additional delay caused by the extra work . . . If [C] is already a year late through his culpable fault, it would be absurd that [D] should lose his claim for unliquidated damages just because, at the last moment, he orders an extra coat of paint.”230

21–216 It is generally the rule that a party seeking compensation for breach must prove its losses; the courts recognise how commercially attractive it is for the parties to a contract to agree what will be their recoverable losses in the event of a breach, at the time the contract is entered into, by the imposition of liquidated damages, irrespective of how difficult they may be to quantify231.

Illustration Facts: Dick Emard Electric was the successful bidder on a public works project to upgrade the Marin Community College’s Math Central Plan Complex. On Shore Construction and Mechanical was selected as a subcontractor to furnish and install various mechanical items. The project was to last only four months but ultimately lasted nearly two years before it was completed. There were numerous delays attributable to the general contractor, the subcontractor, other subcontractors, problems with the site, and other reasons. The general contractor made a decision early on to seek and obtain a revision to the general contract and have all the piping placed in one trench as opposed to two. In addition, there were also delays in purchasing a chiller. When the chiller was finally purchased, design changes for the pad upon which it was mounted were needed. The subcontractor also requested and obtained an authorisation to obtain the chiller from a different vendor than originally contemplated. When the chiller was acquired, the subcontractor failed to pay for it as required, and the general contractor was forced to pay for it to save time. The problems escalated by early December 2008, when On Shore had been repeatedly urged to submit its three-week schedules and necessary shop drawings. In January 2009, the general contractor gave the subcontractor a notice of termination of contract. The notice set forth multiple grounds for termination of the subcontract, including

226 Wells v Army and Navy Co-operative Society (1903) Construction Law Year Book vol. 4, 65 at p.71 (CA). 227 See Ch.6, “Extensions of time and time at large”. 228 McAlpine Humberoak Ltd v McDermott International Incorporated (No 1) (1992) Const LJ 383. 229 See SMK Cabinets v Hili Modern Electrics [1984] VR 391 at 398; May, A, QC (ed), Keating on Building Contracts (5th edn, 1991, Sweet & Maxwell), p.231. 230 Ibid., at p.404, per LLoyd LJ. 231 Clydebank Engineering and JF Finnegan v Community Housing (1993) 65 BLR 103. However, see also Philips v Attorney General of Hong Kong (1993) 61 BLR 41, where minimum damages were held to be a penalty and see also T Thompson, “A fresh look at liquidated damages” (2006) 22 Const LJ 289, in which the difficulties presented by pre-estimated losses are reviewed in the light of current case law.

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the subcontractor’s failure to continue diligently with its work, failure to submit a proposed schedule and performance of its work causing delays to the general contractor, and the subcontractor’s lack of co-operation on the completion of the scheduled work. Thereafter, the subcontractor filed Chapter 13 bankruptcy. The general contractor had to hire a replacement subcontractor to finish the subcontractor’s unfinished work and the project was delayed additional months as a result of the dismissal. Whether or not the subcontractor breached the subcontract depended on whether it caused disruption at the project, failed to submit proper shop drawings, understaffed its work force, and failed to provide an appropriate work schedule. Held, that the subcontractor was culpable on every ground the general contractor alleged. Because the court determined that the subcontractor breached the subcontract, the only issue left was to determine whether the general contractor had established a basis for the back charges and set-offs. The set-offs were broken down into three categories by the general contractor: (1) payments made to the replacement subcontractor, (2) delay damages suffered by the general contractor and charged to the subcontractor, and (3) the general contractor’s costs to complete the subcontractor’s work. All amounts presented by the general contractor were not refuted by the subcontractor except for the hourly rate charged by the general contractor for the labour hours totalled in the recapitulation. The subcontractor pointed out that the general contractor back charged another subcontractor at a different rate; however, the subcontractor failed to show what the appropriate rate should have been. The general contractor then filed suit against the subcontractor seeking back charges and off-sets against the adjusted net contract amount claimed by the subcontractor. The contractor demonstrated that On Shore’s delays on the job justified an off-set of $53,844. The court accepted by the preponderance of the evidence the labour charges imposed by the general contractor. The subcontractor was not entitled to any recovery and the general contractor was entitled to judgment in its favour: Emard Engineering v Linares (in re Linares)232.

21–217 In the Clydebank Engineering case233, for example, the Spanish Government contracted with C for four torpedo boats. The contracts contained liquidated damages on a weekly basis for each boat in the event of late delivery. The boats were delivered several months late. The House of Lords held that the sum per week was a liquidated damages clause and not a penalty, in spite of the fact that it was not possible to put a commercial value on the loss of use of such vessels234. 21–218 In Multiplex v Abgarus, Cole J said: “Conceptually I do not think it is correct to say that public works, because they may not yield a cash flow, cannot result in damages to [D] if delay in construction occurs. Whilst the example may be peripheral to the one being here considered, it demonstrates that, at least in some instances, an appropriate measure of liquidated damages is the cost of capital tied up for the period of delay. I regard it as an inadequate answer, in the case of a public work, to say that if the work were delayed say six months, no damage is suffered, and no liquidated damages could be validly agreed, because there was no delay in receipt of cash flow, and there was mere deferment of a planned recoupment of capital and interest costs over time.”

232 2012 Bankr LEXIS 5944 (Bankr ND Cal 27 Dec 2012). 233 See fn 231 above. 234 The House also rejected an argument that the Spanish Government had suffered no loss because, had the torpedo boats been delivered on time, it was likely that in any event they would have been sunk by enemy action!

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21–219 Similarly, in State of Tasmania v Leighton235, Cox J observed that: “The fact that this project was a public utility with no anticipation of a loss of revenue by reason of the delay is not in itself a proper reason for claiming that [D] could suffer no damage other than the direct costs.”

21–220 And in Philips Hong Kong Ltd v The Attorney General of Hong Kong236, the Privy Council noted the following: “In the case of a governmental body the nature of the loss it will suffer as the result of the delay in implementing its new road programme is especially difficult to evaluate. [D] reasonably adopted a formula which reflected the loss of return on the capital involved at a daily rate, to which were added figures for supervisory staff costs, the daily actual cost of making any alternative provision and a sum for fluctuations.”

21–221 Again, there is no reason why liquidated damages could not be levied in relation to a number of fixed performance standards to be achieved by calculable dates. So long as there is an objective standard by which performance can be measured and a date by which performance is to be achieved that can be ascertained and from which liquidated damages can run, such provisions will be enforceable. The question of liquidated damages relating to an intermediate stage of a process was canvassed before Mayo J at the High Court in Hong Kong, in Philips Hong Kong Ltd v Attorney-General of Hong Kong237. The contract provided for liquidated damages for the non-completion, by “key dates”, of both physical and non-physical stages of work. In considering the plaintiff ’s objections to the clause on this ground, the judge said: “Clause 29 is a highly sophisticated clause which attempts to cater for a number of different situations. It is, however, imperative to bear in mind that the plaintiffs are only one of a number of contractors and I can see no objection to interlinking the penalty clauses of the different contracts and introducing the concept of ‘key’ dates. The fact that it may be necessary to establish damages which are suffered as a result of a ‘knock on’ effect does not seem to me to be fatal in attempting to assess sensibly what damages may arise if ‘key’ dates are not adhered to. It is evident that a considerable amount of time and energy has been expended by the defendant in attempting to quantify losses which would be occasioned if ‘key’ dates are not met and I am by no means satisfied that this approach to the drafting of clause 29 necessarily leads to a conclusion that damages payable under the clause constitute a penalty. Provided that the drafting is sufficiently clear and explicit I do not think that there is any inherent objection in the concept of ‘key’ dates. It may well be possible to make genuine pre-estimates of damages referable to different sections of work.”238

21–222 The decision in this case was reversed by the Court of Appeal in Hong Kong on the basis that the disputed provisions of the government’s form of contract had no application to the particular circumstances before the court. However, the views quoted were not dissented from by the Court of Appeal. 21–223 There can be no doubt that in many cases it will be an advantage to D to be able to agree in advance what damages will be paid by C in the event of non-performance. This will be particularly so in relation to completion of non-physical stages of work or the performance of administrative tasks and completion of key dates during the course of the works as well as for damages for non-completion of the works as a whole. C’s failure to

235 236 237 238

State of Tasmania v Leighton Contractors Pty Ltd (No 3) [2004] TASSC 132. [1993] 61 BLR 49 at [60]–[61]. (1990) 50 BLR 122. Ibid., at p.128.

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complete a non-physical stage of the work will not bar the deduction of liquidated damages, or the withholding of money239. Apart from liquidated damages for delay, it is entirely possible (and possibly desirable)240 to define liquidated damages for the breach of administrative functions under the contract, for which it would be difficult or impossible to prove the actual loss suffered. Such administrative functions might include the provision of and updating of a compliant schedule and the provision of progress records241.

Liquidated damages 21–224 Generally, whether agreed liquidated damages are recoverable will depend upon the care with which the overall contract has been put together242. Liquidated damages appear to be applicable provided the following conditions are fulfilled: 1. 2.

3.

4.

5.

there must be a clear breach of contract on C’s part by its failure to meet the requisite performance by the date, or dates specified; the deduction of liquidated damages at an interim stage during the works on site is valid where those liquidated damages represent a genuine pre-estimate of a foreseeable loss to D; the withholding of interim payments, or moneys otherwise due to C, will be valid, provided that the amount that is withheld is not extravagant in relation to the maximum conceivable loss D will incur; a bona fide estimate of the loss suffered made in accordance with the contract at the time that the breach occurs may be valid as a basis for a deduction of damages for delay; and appropriate notice of deduction is given under the HGCRA243.

Illustrations (1)

Facts: Lim Ting Guan and Lim Ting Chai (the appellants) engaged Goodlink Enterprises (the respondent) to construct buildings to be completed within 12 months of the date of commencement, completion of the works being delayed by eight months. The respondent claimed for the balance due under the contract, payment for additional works outside the contract and damages for delay caused by the appellants. The appellants counterclaimed, seeking liquidated and/or general damages for the delay in completion, damages for defective work and payment of moneys allegedly due. At first instance, it was found that substantial delay was

239 A Houghton, “Milestones and liquidated damages” (1992) 8 Const LJ 232. 240 See Chapter 10, “Project control” and the Society of Construction Law Delay and Disruption Protocol (2002), para.2.2.1.4. 241 The principal reason for liquidated damages is that the type of loss suffered “is such that proof of it [might be] . . . extremely complex, difficult and expensive”, Clydebank Engineering and Shipbuilding Co Ltd v Don Jose Ramos Yzquierdo y Castaneda [1905] AC 6, HL, per Earl of Halsbury LC at p.11. See, for example, the Change Management Supplement which contains such provisions: see App.4 to the 4th edn hereof. 242 A Houghton, “Milestones and liquidated damages” (1992) 8 Const LJ 232. 243 Local Democracy, Economic Development and Construction Act 2009 (LDEDCA), which amends Part II of the HGCRA, 1996, received Royal Assent on 12 November 2009. The new amendments will come into force on a date or dates to be appointed by the Secretary of State and Welsh and Scottish Ministers, and will apply only to construction contracts entered into after the appointed dates (the unamended HGCRA 1996 will continue to apply to earlier contracts).

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(2)

attributable to the appellants, who caused $120,000 worth of damage to the respondent and that the appellants’ own delay disentitled them from recovering anything as liquidated damages, since no general damages had been proved. It was also found that none of the appellants’ claims for defective works against the respondents had been made good, save for one. The appellants appealed against the decision, on the ground that the trial was flawed by a miscarriage of justice by the judge; that the evidence of one of the expert witnesses was not credible and, as a consequence, should not be admitted, that the trial judge’s findings relating to delay were in error, that there was no basis for the respondent’s estimation of damages for the appellant’s delay; and that the trial judge was incorrect in rejecting the appellants’ claims for defective works, as well as for dismissing their counterclaim for liquidated damages. Held, by the Court of Appeal of Negara Brunei Darasslam Holden Bandar Seri Begavan, that (1) the circumstances of the original trial did not indicate a failure of due process, or a miscarriage of justice; the evidentiary problems relating to witnesses were more properly attributable to presumptive behaviour of counsel for the appellants; (2) the evidence of Mr Gainsbury was credible, on the basis that he took into account the appropriate documents and correspondence and had relevant experience in the industry; further, that, even if his expert’s report was prepared in respect of a separate contract (which there was no evidence to suggest), this did not render it inadmissible; (3) there was no reason to doubt the trial judge’s original findings in relation to delay in any of the areas raised by the appellants; (4) the estimation of damages chosen by the trial judge was the best estimate available in the circumstances and that there was no reason to interfere with his original finding in this regard; (5) the trial judge has been correct to reject the appellants’ complaints of defects in the respondents workmanship, as lacking any convincing evidential basis; (6) the trial judge had been incorrect to reduce the estimate of the delay caused by the appellants upon the basis of an undefined period of delay on the part of the respondent: apart from a certain six-day period, the trial judge made no actual finding of fault on the part of the respondent; and (7) the trial judge had been correct to dismiss the respondents’ counterclaim for liquidated damages because they had called no evidence to establish the fact that they had “suffered some loss or damage”: Lim Ting Guan v Goodlink Enterprise244. Facts: Penta-Ocean Construction Co Ltd (A) was the main contractor retained by the government as employer to build two schools as Tai Po and CWF Piling and Civil Engineering Co Ltd (R) was a domestic subcontractor for the design and construction of piling works. The subcontract documents comprised a letter of acceptance, dated 30 March 2001, a written subcontract based upon the Hong Kong Construction Association’s standard form of domestic subcontract (1994 edition) and other correspondence, as well as documents including specifications and bills of quantities. By an award dated 17 January 2007, the arbitrator rejected the appellant’s claim for liquidated damages (LADs) on the ground that the LADs provisions were inconsistent with Cl.3.4 in the standard form subcontract (which provided for deduction from the contract price of common law damages) and therefore Cl.3.4 “prevailed over” the LADs provisions pursuant to Cl.2.4 of the subcontract. The arbitrator also rejected an alternative claim by the appellant, based upon rectification. A sought to appeal the award. Held, by A Cheung J, that leave to appeal would be granted; that, upon a proper construction of the subcontract documents, Cl.3.4 did not conflict with item 6 of the letter of acceptance and therefore Cl.2.4 did not apply to prevent the A from claiming LADs for R’s alleged

244 [2004] 25 Const LJ 52 at [63].

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delay in completion of the subcontract works (at [74](1)); that the first part of Cl.3.4 sets out what items of loss and damage the parties reasonably contemplate will be involved in case of breach; that the latter part of Cl.3.4 informs the parties how such loss and damage may be easily recovered: Penta-Ocean Construction Co Ltd v CWF Piling and Civil Engineering Co Ltd245.

Standard form provisions 21–225 So far as concerns the standard forms, the mechanics of the deduction of, or claim for, liquidated damages for delay to completion differs from contract to contract246. So, for example, ECC2247 and ECC3248 have only optional clauses for damages for delay which, unless included, do not apply. If they apply, then, as with MWA80, MWA98 and MWA09, GC/Works/1, GC/Works/1/98, ICE6, ICE7, FIDIC4, FIDIC/ Build98, FIDIC/DB95, FIDIC/SF98 and FIDIC/M&E87, the CA has no part to play at all. On the other hand, under the other JCT contracts, the certificate by the CA that C has failed to complete on time is a condition precedent to D’s right to claim liquidated damages for non-completion249. 21–226 In ACA82 and ACA98, the CA may deduct the liquidated damages on valuation and before certifying a sum for payment250, although that is unusual. The engineering forms generally empower D to deduct liquidated damages from any moneys due, or to recover the liquidated damages as a debt. Under the JCT forms, D has to notify C of its intention to deduct liquidated damages before doing so. The JCT practice note251 in this regard advises: “Upon receipt of the certificate from the [CA], [D] has a discretion as to whether or not, having received that certificate, he requires [C] to pay or allow [liquidated damages] . . . . . . [D] must give written notice to [C] not later than the date of the Final Certificate of his intention to require the payment of liquidated damages; and the [CA] should advise [D] to this effect. Having given such notice [D] may deduct damages from monies subsequently becoming due to [C] under the Contract or may recover the same from [C] as a debt.”

21–227 Wherever there is a review provision in respect of extension of times, the contract also provides for the repayment of liquidated damages in the event that the extension of time is subsequently increased with the resultant reduction in the period for which damages are due. So, for example, JCT practice note 16 advises: “Where as a result of the [CA] carrying out his review in the 12 weeks after practical completion (see paragraph 8 above), the [CA] fixes a completion date which is later than that referred to in a previous certificate issued under clause 24, then [D] must pay or repay 245 (2012) 26 Const LJ 131. 246 For guidance upon the drafting of liquidated damages clauses see M Hollingdale, “Designing and enforcing liquidated damages clauses to maximise recovery” (2005) 21 BCL 412. 247 Option R. 248 Option X7. 249 Eg IFC84 and IFC98, Cl.2.6; IFC2005, Cl.2.23.1; JCT80 and JCT98, Cl.24.1; JCT2005, Cl.2.32.1; ACA82, Cl.11.3. 250 Cl.11.3, Alternative 1. 251 JCT Practice Note 16: “Extensions of time and liquidated damages”.

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to [C] any [liquidated damages] paid or allowed in respect of the period between the original and the revised completion dates.”

An exclusive remedy 21–228 In Pigott Foundations252, HH Judge Gilliland QC said: “The effect of a provision for the payment of liquidated damages for delay in a building contract has been considered in a number of recent authorities from which it is clear that not only does such a clause have the effect of imposing a liability upon the party who is responsible for the delay to pay damages at the stated rate, but also it has the effect of precluding the other party to the contract from seeking to avoid the limitation on any amount of damages contained in a liquidated damages clause by claiming damages for delay, or disruption arising from delay in completing the works as damages for the breach of some other provision of the contract.”253

21–229 In Biffa Waste Services254 the argument was put that a clause in the contract stipulating that: “The payment, or deduction of such damages shall not relieve [C] from its obligation to complete the works, or from any other of its obligations and liabilities under the contract and shall be without prejudice to any other right, or remedy of [D]”

in relation to the power to deduct liquidated damages for delay to completion, empowered D to claim unliquidated damages where completion had been delayed as a result of a fire negligently caused by C. 21–230 In rejecting the argument, Ramsey J said: “. . . I do not consider that the provisions of [the liquidated damages clause] can be construed to draw a distinction between a ‘simple’ failure to complete and a failure to complete caused by the breach of another obligation under the Design and Build Deed. First, I do not consider that it is possible to draw a distinction between a ‘simple’ failure to complete and a failure to complete caused by breach of another obligation. If there is a failure to complete then liquidated damages are ‘the only monies’ due for such default. If there is a breach of another obligation and that breach causes a failure to complete then liquidated damages are still the only monies due for that default, that is a breach of contract causing a failure to complete on time. . . . I do not accept that a liquidated damages clause which only applied to a case where there was simply a failure to complete on time without a breach of any other provision would make commercial sense. The purpose of the liquidated damages clause is, as Lord Upjohn said in the Suisse Atlantique case, for the benefit of both parties: ‘the party establishing breach by the other need prove no damage in fact; the other must pay that, no less and no more’. Assessment of damages for delay is a difficult process as the expert evidence in this case has shown. The advantage of certainty in the sum payable as liquidated damages provides advantages to both sides. If that benefit were limited to cases of ‘simple’ delay, but not to cases where that ‘simple’ delay had been caused by breach of another obligation, the commercial purpose would disappear. A party wishing to avoid liquidated damages and argue for no loss, or a smaller sum would attempt to find some other breach of an implied, 252 Pigott Foundations v Shepherd Construction (1993) 67 BLR 48 at p 67. 253 See also Cellulose Acetate v Widnes Foundry [1933] AC 20 (House of Lords); Temloc v Errill Properties (1988) 39 BLR 30 (CA) at pp.38–39 and Surrey Heath BC v Lovell Construction (1988) 42 BLR 25 at p.37 and Masons v W D King [2003] EWHC 3124 (TCC). 254 Biffa Waste Services Ltd v Maschinenfabrik Ernst Hese GmbH [2008] EWHC 6 (TCC), [2008] BLR 155.

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or express term to hang the delay on. A party seeking to uphold the clause would be trying to disprove that another breach was the cause of the delay.”

21–231 Thus, it would appear that unless it is expressly provided for in the contract in unambiguous terms, D cannot recover time-related damages in excess of the liquidated and ascertained damages for delay to completion. For example, where the contract requires C, pursuant to an instruction from the CA, to recover the effects of its own dilatoriness, the losses on completion, unless expressly determined otherwise, will be exactly the same losses as would have flowed from C’s dilatoriness and, if liquidated, the very same liquidated damages255. The Change Management Supplements attempt to deal with this issue by stating that: “Notwithstanding the provisions for default in compliance with an instruction . . ., if [C] fails to comply with an instruction issued pursuant to [the clauses requiring C to accelerate performance, C] shall reimburse [D] for all the loss and expense, costs and damages that [D] thereby incurs. [D] shall be entitled to deduct such sums from any monies due, or to become due to [C], or may recover them as a debt. For the avoidance of doubt, [D’s] entitlement hereunder is distinct from and not included within any entitlement to liquidated damages recoverable, or deductible pursuant to [the clause providing for liquidated damages for delay]. However, in computing his losses, [D] shall give credit for any liquidated damages that have been deducted, or paid as liquidated damages under [the liquidated damages for delay clause].”

Penalties “It will be held to be a penalty if the breach consists only in not paying a sum of money, and the sum stipulated is a sum greater than the sum which ought to have been paid.”256

21–232 The reluctance of the courts to permit parties to agree terms that will inhibit a breach rather than compensate for loss when it occurs, or provide to the innocent party with a sum far in excess of its reasonable loss, is recognised generally under what is known as the equitable “doctrine of penalties”. The effect of this is that at common law the courts will enforce a contract that provides that a certain sum will be payable on breach, irrespective of whether that sum is actually suffered, provided that the sum is not excessive in relation to the losses that could reasonably have been foreseen at the time the contract was entered into. Whether a stipulated sum is in truth an estimated loss, agreed to be paid in lieu of actual damages and properly liquidated damages, or is a sum intended to deter a breach and then unenforceable as a penalty, is an objective test to be made at the time of the breach257: “It is important to note that the two alternatives, a deterrent penalty; or a genuine preestimate of loss; are indeed alternatives, with no middle ground between them. Accordingly, if the court cannot say with some confidence that the clause is indeed intended as a deterrent, it appears to be forced back upon finding it to be a genuine pre-estimate of loss. That choice illuminates the meaning of the latter phrase. ‘Genuine’ in this context does not mean ‘honest’; and much less, as the argument before us at one stage suggested, that the sum stipulated must be in fact an accurate statement of the loss. Rather, the expression merely underlines the requirement that the clause should be compensatory rather than deterrent.”258

255 256 257 258

Masons v W D King [2003] EWHC 3124 (TCC). Kemble v Farren [1829] 6 Bing. 141, at 148. State of Tasmania v Leighton Contractors Pty Ltd [2005] TASSC 133. Murray v Leisureplay [2005] EWCA Civ 963, per Buxton LJ at [109].

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21–233 In the leading case of Dunlop Pneumatic Tyre v New Garage259, Lord Dunedin set out a series of guiding propositions as to the acceptability of liquidated damages provisions: “1. Though the parties to a contract who use the word ‘penalty’ or ‘liquidated damages’ may prima facie be supposed to mean what they say, yet the expression used is not conclusive. The Court must find out whether the payment stipulated is in truth penalty or liquidated damages. This doctrine may be said to be found passim in nearly every case. 2. The essence of a penalty is a payment of money stipulated as in terrorem of the offending party260; the essence of liquidated damages is a genuine covenanted pre-estimate of damage261. 3. The question whether a sum stipulated is penalty or liquidated damages is a question of construction to be decided upon the terms and inherent circumstances of each particular contract, judged as at the time of making the contract, not as at the time of the breach262. 4. To assist this task of construction various tests have been suggested, which if applicable to the case under consideration, may prove helpful, or even inclusive. Such are: (a) (b)

It will be held to be a penalty if the sum stipulated for is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach263 . . . There is a presumption (but no more) that it is a penalty when, ‘A single lump sum is made payable by way of compensation, on the occurrence of one or more or all of several events, some of which may occasion serious and others but trifling damage’264.

5. On the other hand, it is no obstacle to the sum stipulated being a genuine pre-estimate of damage, that the consequences of the breach are such as to make precise pre-estimation almost an impossibility. On the contrary, that is just the situation when it is probable that pre-estimate damage was the true bargain between the parties.”265

21–234 The question of whether a stipulated sum is disproportionate to the likely loss that could be suffered was considered by Earl Halsbury LC thus: “. . . it is impossible to lay down any abstract rule as to what it may, or it may not be extravagant, or unconscionable to insist upon without reference to the particular facts and circumstances which are established in the individual case . . ..”266

And by Lord Davey: “I conceive that it may be taken as an established principle in the law of Scotland that if you find a sum of money made payable for the breach . . . of one particular stipulation in an agreement and when you find that the sum payable is proportioned to the amount . . ., or the rate of the non-performance of the agreement . . ., or if you find, as in the present case, that it is so much per week during the whole time for which the non-delivery of vessels 259 Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 at pp.86–88, per Lord Dunedin. 260 Although under Civil Law that would appear not always to be the case, see Colaiuta, Virginie, “Acceleration of works and penalties for delay in France in construction projects” ICLR [?] 261 See also Clydebank Engineering and Shipbuilding Co v Don Jose Ramos Yzquierdo y Castaneda [1905] AC 6, 21 TLR 58. 262 See also Public Works Commissioner v Hills [1906] AC 368 and Webster v Bosanquet [1912] AC 394. In civil law, the distinction appears to be irrelevant. See Colaiuta, Virginie, “Acceleration of works and penalties for delay in France in construction projects” ICLR [?]. 263 Illustration given by Lord Halsbury in Clydebank Engineering. 264 Per Lord Watson in Lord Elphinstone v Monkland Iron and Coal Co (1886) 11 App Cas 332. 265 Per Lord Halsbury in Clydebank Engineering and per Lord Mersey in Webster v Bosanquet [1912] AC 394. 266 [1905] AC 6, at p.10.

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beyond the contract time is delayed then you infer prima facie the parties intended the amount to be [liquidated damages] and not a penalty . . . because it is always open to the parties to show that the amount named in the clause is so exorbitant and extravagant that it could not possibly have been regarded as damages for any possible breach which was in the contemplation of the parties.”267

21–235 In construing a subcontract in Gilbert Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd268, Viscount Dilhorne, said: “Literally read, the third sentence of clause 14 enables [C] to suspend, or withhold payment of any moneys due, or becoming due to the [SC], however large, if the [SC] is guilty of any breach, however minor, of the subcontract. Read literally this sentence provides for the imposition of a penalty which may be wholly disproportionate to the damage suffered by [C]. One would have expected the subcontract only to have provided for the suspension, or withholding of the payment of moneys estimated to be the loss suffered by [C] by reason of the breach.”269

21–236 In Ariston SRL v Charly Records270, the Court of Appeal relied on Lord Dunedin’s dicta in Dunlop271, and determined that a liquidated damages clause that provided for payment of £600 per day for late delivery of parts was a penalty because £600 was payable whether one or every item was not delivered. On the other hand, it appears that if, at the time that the contract is made, D notifies C that its loss, if any part of the works remains incomplete (no matter how small the incomplete part is), is likely to be a certain figure and C expressly contracts on that basis, then C will have knowledge of the special circumstances that made the loss likely and will be liable for it272. 21–237 In AMEV v Austin273, to assist in considering whether a term of a contract was penal in character rather than a genuine pre-estimate of damage, the High Court of Australia said that: “The test to be applied in drawing that distinction is one of degree and will depend on a number of circumstances, including (1) the degree of disproportion between the stipulated sum and the loss likely to be suffered by [D], a factor relevant to the oppressiveness of the term to [C], and (2) the nature of the relationship between the contracting parties, a factor relevant to the unconscionability of [D’s] conduct in seeking to enforce the term.”

21–238 The principles were applied in the cases of Jeancharm Ltd v Barnet FC274 and Alfred McAlpine v Tilebox275. In Jeancharm, C agreed to supply football kits to D. The contract provided that D should pay 5% interest per week in the event of late payment (equivalent to 260% per annum). On delivery, D refused to pay on the grounds, amongst other things, that the goods were defective. In a subsequent dispute C was awarded £5,000 for the supply of goods and then went on to claim that its 5% per week clause should apply to the amount payable from the date of supply to the date of judgment. D contested the interest payment and, on appeal, the court determined

267 Ibid., at p.16. 268 (1974) 1 BLR 73 at p.89. 269 Ibid., at p.711. 270 The Independent, 13 April 1990, referred to by Lord Woolf in Philips Hong Kong Ltd v The Attorney-General of Hong Kong (1993) 61 BLR 41 at p.59. 271 Dunlop v New Garage and Motor Co [1915] AC 79. 272 Robophone Fidelities Ltd v Blank [1966] 1 WLR 1428. 273 AMEV-UDC Finance Ltd v Austin (1986) 162 CLR 170 (FC) at para.41. 274 Jeancharm Ltd v Barnet Football Club Ltd [2003] All ER 69. 275 Alfred McAlpine Capital Projects Ltd v Tilebox Ltd [2005] EWHC 281 (TCC).

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that the magnitude of the interest rate far exceeded anything that could be said to be a genuine pre-estimate of loss and was therefore unenforceable. 21–239 On the other hand, in Tilebox, the Technology and Construction Court considered whether a liquidated damages clause was valid and enforceable in which, in precontract negotiations, D had proposed £45,000 per week to which C had initially objected, but subsequently accepted as part of the give and take of the negotiations. The date for completion of the contract was 12 July 2002. However, by December 2004, when C wrote to D to object about the level of liquidated damages, work was still continuing and not expected to be completed until the spring of 2005. C sought a declaration under Part 8 of the CPR that the specified liquidated damages were an unenforceable penalty. In taking the opportunity to summarise the past approach of the English courts, Jackson J stated: “1. There must be a substantial discrepancy between the level of damages stipulated in the contract and the level of damages which is likely to be suffered before it can be said that the agreed pre-estimate is unreasonable. 2. Although many authorities use, or echo the phrase ‘genuine pre-estimate’, the test does not turn upon the genuineness, or honesty of the party, or parties who made the pre-estimate. The test is primarily an objective one, even though the court has some regard to the thought processes of the parties at the time of contracting. 3. Because the rule about penalties is an anomaly within the law of contract, the courts are predisposed, where possible, to uphold contractual terms which fix the level of damages for breach. This predisposition is even stronger in the case of commercial contracts freely entered into between parties of comparable bargaining power. 4. Looking at the bundle of authorities provided in this case, I note only four cases where the relevant clause has been struck down as a penalty276. In each of these four cases there was, in fact, a very wide gulf between (a) the level of damages likely to be suffered, and (b) the level of damages stipulated in the contract.”

21–240 In this case, it was held that, although the liquidated damages could have been both much more and much less than the stipulated sum, depending upon the length of, amongst other things, the period of delay, the gap between what was stipulated and what was likely was not nearly wide enough to be struck down as a penalty. 21–241 Whereas, under the civil law, it is apparent that the courts will vary specified liquidated damages both upwards and downwards depending upon how they see the justice of the case277, at common law, the effect of an agreement for liquidated damages is to place an agreed limitation on C’s liability for damages for delay to completion and such a figure will be payable whether or not the sum is actually incurred and no matter how the loss should in fact arise. It is normally the case that if a liquidated damages clause is found to be unenforceable because it is deemed to be a deterrent rather than compensatory, at common law it does not mean that D will be entitled to nothing in the event of C’s breach; it merely means that, in those circumstances, the level of agreed damages will not be enforceable and D will have to prove its actual loss as damages. Accordingly, if what is called in the contract “liquidated and ascertained damages” is found to be a penalty and hence unenforceable, it would seem that D should be able to recover its losses as general damages at common law up to the limit of liability identified by the liquidated damages278. 276 These are Commissioner of Public Works v Hills [1906] AC 368, Bridge v Campbell Discount Co Ltd [1962] AC 600; Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd [1993] AC 573, and Ariston SRL v Charly Records (CA, The Independent, 13 April 1990). 277 See Colaiuta, Virginie, “Acceleration of works and penalties for delay in France in construction projects” ICLR. 278 See, for example, I N Duncan Wallace, QC, Hudson’s Building and Engineering Contracts, 11th edn (London: Sweet & Maxwell, 1995) at para.10–002; S Furst, QC, and V Ramsey, QC, Keating on Building

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Failure to quantify 21–242 There have been a number of cases in which the sum specified in the contract as liquidated damages has been indicated as “nil” or “N/A”. Whether the effect of such a specified limitation is the agreement of liquidated damages as zero, so as to deprive D of its common law right to actual damages, appears to depend largely upon the way the contract is interpreted as a whole. “The effect of such a provision cannot be determined apart from a consideration of the terms of the particular contract. Whether the effect is to exclude any damages from being payable in the event of a breach or simply to exclude liquidated damages must depend upon the proper construction of the contract as a whole. And it is trite law that great caution must be exercised in seeking to apply the meaning given to a word or words in one contract to the same word or words in a different contract. That is obviously because commonly the meaning of words is affected by the particular context in which they are used. Accordingly, even the same words may give rise to different meanings in different contractual contexts.”279

21–243 In Temloc v Errill280, in which the appendix to a JCT contract specified that the amount of liquidated damages was to be “nil” and under this form the CA had a duty to issue a certificate of non-completion prior to the operation of the clause, the Court of Appeal determined that once the certificate had been issued the parties had agreed that the liquidated damages were zero, and the form did not permit actual damages to be recovered in its place. On the other hand, in Baese281, an Australian case under a standard form known as JCC B 1985, in which the CA had a discretion as to whether to issue a certificate, it was successfully argued that the liquidated damages were not an exhaustive remedy for delay-related losses and that, in the absence of the CA’s certificate of entitlement to liquidated damages, D was entitled to its actual losses. The court observed: “It can be seen that clause 10.14.01 did not provide that the [CA] ‘shall’ give notice in writing and that clause 10.14.02 opened with the words ‘If such notice is given’. Thus it is plain that the parties contemplated that the [CA] may or may not give the notice in writing to which the sub-clause refers.”282

21–244 The rationale of Baese has been criticised by the editor of Building and Construction Law283 in Australia, by the editorial team of the Building Law Reports284 in England and by the authors of Keating on Building Contracts (7th edition)285. However, the same result was achieved in J-Corp v Mladenis286 in which, in a contractor’s bespoke contract, in which C had inserted the clause:

Contracts, 7th edn (London: Sweet & Maxwell, 2001) 9–26; and J Dorter and J Sharkey, Building and Construction Contracts in Australia (2nd edn, 1990) at p.4749 279 J-Corp Pty Ltd v Mladenis and Graham Athletic Pty Ltd [2009] WASCA 157, per Newnes JA at [39]. 280 Temloc Ltd v Errill Properties Ltd (1987) 39 BLR 30. 281 Baese Pty Ltd v R A Bracken Building Pty Ltd (1989) 52 BLR 134; (1990) 6 BCL 137. 282 BLR 134, p.138, per Giles J. 283 (1990) 6 BCL 137. 284 (1991) 52 BLR 131. 285 S Furst, QC and V Ramsey, QC (eds), Keating on Building Contracts, 7th edn (London: Sweet & Maxwell, 2001) at note 52, p.280. 286 J-Corp Pty Ltd v Mladenis and Graham Athletic Pty Ltd [2008] WADC 174.

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“If [C] breaches sub-clause 11.1, it shall be liable to pay the [D] liquidated damages at the rate of NIL DOLLARS ($00.00) per day for each day beyond the due date for practical completion until practical completion is deemed to have taken place.”

In this case, the court of first instance held that an intention to deprive the D of its common law right to damages would have to be clearly expressed and where no such intent was expressed as here, the specification of nil dollars was intended to exclude a claim by D for liquidated damages, but did not exclude a claim for damages at common law. 21–245 The court also held that, in any event, any ambiguity in C’s contract should be construed against C on the basis of the contra proferentem rule. Having considered both Temloc and Baese the Court of Appeal held that there was no ambiguity, the liquidated damages clause was inapplicable and that D was entitled to recover such losses as it could prove at common law. In a unanimous decision, Newnes JA said: I do not consider there is any inconsistency between the terms of cl 11.9 and a right in [D] to claim unliquidated damages for delay. The position may well be different where a contract provides for the liability of [C] for liquidated damages in a positive amount, it being unlikely that the parties would have intended that [D] should have the benefit of both liquidated and unliquidated damages for the same delay. But that is not this case. In this case, the effect of cl 11.9 is that [C] is not liable to pay any amount by way of liquidated damages. It does not seem to me that any significant weight can be placed on what were described by senior counsel for the appellant in argument as the ‘mandatory terms’ of cl 11.9. In the present case, to say that [C] ‘shall be liable to pay . . . liquidated damages at the rate of NIL DOLLARS ($00.00)’ is to say no more than that [C] shall not be liable to pay any amount by way of liquidated damages, albeit to say it in a somewhat clumsy fashion. Indeed, there is, with respect, an artificiality about talking of a mandatory liability to pay nothing. In addition, cl 11.9 must be considered in the light of cl 11.3, which provides, in effect, that where [C] has incurred any cost by reason of delays caused by [D], [C] is entitled to vary the contract price by adding that cost to the contract price payable at practical completion. That is, on [C’s] case, while [C] is entitled to recover any extra costs it incurs by reason of [D’s] delay, the respondents are precluded by cl 11.9 from claiming any loss they incur by reason of [C’s] delay. On [C’s] case, the only remedy available to [D] in the event of delay by [C] is the right to terminate the contract under cl 13.4 and then only if the delay reaches the point where it causes [C] to substantially breach the contract. While the parties to a contract are, of course, free to agree that one party is entitled to recover damage resulting from delay caused by the other party, but that the latter is not entitled to recover damage resulting from delay caused by the former, in the present case it is not evident why [D] should be taken to have agreed to such an unequal arrangement.”287

21–246 Similarly, in the subsequent case of Silent Vector v Squarcini 288, on appeal from an arbitrator’s decision, the Supreme Court of Western Australia held that in regard to an AS2124 contract, which had been heavily amended in a variety of ways, the effect of inserting the words “N/A” in place of a specified sum for liquidated damages, was to render the liquidated damages clause inapplicable and for D to be able to recover its actual losses as damages at common law.

287 J-Corp Pty Ltd v Mladenis and Graham Athletic Pty Ltd [2009] WASCA 157, per Newnes JA at [51]. 288 Silent Vector Pty Ltd T/A Sizer Builders v Squarcini [2008] WASC 246; (2009) BCL 29.

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Quantifying predictive loss “Dreams and predictions ought to serve but for winter talk by the fireside.”289

21–247 In principle, the rules for recovery of damages by D are the same as they are for C. These are that D can only recover as damages those costs that are: “. . . either arising naturally, ie, according to the usual course of things from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach of it.”290

Illustration Facts: International Trade Corporation Ltd (ITC) entered into a written contract with Yam Seng Pte Ltd (Yam Seng) entitled the “Manchester United Distribution Agreement” (the contract). Under the contract, ITC granted Yam Seng the exclusive right to distribute certain fragrances bearing the brand name “Manchester United” in specified territories in the Middle East, Asia, Africa and Australasia. Those rights were for the most part limited to duty free sales, but also included “domestic” sales in Hong Kong, Macau and two provinces of mainland China. There were delays in the shipment of orders, a failure to supply all the specified products and misrepresentation in the information provided with regard to the licence in China. Yam Seng claimed damages for breach of contract on two alternative bases, its primary claim being for loss of the profits that Yam Seng would have made if ITC had performed its obligations under the agreement for the whole of the contract period. In the alternative, Yam Seng claimed as wasted expenditure the loss that it sustained as a result of entering into the contract. Held, by Akenhead J, that ITC was in repudiatory breach of the agreement; that, if ITC had not made representations regarding its rights to manufacture and sell the Manchester United products, the agreement would not have been made; and that Yam Seng was entitled to recover damages for its net loss incurred as a result of entering into the contract: Yam Seng Pte Ltd v International Trade Corp Ltd 291.

21–248 In other words, a greater loss suffered due to special circumstances is not generally recoverable unless both parties to the contract were aware of the special circumstances at the time that the contract was made. Thus, a prudent developer is well advised to explain to C the basis of any special losses it is likely to suffer. Generally, D’s ordinary costs may include, amongst other things, such heads as: 1. 2. 3. 4. 5. 6. 7.

storage costs; unproductive staff costs; rent of alternative premises; lost investment value of rents; extended head office overheads; costs of retaining architects, engineers and other consultants for the delay period; and interest and financing expenses.

289 Francis Bacon, Of Prophecies, at p.35. 290 Hadley v Baxendale (1854) 9 Ex 341 at p.354, per Alderson B. 291 [2013] EWHC 111 (QB).

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21–249 In addition to the direct costs described above, D can often recover consequential damages, including the costs of: 1. 2. 3. 4. 5.

reimbursable delay damages payable to other contractors; lost profits; cost escalation; asset depreciation; and inconvenience, discomfort and distress292.

21–250 Clearly, the calculation of liquidated damages should be based upon those heads of loss that would ordinarily be calculated to cause loss in the event of breach. However, it sometimes occurs that, when calculated as likely actual damages, the total figure represents such a high proportion of the contract figure that it is not realistic to expect a contractor to agree to it, or to contract on that basis competitively. For example, if D had a particularly lucrative manufacturing contract for which the facility was essential, liquidated damages on a weekly, or even daily, basis might be unrealistically low in relation to D’s potential losses. In such a case, a delay of four or five weeks may produce several thousand pounds in liquidated damages, but the loss from the contract may be several millions and even spell the end of the company as a going concern. 21–251 In those circumstances, D may take a view that it is better to impose lower liquidated damages than a true reflection of the losses likely to be suffered, rather than risk the possibility of exceptionally high tender prices, if any can be obtained, or ultimately have to prove its losses in litigation293. Where the sum specified as liquidated damages is so small that it cannot reasonably be construed as a genuine pre-estimate of loss, it appears that will nevertheless be enforced as a cap on liability; in such circumstances the liquidated damages clause is likely to be of little assistance to D and may in fact act to its detriment simply because, having agreed to liquidated damages, D cannot at a later date opt for its actual damages just because, for example, its actual losses far exceed the liquidated and ascertained damages294. 21–252 In Cellulose Acetate Silk Co Ltd v Widnes Foundry295, for instance, liquidated damages were agreed at £20 per week for delayed completion of an acetone recovery plant which, following late completion, was claimed to be so paltry in relation to D’s actual losses as to be a penalty. The argument that as a result D was entitled to sue for its actual losses was rejected by the House of Lords. Lord Atkin (with whom the other members of the House agreed) said it was clear that the parties had agreed that, in the event of delay, the damages payable by the defendant was £20 per week and whilst this was not a pre-estimate of actual damage, it was intended to go towards the damages suffered and it was all that C had agreed to pay under the contract. 21–253 On the other hand, in an arbitration between Athens Generating Co, LP v Bechtel Power Corporation296, the contract specified liquidated damages at the rate of 292 Generally only affecting people in their domestic capacity and not commercially. 293 See, for example, Masons v W D King [2003] EWHC 3124 (TCC), in which, for commercial reasons, D chose not to calculate its liquidated damages below the level of the loss it could foresee and, when ultimately completion was delayed, was unable to recover its actual losses. 294 S Furst, QC and V Ramsey, QC (eds), Keating on Building Contracts, 7th edn (London: Sweet & Maxwell, 2001) at para.9–26 on p.288, referring to Elsley v JG Collins (1978) 83 DLR (3d) 1, Can Sup Ct. 295 Cellulose Acetate Silk Co Ltd v Widnes Foundry (1925) Ltd [1933] AC 20. 296 Superior Court District of Columbia No 6085–09, (2009).

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$49,000 per day for delayed completion of three gas turbines. Although the actual damages suffered were less than that, the tribunal held that because the daily rate was a reasonable forecast of the damages D might incur at the time of the contract, liquidated damages totalling nearly $27m were recovered. 21–254 In State of Tasmania v Leighton297 the court of first instance struck out a liquidated damages clause that had been calculated by D’s consultants because it was found to be so plainly in excess of what could reasonably have been incurred. In this case, the contract stipulated, at Cl.11.6, that: “(a)

(b)

If the date of construction completion has not occurred by the date for construction completion, [C] must pay liquidated damages at the rate of $8,000 for every day after the date for construction completion until the date of construction completion or this deed is terminated, whichever is first. The amount referred to in clause 11.6(a) is a genuine pre-estimate of [D’s] damages if [C] does not achieve construction completion by the date for construction completion.”298

21–255 The evidence before the court was that the CA had come up with a calculation of $3,000 per day, about which the judge observed: “the figures in that estimate are extremely high in themselves . . . and the number of hours contemplated totally speculative in some cases. I infer that [the CA’s] original calculations in respect of direct costs were inflated to produce a figure of $8000”. The rounded up figure of $8,000 had been arrived as a result of a calculation made by D’s consultants, as follows: 299 “LIQUIDATED DAMAGES ESTIMATE (based on 6 days/week) [D’s Project Director]; 50% × $1,200/day [CA]; 75% × $1,300/day Legal Advisors; 2hrs × $350/perhr Contract Advisor; 2hrs × $160/hr [D’s] Site Representative; 100% × $1,100/day Site Engineer Clerk of Works OHS/Secretary Technical Support (Environmental/Design/Cultural) Site Vehicle ×2 Audit Testing (Field testing, laboratory services) Site Running Expenses (telephone, courier, postage, etc) Accommodation; 3 × $110/night Travel; 300km × $0–60/km Sub Total Escalation to Dec 2000; 2.25yrs @ 5%

$ 600 $ 975 $ 700 $ 320 $1,100 $ 900 $ 700 $ 400 $ 300 $ 200 $ 300 $ 150 $ 330 $ 180 $7,155 $ 830 $7,985”299

297 State of Tasmania v Leighton Contractors Pty Ltd (No 3) [2004] TASSC 132. 298 Ibid., at [232]. 299 Ibid., at [236].

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21–56 In regard to the calculation, the judge remarked: “In cross-examination [D’s Project Director] agreed that [the CA] had a lot of other projects for which he was responsible and also that as manager of the National Highways Programme, a number of other road projects fell within the scope of his responsibilities. The rates at which [D’s Project Director], the [CA] and [D’s] Site Representative, were charged for a six day week represented an annual rate to each in the order of $360,000, $430,000 and $330,000 respectively. Calculated on an annual basis, the charge-out rates for all other personnel whose services might be required if the Contract overran are extremely high and, notwithstanding [D’s Project Director’s] unwillingness to make the concession, extravagant and speculative in my opinion. Furthermore, based on this method of calculation which assumes costs being incurred on six days of each week totalling $48,000 the deduction of $56,000 for every week of delay represents a surcharge of $8,000 per week over and above the costs estimated to be incurred.”300

21–257 In declaring that the sum of $1,832,000.00, deducted as liquidated damages by D was a penalty and ordering D to repay it with interest, Cox J held that: “In the present case, it does not appear that any estimation was made in respect of [D’s] loss other than direct costs of supervising an over-run contract and it is my view that these costs are extravagant and exorbitant as they are totally disproportionate to the likely actual costs anticipated to be incurred. Furthermore, the evidence is that the costs of the project were fully funded by the Commonwealth Government and [D] has not been exposed to either its capital cost or the costs incurred after the date for construction completion. In these circumstances I am of the view that the estimate of $8,000 for each calendar day of delay was not a genuine pre-estimate of the likely damage to [D] resultant upon the late opening of the bypass and is unconscionable.”301

21–258 D appealed to the Supreme Court of Tasmania, on the basis that the judge was in error by finding that the rate agreed upon between D and C constituted a penalty because the court wrongly: 1.

2. 3.

analysed the individual components of the sum of $8,000, as subjectively assessed by D’s consultants, instead of engaging in an objective analysis by comparing that sum as a whole with the greatest loss that could have been conceivably suffered by D in the event of delayed completion. Concluded that the sum was not a genuine pre-estimate of D’s loss at the time of entry into the contract, or was unconscionable. Gave undue weight to the fact that D was unlikely to suffer a loss because, amongst other things, the project was funded by the Commonwealth.

21–259 The Full Court (Slicer, Evans and Tennent JJ) overturned the decision302. In regard to the quantified sum of $8000, the Court of Appeal said: “The figure of $8,000 was not arbitrarily chosen and figures were adjusted to justify that selection. It was reasonable for [D] to consider the possibility of delay or breach. It was reasonable to provide for a contractual remedy. The contract itself provided for the expenditure of public money amounting to over $30m. There would be a need to supervise works of rectification or to ensure efficient compliance. Delay in completion would impact on a public utility. Quantification of that impact would be problematic. The first calculation of [the CA] attempted to include an interest loss equivalent and [D’s Project Director] referred to that loss equivalent as amounting to some $4,000. The calculations were no more than

300 Ibid. 301 Ibid., at [241]. 302 State of Tasmania v Leighton Contractors Pty Ltd [2005] TASSC 132.

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an attempt to provide a general basis for the assessment of an overall figure. D was negotiating with a large corporation, well experienced in work of the nature subject to the contract, and an equivalent ‘breach’ clause calculated at the comparable figure of $7,170. [C] did not question the calculation during negotiations or at the time the agreement was concluded. The integrity of the person who compiled or reviewed the calculations was not impugned at trial. If there were errors (especially since they did not take into account ‘loss of public amenity’), they could not be said to be ‘non genuine’. The calculations involved a projection of costs for a period of two years into the future. Expensive delay might require expensive advice and involve the transfer of administrative or other resources from [D] to accommodate difficulties caused by the delay in providing for the maintenance of existing infrastructure during that period303. The learned primary judge correctly recognised that ‘loss of revenue by reason of the delay is not in itself a proper reason for claiming that [D] could suffer no damage other than . . . direct costs’ but gave that fact no weight. . .304. The learned primary judge was not engaged in an assessment of past loss or an award of damages after the event. He was undertaking a task which required a different methodology. The question was whether, given the nature of the contract, its complexity, value and the bargaining strength of the parties, the amount of $8,000 was, in all the circumstances, a penalty as of the date of the agreement. The test was objective as of that date. The test was whether as of that date, allowing for potential incurred costs, public utility or loss of amenity, diversion of resources and future dealings with, or responses by, the Commonwealth, loss of capital or its equivalent, the sum was so disproportionate that it provided not for ‘liquidated damages’ but operated as a penalty which placed the then contracting party in terrorem.”305

21–260 As to the “no loss” point, the Court of Appeal said: “The provision of public money does not change the character of a compensatory provision into one of penalty simply because the expenditure is to be paid by another public authority. The test of disproportionality applies equally to public and private institutions in consideration of whether a ‘breach’ clause ought be regarded as a penalty306. Here the respondent was responsible to the appellant for loss occasioned by delay. That loss was calculated in advance and irrespective of whether another would reimburse for that loss, the responsibility remained as between the parties to the agreement and the test of ‘penalty’ or ‘damages’ is that of purpose rather than cause. Although it might be dangerous to determine a legal principle by analogy in cases where compensation is also payable by another pursuant to contract, the general principle that payment or indemnity by another does not alter the responsibility of persons in breach of tortious or contractual harm to make recompense for loss remains. In turn, the fact that another public authority or agency of the State will eventually bear the cost of default or breach does not render a compensatory agreement into one of penalty. Assumption by another of payment for loss does not entitle a contractual party to avoid responsibility for breach of a term or condition. Reimbursement of an organisation for the cost of rectification following contractual breach by a public authority does not entitle the offending party to claim that there had been no loss to the organisation307. The learned primary judge concluded, as part of his reasoning, that the terms of the Deed, cl 11, amounted to a penalty since it was an artificial construct not a genuine preestimate of likely damage to [D] because the ‘costs of the project were fully funded by the Commonwealth’. The evidence established that the Commonwealth, through a public officer, [the CA], the manager of the National Highways program, had some involvement in the formulation of the Deed, including calculation of potential damages. That being the case, it was for [C], in support of his pleading of ‘penalty’, to affirmatively demonstrate that the

303 304 305 306 307

Ibid., Ibid., Ibid., Ibid., Ibid.,

at at at at at

[31(1)]. [31(2)]. [31(5)]. [38]. [39].

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DAMAGES

Commonwealth would pay all the costs of the project, irrespective of delay or breach. It was for the [C] to demonstrate that the Commonwealth would reimburse [D] for any internal or departmental costs in supervising the project for a more extended period. It was for [C] to show that the Commonwealth would not withhold future payments, or portion thereof, from [D] for its failure to properly protect the expenditure of public money through failure to require a compensation provision, or that it had not insisted on, or at least been indifferent to, the insertion of a compensation clause. If [C] relied upon the contention that the clause amounted to a penalty because there could not be loss to the party, then it was required to establish such as a basis308. Alone, the error might not warrant the upholding of the appeal, but considered together with the issue of unconscionability and genuineness of the pre-estimate, it constitutes appellate error.”309

21–261 The trend in the common law courts to intervene in what is perceived to be an unconscionable bargain between the parties, and to strike out a provision agreed between them as inequitable, is in marked contrast to the attitudes of the courts in other European countries, whose legal systems are based on the Civil Code and who, rather than strike out the provision, will adjust the recoverable losses either up or down to be more reflective of D’s actual losses, irrespective of what was agreed by way of liquidated damages310. 21–262 Notwithstanding, it would seem that in order to achieve the calculation of reasonably foreseeable loss resulting from delayed completion for the purposes of a figure for liquidated damages, D should estimate its liquidated damages in three stages: Stage 1 D should estimate what would be its likely outgoings at the end of the contract period if the work was continuing on site. These costs may include, on a daily, or weekly basis: 1. 2. 3. 4. 5. 6. 7.

unproductive staff costs; storage costs; extended head office overheads; extended preliminaries; reimbursable delay damages payable to other contractors; interest and financing expenses; and costs of retaining architects, engineers and other consultants for the delay period.

Stage 2 D should estimate what would be its likely consequential losses at the end of the contract period if the project could not be put into use. These costs are likely to be fixed costs which may have to be depreciated over time: 1. 2. 3. 4. 5.

rent of alternative premises; lost investment value of rents; cost escalation; asset depreciation; and lost profits.

308 Ibid., at [42]. 309 Ibid., at [43]. 310 See for example, art.1152 of French Civil Code and s 307(1) of the German Civil Code and see also Colaiuta, Virginie, “Acceleration of works and penalties for delay in France in construction projects” ICLR.

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DAMAGES

Stage 3 This comprises depreciating the total of the figure produced by stage 2 over the notional period it would take to overcome any default (for example, half the original contract period) and adding this to the figure that is arrived at by calculating stage 1. 21–263 The following is a worked example in which, for the purposes of the calculation, the following are the assumptions made: 1. 2. 3. 4. 5.

the contract is to last 24 months; the maximum period over which the lump-sum costs can be written off is 12 months; the project is to build offices in which D is to occupy 25% and 75% is to be let; the project is to be pre-let and the whole development sold on completion; the contract value is £2.4m.

Stage 1 Unproductive staff costs: Salary etc of new staff taken on for new offices who are not accommodated Storage costs: New furniture held in store Extended head office overheads Extended preliminaries: Visiting site and meetings with contractor and CA, say ½ day per week Interest and financing expenses: Financing costs of development unable to be used at, say, 12% on £2.4m Costs of retaining architects, engineers and other consultants for the delay period: Assume ½ day per week for four people at £100/hr Compensable delay damages payable to other contractors: Assume £1,000 pw to directly employed contractors in D’s control Total stage 1:

@£250 pw.

@£50 pw. Nil @£250 pw.

@£5,530 pw.

@£1,600 pw. @£1,000 pw. £8,680 pw.

Stage 2311 Rent of alternative premises: Short-term 12-month licence Lost interest on rents:311 800m2 at £250/m pa = £200,000 × 12% pa

£50,000 £24,000

311 Rent is rarely “lost”, but is usually deferred. The loss then is not so much the rent, but the value of the investment of rent not received during the period of deferment, less the recovery during the extended rental period.

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Cost escalation: Say 5% pa on fitting out costs of £500,000 Asset depreciation:

£25,000 None assumed

Lost profits: Loss of opportunity to realise investment value, say 12% on £0.5m Total stage 2:

£60,000 £159,000

Stage 3 Liquidated and ascertained damages 159,000 per week = + 8,680 = 11,737 (say) 52 Total liquidated damages

£11,700 pw £11,700 pw

Exclusion clauses “In construing such a contract one starts with the presumption that neither party intends to abandon any remedies for its breach arising by operation of law, and clear and express words must be used in order to rebut this presumption . . . So when one is concerned with a building contract one starts with the presumption that each party is to be entitled to all those remedies for its breach as would arise by operation of law . . . To rebut that presumption one must be able to find in the contract clear and unequivocal words in which the parties have expressed their agreement that this remedy shall not be available in respect of breaches of that particular contract.”312

21–264 When commercial parties negotiate contracts, it is not unusual for one or the other to seek to reduce its potential liability for non-performance in whole or part by an exclusion of liability clause in the contract. However, a clear distinction must be made between clauses that define the terms upon which the parties conduct their business (and prevent an obligation from arising in the first place) and those that exclude liability for a failure to perform an obligation that has been assumed under the contract313. In an otherwise legal contract, there can be no inhibition upon the former but, in the case of the latter, whether or not such an exclusion is effective, depends largely upon the jurisdiction under which the contract is executed and the extent of the intended restriction on liability.

312 Gilbert Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd [1974] AC 689, per Lord Diplock at [717] to [718]. 313 JP Morgan Chase Bank v Springwell Navigation [2008] EWHC 1186 (Comm) per Gloster J at [601].

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Illustration Facts: Inframatrix Investments Ltd (C) engaged Dean Construction Ltd (D) to construct the first phase of a camera factory. C brought proceedings for damages against D for breaches of the construction agreement, which were dismissed, with a finding that the limitation of liability clause (17) barred the claim. C appealed as to the interpretation and effect of Cl.17 and its application. Held, by Stanley Burnton LJ, that the proceedings were barred by virtue of Cl.17.4 and the appeal should be dismissed, since the performance of later without prejudice negotiations did not comprise the performance of the original contractual services: Inframatrix Investments Ltd v Dean Construction Ltd314.

21–265 Although most of the standard forms and most bespoke forms will include provisions for extensions of time for excusable delays and for compensation to be paid for disruption, or prolongation caused by D, bespoke forms may contain exclusion clauses that attempt to prevent C from recovering damages for disruption, or prolongation, even when caused by D. Whilst, save for the Irish government standard forms of contract, they do not appear in any of the standard forms of contract discussed here315, in bespoke forms on both sides of the Atlantic, it is common to find quite draconian exclusions of liability, caps on recoverable damages, overcomplicated preconditions to acceptance of liability and the like. Typically, this sort of exclusion clause may take the following form: “Neither [D], nor the project manager nor the [CA] shall be obligated or liable to [C] for, and [C] expressly waives any claims against them, or any of them, on account of any damages, costs or expenses of any nature whatsoever which [C], its subcontractors or suppliers or any other person may incur as a result of any delays, interferences, suspensions, rescheduling, change in sequences, congestion, disruptions or the like arising from, or out of any act or omission of [D], the project manager or the [CA]. [C’s] sole and exclusive remedy in such event shall be an extension of the contract period in time, but only in accordance with the provisions of the contract documents, all at no additional cost to or compensation from [D].”

21–266 Whilst such exclusion clauses may not be taken too much to heart in C’s eagerness to secure the contract in the heat of the bidding process, once things start to go wrong and costs (sometimes, very high costs) are suffered as a result of what would normally be considered to be a compensable event, they tend to become very important. 21–267 In the United States this sort of exclusion clause is commonly referred to as a “no-damages-for-delay” clause. The character of such an exclusion clause is that D seeks to preclude C from recovering its loss, or expense for any occurrence, regardless of whether D is at fault. Depending on the express terms and positions of the parties, such provisions have been upheld by both the US and UK courts to prevent recovery of loss and expense for disruption or prolongation316.

314 [2012] EWCA Civ 64. 315 See below. 316 Eg where the disruption complained of was anticipated by the contract. See, for example, Kitson Sheet Metal Ltd v Matthew Hall Mechanical & Electrical Engineers Ltd (1989) 47 BLR 82 and Phoenix Contracting Corp v New York City Health and Hospital Corp, 118 AD 2d 477; 499 NYS 2d 953 (1986) NY App Div.

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21–268 It seems that where they have been given an opportunity to consider such exemptions, courts have sought to construe them restrictively and they have not upheld such terms where the delay was arbitrarily caused and was beyond the contemplation of the parties at the time of the contract’s execution, where the delay was of a kind not contemplated by the parties, amounted to abandonment of the contract, was caused by bad faith, wilful conduct, or active interference (save where the contract expressly covers the point)317. 21–269 In the United Kingdom, the Unfair Contract Terms Act 1977 is often raised as a primary defence to the implementation of such an exclusion, on the basis that such an exclusion of liability is unfair, or unreasonable318. If one of the parties is a “consumer” as defined by the Act, rather than a trading company or firm, or if the parties have entered into the contract on one party’s standard terms of business, then the Act will bite to govern the enforceability of the contract terms. It would appear that the expression “standard terms” of business is not to be taken to mean only those forms that are written and produced by a party to the contract but, it seems, could include a standard form of contract if habitually used by that particular party319. 21–270 However, what is fair and reasonable between experienced construction and development companies in a free market is a matter of some debate and must depend upon all the circumstances pertaining at the time the parties entered into the contract. For example, in St Albans Council v ICL320, where the two contracting parties could not reasonably be considered to be anything other than in an equal bargaining position, a limit on ICL’s liability of £250,000 for breach of contract in the supply of computer equipment to the local government authority was considered to be unreasonable and unenforceable. 21–271 In a UK domestic arbitration D had given C a letter of intent for commencement, stating: “The contract period of the above will be 70 weeks. This will however be defined as follows: (a) (b)

a period of 70 weeks for the works defined in the contract documents An additional period of 8 weeks specifically allowed for any unforeseen works due to the existing building, for which no additional preliminaries will be payable.”

21–272 The arbitrator declined to accept that this exclusion clause meant that C was not entitled to an extension of time in excess of eight weeks and had agreed not to require reimbursement of its losses if the project was delayed due to unforeseen work. Without reference to the Unfair Contract Terms Act, the arbitrator held that neither the terms of the letter of intent nor the express conditions of the contract could take priority one over the other, and that they must be construed “together”. 21–273 The arbitrator felt that the only sensible interpretation he could put on the parties’ negotiations was that they had intended that there should be two contract periods: 70 weeks without unforeseen works at all and 78 weeks with any unforeseen works. The “preliminaries” content of C’s tender was to remain unaffected no matter which was the contract period. The terms of the contract regarding C’s entitlement to 317 Phoenix Contracting Corp v New York City Health and Hospital Corp, 118 AD 2d 477; 499 NYS 2d 953 (1986) NY App Div. 318 See also the UK Unfair Terms in Consumer Contracts Regulations 1999. 319 See British Fermentation Products Ltd v Compair Reavell Ltd [1999] BLR 352, per HH Judge Bowsher QC at p.359. 320 St Albans City & District Council v International Computers Ltd (1994) 12–CLD–06–06 (QBD).

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an extension of time321 and entitling C to recover any loss or expense incurred as a result of reimbursable events322 were held to remain unaffected. 21–274 Cases on this subject in the United States seem to have followed a similar pattern. In the US Federal Appeals Court case of Green Plumbing v Turner 323, Green Plumbing was the works contractor responsible for the plumbing and fire-sprinkler element of the Detroit General Hospital. Turner Construction was the construction manager with duties which included scheduling the work, reviewing schedules to eliminate potential conflicts between the various works contractors and conducting site meetings to resolve those conflicts that did occur. The works contractors’ contract with D included an exclusion clause in the following terms: “Should the works contractor be delayed in the commencement, prosecution or completion of the work by the act, omission, neglect or default of the construction manager, [D], and/ or anyone employed by the construction manager, [D], or any other contractor or subcontractor on the project . . . then the works contractor shall be entitled to an extension of time only, such extension to be for a period equivalent to the time lost by reason of any and all of the aforesaid causes.”

21–275 The works contractor claimed that it had encountered numerous problems caused by the construction manager’s mismanagement of its site responsibilities and that, as a result, works contractors were doing work out of sequence, no temporary heat was provided, and design changes took too long to be approved. Some of these problems, like the slow approval of design changes, simply caused a delay in the completion of the works contractor’s work. Other problems, like the lack of temporary heat and the out-of-sequence work, caused the works contractor to employ more manpower resources to get the job done. As a result of these difficulties, the works contractor claimed to have lost a great deal of money. 21–276 In construing the effect of the exclusion clause, the court said: “No-damages-for-delay clauses ‘are commonly used in the construction industry and generally recognised as valid and enforceable’324. However, because of their harsh effects, these clauses are to be strictly construed. In our case, the clause at issue forbids damages ‘should the construction manager be delayed in the commencement, prosecution, or completion’ of the project. [The works contractor] argues rather forcefully that this phrase, strictly construed, only bars delay damages and not other kinds of damages, such as damages for hindering work on the project. Under this interpretation, delay means time lost where work cannot be performed because essential supplies have not been delivered or necessary preliminary work has not been performed. Delay damages, then, refers simply to the cost of an idle workforce. We agree with [the works contractor]. In this context, [the works contractor] is not arguing that it suffered damages from delay, but rather that it suffered damages from obstacles created by [the construction manager]. And because at least a portion of [the works contractor’s] claimed damages related to extra manpower costs incurred as a result of [the construction manager’s] hindrances – failure to properly coordinate work on the project and failure to ensure that temporary heat was provided, it was an error for the trial judge to grant summary judgment against [the works contractor] on this issue.”

321 Cl.25. 322 Cl.26. 323 John E Green Plumbing and Heating v Turner Construction Co, F 2d 965 (6th Cir 1984) 8 CCH para.478. 324 WC James Inc v Phillips Petroleum Co, 485 F 2d 22, 25 (10th Cir 1973). See also 74 ALR 3d 187 (1976).

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21–277 Similarly, in Housing Authority v Hubbell325, the court permitted C to recover its costs in a contract containing the exclusion: “No payment or compensation of any kind shall be made to [C] for damages because of hindrance or delay from any cause in the progress of the work, whether such hindrances or delays be avoidable or unavoidable.”

21–278 This was a case concerning a housing contract for 3,500 dwellings in which C claimed return of liquidated damages and compensation for prolongation of its overheads. The exclusion clause was held not to bar C’s claim for damages where the court at first instance had found that the CA had acted arbitrarily and capriciously in interfering with the progress of the works and denying C a reasonable extension of time. D appealed, contending that the “arbitrary and capricious” finding of the court at first instance implied that there had been bad faith, fraud, or wilful intent to injure, no evidence of which had been before the court. On appeal, Dixon CJ said: “The ‘no-damages-for-delays’ provision was intended to protect [D] from damages for delays caused by others than [D], and was intended also to protect [D] from damages for delays caused by [D] itself even if such delays were due to [D’s] negligence and mistakes in judgement. But the ‘no-damages-for-delay’ provision did not give [D] a licence to cause delays ‘wilfully’ by ‘unreasoning action’, ‘without due consideration’ and in ‘disregard of the rights of other parties’, nor did the provision grant [D] immunity from damages if delay were caused by [D] under such circumstances.”326

21–279 Similarly, in Tricon v Lafarge327, C was not able to avoid the consequences of its own active interference by a “no damages for delay” clause in its contract with a subcontractor. In this case, the subcontract provided as follows: “In the event the [SC’s] performance of this subcontract is delayed or interfered with by acts of [D, C, or other SCs], he may request an extension of time for the performance of same, as herein provided, but shall not be entitled to any increase in the subcontract price or to damages or additional compensation as a consequence of such delays or interference, except to the extent that the prime contract entitled [C] to compensation for such delays and then only to the extent of any amounts that [C] may, on behalf of the [SC], recover from [D] for such delays.”

21–280 The Colorado Court of Appeal held that, when the SC was affected by the failure of another to complete work, so that, in order to carry on, it had to alter the sequence of its work causing delay and C’s instruction to proceed with out-of-sequence work, was a wilful, affirmative act, thereby unreasonably interfered with the SC’s performance of the subcontract and went outside the protection of the “no damages for delay” clause. The Court further observed that: “[C] . . . claiming active interference on the part of [D] . . . needs only to show that [D] committed an affirmative, wilful act that unreasonably interfered with [C’s] performance of the contract, regardless whether [that act] was undertaken in bad faith. However, we further conclude that, while it is unnecessary to show bad faith, or reprehensible conduct, active interference requires more than a simple mistake, error in judgment, lack of total effort, or lack of complete diligence.”

325 Housing Authority of City of Dallas, Texas v Hubbell-Hubbard Associated Contractors, 325 SW 2d 880 (Tex 1959). 326 Ibid., at 891. 327 Tricon Kent Co v Lafarge North America, Inc (Colorado Court of Appeal No 06CA0595, 1 May 2008.

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21–281 In the US case of McGuire & Hester v City & County of San Francisco328, C was required to construct a water supply. D warranted that it would acquire any necessary rights of way or easements required before C commenced work, but with an exclusion clause stating that: “Apart from granting [C] extensions of time for unavoidable delays, no payment or allowance of any kind shall be made to [C] by way of compensation or damages on account of any hindrance or delay from any cause in the progress of the work or any portion thereof whether such delay be avoidable or unavoidable.”

21–282 In this case because of D’s failure to procure some of the necessary rights of way until some time after the commencement of the project, the work was completed 182 days late and C claimed damages caused by D’s delay in procuring the rights of way and additional expense caused by the winter weather that it otherwise would not have experienced. In reliance on the phraseology of the exclusion clause in the contract, D maintained that C’s only remedy for D’s delay in obtaining the requisite rights of way was to apply for and obtain an extension of time to complete the work. Rejecting this contention shortly, the California Court of Appeals said: “It will be noted that the definitions of ‘unavoidable’ and ‘avoidable’ delays in the contract refer primarily to delays by, or beyond the control of [C] and not of [D], except to orders issued by [D’s] commission changing the amount of work to be done, the quality of material to be furnished or the manner in which the work is to be prosecuted, and to delays due to other contractors. Nowhere is there the slightest suggestion that [D] will be absolved from damages caused by its not keeping its agreement to secure rights of way prior to the starting of the work. To construe that language in section 49, which says, ‘no payment . . . shall be made to [C]’ for ‘hindrance or delay from any cause . . . whether such delay be avoidable or unavoidable’ to mean that it was thereby intended by the parties that the only remedy for [C], when [D] broke its solemn agreement to procure rights of way in advance, was for [C] to obtain an extension of time to do the work, would be to give the clause and the contract as a whole a strained, unreasonable and unfair interpretation. Particularly is this so, when it is remembered that the contract was drawn up by [D’s] attorney. Considerable portions of it are devoted to outlining what are avoidable and unavoidable delays and this type of delay is not included. Nor is there any provision for extension of time for avoidable delays. The delay here was avoidable. As said by the trial judge . . . in his excellent opinion: ‘It cannot be said that it was within the contemplation of the parties that [D] would be permitted to delay the securing of right of ways for months, thereby causing [C’s] expensive and heavy equipment to remain idle, finally causing them to complete the job under extreme adverse weather conditions, and then relegate it to an extension of time only. If [D] had such an intention then the contract should have so provided in explicit, unambiguous language. It is a fundamental rule that stipulations against liability are not favoured and are to be strictly construed.’”

21–283 The unifying theme among these US cases is that the more that D attempts to limit C’s rights to damages, the more strictly the US courts will construe the contract against D. When one considers how the cost of an inefficient allocation of risk (whereby C bears risks for factors over which D is likely to have better control, or superior knowledge) is likely to be reflected in competition for the work and the subsequent tender prices, it would seem counterproductive for D to attempt such a risk transfer329. Many American states have legislation forbidding exclusion clauses in public contracts.

328 Cal App 2d 186; 247 P.2d 934 (1952). 329 See also Chapter 10, Project Control.

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For example, the state laws of California330, Colorado331, Massachusetts332 and Washington333 forbid such clauses in any construction contract. For example, Section 4113.62 of Ohio Revised Code provides, in relevant part: “Any provision of a construction subcontract, agreement, or understanding, or specification or other documentation that is made part of a construction subcontract, agreement, or understanding, that waives or precludes liability for delay during the course of a construction subcontract when the cause of the delay is a proximate result of [D’s] or [C’s] act or failure to act, or that waives any other remedy for a construction subcontract when the cause of the delay is a proximate result of [D’s] or [C’s] act or failure to act, is void and unenforceable as against public policy.”

21–284 In Acme Contracting, Ltd. v TolTest, Inc.334, the United States Court of Appeals for the Sixth Circuit upheld the decision of the District Court, which had held that the subcontractor was entitled to its claim for damages in a contract notwithstanding a no damages for delay clause saying: “In this case, the contract provisions at issue include that any delay must be reported in writing and an ‘extension of time shall be the sole and exclusive remedy of [the SC] for any such delays or suspensions, but only to the extent that a time extension is obtained from [C]’, and that ‘No claims will be accepted for costs incurred due to delays caused by others except to the extent that such delays exceed four (4) months.’ Thus, the contract as a whole precludes, limits or waives liability for delay, even when the cause of the delay is a proximate result of [C’s] actions or failures to act. The Court therefore concludes that these provisions are therefore void and unenforceable and do not preclude recovery of delay damages by [the SC] in this case.”

21–285 Thus, the effect of these laws is that any clause in a construction contract that has the effect of waiving C’s right to recover damages for the effect of the acts of D, or the CA acting on its behalf, is deemed to be against public policy and is therefore void and unenforceable. 21–286 The 2009 edition of the Irish government standard forms of contract appear to be the first government standard forms outside the United States to attempt to preclude damages for delay to progress, or to sectional completion dates caused by events at D’s risk as to cost where they state335: “except as provided in this sub-clause 10.7 (notwithstanding anything else in the contract) losses, or expenses arising from, or in relation to delay, disruption, loss of productivity, or knock-on effect should not be taken into account, or included in any determination of an increase to the contract sum, and [D] shall have no liability for such losses, or expenses”.

21–287 And Cl.10.7.5, the standard forms add: “There shall be no delay cost paid as a result of extensions to the date of substantial completion of a section.”

330 Cal Pub Cont Code para.7102 (1985). This applies only to construction contracts entered into by public agencies and the subcontracts entered into thereunder. 331 Colo Rev Stat para.24–91–103.5 (1990). 332 Mass Gen L Ch 30, para.390 (1992). 333 Wash Rev Code Ann para.4.24.360 (1979) states that “any clause in a construction contract, as defined in RCW 4.24.370, which purports to waive, release, or extinguish the rights of a contractor, subcontractor, or supplier to damages or an equitable adjustment arising out of unreasonable delay in performance, which delay is caused by the acts or omissions of the contractee or persons acting for the contractee is against public policy and is void and unenforceable”. 334 Acme Contracting, Ltd. v TolTest, Inc (2008) US Dist LEXIS 36355 (ED Mich 5 May 2008). 335 See, for example, IGBW/09, at Cl.10.7.4.

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21–288 The effect of this is to attempt to prevent C from recovering from D, delayrelated losses incurred by its sub-contractors who were delayed in completion of their works, but which finished before the substantial completion date and did not have a knock-on effect on that date. 21–289 In this context, CL.10.1, provides that “[C’s] sole remedies from compensation event shall be those stated in the contract” and, at Cl.1.9.1, the standard forms state that: “the contract and the documents referred to . . . set out the entire agreement between the parties about the subject-matter of the contract”.

21–290 The intent of these clauses would appear to be to preclude any claim for loss, or expense arising out of delay to progress, or disruption caused by an event at D’s risk as to costs, or for compensation arising out of damages at common law. 21–291 Notwithstanding that the EC (Unfair Terms in Consumer Contracts) Regulations 1995 do not regulate contracts other than those with consumers, it is foreseeable that the effect of the 2009 edition of Irish government standard forms of contract will be to keep many small contractors away from public contracts, or out of business and that for larger contractors (for whom litigation remains a way of life) the effect will be to assist the Irish courts to add further to their case law.

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CHAPTER 22

Settlements and dispute resolution

Introduction Costs Claim preparation In-house Claims consultants Experts Settlement Duress Misrepresentation and fraud Dispute resolution Non-binding Mediation Conciliation Non-binding or final and binding Expert determination Adjudication Final and binding Arbitration Litigation Statements of case Claim Defence Counterclaim Reply and defence to counterclaim Amendment of statements of case Request for further information Striking out statements of case

22–001 22–009 22–020 22–024 22–027 22–029 22–057 22–065 22–075 22–085 22–089 22–091 22–096 22–099 22–100 22–106 22–113 22–114 22–119 22–123 22–130 22–137 22–140 22–145 22–147 22–151 22–155

Introduction “The partisan, when he is engaged in a dispute, cares nothing about the rights of the question, but is anxious only to convince his hearers of his own assertions.”1

1 Plato (427 BC -347 BC) Dialogues, Phaedo.

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22–001 If C is to have its claim dealt with competently and promptly, it must present it with competence and promptitude. In essence, this means that it must constantly appraise the progress of the work in relation to the planned progress and, once there is a deviation, it must go through the same logical procedure that is required for the presentation of a statement of case. 22–002 What it must then do is to: 1. 2. 3.

4. 5.

describe clearly the excusable and/or compensable event that is a departure from the description of the works in the contract documents; identify, with precision, when that event was initiated and became apparent; establish the effect of the event upon the duration and timing of all affected activities (by reference, if possible, to the resources planned in relation to the resources used, or expected to be used); establish the financial effect of the event; and provide documentary evidence to substantiate the calculations of both time and money.

22–003 It is equally important for C to be able clearly to distinguish between the effects of disruption that go to a delay to progress or loss of productivity and delays to progress that go to delayed completion, extensions of time and compensation for prolongation. 22–004 As to damages, there is a school of thought that, as there are frequently so many and various interrelated causes and effects of delays and disruptions on a construction project, no attempt should be made to attribute costs to individual items2. There is some authority for accepting this3. However, there is a world of difference between not being able to separate the costs of specific delays for which liability can be proved and not trying to separate the liability for the various causes of delay to completion of the works. Thus, any statement in a claim to the effect that: “C contends that the full extent of delay to completion depends upon a complex interaction between the consequences of the various events which make it impractical and/or impossible to make an accurate apportionment of the total delay attributable to each individual event or series of individual events . . .”

should get short shrift from any competent CA and be dealt with similarly by a tribunal. Unless C wishes to take the rocky road with a global or total loss claim (requiring it to demonstrate to a sceptical judge, or arbitrator, that that is all it can do to prove its claim), competent presentation requires a well-thought-out, comprehensive, accurate and quality-assured system of recording events in a time-frame4, as well as an accurate cost analysis. 22–005 In addressing claims preparation, the gist of LLoyd LJ’s comments in McAlpine Humberoak v McDermott5 provide some helpful guidance: 1.

theoretical calculation, formulae, and rules of thumb do not provide proof of anything;

2 J Franks, “Building subcontractors’ claims – avoidance, or submission?” (1986) Studies in Contractual Claims 10 (Chartered Institute of Building). 3 See Ch.19, “Total time, total loss and global claim” at paras 19–021 to 19–039. 4 See Ch.13, “Construction records” and Ch.21, “Damages”. 5 (1992) 58 BLR 1.

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2.

3.

hypothetical assumptions and calculations might be satisfactory for preliminary issues of principle, but hard facts, visible and proved, are needed to substantiate claims for reimbursement6; and whether measured in time, or money, damage must be proved by hard evidence.

22–006 Although there is no formality laid down for the manner in which the information is to be provided under any of the standard forms, the information required for the CA to determine the claim, save for the names of the parties and the form of contract, is the same as that which would be required by tribunal. 22–007 Whether the claim is submitted to the CA, ADR, or a tribunal, in the course of the works, or to ADR, or a tribunal, after the work is finished, the burden of proof is on C to show, on a balance of probabilities, that the delay to progress, or to completion, occurred as a result of an excusable and/or compensable event and that the time to be added, or the costs claimed in compensation, flowed from, and only from, the event alleged. 22–008 In Ascon v McAlpine7, Ascon was the concreting subcontractor to McAlpine, the contractor, for the redevelopment of the Villiers Building at Douglas on the Isle of Man. The SC alleged that seawater ingress below ground (for which it was common ground that C was liable) had caused the SC the delay it had suffered in constructing the concrete substructure. However, the attempt of the SC’s expert to demonstrate liability had been severely criticised and, in response, the SC had attempted to demonstrate that, because C had no satisfactory alternative explanation, its claim for an extension of time should nevertheless be allowed. HH Judge Hicks QC dealt with this shortly, saying: “[Counsel for the SC] sought to deflect criticism of [the SC’s Expert] evidence by counterattacking. [C’s] quantity surveying expert . . . he said, had only one explanation for the delay, namely the [SC’s] failure to provide enough steel-fixers. That, he submitted (and [the SC’s expert] said in evidence), was not made out, so [the SC’s] explanation was the only one in the field and should be accepted. I doubt whether it is true that [the SC] can be completely cleared of the allegation of providing inadequate numbers of steel-fixing staff, but it is not necessary to decide that point since the argument fallaciously seeks to reverse the burden of proof. It is [the SC] which is seeking an extension of time and must establish a cause of a quantified period of delay entitling it to that extension.”8

Costs “The basic rule is that the longer the dispute runs, the higher the costs incurred and the lower the profit retained by the successful party.”9

22–009 Although costs can be incurred, to varying degrees, over the whole of the period of a dispute, no matter which way it is handled and irrespective of C’s

6 Whilst the burden of proof is on the claimant in that it must show, on a balance of probabilities, that the breach it alleges has resulted in the effects for which it claims reimbursement, in McAlpine Humberoak v McDermott it was the defendant who put up a detailed analysis of the factual nexus of events to defeat the claimant’s unmeritorious global claim. 7 Ascon Contracting Ltd v Alfred McAlpine Construction Isle of Man Ltd (1999) 66 Con LR 119. 8 Ibid., at pp.127–128. 9 A Sharvatt, “Settlement – maximising your return”, an occasional paper given to a conference sponsored by SJ Berwin & Co (1996).

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management efficiency, there tend to be particular times at which costs escalate quickly, whilst the chances of settlement diminish proportionately. 22–010 Unless one of the parties wishes to change the law, or is simply trying to get out of its bargain for as long as possible, or altogether, the most likely reason that parties find themselves pursuing formal dispute resolution processes is that they are not in possession of the same facts, or they do not have the same perception thereof. Thus, getting at the facts of the matters in dispute and exposing the factual differences tends to have an enormous effect on the likelihood of settlement10. 22–011 There is a tendency in claims presentation, often brought about by fuddled thinking and mental laziness, to throw everything into the pot and leave someone else to sort it out. However, how much more powerful and unarguable does C’s case become if, in accepting that some breaches simply do not cause any loss, or a loss so small so as not to be worth pursuing, it discards the nominal breach and pursues only those few breaches for which an actual loss or damage can be accurately quantified and causally connected to the breach? This is not just a forensically sound tactic, it is also good business sense. Cs should be aware that the cost and time taken to analyse and prove their case before any action is commenced produce a very much cheaper and more efficient result than analysing and proving their case as a result of requests for further information, applications to strike out, amended pleadings, and so on. The cost of time taken before lawyers are instructed, and in isolation from those costs that are driven by the participation in a dispute of the other party’s legal and expert team, is necessarily smaller. Often, once the claim is served, or the arbitrator appointed, the other party’s team becomes involved and the costs then escalate (almost) exponentially. 22–012 Depending upon the nature of the factual dispute, it can sometimes be more cost-efficient if experts in liability are consulted before those on quantum. However, whilst liability is fundamental to recovery, once established, it is of little use without quantum. The objective should be to provide a claim document that deals with both liability and quantum equally thoroughly at the outset. 22–013 Figure 22.1 indicates the graphic escalation of costs through the various stages of the course of traditional litigation against the change in likelihood of settlement as the facts become clearer. 22–014 Traditionally, document files have tended to be maintained manually and those relevant to a dispute may be in various hands. This gives rise to two potential problems: • •

having all available documents; and being able to get at the relevant facts exposed by those documents.

22–015 The process of full disclosure is notoriously expensive and time-consuming to both parties and their advisors. After discovery and inspection, there will be a period whilst lawyers and experts digest their content. Costs tend to accrue rapidly at this stage. Witness statements and expert reports then tend to be updated and finalised and much information is exchanged in conferences between the various experts and also between experts and counsel. Whilst disclosure tends to occur late in the course of a dispute resolution process11, its timing also serves inevitably to restrict access to the 10 See Ch.13, “Construction records”. 11 However, CPR r.31.16 now provides for general pre-action disclosure that will assist parties in earlier, more effective claims presentation and analysis. See A Rawstron, “It’s open day for sensitive

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information until shortly before trial, but it is then that, with the facts exposed, settlement becomes most likely. [Please refer to Figures 22.1 to 22.3 inclusive] 22–016 Sometimes, the appointment of experts to deal with each party’s respective case can lead to points of difference being identified in early expert meetings and exposed before disclosure, but it is usually not until counsel and experts are preparing for trial and everything has been laid out that a clear picture of the merits of the parties’ respective cases, in the light of the estimate of costs of trial, produces a settlement. The disadvantage of the traditional approach to fact-finding is therefore that C is kept out of its money for longer than otherwise necessary. 22–017 The essential difference in the costs perspective of a case in which C has its documents managed by computer (so that they can be searched and located electronically rather than manually) is that it is far easier to get at the relevant controlled information12. The early input of experts to advise on the parties’ cases then becomes far more efficient and the chances of early settlement are enhanced. A pictorial graph of the respective costs against the chances of settlement in such a scenario is illustrated at Figure 22.2. 22–018 The third possibility to consider is the effect on dispute costs of an “openbook” document management system, in which all documents are available to all parties from the start13. Two advantages flow from this: • •

the reduction in likelihood of dispute (because common facts are available); and the absence of the need for disclosure.

The effects of this upon dispute costs in relation to the chances of settlement appear at Figure 22.3. 22–019 Whatever the possibilities and whichever method of dispute resolution is adopted, prior to embarking upon each stage of the process it is always worth taking a step back to consider whether, on the evidence available at the time, the parties should try to reach a settlement by negotiation, conciliation, or mediation. Irrespective of what happens in the interlocutory stages, it is in the common experience of those involved in litigation that, once the hearing has started, whilst the costs continue to rise, the chances of settlement tend to diminish in inverse proportion.

Claim preparation 22–020 Whosoever prepares the claim, it is important that it appears credible. There is a school of thought that, if D appears sympathetically disposed to a claim and that all it needs is dates, facts and figures before it will feel justified in recommending payment, a fully reasoned submission might not only be unnecessary but, indeed, might even be counter-productive. The fallacy of this mindset is that if a half-cocked, badly reasoned submission is not accepted, then anything produced after that not only has to deal with the true picture, but it also has to rationalise any differences between that which was first claimed and that which is later claimed. The inevitable result is that C’s credibility in the light of its “first guess” is undermined; D rarely settles on a second submission and mistrusts the whole claim. information” (a commentary on Burrells Wharf Freeholds v Galliard Homes), Construction News, 29 July 1999. 12 See Ch.13, “Construction records”, at paras 13–042 to 13–050 and 13–120 to 13–134. 13 See Ch.13 “Construction records”, at paras 13–067 to 13–119.

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22–021 The cost of preparing a claim tends to increase in proportion to the number of people involved. A claim that requires the input of lawyers, architects, engineers and quantity surveyors will inevitably cost more than one that does not. The only feature that is likely to have a fundamental effect on costs, irrespective of who is involved, is whether C has maintained good records14. Nevertheless, one of the most important decisions to be made at the outset is who is to prepare the factual basis of the claim. In principle, there are three possibilities. It can be prepared by: • • •

in-house staff; claims consultants; or experts and lawyers.

22–022 Each category has its merits and demerits depending upon whether the claim settles or proceeds to dispute resolution. The type and content of a claim are important considerations in deciding how it is to be prepared and presented. For example, if the dispute goes only to quantum, or valuation, it may be perfectly adequate for the matter to be dealt with by in-house personnel, but, if the claim must be supported by an analysis of liability and causation and a view as to whether C, or the CA, behaved reasonably, the input of an expert instructed by lawyers is usually essential. 22–023 Whilst it is convenient and generally more effective for an expert, or claims consultant, to take over the whole of the papers and do all the work within his own office, depending upon the facts at issue, a party’s staff may undertake much of the routine research and assembly of factual information under the guidance of the consultant whose task is then to interpret it and draft the claim for submission on the basis of the facts found. Whether this is a practical way to proceed depends, to a great extent, on the issues in dispute. The difficulty is that, when the facts are selected by C, or C’s lawyers, or the expert’s report is restricted only to only those issues upon which it can be expected to provide an attractive opinion, it will produce an unbalanced result and prolonged dispute resolution is likely to follow.

In-house 22–024 Large contractors generally have in-house departments that deal with legal, accounting, quantity surveying and programming matters, which are likely in combination to have sufficiently experienced and adequately trained personnel in the claims field to prepare their own information for the purposes of the contract requirements. On the other hand, the preparation of claims is not a task that every contractor undertakes on a regular basis and, although the technical knowledge and experience may be in the company as a whole, competence in the analysis of cause and effect and experience to draw it together has to reside in someone who has an understanding of both the legal and technical issues and it is rare to find a contractor with personnel who have the necessary knowledge and experience for such a task. Smaller contractors do not generally have in-house personnel of the same breadth of experience and must consider whether they should take on staff to deal with claims, or to engage consultants as and when claims arise. 22–025 Unless those in-house staff who normally carry out estimating, surveying, technical accounting and programming are not fully occupied, claims preparation must 14 See Ch.13, “Construction records”, at paras 13–003 to 13–041.

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be carried out outside normal working hours. This usually means that the preparation of the claim will take longer than would otherwise be necessary. The risk inherent in a delayed claim presentation is that the facts supporting the claim (which may ultimately be in the hands of others) can become unavailable and memories can fade. This will affect the usefulness of witnesses. Of course, unrecouped costs will remain unrecovered for longer than would otherwise be the case. 22–026 It is not uncommon in large cases for the parties to have their own “information manager”, who is often one of the key persons involved in the dispute, and who, by reason of his familiarity with the issues and documentation, will be tasked with dealing with requests for information. But, by the same virtue that renders their appointment efficient, they will sometimes be the de facto censor of information unhelpful to them, or their employer15. There can be no real doubt that the recipient of a well-prepared and objectively reasoned claim will treat it very differently from a homespun story prepared by a partisan unfamiliar with the nuances of the problems to be faced in dealing with the arguments against its client’s case. Additionally, if the staff who have been involved in the project are required to prepare the claim, then there is a risk that any negative aspects of the claim will be underplayed and those difficulties with regard to proof will not be given the attention they deserve. The result is that, too often, in-house prepared claims tend to be over-optimistic, inflated and, rather than facilitate a settlement, actually inhibit one.

Claims consultants “There is much to be said for the subcontractor having the person submitting the claim on his side.”16

22–027 Claims consultants are not “experts” in the legal sense. The purpose of their trade is to sit in the employing party’s place and to prosecute the claim on its behalf. Sometimes a claims consultant will not only prepare the claim, but also act as C’s advocate. Whilst, at a hearing or trial, they might also seek to give evidence of opinion, it would be a rare arbitrator or judge who gave much credibility to the opinion of a consultant whose overt task was to win its client’s case, no matter what title it gave itself17. In Cala Homes18, for instance, the witness admitted that his view of the task of an expert was set out in an article he had written for a professional journal, from which the judge quoted. It is indicative of the difficulty many have that the writer of the article should himself describe the role of the “claims consultant” whilst referring to it as the role of an “expert witness”. The witness had confirmed in cross-examination that that was indeed his view of the expert’s task. In unreservedly condemning such an approach, Laddie J said: “The whole basis of [the witness’s] approach to the drafting of an expert’s report is wrong. The function of a court of law is to discover the truth relating to the issues before it. In doing that it has to assess the evidence adduced by the parties. The judge is not a rustic who has chosen to play a game of Three Card Trick. He is not fair game. Nor is the truth. 15 K Pickavance, “The expert’s perspective”, The resolution of disputes under international contracts (Conference sponsored by ICC and FIDIC, 2004, Paris, France). 16 J Franks, “Building Subcontractors’ claims – avoidance, or submission?” (1986) Studies in Contractual Claims 10 (Chartered Institute of Building). 17 Multimedia Productions Ltd v Secretary of State for the Environment (1988) EGCS 83. 18 Cala Homes South Ltd v Alfred McAlpine Homes East Ltd (1995) CILL 1083.

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That some witnesses of fact, driven by a desire to achieve a particular outcome to the litigation, feel it necessary to sacrifice truth in pursuit of victory is a fact of life . . . The reality, of course, will be somewhat different. An expert who has committed himself in writing to a report which is selectively misleading may feel obliged to stick to the views he expressed there when he is cross-examined. Most witnesses would not be prepared to admit at the beginning of cross-examination, as [the witness] effectively did, that he was approaching the drafting of a report as a partisan hired gun. The result is that the expert’s report and then his oral evidence will be contaminated by this attempted sleight of mind. This deprives the evidence of much of its value . . . In the light of the matters set out above, during the preparation of this judgment I reread [the witness’s] report on the understanding that it was drafted as a partisan tract with the objective of selling [D’s] case to the court and ignoring virtually everything which could harm that objective. I did not find it of significant assistance in deciding the issues.”19

22–028 Thus, the downside risk of employing claims consultants to prepare a claim is that, whilst it may be satisfactory for informal dispute resolution purposes, in the event that the matter goes to court, or arbitration, their work will be of little use and independent experts will then have to review the evidence afresh and prepare an objective, impartial report for the purpose of giving expert evidence of opinion at the hearing. The Academy of Experts and the Expert Witness Institute have a protocol for the appointment of experts and their conduct, drawing a clear distinction between advising the appointing party and that of advising the court. In this regard, the Protocol prepared by the Civil Justice Council for the appointment of experts20 advises: “Part 35 only applies where experts are instructed to give opinions which are relied on for the purposes of court proceedings. Advice which the parties do not intend to adduce in litigation is likely to be confidential; the Protocol does not apply in these circumstances21. The same applies where, after the commencement of proceedings, experts are instructed only to advise (eg to comment upon a single joint expert’s report) and not to give or prepare evidence for use in the proceedings. However this Protocol does apply if experts who were formerly instructed only to advise are later instructed to give or prepare evidence for the purpose of civil proceedings.”

Experts “Persons of this description though in English law confounded with witnesses and not without advantage treated as such, are in fact a sort of assistant to the Judge and treated as such by Roman law.The expert witness is in quite a special position. He is an assistant in the determination of truth. He is a purveyor of information on which decisions are arrived at, and to the truth and validity of that information his professional credit and reputation are pledged.”22

22–029 The essential difference between a claims consultant and an expert is that, whereas the task of the claims consultant is to prosecute its client’s case, that of the expert is to act as an advisor to the tribunal on those matters within the particular expertise of the expert. 22–030 In the past, Cs who had been primed by their claims consultant rarely had the stomach to change horses when their claim was rejected and they proceeded to the hearing with their partisan, with all the risk that that involved. However, since the 19 20 2005, 21 22

Ibid., at pp.1085–1086. Civil Justice Council, Protocol for the Instruction of Experts to give Evidence in Civil Claims, June October 2009 Rev., at paras 5.1–5.3. See Carlson v Townsend [2001] 1 WLR 2415; Jackson v Marley Davenport [2004] 1 WLR 2926. Attributed to Jeremy Bentham (1748–1832).

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introduction of the Practice Direction to Pt 35 of the English Civil Procedure Rules (CPR)23, the days of the hired gun should be over24. In the case of Stevens v Gullis25, the Court of Appeal determined that an expert who failed to comply with the requirements of the Practice Direction to CPR Pt 35 should not be permitted to give evidence even if, as a result of debarring him, the case had to be dismissed26. 22–031 Stevens concerned a contract for the alteration and improvement to D’s premises in Mid Glamorgan. The total value of certified work was over £122,000, of which C claimed just over £8,000 in unpaid certified sums. D counterclaimed over £127,000 under various heads, based upon a report prepared by its expert, on the basis of which third party proceedings had also been issued against the CA. A number of orders were made regarding meetings and exchange of expert reports and an experts’ meeting took place. Subsequently, a memorandum of agreement was sent by the other experts to D’s expert but, despite reminders, he failed to respond to it. Eventually, a further application to the court resulted in an order requiring D’s expert to comply with the requirements of the Practice Direction, or else D would be debarred from calling him as an expert. The Practice Direction to Pt 35 of CPR current at the time27 set out the requirements in relation to experts’ reports. In para. 1.2, it required the expert’s report to contain a statement that the expert understood his duty to the court and has complied with that duty28. It was also to contain a statement setting out the substance of all material instructions summarising the facts and instructions given to the expert29. However, the expert did not follow the CPR, but delivered to the court a letter in the following terms: “. . . relevant qualification is a BSc (Hons) Building Surveying. However, I have been involved with renovation and disabled grants in a professional capacity for over fifteen years, having been an associate of a chartered surveyor for six of those years, undertaking architectural designs, specification of remedial building rectification works, drawings, preparation of bills of quantities, site supervision, defect reports, etc. Although I am not a qualified, nor a practising architect, I have extensive experience in architectural design, having taught computer-aided design and AutoCAD AEC (which is a construction drawing software product) at a number of colleges in South Wales. I have also prepared architectural drawings for large prestigious companies. I am able to, if required, submit copies of drawings so that they can be assessed for their architectural credibility . . . I submitted all reports to the best of my ability, and each report was a true and accurate account of the condition of the building at the time of the inspections.”

At first instance, the judge said that the expert’s letter came nowhere near complying with the order. In particular, it failed to deal with the need to acknowledge the expert’s duty to the court and state the substance of his instructions. In regard to the latter point, the judge said: “[The expert] has not set out the substance of his instructions. That is of particular concern in the present case because of the suspicions of the [CA] that [the expert] is taking his 23 Ministry of Justice, Civil Procedure Rules, 1998, October 2009 Rev. 24 The Civil Procedure (Amendment) Rules 2009, SI 2009/2092, were made on 28 July 2009 and (with exceptions) came into force on 1 October 2009; amongst other things, this makes changes to Pt 35 and the practice direction thereto, including a new statement of truth and statement as to the experts duty to the court. 25 Edwin John Stevens v Gullis and Pile [1999] BLR 394. 26 On the requirements of experts generally under the 1998 edition of the CPR, see K Pickavance and N Lane, “Experts under the 1998 Civil Procedure Rules” [1999] ADRLJ 96. 27 Civil Procedure Rules 1998. 28 Ibid., r.35.10(2). 29 Ibid., r.35.10(3).

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instructions directly from [D]. . . . In my view, it is in the interests of the administration of justice that [the expert] should not give his evidence in the circumstances I have outlined. It is essential in a complicated case . . . that the court should have a competent expert dealing with matters which are in issue . . . [the expert], not having apparently understood his duty to the court and not having set out in his report that he understands it, is in my view a person whose evidence I should not encourage in the administration of justice . . . I deduce from the letter of [the expert] that he does not quite appreciate what his functions are as an expert witness . . . It appears that [the expert] is not co-operating with the other experts in the case. He apparently came to the conclusion that, because he disagreed with their draft, no further steps needed to be taken and the appropriate step was merely not to sign it. The orders of the court have consequently been so much wasted paper . . . I ought to take that into account under CPR 3.9(1)(e) in deciding whether or not to grant relief. In those circumstances I ought to make an order that [the expert] be debarred from acting as an expert witness in the case; so the third party succeeds.”

22–032 D appealed to the Court of Appeal on the following grounds: 1. 2.

it was not appropriate to debar D’s expert from giving evidence against the CA; and in any event, the judge was wrong to come to the conclusion that, because the expert was debarred from giving evidence, the claim against the CA should not be allowed to continue.

Lord Woolf MR dismissed this shortly: “[the expert] had demonstrated that he had no conception of the requirements of the CPR . . . I am quite satisfied that the judge had no alternative but to take the action he did, notwithstanding the fact that the CPR had only recently come into force, and that the consequences to [D] of the course which was taken was draconian and could deprive him of a claim which he might otherwise have against the [CA].”30

22–033 It appears that the judge at first instance actually gave leave for the expert to give evidence of fact, but the Court of Appeal did not like this either. Lord Woolf MR said: “Clearly, [the dismissed expert] could not give evidence as to fact at the same time as [D] was relying upon his new expert. Accordingly, the judge has allowed [D] to have a period of grace, following the outcome of this appeal, to decide whether he wishes to rely upon the new expert, or [the dismissed expert’s] evidence as to fact in relation to the proceedings between [C] and [D]. While I understand the difficulty the judge had in dealing with the position of the new expert, I consider it was a mistake to regard [the dismissed expert] as being in a position to give evidence as to fact although he could not give evidence as an expert. . . . In my judgment it would be extraordinarily difficult, if not impossible, for [the dismissed expert] to give evidence as to fact without giving evidence as an expert. In any event, [the dismissed expert] was so discredited that it would be pointless for his evidence to be included in the hearing of the claim between [C] and [D]. The court has power to control evidence, even evidence as to fact, which is to be given in the course of the proceedings. In my view, it would have been more appropriate for the judge to have refused permission for [the dismissed expert] to have given evidence as to fact.”31

22–034 The fact that D’s expert in this case had not been prepared actively to participate in the experts’ agreement and had not been prepared to demonstrate that he owed a duty to the court, or to disclose his instructions, was clearly a breach of the 30 [1999] BLR 394 at pp.398–399. 31 Ibid., at p.399.

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Practice Direction. Having dismissed the claim against the CA, the Court of Appeal then turned to the question of the case between C and D. D had presented the court with a draft consent order allowing it to call [the dismissed expert] as an expert in the action by C, provided that he set out in writing all the matters referred to in the Practice Direction. Lord Woolf MR dismissed this too: “I consider that it would be wholly wrong to impose [the dismissed expert] as an expert upon the judge. The judge has very properly indicated his view that [the dismissed expert] is not an appropriate person to give expert evidence in a court having regard to his conduct to which I have referred. That being so, it would be quite wrong for this court, even by consent, to interfere with the judge’s judgment. . . It would be wholly wrong, where a judge has appropriately exercised his discretion in relation to that matter, for the parties to override that discretion merely because the parties are content to allow the matter to be dealt with otherwise. The order of the judge in the proceedings between [C] and [D] should stand and [the dismissed expert] should not be allowed to give expert evidence.”32

22–035 In the United States, it was made federal law in 199433 that any expert appointed should disclose its expert report three months before a hearing, stating not only the expert’s terms of reference and what it is to be paid for giving the evidence, but also listing any expert report it had previously produced in the last four years and any article it had had published in the previous ten years. 22–036 In the United Kingdom, the CPR has not gone quite so far, but experts are now to be appointed in the capacity of advisor to the court and, in that capacity, all correspondence relating to that appointment may be discoverable, together with any instructions the expert receives after appointment34. It follows from this that quantum, method and means of payment will also be disclosable. The Protocol for the appointment of experts35 renders acceptance of (but, apparently not the giving of) instructions that constrain the independence of experts a breach of Pt 35 of the Civil Procedure Rules: “Payments contingent upon the nature of the expert evidence given in legal proceedings, or upon the outcome of a case, must not be offered or accepted. To do so would contravene experts’ overriding duty to the court and compromise their duty of independence36. . . .Experts should confirm without delay whether or not they accept instructions. They should also inform those instructing them (whether on initial instruction or at any later stage) without delay if: . . .instructions are not acceptable because, for example, they require work that falls outside their expertise, impose unrealistic deadlines, or are insufficiently clear”37; ..the instructions and/or work have, for any reason, placed them in conflict with their duties as an expert”38; or

32 Ibid., at pp.399–400. 33 Rule 26 of the Federal Rules of Civil Procedure 1994. 34 CPR 2009, r.35.10(3) states that “The expert’s report must state the substance of all material instructions, whether written or oral, on the basis of which the report was written.” However, Practice Direction 35 adds that “Cross-examination of experts on the contents of their instructions will not be allowed unless the court permits it (or unless the party who gave the instructions consents). Before it gives permission the court must be satisfied that there are reasonable grounds to consider that the statement in the report of the substance of the instructions is inaccurate or incomplete. If the court is so satisfied, it will allow the cross-examination where it appears to be in the interests of justice.” 35 Civil Justice Council, Protocol for the Instruction of Experts to give Evidence in Civil Claims, June 2005, October 2009 Rev. 36 Ibid., para.7.6. 37 Ibid., at para.9.1(a). 38 Ibid., at para.9.1(d).

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. . .they are not satisfied that they can comply with any orders that have been made39. . . .Where experts’ instructions remain incompatible with their duties, whether through incompleteness, a conflict between their duty to the court and their instructions, or for any other substantial and significant reason, they may consider withdrawing from the case. However, experts should not withdraw without first discussing the position fully with those who instruct them and considering carefully whether it would be more appropriate to make a written request for directions from the court. If experts do withdraw, they must give formal written notice to those instructing them.”40

22–037 Whilst this goes a long way to resolving obvious difficulties, there often remains an unresolved tension between on the one hand, the need of the tribunal to receive an independent impartial opinion on the matters in dispute and, on the other, the fact that the expert is instructed by one of the parties. Such imbalance between the requirements of the tribunal and those of the parties can sometimes manifest itself in the timing of appointment of experts and the amount of information made available to them41. For example, at the time of forming its opinion for the purpose of the dispute, it will be unusual for the party-appointed expert to have the time, or material, available to it for the inspection of any documents, information, or witness statements that the advocate for the party appointing it does not positively wish it to see42. The restrictions that result are sometimes shielded behind the positive stricture of economic reality and the timetable set by the tribunal and it is sometimes the case that it is not until after both sides have produced their expert reports and are ready to go to trial that all the information necessary to produce a balanced opinion becomes available. When that material is disclosed, if it is different from the information on which its published report was based, it is then incumbent upon the expert to review and revise its opinion so as properly to advise the tribunal on the facts then before it. However, there are problems in revising an expert report at a time usually shortly before the date set for the hearing: 1.

2.

3.

the expert’s client does not always want to pay for the expert to revise its report, particularly if it results in a report to the tribunal inconsistent with its pleaded case, with the obvious difficulties that this would cause; the other side rarely wants its opponent’s expert to have the opportunity to revise its opinion, particularly if it results in its being able to demonstrate the falseness of their pleaded position; and the tribunal sometimes provides insufficient time in the timetable for such a task to be competently executed.

39 Ibid., at para.9.1(e). 40 Ibid., at para.10.1. 41 See, for example, The Royal Brompton Hospital National Health Trust v Alexander Hammond and Others (1999) CILL 1464. In dismissing the expert’s evidence, the court observed that it was not until shortly before the matter came to trial that the expert for the C was instructed to do any substantial work. As a result he was put in the unhappy position of being unable to consider a great deal of material and deprived of the opportunity for mature reflection before reaching his conclusion. In the event, the judge found many worrying features in the expert’s evidence. The most fundamental was, he said, the making of assumptions that logically drove his conclusions. This is so notwithstanding that he had been instructed to make those assumptions by his instructing solicitors. 42 Paradoxically, such information cannot be withheld from the other side. CPR 2009, r.35.9 states “Where a party has access to information which is not reasonably available to another party, the court may direct the party who has access to the information to (a) prepare and file a document recording the information; and (b) serve a copy of that document on the other party.”

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22–038 Commonly, the alternative is that the tribunal is then left with two experts’ reports, both of which, at their highest, are no better than honestly held opinions on partial facts. This can be troubling for the decision maker. It will be particularly troubling in cases in which the tribunal does not have the expertise to examine critically the facts and opinions of the competing reports and does not have a tribunal appointed expert or assessor, for that purpose. In such a case the tribunal can be left with reports that it perceives to be unbalanced, or partial, and may then look for a culprit. There have been a number of cases in which C’s expert43 has been roundly condemned by the UK courts for not making sure that it has had the opportunity to deal with all the facts available in the case44. 22–039 In international arbitration, whenever the parties, their advocates, or their experts, are from differing cultures (or sometimes, professional disciplines), there will be a further issue to be considered. The difficulty is generally manifest in the manner of adducing evidence from lay witnesses and from experts. In some cultures the coaching of witnesses by the advocate both before and during the period of giving evidence is not only not frowned upon, but is considered to be a normal and advantageous practice. In other cultures, it can amount to professional misconduct on the part of the advocate, or result in the evidence becoming inadmissible, or both. If the parties are not playing to the same rules, then, without a tribunal-appointed expert, the tribunal may be in some difficulty. 22–040 In matters concerning advanced technological considerations with which the tribunal is unfamiliar, or where one of the parties’ experts is likely to have been inhibited in reaching a properly balanced opinion by virtue of the hearing timetable, or the timing, or content, of the expert’s appointment45, or any other indication of similar effect, the tribunal should consider the merits of making a tribunal appointment of an independent expert, assessor or adviser of its own46. This is particularly so in international arbitration, where the added dimension of cultural differences is likely to render reconciliation of contrasting technical advice difficult, if not impossible.

43 However, this is not always the case. In Skanska Construction Ltd v Egger (Barony) Ltd [2004] EWHC 1748 QBD (TCC) and Great Eastern Hotel Co Ltd v John Laing Construction Ltd [2005] EWHC 181 (TCC) HH Judge Wilcox criticised D’s experts for taking into consideration facts that the court subsequently held to be unproven, or not relevant. These cases seem to suggest that an expert cannot be content to render its opinion from the factual matrix provided by those instructing it; the expert has an active duty to go behind the instructed facts and arrive at its own independently ascertained factual matrix and, if oral evidence is not supported by witness statements, that evidence must be positively discounted, otherwise the expert will leave itself open to criticism. Unless the expert is then given an adequate opportunity to deal with the facts found by the court as was suggested in John Barker Construction Ltd v London Portman Hotels (1996) 83 BLR 31, this seems unduly onerous. 44 The Brompton Hospital case is referred to above. See also Gareth Pearce v Ove Arup & Partners International Ltd [2001] EWHC 455 (Ch), in which an expert architect was reported to the Architects’ Registration Board (ARB) by the judge, who accused the expert of professional misconduct in the conduct of his research, the preparation of his report and in giving evidence. However, on enquiry by the Professional Conduct Committee of the ARB, the expert was found to have properly fulfilled the brief he was given by his instructing solicitors and to have behaved correctly. 45 As was the case in the Brompton Hospital and Skanska v Egger cases, see notes 54 and 55. 46 Arbitrators are often appointed for their technical knowledge and generally, under the standard rules of arbitration, have the power to appoint an assessor, or advisor if they require it. Judges also have a similar power under s 70 of the Senior Courts Act 1981 or s 63 of the County Courts Act 1984 as an assessor. Where the court appoints an assessor the appointment is governed by CPR 2009, r.35.15.

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22–041 In Balcombe v LDA47, in declining to appoint an assessor to assist in the determination of fees due on a claim of £600,000, Coulson J set out the factors that will normally be considered in exercising the court’s discretion, under the 2005 edition of the CPR as follows: “(a)

(b)

(c)

(d)

The court must have regard to the overriding principle. . .and in particular to all questions of proportionality, when considering appointing an assessor. Since the parties will have to pay the costs of an assessor, a court should think twice about imposing an extra layer of cost on the parties, and evaluate the potential benefit of an assessor against that cost, and the amount at stake in the proceedings. The appointment of an assessor may be appropriate if the subject-matter of the proceedings is technically complex, or involves a particular activity which will be unfamiliar to the court. In nautical collision cases, an assessor will often be appointed;. . .48. Assessors can sometimes be appropriate in detailed, or complex costs disputes although, depending on the circumstances, their own costs will often be met by the court service, rather than by the parties. Where assessors are appointed, it will be important to ensure that both the questions put to the assessor, and the assessor’s answers to those questions are shared with the parties and made the subject of counsel’s submissions. This can lead to the risk of increased cost and delay which will be ‘inherent in the ping-pong of post-hearing exchanges’; see [16] of the judgment of Gross J in Global Mariner49. In TCC cases in recent years, the appointment of an assessor has been very much the exception rather than the rule. In McAlpine Humberoak v MacDermott50, although HH Judge Davies QC sat with two assessors, they played no separate part in the proceedings, produced no reports, and their influence was not obviously discernible in the judge’s judgment.”

22–042 In summary, unless instructed otherwise, the expert’s task extends from advising its client in regard to its claim, the weaknesses in the case and the strengths of opposing views on the facts. The expert is entitled and required to form its own opinions on the respective merits of the opposing sides’ respective cases and to advise the client of its opinions “unless instructed otherwise”. This is an important consideration that was, no doubt, in the mind of Lord Woolf when he advised the Law Commission that an expert’s instructions and its communications with its instructing solicitor should no longer be privileged51. The position used to be that: “. . . since the procedure in both courts and arbitrations is adversarial, an expert is not obliged to speak out, or write in his report, about matters concerning which he has not been asked at all, either by his client’s opponent’s counsel, or by the Official Referee, or arbitrator”52. Under the CPR an expert is required to set out the substance of all material instructions in its report and these instructions are not privileged53. However, the court will not order disclosure of pertinent documents, or permit cross-examination of the expert on the content of its instructions, unless the court is satisfied that there are reasonable grounds for so doing54. 47 Balcombe Group plc v London Development Agency [2008] EWHC 1392 (TCC); [2008] TCLR 8, at [6]. 48 See, by way of example, Owners of the Bow Spring v Owners of the Manzanillo II, and Owners of the Global Mariner v Owners of the Atlantic Crusader [2005] EWHC 380, [2005] 1 Lloyd’s Rep 699. 49 See Owners of the Bow Spring v Owners of the Manzanillo II, and Owners of the Global Mariner [2005] EWHC 380, [2005] 1 Lloyd’s Rep 699. 50 McAlpine Humberoak Ltd (1990) 51 BLR 34. 51 Woolf, The Rt Hon the Lord, MR, Access to Justice – The Final Report to the Lord Chancellor on the Civil Justice System in England and Wales (HMSO, 1996). 52 A Burns, Construction Disputes, Liability and the Expert Witness (London: Butterworths, 1990). 53 CPR, r.35.10 (3). 54 CPR, r.35.10 (4). See also para.3 of the Practice Direction.

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22–043 Under the CPR, the expert’s independence is encapsulated in the “overriding duty to the court” set out in Pt 35, which, at r.35.3 states: “1. 2.

It is the duty of experts to help the court on matters within their expertise. This duty overrides any obligation to the person from whom experts have received instructions or by whom they are paid.”

22–044 Historically, opinion evidence from experts was required in practically all Official Referee cases55. However, under the CPR, whilst expert evidence may still be desired, there is no inherent right to adduce it. The CPR provides that “no party may call an expert, or put in evidence an expert’s report without the court’s permission”56. In arbitration, likewise, expert evidence tends to be limited. However, if the arbitrator is competent in the field in question57, then it is apposite to consider whether, although the parties may need technical assistance in the preparation of their respective claims and defences, expert evidence of opinion may not be necessary at all. 22–045 In the Cala Homes case, Laddie J approved the dicta of Cresswell J in The Ikarian Reefer58, in which the duties of an expert in civil cases were set out as including the following: “1. 2. 3. 4.

Expert evidence presented to the court should be, and should be seen to be, the independent product of the expert uninfluenced as to form or content by the exigencies of litigation . . .59 An expert witness should provide independent assistance to the court by way of objective unbiased opinion in relation to matters within his expertise . . .60 An expert witness in the High Court should never assume the role of an advocate. An expert witness should state the facts or assumptions upon which his opinion is based. He should not omit to consider material facts which could detract from his concluded opinion.”61

22–046 The Practice Direction to CPR r. 35 sets out that an expert’s report must, amongst other things, contain a statement that the expert: “1. 2.

understands their duty to the court, and has complied with that duty; and is aware of the requirements of Part 35, this practice direction and the Protocol for Instruction of Experts to give Evidence in Civil Claims.”62

It is also to contain a “statement of truth”, the current version of which is: “I confirm that I have made clear which facts and matters referred to in this report are within my own knowledge and which are not. Those that are within my own knowledge I confirm to be true. The opinions I have expressed represent my true and complete professional opinions on the matters to which they refer.”63

55 HH Judge Newey QC, “The Preparation and presentation of cases in the Official Referees’ Courts” (1990) 6 Const LJ 216. 56 CPR, r.35.4(1). 57 If the parties have agreed to select their arbitrator for its expertise in the area of dispute, the opinions of others in the same field may not necessarily be useful or cost effective. 58 The Ikarian Reefer [1993] 2 Lloyd’s Rep 68. 59 Whitehouse v Jordan [1981] 1 WLR 246 at p.256, per Lord Wilberforce. 60 Polivitte Ltd v Commercial Union Assurance Co Plc [1987] 1 Lloyd’s Rep 379 at p.386, per Garland J, and Re J [1990] 1 FCR 193, per Cazalet J. 61 The Ikarian Reefer [1993] 2 Lloyd’s Rep 68 at p.81, per Cresswell J. 62 CPR 2009, r.3.2(9)(a) and (b). 63 Practice Direction to CPR, r.35, at para.3.3.

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22–047 In combination with the overriding duty of the expert to the court under r. 35.3, which should have the effect of keeping experts in line with the duties set out in the Ikarian Reeferr; however, it is no answer to the lay witness who is permitted to give expert opinion without either an acknowledgment of its duty to the court, or a statement of truth. It is apparent that complex litigation concerning complex factual scenarios presents more complex issues that cannot easily be resolved simply by excluding the witness from giving evidence of fact in circumstances in which evidence of fact and opinion are interwoven. In Multiplex v Cleveland Bridge64, Jackson J (as he then was) had to consider the position in which one of the principal witnesses of fact (who was a highly experienced engineer who had been deeply involved in the project as an employee of one of the defendants) had produced a witness statement embodying evidence of opinion, to which objection was raised in part before oral examination and in part after cross-examination. Jackson J dealt with the objections as follows: “As a matter of practice in the TCC, technical and expert opinions are frequently expressed by factual witnesses in the course of their narrative evidence without objection being taken. Such opinion evidence does not have the same standing as the evidence of independent experts who are called pursuant to CPR rule 35. However, such evidence is usually valuable and it often leads to considerable saving of costs. Having regard to the guidance of the Court of Appeal and the established practice in TCC cases, I conclude that in construction litigation an engineer who is giving factual evidence may also proffer (a) (b)

statements of opinion which are reasonably related to the facts within his knowledge and relevant comments based upon his own experience.

For example, an engineer after describing the foundation system which he designed may (and in practice frequently does) go on to explain why he believes that this was appropriate to the known ground conditions, or an engineer brought in by [C] to design remedial works (which are subsequently challenged as excessive) may refer to his experience of rectifying comparable building failures in the past. For example, such evidence may be given in cases about concrete failure through ASR (a world wide problem). With this guidance in mind, I turn to the two witness statements of [the witness]. These witness statements include narration of facts which are within [the witness’s] knowledge, expressions of engineering opinion upon those facts, relevant comments based upon his own experience, statements of opinion on matters outside his expertise, argument and gratuitous comment on matters which are for me to decide. . .65. The unfortunate and partisan manner in which [the witness’s] statements have been drafted tends to reduce the credibility of his evidence. On the other hand, I note that many of [the witness’s] views were accepted by [C’s] witnesses, when put in cross-examination. I conclude that the presentation, but not the underlying content, of [the witness’s] witness statements was unduly influenced by [D’s] lawyers. Furthermore, [the witness] gave his oral evidence in a fair and candid manner, despite his admitted close connection with [D]. These are all matters which I take into account when assessing the weight to attach to those parts of [the witness’s] evidence which are admissible. Finally, it should be noted that a number of factual witnesses called by [C] included expert opinion within their statements (although these statements were drafted in more moderate and appropriate language than that of [the witness]. No objection is taken to the admissibility of those statements.”66

64 Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd (No 6) [2008] EWHC 2220 (TCC). 65 Ibid., at [670]–[673]. 66 Ibid., at [675]–[676].

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22–048 It would therefore appear that, despite the Practice Direction to CPR Pt 35, a mixture of fact and opinion, without leave for expert opinion to be adduced, even if drafted by partisan lawyers so as to amount to advocacy will not always result in the witness being dismissed. However, the general mood on both sides of the Atlantic is to try to get rid of the “hired gun” syndrome, in which someone purporting to give “expert” evidence is, in fact, no more than reporting as a representative of the party that pays it, saying virtually what its client wants it to say and arguing its case. 22–049 Strictly speaking, the expert should not express an opinion in its disclosed report upon any of the issues, whether of law, fact, or liability, which the tribunal has to determine67. In practice, in complicated construction cases, the expert is often required to find relevant case law and to identify potential and separable liability. That advice, however, should not be contained in its disclosed report and, in light of its privileged position, it is important that the expert should not express its opinion on matters not within its technical expertise. Thus, only an architect can give expert evidence of opinion on the duties of an architect, and only an engineer can give evidence of the duties of an engineer68. On the other hand, at the moment it appears that the courts are prepared to accept evidence in forensic schedule analysis from anyone who offers it. 22–050 If an expert refers to the results of research published by a reputable authority in a reputable journal, the tribunal would ordinarily regard those results as supporting any inferences fairly to be drawn from them, unless, or until, a different approach is shown to be correct69. Thus, experts are entitled to draw upon and rely upon materials produced by others in the area in which the expert has their expertise70 and they may do so as part of the body of their report. If they do, the tribunal must admit such materials in evidence and give the factual assertions in them such weight as is thought fit. 22–051 Preparation of a joint statement between experts is a useful exercise, helping to concentrate the minds of the experts on the facts upon which their opinions have been based and to reveal differences of perceptions. If the facts are the same for both parties and the experts do their job properly, the case should not go to trial. 22–052 Meetings are generally held “without prejudice”, unless the parties, with the agreement of their experts, choose to make them open. The court may order discussions between experts71. The conduct of discussions between experts (where ordered by the court) is governed by CPR r. 35.12. The content of such discussions is not admissible at trial without the parties’ agreement and agreements between experts are not binding on the parties72. Even if the meeting is without prejudice, if an expert agrees something with its opposite number, which the party instructing it is not willing to accept, then that party will have difficulty in calling the expert as a witness73. In

67 Crosfield & Sons v Techno-Chemical Laboratories Ltd (1913) 29 TLR 379, per Neville J. 68 Samson v Metcalfe Hambleton (1998) 57 CLR 88, per Butler-Sloss LJ. 69 H v Schering Chemicals Ltd [1993] 1 WLR 143. 70 Eg, statistical records compiled by the Weather Office, authoritative books, research papers consisting of summaries of the results of research, or articles published in reputable journals. 71 CPR, r.35.12. 72 Although it is difficult to see how a party can prosecute a claim in which its appointed expert has no faith. See K. Pickavance, and N Lane, “Experts under the 1998 Civil Procedure Rules” [1999] ADRLJ 96. 73 The expert will usually be asked to give evidence under oath but, in any event, it could not honestly give evidence contrary to the views it has expressed.

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those circumstances, the party will have to seek leave to appoint another expert and either seek leave for an order that a fresh meeting of experts be held, or concede its position74. The importance of this became apparent in the Court of Appeal case of Aird v Prime Meridian75, in which experts who had been ordered to prepare a statement of agreement under CPR r. 35.12 in a case that subsequently went to mediation were not able to resile from that agreement. On appeal, it was held to be irrelevant as to whether the parties, or their experts, considered the document to be prepared in the course of mediation and privileged because, since it was prepared by order of the court, it was necessarily an open document. May LJ expressed the position thus76: “In my view, the structure of this rule is clear. It provides a balance between the need for the parties’ experts to be able to have a free discussion about issues amenable to their expert opinion which are relevant in the case without the details of those discussions becoming material which can be used in the proceedings, with the court’s need to have some proportionate and useful product of those discussions. The statement for the court for which rule 35.12(3) provides is a statement which, if it is directed, the experts must produce. It is a statement which, from the very wording of the rule, is available for use in the proceedings. It is not protected by privilege. One of its purposes is to define and narrow the contentious issues. An agreement of this kind is likely to influence any decision the court may reach and the court is likely to make findings consonant with what the experts have stated to be their agreement., but the court is not bound to do so and rule 35.12(5) expressly says that the experts’ agreement shall not bind the parties unless they expressly agree so to be bound. A stated agreement by the experts is not therefore, strictly speaking, an admission. It is certainly not an admission by the parties, because it is not their statement and they are not bound by it. It is not perhaps apt to characterise it as an admission by one, or both of the experts, but rather as an expression of agreement or, as the case may be, disagreement by them in response to an order of the court and in performance of their overriding duty to the court. As I have said, by instructing experts in civil proceedings the parties authorise their experts to do this. It would no doubt be possible for a party instructing an expert in civil proceedings to instruct that expert not to proceed in accordance with an order under rule 35.12(3), but I think that, if this happened, the expert would have to decline to continue to act as an expert in the proceedings, or at least to seek the court’s direction in that respect. For, in truth, the instruction would be an instruction not to perform the expert’s duty to the court. It would be so because the postulated instruction would be an instruction to disobey an order of the court for which the Rules provide, and an instruction to the expert not to perform his overwriting [sic] duty to the court, for which again the Rules provide.”

22–053 Apart from the meeting ordered by a tribunal parties may arrange for their experts to meet as often and upon such terms as they think fit, but at least once before finalising reports77 and, in the case of expert analysis on delay matters, it is often useful to meet before commencing any analysis at all. In order to avoid subsequent disputes, they should agree in advance whether a meeting is to be open, or “without prejudice”. This is particularly appropriate where meetings are held when a trial is already in progress.

74 CPR, rr. 12.5 and 13 state “Where experts reach agreement on an issue during their discussions, the agreement shall not bind the parties unless the parties expressly agree to be bound by the agreement. A party who fails to disclose an expert’s report may not use the report at the trial or call the expert to give evidence orally unless the court gives permission.” 75 Aird v Prime Meridian Ltd [2007] BLR 105. 76 Ibid., at [3] and [4]. 77 See HH Jackson, J, “Expert evidence in the TCC” (Winter 2006) The Expert and Dispute Resolver, Journal of the Academy of Experts.

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22–054 If the matter comes before a tribunal, then the expert must present its opinions to the tribunal as evidence in the case78. It is for that reason that the expert must maintain its impartiality. An expert who departs from the rule of “impartiality” renders their opinions worthless and their evidence will be dismissed79. 22–055 Apart from the professional institutes of the various disciplines, a number of advisory bodies keep directories of experts who practise in particular fields80 and exercise a degree of control over the training and competence of experts admitted to their respective registers81. The Academy of Experts, for example, has a training and qualifying regime that is accepted as implying an acceptable degree of competence for admission to the Law Society’s register. The Law Society, the Academy of Experts and the Royal Institute of Chartered Surveyors have codes of conduct imposed upon those admitted to their register, which include such matters as: “when giving evidence at court, the role of a witness of fact, or an expert witness, is to assist the court and remain independent of the parties”. 22–056 Similarly, the Code of Conduct of the Academy of Experts requires that: “experts shall not do anything in the course of practising as an expert, in any manner which compromises, or impairs, or is likely to compromise, or impair . . . the expert’s duty to the court”. It is in this “duty to the court” that the role of the expert as an impartial advisor to the court is distinguishable from the role of the claims consultant.

Settlement “A verbal agreement is not worth the paper it is written on.”82

22–057 Ad hoc negotiations between parties who do not know each other well and who are unlikely to meet again, for example in unique competitive construction contracts that do not have a possibility of repeat business, or a continuing relationship, tend to involve party positioning along the lines of the following sequence of events: 1. 2. 3. 4. 5.

each party adopts its opening position on what it wants and is prepared to give in return; the parties explain to each other why they cannot afford to take, or accept, less than they offer; the parties haggle with a view to shifting the other side from its chosen stance; the parties exchange concessions; and the parties then come to an agreement at a point somewhere between those from which they started.

78 CPR, r.35.13 provides that “a party who fails to disclose an expert’s report may not use the report at the final hearing, or call the expert to give evidence orally unless the court gives permission”. 79 Cala Homes South Ltd v Alfred McAlpine Homes East Ltd (1995) CILL 1083; London Underground Ltd v Kenchington Ford (1998) CILL 1452. 80 For example The Law Society, Academy of Experts, and British Institute of Agricultural Consultants. 81 The Association for the Advancement of Cost Engineering International not only keeps a register of accredited forensic planning engineers, but requires a formal examination to be completed before being admitted to the register. This can be considered by the US courts to be of significant importance in the evaluation of such members’ evidence. See, for example, Sunshine Construction & Engineering Inc v United States, 02–250C Fed Ct Cl (filed 4 March 2005). 82 Attributed to Samuel Goldwyn by Alva Johnson (1937) The Great Goldwyn, Ch. 1.

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22–058 This scenario is the forum for a number of strategies deployed in an attempt to move the final settlement position from the middle towards each party’s own end of the opening extremes. For example, either one, or both parties may: 1. 2. 3. 4. 5. 6. 7. 8.

inflate the opening demands; misrepresent their position, or interests; withhold sensitive, or potentially damaging information; use threatening behaviour; adopt an intransigent stance until the other side is ready to move; secure concessions before giving concessions; concede little and slowly; and/or re-open negotiations on “agreed” settlements as a result of “new” information.

22–059 When they are not successful, the failure of negotiations is usually blamed on the techniques adopted by the other side, but that is not always so: a negotiated settlement like any informal settlement can be successful only if both sides want it to be, and sometimes parties in dispute are unable to agree because of factors that are beyond the parties’ control83. 22–060 Negotiation, of course, can be attempted at any time and there is no reason why, having failed once, another attempt, or indeed several attempts to settle should not be made before resorting to more formal methods of dispute resolution. However, apart from ad hoc negotiations, there are a number of more formal methods of dispute resolution that may be attempted before proceeding to trial, or an arbitral hearing84. 22–061 Generally, for reasons of public policy, all correspondence and proceedings that arise in the course of attempting to negotiate a settlement are privileged, whether, or not they are stated to be “without prejudice”85, but, if they are to achieve an effective settlement and an end to the dispute, the terms must be clearly expressed. 22–062 In Hamlin v Edward Evans86, a claim that had not even arisen at the time of settlement was held to be settled by the terms of the agreement. In this case, in 1987, the original claim for dry rot was settled upon payment to C of £750. C signed a “Form of Discharge” stating that he accepted the £750 “in full and final settlement satisfaction and discharge of any and all claims known, or competent to him [sic] at this date arising, or to arise from [the] Report”. However, in 1992, C discovered serious structural defects in the property and commenced proceedings against D for negligence. Whilst the Court of Appeal dismissed C’s claim on limitation grounds, the court went on to state that it would in any event have dismissed the claim on the basis 83 See reasons for dispute above, at para.22–061. 84 Below at para.22–089. 85 “The public policy justification, in truth, essentially rests on the desirability of preventing statements, or offers made in the course of negotiations for settlement being brought before the court of trial as admissions on the question of liability” in Cutts v Head [1984] 1 All ER 597 at pp.605–606, per Oliver LJ. This appears also to protect the terms of a settlement in allied proceedings. See Rush & Tompkins Ltd v Greater London Council and RJ Carey Plant Hire (Oval) Ltd (1987 and 1988) (CA and HL) 43 BLR 1, reversing 40 BLR 53, but not in connection with a settlement with D in an action brought to secure the benefits of a subcontractor under Cl.10 (2) of the “blue form” of subcontract. See Costain Civil Engineering Ltd v Zanen Dredging and Contracting Co Ltd (1996) 85 BLR 77. 86 (1996) CILL 1173.

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that the claim had already been compromised by the agreement. The court stated that the only way of giving proper effect to the phrases “known or competent” and “arising or to arise” was to treat them as indicating an intention to reach an all-embracing compromise. 22–063 On the other hand, in Hoppe v Titman87, it was held that where D had raised negligence as a defence to an action for an architect’s unpaid fees, but who had made no counterclaim, D was still free to pursue the counterclaim two years after the settlement of the action by C’s acceptance of a payment into court made without similar provisions. In Titman, the acceptance, whilst covering known and subsisting claims, did not exclude claims that were unknown and had not yet come into existence at the time of settlement. 22–064 Accordingly, if it is to be enforceable, a settlement must be: 1. 2. 3.

final in relation to both claim and counterclaim; unambiguous; and workable.

Apart from dealing with the definitive issues between the parties, it should also deal with any discontinuance of proceedings, confidentiality88, or the way the terms of settlement are to be communicated to third parties and, of course, it should be signed by both parties.

Illustrations (1)

Facts: Gladman Commercial Properties (GCP) was a property developer, which exchanged contracts to buy a fire station from Nottingham Fire Authority (NFA) and an adjoining piece of land from Nottingham City Council (the Council). GCP refused to complete the purchase, because it claimed to have been fraudulently misled by the vendors as to the planning potential of the property. GPC claimed to have been induced to offer to exchange in reliance upon a statement from the vendors’ surveyors that the sites would be appropriate for keyworker and/or student accommodation. NFA sought specific performance of the sale contract, which proceedings GPC defended. GPC claimed against both vendors for damages for fraudulent misrepresentation. Individuals from the surveyors’ firms were called to give evidence in the proceedings. Halfway through the trial, the Council and NFA agreed to pay £2.7m in full and final settlement of GCP’s claims. After settling with the Council and NFA, GCP commenced an action against the surveyors, Fisher Hargreaves Proctor, Heb Chartered Surveyors, David Hargreaves, Jonathan Paul Thomas Bishop and two others (with whom they settled) for fraudulent misrepresentation. The surveyors applied for the claims to be struck out on the basis that, given that they were joint tortfeasors with NFA and the Council, the settlement of GPC’s claims by NFA and the Council released the causes of action against all of the joint

87 (1996) CILL 1148. 88 Settlements not expressed to be confidential to the parties may normally be disclosed to anyone either party wishes to inform.

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tortfeasors, including them. The judge at first instance agreed with the surveyors and GCP appealed. Held, by Briggs LJ, that the appeal must be dismissed since the second claim against the surveyors consisted of an abusive attempt to pursue a cause of action already released, with no coherent basis pleaded for the ambitious proposition that the appellant was not fully compensated for the alleged loss by the settlement agreement: Gladman Commercial Properties v Fisher Hargreaves Proctor89. Facts: Point West Limited (PWL) was the property developer and Mivan was the building contractor for a property in West London. Certain defects in the curtain walling system in one of the flats bought by the Rothschild Trust (Bermuda Trust), in respect of which a “change order” was issued, required Mivan to renew the curtain walling. The problem persisted over the course of around six years. In addition to that, there were problems with the heating and cooling system. PWL and Mivan reached a final agreement for the final account, in which the latter was requested to assist PWL with the case regarding the Bermuda Trust flat, but no further remedial works were expected. PWL sued the Bermuda Trust for arrears of service charge, payment of retention and other sums regarding the lease. Bermuda Trust successfully counterclaimed regarding the outstanding defects and was awarded damages. PWL sought to recover these damages from Mivan. Mivan claimed that this action was precluded by the settlement agreement. Held, by Ramsey J, that the settlement agreement was intended to bring to an end Mivan’s responsibilities and obligations in respect of any and all outstanding matters, including defects that were patent at the time the agreement was reached, therefore covering outstanding payment matters and outstanding defects in all of Mivan’s works; that the said agreement included a settlement of any liability of Mivan, thus precluding PWL from seeking damages, or specific performance in relation to the property in West London: Point West London Ltd v Mivan Ltd90.

(2)

Duress “It must be a peace without victory . . . Victory would mean peace forced upon the losers, a victor’s terms imposed upon the vanquished. It would be accepted in humiliation, under duress, at an intolerable sacrifice, and would leave a sting, a resentment, a bitter memory upon which the terms of peace would rest, not permanently, but only as upon quicksand.”91

22–065 Until recently the application of the doctrine of duress was confined to duress to the person and this required actual or threatened violence to the victim92. In the nineteenth-century case of Skeate v Beale93, it was held that detention, or threat of detention, of another’s goods was not sufficient to warrant a contract being avoided but, in the latter part of the nineteenth century, that was criticised in a number of cases and it is apparent that it is no longer good law. The equitable doctrine of economic duress is a recognition that threats, or forms of pressure, not associated with threats to the person, nor limited to the seizure, or withholding of goods, may give

89 [2013] EWCA Civ 1466. 90 [2012] EWHC 1223 (TCC). 91 President Woodrow Wilson (1856–1924), the US President’s address to the Senate (22 January 1917). 92 See, for example, Barton v Armstrong [1976] AC 104. 93 Skeate v Beale (1840) 11 Ad & El 983.

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grounds for relief to a party who succumbs to the pressure and enters into a contract as a result of the threats or pressure94. 22–066 One of the earliest cases to deal with economic duress was D&C Builders v Rees95. That was followed in the 1980s by a number of cases that developed the application of the doctrine, for example Atlas Express Ltd v Kafco (Importers & Distributors) Ltd96, concerning a claim by a carrier against a supplier who was, to C’s knowledge, committed to an important customer who would sue D if goods were not delivered on time. The parties had agreed a freight price but, at the last moment, when it would have been impossible for D to obtain other transport, C demanded and obtained D’s signature to a new agreement at an increased freight price. Following the D&C Builders case, the court held that there was no consideration for the second agreement and the agreement could be avoided97. 22–067 In order for there to be a valid settlement agreement, the parties must act freely. If one of the parties is forced to make the contract under threat that is duress, and renders the contract not void ab initio, but voidable at the behest of the injured party. The injured party will, therefore, be entitled to have the contract set aside for operative duress, unless he has expressly or impliedly affirmed it. The victim of duress must seek rescission as soon as possible after the original pressure has ceased to operate. In DSND v Petroleum98, C entered into a contract with D on 3 June 1997 for sub-sea work. In September and October 1998 the parties entered into a memorandum of understanding and a memorandum of agreement respectively. The memorandum was adhered to by C but, notwithstanding that D relied upon the disputed agreement and clearly regarded it as governing the rights and obligations, it declined to pay sums due under the memorandum. C issued proceedings in the High Court, which D defended alleging that the memorandum was only signed under duress. In declining to set aside the agreement, Dyson J (as he then was) said: “Accordingly, if I had held that [D] entered into the memorandum of understanding under duress, I would have declined to set aside the agreement on the ground that they affirmed it. Another way of putting it is to say it would be inequitable to allow [D] to avoid the memorandum of understanding after they had relied upon it in the way that I have mentioned to their own benefit, after (as I have held) it ceased to be subject to the duress.”

22–068 Clearly, illegitimate pressure must be distinguished from the rough and tumble of the pressures of normal commercial bargaining99 and it seems that, in order to show that there was economic duress going to the root of the agreement, the injured party must be able to show: 1. 2. 3. 4.

there is pressure; the practical effect of which is that there is compulsion on, or lack of practical choice for, the victim; which is illegitimate; and which is a significant cause inducing the claimant to enter into the contract100.

94 See Professor Hugh Beale (ed), Chitty On Contracts, 28th edn (London: Sweet & Maxwell, 1994), vol. I, para.7–010. 95 [1966] 2 QB 617. 96 [1989] 3 WLR 389; [1989] 1 All ER 641. 97 Occidental Worldwide Investment Corp v Skibs A/S Avanti (The Siboen and The Sibotre) [1976] 1 Lloyd’s Rep 293; North Ocean Shipping v Hyundai Construction (The Atlantic Baron) [1979] QB 705. 98 DSND Subsea Ltd v Petroleum Geo-Services ASA [2000] BLR 530. 99 DSND Subsea Ltd [2000] BLR 1. 100 DSND Subsea Ltd v Petroleum Geo-Services ASA [2000] BLR 530; Carillion Construction Ltd v Felix (UK) Ltd [2001] BLR 530.

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Illustration Facts: Farm Assist Ltd (C) sought to set aside a mediation agreement with the Secretary of State for Environment and Rural Affairs (D) claiming economic duress. Throughout the interlocutory and case management hearings, a number of issues arose relating to privilege, and directions were given to identify such issues, to be followed by a hearing. Prior to that hearing, an agreement was reached for standard disclosure of certain documents dated between 2001 and 2003, which agreement did not cover those documents for which legal advice privilege could be claimed. D claimed that, by reason of the state of mind of C’s managing director (MD), there was an implied waiver of any legal advice privilege and that, in the absence of such disclosure, the allegations of economic duress ought properly to be struck out. Held, by Ramsey J, that, in English law, legal advice privilege is absolute and is not overridden as a matter of policy: see Three Rivers DC v Bank of England (No 4)101; that the only situation in English law where there is an implied waiver is in proceedings between a solicitor and a client; the rationale for such an implied waiver being that the client cannot, as a matter of fairness, subject its confidential relationship with its solicitor to public scrutiny, without destroying the confidentially of that relationship; that, whilst in certain US and Australian cases, a “fairness”, or other balancing act is to be carried out, this was not the correct test under English law: Paragon Finance Plc (formerly National Home Loans Corp) v Freshfields102 applied; that, in all the circumstances, the simple fact of pleading economic duress and putting the MD’s state of mind in issue, did not constitute a waiver; that, as a consequence, D’s claim to strike out the allegations of duress would be dismissed: Farm Assist Ltd (in liquidation) v Secretary of State for the Environment, Food and Rural Affairs103.

22–069 In the case of Carillion v Felix104, C entered into a subcontract for the design, manufacture and supply of cladding. The subcontractor started work in July 1999 and the subcontract stipulated that cladding deliveries would be completed by January 2000. By February 2000 C complained of delay and the SC told C that future deliveries were dependent on agreement by C of the SC’s final account (notwithstanding the practical completion was some way off). C had to finish the project by June 2000, otherwise it faced substantial liquidated damages. The subcontractor knew of its potential liability to C for liquidated damages and that C depended upon the SC’s rendering the building watertight to enable other trades to carry on. It also knew that it would be impossible for C to find an alternative supplier in time to meet the main contract completion date. The SC set up a meeting with C with a view to getting paid in full before completing its work. In preparation for the meeting, the SC’s directors made an aide-memoire that, under the heading “[C’s] weaknesses”, included the note “they need to finish the work”, and at the bottom was written “no deliveries until we get agreement”. C thought the maximum value of the subcontract was £2.9m, from which it intended to deduct, amongst other things, liquidated damages. On the other hand, the SC wanted £3.3m, but in preparation for the meeting raised its claim to nearly £3.5m. The SC threatened to withhold deliveries until the final account was agreed. This was eventually achieved at £3.2m, following which C made a written complaint to the SC, stating that they felt under duress. The settlement agreement was put into effect and the SC completed its deliveries. C then sought an order rescinding the agreement for duress. 101 102 103 104

[2005] 1 AC 610. [1999] 1 WLR 1183. [2008] EWHC 3079 (TCC). Carillion Construction Ltd v Felix (UK) Ltd [2001] BLR 1.

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22–070 The court held that the threat to withhold deliveries was illegitimate and a threat to commit a clear breach of contract. Neither was there any right to insist on agreement of the final account before completion of the subcontract works, nor to suspend deliveries until the account was agreed. 22–071 C’s evidence was that it had no practical alternative but to enter into the agreement with the subcontractor. It had approached two other contractors to see whether they would supply the remaining cladding units, but one was not interested and the other would not have been able to deliver for several months. 22–072 It was suggested at trial that C could have commenced adjudication if it was unhappy with the pressure being applied and that, in any event, C had affirmed the settlement agreement by applying its terms. The court dismissed both arguments on the basis that C had stopped performing the settlement agreement as soon as it ceased to be subject to the effect of the threat – as soon as the SC had made its final delivery; and that to get an adjudicator’s decision would have taken a minimum of six weeks, a period that C could not afford to wait. The court held that C had made out its case on economic duress and the settlement “agreement” was set aside. 22–073 More recently, in the Australian case of Mitchell v Pacific Dawn105, C had agreed to compromise its claims against D on the basis of a promise of prompt payment of the agreed amount plus a reduction in the retention fund. In subsequent proceedings the Supreme Court of Queensland held the settlement was voidable because of the economic pressure D had put on C by: 1. 2. 3. 4. 5.

delaying in making undisputed progress payments; failing to comply with an earlier compromise agreement; interfering with the subcontractors (including influencing one to supply to C an inflated quotation for repair work); threatening to delay payments further if C did not compromise its claims; and falsely claiming that it did not have the funds to meet all of C’s claims.

22–074 The court accepted that, as C would not be able to pay its creditors unless payment was made, the totality of D’s behaviour was unconscionable and part of a deliberate strategy to avoid its contractual obligations. The settlement was set aside and C permitted to litigate its full entitlement. Whether an injured party who cannot avoid the contract, perhaps because of delay in asserting duress, can go on to sue in tort for intimidation, as Lord Denning seemed to think in D&C Builders v Rees, does not yet appear to have been established106.

Misrepresentation and fraud “Things gained through unjust fraud are never secure.”107

22–075 Bearing in mind the tendency of those trying to negotiate a settlement to try to improve the result, there is always potential for the true position to be distorted.

105 Mitchell v Pacific Dawn Pty Ltd [2003] QSC 086. 106 Professor Hugh Beale (ed), Chitty on Contracts, 28th edn (London: Sweet & Maxwell, 1994) vol. I expresses the view, at para.7–040, that damages should be recoverable, since otherwise a party who has lost the right to avoid the contract by the operation of equity is left without a remedy for what is an unlawful act. 107 Sophocles (497–406/5 BC), Oedipus at Colonus, l. 1026.

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There must then be some consideration of where such a distortion can result in a settlement being set aside. Generally, the courts have found it undesirable to make a rigid definition of the type of misrepresentation that amounts to actual fraud and have preferred to consider individually the factors in each case. The misrepresentation may be a positive lie, a failure to disclose information, or even a statement made in reckless disregard of possible inaccuracy. Actual fraud can never be the result of accident, or negligence, because of the requirement that the act be intended to deceive. 22–076 The question uppermost in the mind of C (or D) when faced with a possible case of misrepresentation will invariably be: can it claim for rescission of the agreement and, if not (as is likely to be the case), can it claim for damages in lieu of rescission?

Illustration Facts: Ampurius Nu Homes Holdings Ltd (C) contracted with Telford Homes Ltd (D) for the construction and grant of long leases of a commercial and residential development (Creekside Village West) in Greenwich and Deptford. C sought to terminate the contract by a letter from its solicitors dated 22 October 2010 on the basis of repudiatory breach by D. Alternatively it argued that it was entitled to rescind the contract for fraudulent, alternatively negligent, misrepresentations by D regarding the funding of the development. The D denied these allegations and, on the ground of C’s non-payment, terminated the contract on 9 November 2010, for repudiatory breach by C, counterclaiming for alleged loss. Held, at first instance that: (1) there was no misrepresentation by D; (2) D was in repudiatory breach of the contract, which C was entitled to accept and, in fact did accept; (3) the claim for damages for breach of the contract was dismissed; (4) D’s counterclaim was dismissed. D appealed. Held, by Lewison, Tomlinson and Longmore LJ, that the mere fact of a communication as between C and a third party (but not acted upon) was too slender to be construed as C’s renouncing the contract; that a repudiatory breach is of no relevance, unless it is relied upon as giving to the innocent party a right to terminate the contract, and that the appropriate question instead is to ask whether such a right existed at the time at which it was sought to be exercised; that by 22 October, the element of uncertainty had been removed, that there was no repudiatory breach available for acceptance and consequently the appeal should be allowed: Ampurius Nu Homes Holdings Ltd v Telford Homes (Creekside) Ltd108.

22–077 In the presentation of claims for the purpose of recovering financial benefits, there is an obvious legal and practical distinction to be made between, on the one hand, a false statement made without believing it to be true or not caring whether it be true or false and, on the other, making an honest mistake in the interpretation of a right to reimbursement. Apart from other forms of redress, the former, if proved, can result in a prison sentence for fraud for attempting to take “pecuniary advantage by deception”109, whilst the latter may result only in civil redress by way of rescission or damages. 22–078 For example, where C in presentation of its final account sought reimbursement for additional excavation and tipping by reference to invoices for delivery of materials, the figures for which were not the same as those on the same documents 108 [2013] EWCA Civ 577. 109 See A Bingham, “From porkies to prison” (a commentary on R v Sutton), Building, 7 February 1997.

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whereby payment had been made, there was a prima facie case to be made of attempted criminal deception. However, where a subcontractor has a general discounted purchasing agreement that is separate from its undisclosed job-related costs, so that the purchase invoices (although not falsified) do not demonstrate its true costs, then whether the presentation of those without such disclosure amounts to deception may well depend upon how they are referred to in the claim. 22–079 Providing a remedy to a party who has suffered loss as a result of misrepresentation on the part of the other party to that agreement was originally a function of the court’s equitable jurisdiction. However, until the combined effect of Hedley Byrne & Co Ltd v Heller & Partners Ltd110 and the Misrepresentation Act 1967, it was not possible to claim damages unless the misrepresentation was demonstrably fraudulent111. Even with the changes that came with these legal landmarks, the impact of the species of misrepresentation claimed still directly affects a misrepresentee’s entitlement. 22–080 In general, the effect of a misrepresentation is to make an agreement not void, but voidable, so that, once apprised of the facts, the offended party can elect to affirm, or rescind the contract, either by making its intentions clear, or pursuing a course of indicative conduct. In other words, a representee can choose either to remain bound by the terms of its contract, or to nullify his contractual obligations112. However, the law demands that for rescission to be made it must be possible to make restitutio in integrum, that is to restore both parties to their pre-contractual position113. That is very often impossible, or inequitable, or both. 22–081 Through the courts and parliamentary legislation a scheme has come into being whereby it is generally possible for a misrepresentee to claim damages in lieu of rescission for misrepresentation. Prior to Hedley Byrne114 a claimant had to establish that: 1. 2. 3.

the representation in question was made fraudulently115; the representee had acted as a result of the misrepresentation; and the action had caused him loss116.

22–082 In Hedley Byrne, a case in tort for negligent misstatement, the House of Lords held that in the context of a “special relationship” a negligent statement of fact (or opinion)117 might found a claim in tort. Subsequent cases have shown that duties can co-exist in tort and contract, perhaps even at a pre-contractual stage118. Section 2(2) of the Misrepresentation Act 1967 gives the courts a general power to award damages in lieu of rescission. It provides that: “Where a person has entered into a contract after a misrepresentation has been made to him otherwise than fraudulently, and he would be entitled by reason of the misrepresentation to rescind the contract, then, if it is claimed in any of the proceedings arising out of the contract, that the contract ought to be or has been rescinded, the court or arbitrator

110 [1964] AC 465. 111 A misrepresentation is fraudulent where the representor knows that what he says is untrue, or he does not care whether it is true, or not. See Derry v Peek (1889) 14 App Cas 337. 112 Any election will be final provided that it is not equivocal. See Clough v London & North Western Rly Co (1871) LR 7 Exch 26. 113 Spence v Crawford [1939] 3 All ER 271. 114 Hedley Byrne & Co v Heller & Partners [1964] AC 465. 115 Derry v Peek (1889) 14 App Cas 337. 116 Briess v Woolley [1954] AC 333. 117 Although in the statutory framework “opinion” is not included. 118 See, in particular, Esso Petroleum Co Ltd v Mardon [1976] QB 801.

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may declare the contract subsisting and award damages in lieu of rescission if of the opinion that it would be equitable to do so, having regard to the nature of the misrepresentation and the loss that would be caused by it if the contract were upheld, as well as to the loss that rescission would cause the other party.”

22–083 There has been some debate as to the principles upon which damages should be calculated. However, in cases of fraudulent misrepresentation at common law founded in the tort of deceit, the general principle of tortious damages applies, ie a claimant should as far as possible be put in the position he would have been in had the representation not been made119. 22–084 Finally, it must be remembered that liability for misrepresentation can be and often is excluded by the terms of a contract. The exclusion must be express and clear not to fall foul of the contra proferentem rule and it must pass the test of reasonableness laid down in statutory requirements such as the Unfair Contract Terms Act. However, such exclusion is limited, since fraudulent misrepresentation can never be excluded by contract.

Dispute resolution 22–085 The construction industry is a fertile breeding ground for disputes; they cannot be avoided entirely and it would be foolish to suggest that they could. No matter how well a project is designed, or constructed, and no matter how efficiently it is managed, it is always open to a party to a contract to seek to establish a right, or liability which the other party is not prepared to recognise or accept. That is the genesis of dispute. Whether a compromise is negotiated, whether it settles as a result of some informal procedure, or it proceeds through to an enforceable decision of an adjudicator, judge, or arbitrator, depends on many factors. However, it is probably fair to say that most disputes finish up in a court, or tribunal for one or more of the following reasons: 1. 2. 3. 4. 5. 6. 7.

the parties do not have the same facts120; the parties do not have the same law; one of the parties wishes to change the law; one of the parties does not wish to perform its part of the bargain; one of the parties wishes to put off the day of payment as long as possible; one of the parties does not have an administrative mechanism for compromise121; or one of the parties wishes to demonstrate its unbending faith in its own infallibility122.

22–086 Informal methods of dispute resolution have varying degrees of success depending on the issues in dispute, the reasons for the dispute and the methods chosen to resolve it; there are no hard and fast rules in this and the choice of method depends

119 See M Spencer and J Picton (eds), McGregor on Damages, 15th edn (London: Sweet and Maxwell, 2003), paras 1718–1722. 120 The facts often seem to get progressively more distorted as the costs escalate. 121 Where provision for the recovery of a claim is made in year-end accounts, they often become “cast in stone” and acceptance of a lower figure than that declared in the accounts tends to be inextricably linked to director resignations. 122 The issues in the dispute become “issues of principle”.

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as much on the willingness of the parties to compromise as anything else. On the other hand, what can be said with reasonable certainty is that if the reason for the continuance of the dispute is one or more of the possibilities numbered either 3 to 7 above, then it is unlikely that the dispute will settle before it has run its full course and any time, or money spent in trying to deal with the matter, using a method other than formal dispute resolution, is likely to produce little reward. However, the high cost of energy-sapping defended litigation can often be avoided by sensible planning of the dispute resolution procedures before contract, as well as by the proactive management of the process of resolution once a dispute has arisen. 22–087 Mediation, conciliation, expert determination, adjudication, arbitration, and, of course, litigation, are all possibilities to be considered. Two of these: mediation and conciliation, are often referred to as “ADR” an acronym that means “alternative dispute resolution”. That in itself does not mean much without recognising to what it is an alternative. Apart from reference to the courts by litigation (which in every common law country is a unilateral act, open to anyone who thinks they have had a right infringed) all the other methods of dispute resolution require an agreement. Naturally, it is easier to agree a method of resolving a dispute before it has arisen rather than after. However, irrespective of whether there is an agreement in place, it is always open to either party, at any time, to suggest an alternative means of dispute resolution that will save both parties time, cost, and frustration. 22–088 The essential difference between dispute resolution through litigation or arbitration and ADR is that in ADR the parties make their own settlement agreement, which is only binding so long as they want it to be, and in litigation and arbitration the decision is made for them by a third party and it is final and binding upon them. There is a grey area in all this and that is in expert determination and adjudication in which the decision can be final and binding, or it can be final and binding unless disputed in another forum, or it could be non-binding depending upon how (and under what law) it is structured. Accordingly, the possibilities will be considered in those classifications: • • •

non-binding binding, or non-binding final and binding.

Non-binding 22–089 In non-binding processes the dispute resolver helps the parties to agree their differences. These are entirely private processes, conducted without prejudice to the rights of either party and either party may shift its ground during the process; indeed, if it is to be successful, it is essential that they do. As a matter of public policy, anything produced in an attempt to achieve a private resolution of a dispute is privileged. If the parties do not succeed in reaching a settlement either party may subsequently institute proceedings for dealing with the same dispute through another forum at a later date but may not introduce in evidence anything that was used in an informal attempt at settlement without agreement. 22–090 In ADR procedures the mediator or conciliator will agree with both parties a procedure; they will read the parties’ respective position statements and any documents provided in support. They will consult with the parties privately, and with both together. Although essentially a non-binding process, it is always open to both parties

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to agree that the final settlement should be binding. The parties usually agree to share the costs of the dispute resolver and to pay their own. This is an excellent method of dealing with disputes, because it encourages the parties to talk to each other, if successful it helps to preserve working relationships and, even if unsuccessful, it helps the parties to focus on the real matters in which they are in dispute. In many contracts ADR is required at some stage and, in England, court-ordered ADR forms a part of the Civil Procedure Rules of the courts.

Mediation 22–091 Mediation does not involve the intervention of a third party to decide a dispute so much as the participation of a neutral third party as go-between to assist the parties in reaching a settlement. “The reason the mediator adds potential value to a negotiation is that the mediator, by having no personal stake in the case, brings neutrality to detailed negotiation discussions and debates, adds a fresh and independent mind to a review of the case, and otherwise by his or her presence changes the underlying dynamic of the negotiating process. Mediators can play the role of someone who facilitates communications (for example by assisting the parties to review their positions or by ‘translating’ proposals and emotional language into more acceptable terminology); or who assists the parties brainstorm possible settlement options and otherwise assists in problem-solving; or who helps positional negotiators make offers and concessions with less threat of loss of face: or who can provide informal evaluation of a case by probing each party’s strengths and weaknesses or challenging their interpretations.”123

22–092 There are a number of forums available and a number of advisory bodies in mediation, some of which provide a training and accreditation service for mediators, advice on the appointment of an appropriate mediator and that will also, sometimes, provide facilities for the conduct of a mediation124. 22–093 Without express permission, the mediator will never disclose what has been said to him by either party to the other. A mediator does not have to have a detailed understanding of the facts or the law of the matters in dispute but it often helps. They will not advise the parties of their rights nor generally will they advise the parties of the strength of their case but they will help each to see the weaknesses of their own and the strengths of their opponent’s position. By undermining the respective parties’ confidence in their own position, the mediator will draw them closer together with a view to executing an agreement to settle their differences. Depending upon the complexity and volume of the issues in dispute a mediation may be completed in two to three days, or take several weeks. 22–094 The procedure is usually conducted in private and without prejudice so that neither party, if they fail to settle, can rely in subsequent proceedings upon anything which has been said, or revealed which could not be obtained out of the process of the subsequent proceedings.

123 Karl J Mackie, “Mediation and ADR”, an occasional paper given at a seminar sponsored by the Centre for Dispute Resolution (1996). 124 Such as the Chartered Institute of Arbitrators, the Academy of Experts, and the Centre for Effective Dispute Resolution.

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22–095 Some contracts have compulsory mediation clauses written into them125 and, under the CPR, mediation is commonly ordered by the court126 although, bearing in mind that consensus is the sine qua non of effective mediation, it is difficult to understand how it can be made obligatory or, indeed, why it should be, as such a provision clearly undermines the essential spirit of effective mediation127. A bringing together of opposing views requires a degree of compromise and parties in dispute will not compromise if they do not wish to, no matter what is written into their contracts. However, having said that, according to CEDR128 there have been some significant successes and mediation can be a most effective dispute resolution tool if the parties want it to be.

Conciliation 22–096 Conciliation is a similar process to mediation but the conciliator takes a more active role in the settlement of the dispute than does the mediator. A conciliator necessarily has to have to a detailed understanding of the facts and law of the matters in dispute. The conciliator will express an opinion on the relative merits of the parties’ respective cases. They will try to persuade them of his views and, in doing so, they will attempt to guide the parties into an agreement compatible with his view of the parties’ rights under the contract. Conciliation can be expected to be a little shorter than mediation simply because the conciliator is able to focus the parties’ attention on the issues and drive the process in a way that is unavailable to a mediator. 22–097 Some standard forms and bespoke contracts contemplate conciliation as a method of resolving disputes. For example, the RIBA’s Architect’s Appointment129 standard form provides at Cl.3.25 for a dispute to be referred to the RIBA for its opinion. 22–098 Although not every Dispute Review Board130 will adopt a conciliatory approach, conciliation is at the root of its operative techniques, and it is a dispute resolution mechanism, which is required by a number of major contracts. This is a forum under which a group of individuals (usually three) is appointed either ad hoc or at the commencement of a project to advise on problems which may arise from time to time and to conciliate during the progress of the works on disputes. The Dispute Review Board Foundation, based in the United States, provides training and accreditation for potential appointees and lists a number of substantial users of this technique131: see Chapter 24 below.

125 The model terms of the Academy of Experts, at Cl.7.2, contains the condition “any dispute arising out of the appointment of the expert shall be referred to mediation in accordance with the Academy of Experts’ Mediation Guidelines”. 126 CPR, r.26.4. 127 In practice, compulsory mediation tends to become, on the one hand, another expensive step in an otherwise expensive process and, on the other hand, serves to put off by six months or more the time at which a claim may settle, or be settled by an arbitrator. 128 Centre for Effective Dispute Resolution. 129 Royal Institute of British Architects (1990). 130 Often referred to by its acronym DRB. 131 Outside the United States and Canada, these include: Channel Tunnel Rail Link, UK, City and County of Copenhagen, Electricity Corp. of New Zealand, Eurotunnel, UK – France, Hong Kong Airport Authority, International Monetary Fund, Lesotho Highlands Development Authority and The World Bank.

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Non-binding or final and binding 22–099 Unlike ADR in which the parties make their own decision the essence of these decision-making processes is that a third party is introduced to make the decision for them. Because the process is consensual, it is always a private process. However, depending upon the rules of engagement agreed between the parties, the information that becomes available may not be privileged and the decision made may not be binding on the parties, leaving them free to revisit the dispute in another forum. The parties are free to agree who should pay the dispute resolver’s costs and how the party’s costs should be dealt with, although it is usual for each side to pay their own costs. Amongst these methods of dispute resolution are: • •

expert determination; and adjudication.

Expert determination 22–100 Expert determination is quite different from any other method of dispute resolution. Determination of a dispute by an expert differs from all other forms of resolution in that the nature of the determination can be anything the parties want it to be132. It can be final and binding, or final until the dispute is referred to another forum (as with adjudication), or merely advisory (as with conciliation). Depending upon the issues, expert determination can involve much research and the process may take anything from a week to several months. 22–101 In this forum, the expert133 is appointed for his knowledge and understanding of the particular issues in dispute in the field in which he is an acknowledged expert. The essence of expert determination is that the expert should act inquisitorially, to ascertain for itself the relevant facts and law, in relation to the issues in dispute, to make its own inquiries, tests and calculations, form its own opinion and decide upon the merits of the parties’ position. Unlike the arbitrator under the Arbitration Act 1996, or the adjudicator acting under the provisions of the Housing Grants, Construction and Regeneration Act (HGCRA), an expert is not protected by statutory provisions against actions in negligence. On the other hand, subject always to statutory provisions to the contrary134, the expert is at liberty to limit its liability by the terms of its appointment. 22–102 The expert will agree with both parties the terms of reference and procedure to be followed and will read the parties’ respective position statements and any documents provided in support. There is usually no provision for the parties to change their position or amend their case during the process. They will consult with the parties privately, and may consult with both together, but they are under no obligation so to do unless it is made a term of their appointment. 22–103 The expert cannot go outside their terms of reference, which must be complied with precisely if the expert’s decision is to be enforced as a binding decision. An expert determination cannot normally be opened up in the courts of England and Wales on the grounds that they made a mistake unless the expert has answered the

132 J Kendall, Expert Determination (FT Law, 1997). 133 Sometimes also referred to as an “umpire”, or “referee”. 134 See, for example, the Unfair Contract Terms Act 1977.

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wrong questions or made obvious mistakes going to the root of their decision135, or otherwise failed to follow their instructions. For instance, where an expert was required to provide a reasoned determination, which was to be final and binding, it was not enforceable when insufficient reasons were given for the decision. In Halifax Life v Equitable136, Cresswell J held that in those circumstances, even though there was no statutory power to do so (as there was in arbitration), the court has the power to direct (the umpire in this case) that further reasons were to be given for their decision. The power of the court in this came either 1. 2.

by way of remedy in relation to the relevant contractual provisions of the umpire’s appointment, or under the inherent jurisdiction of the court.

He added that in his view, if he was wrong about the inherent jurisdiction, “the Court on any view has the power to invite the Umpire to state (further) reasons . . . by way of its case management powers”137. (emphasis added) 22–104 In Owen Pell v Bindi138, HH Judge Kirkham was invited to determine whether, in an appointment that required the expert’s decision to be final and binding, there were terms to be implied, that the expert would conduct himself in accordance with the rules of natural justice. Amongst other things, it was alleged that, in failing to take into consideration a letter delivered by D outside the agreed timescale and hearing from C in the absence of D, the expert gave the appearance of bias. In declining to import the rules of natural justice, Judge Kirkham observed that: “There are benefits to parties who choose this route: for example, it may provide a quick solution; the parties are able to limit their exposure to costs; the parties achieve certainty and finality. The wording of the agreement indicates that the parties indeed intended to be bound by it. I accept [the] submission that to imply the term which [D] seeks would frustrate rather than promote the commercial purpose of the agreement. It cannot be said that it is necessary to imply such a term to give business efficacy to the agreement, a purpose of which was to arrive at a binding (and therefore final) decision.”

Illustration Facts: Bindi (D) employed Pell (C) to perform various works at its property, C left site before the works were completed and a dispute arose over the payment due under the contract. The parties appointed an independent expert to resolve their dispute and agreed to be bound by his decision. The expert made a decision in favour of C, but D refused to make the payment directed. C then commenced proceedings to enforce the decision via summary judgment. D contended that the expert had been biased and had breached the principles of natural justice. Held, by HH Judge Kirkham, that (1) the implied terms contended for by D did not form part of the agreement and would not pass the officious bystander test; (2) even if the terms were to be enforceable, there was no evidence to support the allegation that the

135 295. 136 137 138

Veba Oil Supply & Trading GmbH v Petrotrade [2001] EWCA Civ 1832, [2002] 1 Lloyd’s Rep Halifax Life Ltd v The Equitable Life Assurance Society [2007] EWHC 503 (Comm). Ibid., at [96]. Owen Pell Ltd v Bindi (London) Ltd [2008] EWHC 1420 (TCC), at [29].

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expert had been biased. The test for apparent bias was whether a fair-minded and informed observer would conclude that there was a real possibility of bias; (3) the expert’s conclusion that the parties had effectively agreed a “walkaway” situation, whereby C would be entitled to payment, less the cost of any defective works carried out on site, was a conclusion that was within the agreement; (4) even if the expert made gross and obvious errors, or reached perverse conclusions, his decision would remain binding so long as the decision was within the scope of the dispute referred to him; (5) since D had no real prospect of defending the claim to enforce the determination of the expert, summary judgment should be given in favour of C: Owen Pell Ltd v Bindi (London) Ltd139.

22–105 In Banabelle Electrical140, McDougall J rehearsed 15 principles141 that the New South Wales court would adopt in considering whether to adopt, vary, or reject in whole, or in part the report of a referee. The principles are142: “1. 2. 3.

4. 5.

6.

7.

An application [to vary, or reject in whole, or in part the report of a referee] is not an appeal by way of hearing de novo, or by way of rehearing. The discretion to adopt, vary, or reject the report is to be exercised in a manner consistent with both the object and purpose of the rules and the wider setting in which they take their place. . . . The purpose of [the Rule of Court allowing for the review] is to provide, where the interests of justice so require, a form of partial resolution of disputes alternative to orthodox litigation, that purpose would be frustrated if the reference were to be treated as some form of warm up for the real contest. In so far as the subject-matter of dissatisfaction with a report is a question of law, or the application of legal standards to established facts, a proper exercise of discretion requires the judge to consider and determine that matter afresh. Where a report shows a thorough, analytical and scientific approach to the assessment of the subject-matter of the reference, the Court would have a disposition towards acceptance of the report, for to do otherwise would be to negate both the purpose and the facility of referring complex technical issues to independent experts for enquiry and report. If the referee’s report reveals some error of principle, absence, or excessive jurisdiction, patent misapprehension of the evidence, or perversity, or manifest unreasonableness in fact finding, that would ordinarily be a reason for rejection. In this context, patent misapprehension of the evidence refers to a lack of understanding of the evidence as distinct from the according to particular aspects of it [a] different weight; and perversity, or manifest unreasonableness mean a conclusion that no reasonable tribunal of fact could have reached. The test denoted by these phrases is more stringent than ‘unsafe and unsatisfactory’. Generally the referee’s findings of fact should not be re-agitated in the Court. The Court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach the conclusions he or she did, particularly where the disputed questions are in a technical area in which the referee enjoys an appropriate expertise. Thus, the Court will not ordinarily interfere with findings of

139 (2009) 25 Const LJ 168. 140 Banabelle Electrical v State of New South Wales [2005] NSWSC 714. 141 By reference to Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549; Chloride Batteries Australia Ltd v Glendale Chemical Products Pty Ltd (1988) 17 NSWLR 60; White Constructions (NT) Pty Ltd v Commonwealth of Australia (1990) 7 BCL 193; Foxman Holdings Pty Ltd v NMBE Pty Ltd (1995) 38 NSWLR 615; Xuereb v Viola (1989) 18 NSWLR 453; and Hughes Bros Pty Ltd v Minister for Public Works, 17 August 1994, (unreported BC 9402885). 142 Banabelle Electrical v State of New South Wales [2005] NSWSC 714, per McDougall J at [9].

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8. 9. 10.

11.

12. 13.

14.

15.

fact by a referee where the referee has based his, or her findings upon a choice between conflicting evidence. The purpose of [the Rules of Court] would be frustrated if the Court were required to reconsider disputed questions of fact in circumstances where it conceded that there was material on which the conclusion could be based. The Court is entitled to consider the futility and cost of re-litigating an issue determined by the referee where the parties have had ample opportunity to place before the referee such evidence and submissions as they desire. Even if it were shown that the Court might have reached a different conclusion in some respect from that of the referee, it would not be (in the absence of any of the matters referred to in [6] above) a proper exercise of the discretion conferred by [the Rules of Court] to allow matters agitated before the referee to be re-explored so as to lead to qualification, or rejection of the report. Referees should give reasons for their opinion so as to enable the parties, the Court and the disinterested observer to know that the conclusion is not arbitrary, or influenced by improper considerations;, but that it is the result of a process of logic and the application of a considered mind to the factual circumstances proved. The reasoning process must be sufficiently disclosed so that the Court can be satisfied that the conclusions are based upon such an intellectual exercise. The right to be heard does not involve the right to be heard twice. A question as to whether there was evidence on which the referee, without manifest unreasonableness, could have come to the decision to which he or she did come is not raised ‘by a mere suggestion of factual error such that, if it were made by a trial judge, an appeal judge would correct it’. The real question is far more limited: ‘to the situation where it is seriously and reasonably contended that the referee has reached a decision which no reasonable tribunal of fact could have reached; that is, a decision that any reasonable referee would have known was against the evidence and weight of evidence’. Where, although the referee’s reasons on their face appear adequate, the party challenging the report contends that they are not adequate because there was very significant evidence against the referee’s findings with which the referee did not at all deal, examination of the evidence may be undertaken to show that the reasons were in fact inadequate because they omitted any reference to significant evidence. Where the Court decides that the reasons are flawed, either on their face, or because they have been shown not to deal with important matters, the Court has a choice. It may decline to adopt the report, or it may itself look at the detail of the evidence to decide whether, or not the expense of further proceedings before the referee (which would be the consequence of non-adoption) is justified.”

Illustrations (1)

Facts: Hardesty (the appellant) was engaged by Abigroup (the respondent) to carry out certain design services concerning twin bridges at Port Adelaide, Australia. Under the contract, disputes could be referred to expert determination. Without agreement, the appellant referred claims to expert determination, the expert ruled that he had jurisdiction and he awarded AU$499,839.88 to the appellant (awards for under AU$500,000 becoming final and binding, if not challenged within 14 days). The appellant then issued a further notice of dispute. The respondent challenged the validity of the second expert’s appointment. Held, by the Supreme Court of South Australia, that (1) The omission from one of the dispute resolution clauses of an originating step identifying the nature and extent of the dispute rendered such clause void for uncertainty (at [46] and [70]); (2) Strict compliance with the dispute resolution clause was necessary, the

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(2)

(3)

procedure adopted for the appointment of the second expert did not comply and, accordingly, the expert determination was not binding (at [52] and [81]); (3) The interim payment was made under a separate agreement and was enforceable according to its own terms, which did not warrant repayment, pending trial of the substantive issues (at [56]): Hardesty and Hanover International LLC v Abigroup Contractors Pty Ltd143. Facts: Lipman Pty Limited (C) contracted with Emergency Services Superannuation (D) whereby disputes would be referred to expert determination. In December 2005, two experts issued a written determination concerning certain disputes. In January 2006, C served a “Notice of appeal of determination of expert pursuant to clause 42.10”. The parties met over five months in order to resolve the dispute (as provided by Cl.42.11), but the negotiations were unsuccessful. In December 2011, C issued court proceedings against D for AU$1,021,782.93. D applied for the dismissal, or stay, of the proceedings, based upon the fact that both parties were bound by the expert determination, as a consequence of which the proceedings could not be maintained. Held, by Hammerschlag J in the Supreme Court of New South Wales, that: (1) The expert determination was final and binding and the proceedings should be dismissed as disclosing no cause of action (at [34]); (2) The plain and unambiguous words of Cl.42.10(c) required the expert determination to be given effect to unless and until it was reversed, overturned, or otherwise changed (at [28]); (3) A construction of the contract that the parties intended that the same disputes should be resolved before different tribunals was unlikely and, if correct, would result in consequences that were unreasonable, inconvenient and costly (at [31]); (4) A construction of the contract that would permit a party by non-agreement (albeit subject to an obligation of good faith) unilaterally to render a determination by the chosen expert tribunal ineffective is not likely to have been the intention of the parties (at [32]); (5) The protection given by Cl.42.11 to an aggrieved party to an expert determination is to require the other party to engage in genuine and good faith negotiations in relation to the expert determination, or to endeavour to agree (perhaps in good faith, although this was not expressly imposed in Cl.42.11 (b)) upon a further procedure that might result in a different outcome, but no more (at [33]): Lipman Pty Ltd v Emergency Services Superannuation Board144. Facts: Firedam (the contractor) was engaged by Shoalhaven City Council (the employer) to design and construct a waste water system. The expert determination clause contained in the contract provided for a final and binding determination if the aggregate liability of one party to the other did not exceed AU$500,000. The parties referred to expert determination the disputes that arose concerning additional works, extensions of time (EoTs) and delay damages. The expert determined, that, despite the fact that the contractor’s claims for EoTs and delay costs were not made out, or were time barred, the employer had contributed to the delay. An EoT was awarded to the contractor and damages of AU$497,142.55 for delay to completion. The contractor successfully appealed to the Court of Appeal for inconsistency of the grounds of the determination. The employer later appealed to the High Court. Held, by the High Court of Australia that, (1) An expert’s determination that a delay claim was not made out, or is time barred, is not necessarily inconsistent with a separate determination that the employer’s delay damages for the same delay ought to be discounted to reflect the employer’s contribution to the delay (at [31], [32]

143 [2010] SASC 44. 144 [2010] NSWSC 710.

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and [58]); (2) A mistake in the reasons does not necessarily deprive the expert determination of the character, or reasons, prescribed by the contract, nor deprive it of its binding force (at [26]); (3) A deficiency of error in reasons might, however, disclose that the expert has not made a determination in accordance with the contract, or, if reasons are a precondition to the binding operation of the determination, that the purported reasons are not reasons within the meaning of the contract (at [27]): Shoalhaven City Council v Firedam City Engineering Pty Ltd145.

Adjudication 22–106 Under the HGCRA146, compulsory adjudication is now common in most construction disputes147. Several Commonwealth countries have also given statutory authority to adjudication148. Under the law of those countries that adopt this process as a statutory procedure, it is generally the rule that either party to a specified type of construction contract has the right at any time to submit any dispute or difference to the adjudication of a third party. However, even where the statutory right is limited to particular types of contract there is nothing to inhibit the parties from agreeing by contract to follow the same process in regard to contracts that are outside the Act and that is common. A number of the standard forms of contract have a provision for optional adjudication written into the body of the contract, in which adjudication takes the form either of the appointment of either a single adjudicator, or a board of adjudicators149, appointed either ad hoc, or as a standing tribunal.

Illustrations (1)

Facts: Bovis Lend Lease Ltd (C) engaged Cofely Engineering Services (D) as subcontractor to carry out mechanical and public health works at the new Civil Justice Centre in Manchester for the sum of £9,652,946.70. Four adjudications were referred by D, in which the same adjudicator was nominated by the RICS. Following the commencement of the fifth adjudication by D, C purported to commence a separate, sixth adjudication. Although the latter concerned the same issue as that raised in the fifth adjudication, C sought to refer it to a Mr Smith (who appears to have been

145 [2011] HCA 38. 146 Section 108. 147 HGCRA, s 104 defines the parameters of construction contracts affected by it and s 106 states that the provisions do not apply to residential occupiers, or any other construction contract specifically excluded by statutory instrument made under the Act. 148 Following the lead given by the United Kingdom it is apparent that, to varying extents, the trend towards adjudication has been followed in other jurisdictions including Singapore, New Zealand, New South Wales, Victoria and Queensland. See, for example, the Building and Construction Industry Security of Payment Act 2004 (Singapore), Construction Contracts Act 1992 (NZ), the Building and Construction Industry (Security of Payment) Act 1999 (NSW), the Building and Construction Industry (Security of Payment) Act 2002 (Victoria), and the Construction Industry Payments Act 2004 (Queensland) and the Construction Contracts Act 2004 (Western Australia). It is understood, moreover, that equivalent proposals are being considered in Hong Kong, certain Canadian jurisdictions, and China. See also S Magintharan, “Setting aside payment claims and jurisdictional issues: the Sungdo principles” (2011) 27 Const LJ 506, I Aitchison, “Recent developments towards mandatory adjudication in Germany” (2014) 30 Const LJ 30, and V Hattingh, “Adjudication practice in South Africa: fully realising the potential” (2014) 30 Const LJ 205. 149 Referred to as a Dispute Adjudication Board with the acronym DAB.

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(2)

unavailable, or unwilling, to act as adjudicator and nominated instead one of his partners). The court was asked to determine, as a matter of construction of the subcontract, which adjudicator had the necessary jurisdiction to deal with the new dispute. Held, by Coulson J, that the parties had agreed that the RICS would be the nominating body and therefore C was not entitled to the declaration that it sought by way of CPR Part 8 that Mr Smith was the agreed adjudicator: Bovis Lend Lease Ltd v Cofely Engineering Services150. Facts: Glendalough Associated SA (C) engaged Harris Calnan Construction Co Ltd (D) to carry out works, pending agreement. In the end, no formal contract was ever signed and D completed the works under the terms of the original letter of intent. The works took longer than anticipated and C claimed to be entitled to £250,000 in liquidated damages for delay, issuing a withholding notice. D disputed this and referred the matter to adjudication. C objected to the jurisdiction of the adjudicator, reserving its right to challenge the enforcement of any decision on the grounds of lack of jurisdiction. C sought a declaration from the court that (a) the adjudicator had no jurisdiction, (b) further, or in the alternative, an injunction restraining D from continuing with the adjudication, and (c) further, or in the further alternative, a declaration that any decision reached by the adjudicator was a nullity and unenforceable. Held, by Edwards-Stuart J, that: (1) C’s applications must be dismissed, (2) in light of s 107(5) of the HGCRA 1996, the parties were to be taken as having agreed that there was an agreement in writing and it was therefore not open to either party to contend, or to the adjudicator to decide, to the contrary, (3) no part of this judgment should be communicated to the adjudicator before he gave his decision, except for the declaration set out in (2) above: Glendalough Associated SA v Harris Calnan Construction Co Ltd151.

22–107 An adjudicator is often appointed for their knowledge and experience of the type of matters in dispute although it is not essential. The adjudicator will agree with both parties a procedure; it will read the parties’ respective referrals and any documents provided in support and may also require a hearing and/or conference calls with the parties. There is usually provision for exchange of claims and counterclaims, and defences (but generally not replies), but the procedure is entirely in the hands of the adjudicator. Contractually, it is usually the case that the adjudicator may only inquire into the facts and the law of the case that is put to its decision and whilst the adjudicator may seek amplification of ambiguities in the evidence provided it may not ask for further evidence, although statutory adjudication provides for the adjudicator to find both the facts and the law152. However, the adjudicator may not go outside the parameters of the parties’ submissions to make good any deficiencies, and it has no power to order discovery, or to take evidence on oath unless the parties give it by

150 [2013] EWHC 3142 (TCC). 151 [2009] EWHC 3142 (TCC). 152 Section 108(1)(f) provides for the adjudicator to take the initiative in ascertaining the facts and the law.

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agreement. An adjudicator’s decision is made without reasons unless either party requests reasons for the decision153. 22–108 Once the adjudicator has issued the decision, it is then generally binding upon the parties unless, or until the matter is referred to an arbitrator, or proceedings are issued in court154, in which case the decision is binding until a decision is handed down. In the event that the adjudicator’s decision is not accepted by either party it is set aside and the issues heard afresh; the rule of res judicata does not apply to adjudication and there is thus no procedure for appeal of an adjudicator’s decision that would result in the facts, or law, or reasoning underlying his determination being exposed and questioned155. 22–109 When the legislation was first enacted in England, it was thought that adjudicators might act pretty much like a CA under a construction contract and that few parties would take the adjudicator’s decision as final and binding and that, in the event that either party did not accept the adjudicator’s decision, the dispute would then be referred to arbitration or the courts in the usual way. Accordingly, it was not initially thought necessary for the adjudicator to act within the rules of natural justice. 22–110 Several hundred enforcement cases later, it is now clear that parties who have been unhappy with the outcome have sought to overturn the decision on the basis of the adjudicator’s misconduct rather than have the case rerun in arbitration or litigation. As a result the courts have imposed upon adjudicators the obligation to act within the rules of natural justice. They must hear both sides. The parties must have an equal opportunity to make their own case and to respond to the case against them, although they may not alter or amend their submissions. This is a tall order in the limited time available to make the decision. Unless the referring party agrees to extend the period for the decision by up to 14 days, or both parties agree to extend the period for the decision beyond that, the dispute resolution process must be conducted and the decision given within 28 days of referral. 22–111 However, in practice, it has transpired that multi-million pound delay-related disputes156 and even disputes involving professional negligence157 have been referred to adjudication; with the parties’ agreement the period for decision has often been extended to many months; the parties have, in the main not taken their cases on to arbitration and litigation, but have tended to seek to have unsatisfactory decisions set aside by the courts on the basis that the adjudicator has exceeded his jurisdiction158, or has behaved unfairly159, but the courts have not entertained applications on the basis that the

153 Paragraph 22 of the Statutory Scheme under the HGCRA provides that the “if requested by one of the parties to the dispute, the adjudicator shall provide reasons for his decision”. No timing for such a request is stipulated by the Scheme, but in an attempt to avoid last-minute requests, it is common practice for adjudicators and institutional rules to stipulate a time frame within which such a request legitimately may be made. 154 Section 108(3). 155 Macob Civil Engineering Ltd v Morrison Construction Ltd [1999] BLR 93. 156 Balfour Beatty Construction Ltd v The Mayor and Burgesses of the London Borough of Lambeth [2002] EWHC 597 (TCC). 157 Diamond v PJW Enterprises [2002] Scot CS 340. 158 Bouygues v Dahl-Jensen [2000] BLR 522 and C&B Scene Concept Design v Isobars [2002] BLR 93. 159 Discain Project Services Ltd v Opecprime Development Ltd (No 2) [2001] BLR 285.

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adjudicator simply was wrong on the facts160, or because of “an overly sensitive concern for procedural niceties”161, or, as Dyson J (as he then was) put it in Macob: “If [the adjudicator’s] decision on the issue referred to him is wrong, whether because he erred on the facts or the law, or because in reaching his decision he made a procedural error which invalidates the decision, it is still a decision on the issue. Different considerations may well apply if he purports to decide a dispute which was not referred to him at all.”

22–112 In Northern Developments162, HH Judge Bowsher QC cited with approval the following formulation of principles stated by HH Judge Thornton QC in Sherwood v Casson163: “1. 2. 3.

4.

5.

a decision of an adjudicator whose validity is challenged as to its factual or legal conclusions or as to procedural error remains a decision that is both enforceable and should be enforced; a decision that is erroneous, even if the error is disclosed by the reasons, will still not ordinarily be capable of being challenged and should, ordinarily, be enforced; a decision may be challenged on the ground that the adjudicator was not empowered by the Act to make the decision, because there was no underlying construction contract between the parties or because he had gone outside his terms of reference; the adjudication is intended to be a speedy process in which mistakes will inevitably occur. Thus, the Court should guard against characterising a mistaken answer to an issue, which is within an adjudicator’s jurisdiction, as being an excess of jurisdiction; an issue as to whether a construction contract ever came into existence, which is one challenging the jurisdiction of the adjudicator, so long as it is reasonably and clearly raised, must be determined by the Court on the balance of probabilities with, if necessary, oral and documentary evidence.”

In effect, what the industry has finished up with is a form of arbitration without a binding award. In light of the continual development of the substantial jurisprudence164 regarding adjudication, this topic is now dealt with in a dedicated new chapter (Chapter 23)165, which follows this.

Illustrations (1)

Facts: Carillion Construction Ltd (C) engaged Stephen Smith (D) as subcontractor to undertake underground water and gas pipeline systems at Broadgreen Hospital in Liverpool. Works were not finished by the completion date and C referred to the first adjudicator, who decided not to allow C’s claim for overheads and profit due to prolongation, that C should pay the subcontractor a net sum of £110,726.57 plus VAT and that C should pay his fees. C honoured this decision. D referred to a second adjudicator, seeking further payment, particularly in relation to the delays

160 Macob Civil Engineering Ltd v Morrison Construction Ltd [1999] BLR 93, per Dyson J at para.19. 161 Balfour Beatty Construction Ltd v The Mayor and Burgesses of the London Borough of Lambeth [2000] EWHC 597 (TCC) per HH Judge LLoyd QC. 162 Northern Developments (Cumbria) Ltd v J & J Nichol [2000] EWHC 176 (TCC). 163 Sherwood & Casson Ltd v Mackenzie (unreported) 30 November 1999. 164 See, in this respect, Peter Sheridan’s extremely helpful Case Law Index [2014] 30 Const LJ 399 and K Beckett, “Mind the gap(s): in NEC3, statutory adjudication and judicial precedent” 31 Const LJ 254. 165 Please refer to Ch.23 below.

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(2)

(3)

(4)

to the subcontract works, which was dismissed. The matter was referred to a third adjudication by D, and C argued that the questions raised here were the same as in the second adjudication. C then asked the court to decide whether or not the third adjudication was, in substance, the same as the dispute referred in the first adjudication and resolved by the adjudicator in the second adjudication between the parties. Held, by Akenhead J that the third adjudicator did not have jurisdiction to resolve the dispute referred to him and that C is entitled to an appropriate declaration: Carillion Construction Ltd v Smith166. Facts: Mr and Mrs Smith (Ds) employed SG Hart (C) to convert three agricultural barns into four dwelling houses. C issued interim certificates 21 and 24, subject to payment not later than 24 November 2008 and 7 April 2009 respectively. On 25 April 2009, the Ds issued a notice of withholding. C contented that it was issued too late and did not relate to either interim certificates, referring the matter to adjudication. The decision ordered the Ds to pay C under both interim certificates. The Ds in turn referred to adjudication on the grounds that C had failed to complete the works by the due dates. The adjudicator decided that the Ds were entitled to be repaid £7,381.20 by C, as well as £4,112.04 under the notice of withholding, and that the Ds were entitled to a certificate of non-completion. The Ds admitted that, subject to the right of set off, they were liable to pay the sums awarded against them in the first adjudication. C also admitted that he was liable to repay to the Ds the specific sums awarded in the second adjudication. The court was asked to decide whether C was liable to pay liquidated damages to the Ds for £71,314.29 in relation to the adjudicator’s declaration that the Ds were entitled to certificates of non-completion and to set off that sum against the award to C in the first adjudication. Held, by Coulson J, that: (1) it could not be derived from the adjudicator’s decision that the adjudicator decided as part of that decision that C was to repay the sum of £71,314.29 or any sum; (2) enforcement of the adjudicator’s award fell outside the court’s jurisdiction: Hart v Smith167. Facts: Jerram Falkus Construction Ltd (C) was engaged by Fenice Investments Inc (D) to carry out works at a site in London under the JCT Design and Build Form 2005 edition. There was an 86-day period of delay, for which D received liquidated and ascertained damages (LADs), whereas C argued that it was D which had prevented completion and was therefore not entitled to recover loss and expense. A series of adjudications took place, D asserted that the above issues had already been decided by an adjudicator and, not having been challenged by C, the decision was now conclusive. The following issues were brought before the court for a decision, namely the conclusiveness of the adjudicator’s decision and whether D actually prevented C from completing the works, if there were an agreement to vary LADs and if C was entitled to £311,393.78 by way of its final account, or some other sum. Held, by Coulson J, that D was entitled to LADs in the sum to £122,102.36 net (as had been conclusively decided in an adjudication after provision of the final account) and that, for the disputed £43,000, the parties should urgently settle their differences: Jerram Falkus Construction Ltd v Fenice Investments Inc168. Facts: Parkwood Leisure Ltd (Parkwood) provided facilities management services for a number of projects, including the Cardiff International Pool (CIP). Cardiff City Council (the Council) owned this CIP, and let it to Orion Land and Leisure (Cardiff ) Ltd (Orion). Orion sub-let the facility to Parkwood. Parkwood operated the facility

166 [2011] EWHC 2910 (TCC), 141 Con LR 117. 167 [2009] EWHC 2223 (TCC), HT-09–298. 168 [2011] EWHC 1935 (TCC).

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for Orion and the Council. Orion engaged Laing O’Rourke Wales and West Ltd (LORWW) under a standard JCT design and build contract to complete the design for the facility and to carry out and complete its construction. On 6 December 2007, and before the works were completed, a deed was executed between Parkwood and LORWW, under which the latter gave certain warranties, acknowledgements and undertakings to Parkwood (the collateral warranty). Problems arose over the following 30 months, with Parkwood making numerous complaints regarding alleged construction and commissioning defects, particularly in regard to certain air handling units (AHUs). Parkwood, its holding company, Orion and LORWW entered into a settlement agreement. About a year later, Parkwood sought to enforce its rights under the collateral warranty with claims of defective design and/or installation of the AHUs during the construction of CIP. They claimed that these issues were entirely new and separate issues from those the subject-matter of the settlement agreement. Parkwood sought a declaration as to whether it was entitled to institute adjudication. Held, by Akenhead J, that, where one contracting party to agrees to carry out and complete construction operations, it is an agreement “for the carrying out of construction operations”; that it needs to be determined in the light of the contract wording and of the relevant factual background to each such warranty to see whether, properly construed, it is a construction contract for the carrying out of construction operations, a very strong pointer to that end being whether or not the relevant contractor is undertaking to the beneficiary of the collateral warranty to carry out such operations; and that the collateral warranty in this case was indeed a construction contract for the purposes of Part II of the HGCRA: Parkwood Leisure Ltd v Laing O’Rourke Wales and West Ltd169.

Final and binding “A formal inquiry designed to prove and put upon record the blameless characters of judges, advocates and jurors.”170

22–113 In the sense that in the following tribunals, the facts once found cannot be re-opened by any court, the matters are res judicata. Appeal on a point of law is always available from a domestic arbitral tribunal to the court and from a lower court to a higher court. However, statute has tended to limit the right of appeal from an arbitrator’s award in other than a point of law of public importance, in order to give the parties a greater sense of finality.

Arbitration 22–114 An arbitration agreement is written into many standard forms of building and civil engineering contract. It is a private process and nobody is permitted to know of the matters in dispute or the decision unless the parties agree otherwise. Whether that is a sensible restriction is open to debate. Many of the ills of the industry are there simply because the majority of disputes are handled privately and, if published, would not only improve performance in the industry but would help the parties to modify their behaviour

169 [2013] EWHC 2665 (TCC). 170 A Bierce, “A trial”, The Devil’s Dictionary (1881–1906).

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in the light of decisions made. A simple change in the arbitration agreement to reverse the current position, by stating that the arbitrator’s reasoned award would be a public document unless the parties and the arbitrator agreed otherwise, would achieve this purpose. 22–115 The arbitrator’s decision is final and binding and can be enforced in many countries of the world by virtue of the New York Convention 1958. Arbitrators, like judges, must be independent and impartial. They must scrupulously follow the law of the contract and the rules of natural justice to provide a speedy and efficient decision on all the issues submitted to their jurisdiction. The arbitrator may not go outside that limitation to decide things that were not part of the reference.

Illustration Facts: Hardypond’s (H’s) employment was terminated by the University of Maine (the UoM) on a project. However, H commenced arbitration proceedings, claiming improper termination. H was the lowest bidder on three subsequent projects for the UoM, but the latter awarded the contracts to other contractors. The Maine court refused to evaluate whether H’s termination was improper, because that evaluation required to be arbitrated. The UoM’s disputed termination was sufficient to render H not responsible. Held, that a contractor may not be considered a responsible bidder if it has been terminated even during the arbitration of the contractor’s claims for wrongful termination: Hardypond Construction v University of Maine System171.

22–116 Subject to the arbitration agreement, the parties may adopt specific procedural rules that dictate the powers of the arbitrator or the procedure to be followed. Otherwise, the powers of the arbitrator are set out by statutory instrument under the Arbitration Act 1996172. In domestic disputes it is normal for the reference to be to a single arbitrator but in international disputes it is more common for each party to appoint their own arbitrator and for the arbitrators to appoint a chairman or umpire, forming a three-person tribunal. 22–117 The proceedings in arbitration can be just as formal as litigation in the High Court, or very informal173, depending upon the matters in dispute, whether the parties are able to agree how they are to be dealt with, and how the arbitrator or tribunal orders proceedings to be conducted. The overriding considerations in all cases are those set down in s 33 of the Arbitration Act 1996, which states: “(1) The tribunal shall – (a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and (b) adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined. (2) The tribunal shall comply with that general duty in conducting the arbitral proceedings, in its decisions on matters of procedure and evidence and in the exercise of all other powers conferred on it.”

171 2013 Ne Super, LEXIS 48 (May 6, 2013). 172 Other countries have similar enactments which confer the powers and duties on the arbitrator and parties in the respective jurisdiction. 173 See JCT Arbitration Rules, 1988, Rule 7 procedure.

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22–118 A party may usually amend its case during the proceedings, subject to paying the costs of the other side thrown away. Generally, the arbitrator has the powers of a High Court judge in regard to the taking of evidence on oath, subpoenas for evidence, discovery and so on. They can order a party to pay the costs of interlocutory matters and can determine who should pay their fees and whether the losing party should pay the winning party’s costs, in whole or in part, with, or without interest and on what basis. The arbitrator must give reasons for his decision if either party requests it.

Illustration Facts: Mr and Mrs Tomlinson (the Tomlinsons) agreed to sell their house (Inner Promenade) to Newfield Construction Ltd (Newfield) for £820,000 together with a possible share in a part of the profits of a wider development scheme to be carried out by Newfield at Inner Promenade, Fairhaven, Lytham St Annes. The parties fell out before completion and the Tomlinsons commenced arbitration proceedings, seeking a declaration as to the true construction of the relevant terms of the contract. The arbitrator produced his first partial award, in which he declared the true meaning and effect of the relevant clauses of the contract, and, without giving reasons, he decided that the Tomlinsons had substantially succeeded in the arbitration, awarding them their costs. Newfield applied to set aside the award on the grounds of serious irregularity, as well as seeking an order awarding them the costs of the arbitration. Held, by Coulson J, that arbitrators should not take into account matters that the law, or the powers given to them by the parties, or the general law, preclude them from acting upon and, conversely, must not fail to take account of and give effect to matters which the law requires them to take account; that, since the tribunal must observe and give effect to the law, the overall discretionary exercise must not be perverse, nor one that a reasonable arbitration tribunal properly directing itself could not have reached, and that the arbitrator’s award on costs in this case required to be challenged because of a variety of errors that were matters of law: Newfield Construction Ltd v John Lawton Tomlinson174.

Litigation 22–119 Litigation is the dispute resolution process run by the civil courts of the state. It is open to every individual who has a grievance to resolve. Judges tend not to be technical people although in some courts they are specifically selected for their technical ability (eg the English Technology and Construction Court). On the other hand, judges often have the power to appoint technical assessors175 or joint experts176 to assist them and will almost always do so if the parties request it.

Illustration Facts: HM Treasury (D) called for tender for the establishment of framework agreements for the delivery of software application solutions for use by UK public sector bodies. European

174 [2004] EWHC 3051 (TCC). 175 CPR, r.35.15. 176 See Practice Direction para.7 to CPR, r.35.

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Dynamics SA (C), a Greek company, specialising in IT solutions, submitted its tender, which was unsuccessful. Both parties exchanged letters, regarding C’s complaints about the unfairness of the competition, and asking for further details on the marking process. Before D signed a contract with the successful tenderers, C secured a without notice injunction against it. The parties exchanged arguments and, upon conclusion, were informed that the injunction would be discharged, on the basis that damages would be an adequate remedy. Held, by Akenhead J, that the balance of convenience favoured the discharge of the without notice injunction, based upon the following grounds: (a) that there would be substantial prejudice to (D); (b) that due to the court’s busy schedule, there would be a substantial delay in resolving the parties’ dispute, which in turn could cause irreparable damage to D’s reputation; (c) that there was no reliable evidence of reputational damage to C if it did not obtain an injunction; (d) that there was no evidence that C would lose market share; (e) that if C succeeded on liability, damages would adequately compensate it; (f) that if an injunction were granted, there was a risk that the whole tender process would have to be re-run, which, in turn, would cause to exclude C and others from the process on the basis of unfair advantage, due to their knowledge acquired: European Dynamics SA v HM Treasury177.

22–120 Notwithstanding that the court and the judge are provided by the state, litigation is often a very expensive process. This is often simply because of the complicated rules of procedure, which a reluctant but wily litigant can often exploit to put off the hearing of the case for years, including amending its case from time to time. There are also restrictions on who can appear in the courts on behalf of a litigant. During a hearing of a large case, the costs can run to many thousands of pounds per day, and it may take many months, or even years, before a complex dispute reaches that stage.

Illustrations (1)

Facts: Aspen (C) sought declarations that it was not liable to indemnify Adana (D) for any liability to which the D might be subject arising out of the collapse of a tower crane at a construction site, which collapse caused serious injuries to the crane driver and substantial damage to property. D constructed the concrete base upon which the tower crane was erected. The declarations sought by C were as follows: (a) that the pile cap and/or its constituent parts was a product, (b) that any liability would be caused by a product failing to fulfil its intended function, (c) that C was not liable generally, and (d) that, if there was any liability, it was partly excluded by the foundation clause. D counterclaimed for declarations that it was entitled to be indemnified under the policy and to recover its defence costs. Held, by Mackie J, that the concrete base could not be considered a product; that the D’s subcontract was a contract for “work and materials”, not for the provision of a “product”; that the base was a “concrete lump”; held no component parts and could not be bought, but, rather; had to be constructed on site; that, even if the base was a product, the “failure to fulfil its intended purpose” exclusion would not apply; that on the evidence, D was covered by the policy and that C should therefore pay the defence costs: Aspen Insurance UK Ltd v Adana Construction Ltd178.

177 [2009] EWHC 3419 (TCC). 178 [2015] EWCA Civ 176.

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(2)

(3)

(4)

(5)

Facts: Bellway Homes Ltd (C) engaged Seymour (D) to carry out construction works as part of a development. The works were completed 31½ weeks later than had been agreed. D argued that delays arose as a result of events under the C’s control. D took the case to adjudication and was awarded £1,045,358.04 net of retention, including prolongation costs. C was dissatisfied with the decision and commenced court proceedings in relation to the prolongation costs. D counterclaimed, claiming the repayment of the second half of the retention. Both parties argued that each other should recover their costs from start to finish. Held, by Akenhead that, considering the respective positions of the parties at different stages of the proceedings and the offers that had been made, Seymour should pay Bellway 50% of its costs on a standard basis up to and including 30 September 2012; that Bellway should pay Seymour’s costs from 30 September 2012 up to 31 January 2013; that thereafter each party should pay its own costs: Bellway Homes Ltd v Seymour (Civil Engineering Contractors) Ltd179. Facts: This was a joint appeal, involving two different and unsuccessful claimants, regarding personal injury litigation. Gavin Flatman (C) sued Gill Germany (D), whilst Richard Weddall (C) proceeded against Barchester Healthcare Ltd (D). Both claimants were represented by GMS Law Solicitors on the basis of a conditional cost fee agreement (CFA), but without after-the-event insurance. Both claimants lost and neither of the defendants could recover their costs, because both claimants were effectively impecunious. The defendants sought to obtain a non-party costs order against GMS (under s 51 of the Senior Courts Act 1981), on the basis that they had funded both claimants’ disbursements. Held, by Leveson LJ, that the payment of disbursements without more, does not incur any potential liability for an adverse costs order: Flatman v Germany; Weddall v Barchester Healthcare Ltd180. Facts: Grupo Hotelero Urvasco SA (GHU) and Carey Value Added SL (Carey) raised certain questions relating to costs with regard to the previous judgment delivered on 26 April 2013. This judgment had held that GHU was in default under a loan agreement as at 6 June 2008; that Carey was not obliged to make the advance otherwise due on that date and that its subsequent cancellation of that agreement was lawful. Carey obtained judgment in the sum of €65.9m (subject to a deduction for sums received under a performance guarantee). The points which then arose were (1) whether, although judgment was given for Carey, GHU should be entitled to recover from Carey its costs of those issues upon which it was successful, (2) in the alternative, whether Carey should recover only a proportion of its costs from GHU and, if so, what proportion, and (3) the amount that Carey should be awarded by way of an interim payment on account. Held, by Blair J, that a costs judge would have great difficulty in applying an issues based order and that this “alone is sufficient to rule it out”; that, on the facts, a percentage reduction, across the entirety of the claimant’s costs, was to be applied, at 25%: Grupo Hotelero Urvasco SA v Carey Added Value SL181. Facts: Hammersmatch (C) brought proceedings against Saint-Gobain (D) on a dilapidation claim, following the termination of the lease of the Norton Building in Welwyn Garden City. C was awarded damages, but incurred a reduction in its costs, because it had failed to accept an offer by D. C raised questions regarding the costs arising out of that judgment. Held, by Ramsey J, that there was no

179 [2013] EWHC 1890 (TCC). 180 [2013] EWCA Civ 278. 181 [2013] EWHC 1039 (Comm).

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(6)

(7)

(8)

(9)

182 183 184 185

unreasonable refusal to negotiate by Hammersmatch; that Saint-Gobain had failed by a small margin to make a Part 36 offer, which provided it with the costs protection it was seeking; that the court should not use CPR r. 44.2(4)(c) to make an order that the C should pay the D’s costs: Hammersmatch Properties (Welwyn) Ltd v Saint-Gobain Ceramics and Plastics Ltd182. Facts: Sylvia Henry (A) began proceedings for defamation against The Sun newspaper (R). The parties settled the proceedings, but were unable to reach agreement upon costs and they agreed to try by way of preliminary issue the question whether there was any good reason in this case to depart from A’s approved budget. Held, by Moore-Bick LJ, that amendment to the costs budget would be permitted; that, to provide otherwise would constitute an unreasonable and disproportionate penalty against C; and that the management of costs by the court should in future form an integral part of the ordinary procedure governing claims allocated to the multi-track: Henry v News Group Newspapers Ltd (2013)183. Facts: This was the first Court of Appeal judgment on relief from sanctions, following the recently introduced rules for costs budgeting in civil litigation. Andrew Mitchell MP (C), began proceedings alleging defamation against The Sun newspaper (D). C’s solicitors failed to attempt to discuss budgets and budgetary assumptions ahead of the first case management conference (CMC); nor did they file, or exchange, a costs budget seven days prior to the CMC, in accordance with the pilot costs management scheme for defamation claims. Master McCloud’s consequent order provided that, in the event of success in his claim for defamation, C could recover any court fees incurred, but no costs. The subsequent application for relief from sanctions was unsuccessful and the decision was appealed. Held, by Richards LJ, that, where the non-compliance is trivial and inconsequential, then the court should provide relief; however, anything beyond this will require the defaulting party to demonstrate some good reason for relief from sanctions to be granted: Mitchell v News Group Newspapers Ltd184. Facts: On 26 March 2012, C’s solicitors entered into conditional fee agreements (CFAs) with each of the Cs, the CFAs providing for a success fee. The following day, the Cs obtained the benefit of after the event “ATE” insurance, the premium therefor being the subject to staged payments. D was made fully aware of this position, following receipt of a notice of funding. The costs budget was approved on a bespoke document, which was subject to criticism from the judge, although it was largely in the same form as the standard document and a costs management order was made. D subsequently alleged that, since the costs budget did not include the success fee, or the ATE premium, the Cs should be precluded from recovering this should they be successful. An application was made by the Cs for relief from sanctions. Held, by Coulson J, that, on the particular and unusual facts of this case, it would be in accordance with the overriding objective if the approved costs budget was revised and/or rectified, or at least clarified to the effect that it expressly excluded the success fee and the ATE insurance premiums: Murray v Neil Dowlman Architecture Ltd185. Facts: PHI Group Ltd (A) was engaged by Carillion (the MC) to carry out the design and construction of a train servicing depot. Robert West Consulting Ltd (R) was the consulting engineer and lead consultant for the overall works.

[2013] [2013] [2013] [2013]

EWHC 2227 (TCC). EWCA 3. EWCA Civ 1537. EWHC 872 (TCC).

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Carillion JM Ltd started proceedings against A and then against R, each defendant claiming a contribution from each other. The claim was settled between Carillion JM Ltd and A. The judge at first instance held that R had been negligent, assessing Carillion JM Ltd’s loss at £6.7m, with the A bearing 60% responsibility whereas R bore 40%. He ordered A to pay to R £570,000, 20% of Carillion JM Ltd’s costs (which R had been ordered to pay), and to pay 30% of R’s contribution proceedings against it. No order was made regarding the costs of the A’s contribution proceedings. A made a “Part 36” offer and a “without prejudice save as to costs” after, offering to split liability with R on a 70:30 basis in R’s favour. This offer did not specify any period for acceptance, in compliance with CPR r.36.2(2)(c). A made a further offer for a discontinuance of its proceedings against the engineer, in exchange for the engineer discontinuing its proceedings against the subcontractor, with no order as to costs. The trial judge held that the first offer was not a Pt 36 offer and that it had been withdrawn, implicitly, at the time of the second offer. Held, by the Court of Appeal, that: (1) the first offer was not a Pt 36 offer: the requirement in the rule that a period of not less than 21 days must be specified requires some explicit identification of a period of 21, or more days; (2) the first offer had not been withdrawn, but remained open for acceptance until trial, and if accepted, would have determined the contribution as between A and R towards any sum for which either was liable to Carillion JM Ltd by agreement, or by judgment; (3) if the first offer had been accepted at the time it was made, or thereafter, R would have been significantly better off, as regards his net liability to Carillion JM Ltd, than after judgment, and should bear the A’s costs of the contribution proceedings, together with his own costs: PHI Group Ltd v Robert West Consulting Ltd186. (10) Facts: Redwing Construction Ltd (C) entered into a CFA with its solicitors to enforce a decision against Wishart (D) for £100,000, the CFA providing for a 100% success fee of the solicitor’s basic charges. C also took after the event (ATE) insurance. D accepted that he was liable to pay up to £66,960.70 plus interest and the fee for issuing proceedings, disputing the remaining elements. Held, by Akenhead J, that C had basically been bound to win at the time the CFA was entered into; that the risk of losing by C was low enough to weaken the probability of imposing anything near 100% of its premium: Redwing Construction Ltd v Wishart187. (11) Facts: The defendants (Ds) were found to have “hijacked” the claimants’ (Cs’) business in respect of the provision and installation of seating at their venues. The Cs sought damages for the resulting “loss of opportunity”. Ds were absent throughout the litigation. A significant amount of work was undertaken by C in order to establish their loss on an undefended basis. Held, by HH Judge Brown, that the costs should be awarded upon an indemnity basis, by reason of the Ds’ complete lack of participation in the proceedings and the significant additional work required to be undertaken by the Cs as a consequence: Slick Seating Systems v Adams188. (12) Facts: Croydon London Borough Council (D) had made an offer to Sutton Jigsaw Transport Ltd (C) prior to trial. During a short adjournment on the first morning of trial, C attempted orally to accept the D’s offer. When it was pointed out that this was insufficient, since a Part 36 offer must be accepted in writing, C then submitted a handwritten note to this effect. The time was noted as being 13:58. At

186 [2012] EWCA Civ 588. 187 [2011] EWHC 19 (TCC). 188 [2013] EWHC 88 (Mercantile).

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14:00 on the same day, D submitted via facsimile a letter to C’s address for service, formally withdrawing its Part 36 offer. D argued that C’s manuscript note had not complied with CPR r.36.9(1), because it was not served at C’s address for service, in accordance with the relevant rules. C applied to be dispensed with the service requirements, or else permit substituted service. Held, by McKenna J, that the rules of the CPR were clear and, in respect of their application, the parties should be placed on a level playing field; that both parties should be assumed to know the rules and should comply with them if they expect to obtain their benefit; and that, to allow the application, would give an unfair advantage to a party which had not complied with the rules providing for service, or acceptance, of a Part 36 offer, against a party that had so complied: Sutton Jigsaw Transport Ltd v Croydon London Borough Council189. (13) Facts: Sycamore Bidco Limited (C) had succeeded at trial against Sean Breslin (D). C had made two Part 36 offers before the start of the trial. Neither offer was accepted. The following issues of principle arose: (a) It being accepted that Sycamore had been successful overall and that it should be entitled to recover costs, whether some of its costs should be disallowed because of the issues in the action upon which it failed and because of its conduct in running the case; (b) Did all the normal consequences of “beating” a Part 36 offer follow, in the C’s favour, or were there circumstances that justified or required the imposition of lesser burdens upon D?; (c) What orders should be made in relation to the costs of the two applications that were made in the course of the proceedings?; (d) What interest should be awarded on costs?; (e) Should the start date for interest running on costs under the Judgments Act be postponed?; (f) Should D have permission to appeal?; (g) Should there be a stay of enforcement pending any such appeal? Held, by Mann J, that C’s costs should be reduced by 40%; that this apportionment of costs should apply to the costs incurred both before and after the Part 36 offer; and that permission to appeal should be granted: Sycamore Bidco Ltd v Breslin190. (14) Facts: Proceedings were commenced by Tinseltime (C) against Mr Roberts, a selfemployed building contractor, as well as against the local council and assembly and against the main contractor (D) for alleged damage. The Ds were to carry out works on a road-building project, which also involved the demolition of the “Old Creamery”, part of which was occupied by C. A preliminary issue struck out the financial claims and brought the claims to an end. C then went into liquidation. The Ds applied for an order against the C’s solicitor (who had acted on the basis of a CFA), to pay their costs pursuant to s 51(3) Senior Courts Act 1981 and/or CPR r.48.2 as a non-party “funder” and/or for wasted costs. Held, by HH Judge Davies, that the application for a non-party costs should be dismissed and permission for the application for wasted costs refused; that in the majority of cases where a non-party costs order was made there would be either some financial benefit to the solicitor beyond the benefit that he could expect to receive from the CFA, or some exercise of control of the litigation beyond that which would be expected from a solicitor acting on behalf of a client, or some combination of both; that there was no evidence that the solicitor had taken on the case in any capacity other than as one who was willing to work under a CFA and willing to fund the disbursements under that agreement; and that there was no clear evidence that he was aware that the case could not proceed, unless he was willing to fund the disbursements; that it would

189 [2013] EWHC 874 (QB). 190 [2012] EWHC 3443 (Ch).

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be disproportionate to allow the wasted costs application to proceed to a final hearing: Tinseltime Ltd v Roberts191. (15) Facts: United Marine Aggregates (C) employed GM Welding (D) to carry out maintenance works at its processing plant near Greenwich. Part of this work involved cutting metalwork using an oxyacetylene torch. Two of D’s employees undertook this task, one doing the cutting and spraying of the hot works and one keeping watch. A fire developed by reason of molten steel escaping through a gap in the metalwork. C alleged that the fire was caused by breaches of contractual and tortious duties owed by D, in turn seeking an indemnity from its public liability insurers, Novae Syndicates Ltd (Novae). The trial judge held in favour of D that it had not been in breach of duty. Novae was awarded half its costs. C appealed. Held, by Tomlinson LJ, that the judge’s decision should be upheld; that, although the fire could have been prevented, that would have involved D taking steps not required by the contract and that it had fully discharged its obligations to C by what it did; and that Novae should be awarded its full costs: United Marine Aggregates Ltd v GM Welding and Engineering Ltd192. (16) Facts: The assignees of a centralised mortgage lender (the Cs) sued the surveyors (the Ds) concerning three negligent valuations, which were used to advance loans to the borrowers, all of which represented losses to the Cs. The issues raised by the claim dealt with the validity of the various assignments, to what extent the Cs were negligent, or not, whether they failed to take reasonable steps to mitigate their loss and to what extent the individual valuations were or were not made negligently. At the case management conference, the court decided to deal first with the validity of the assignments and negligence regarding the lending, whilst the issues regarding the actual valuations would be heard separately. The Cs’ solicitors and counsel were asked to prepare a draft order for agreement by the Ds. The draft order sent bore hardly any relation to what had been directed by the court. After exchanges between the parties’ representatives, the Ds’ solicitors sent a draft order to the court. The court opted for this latter version, consent to the draft being given to avoid the costs of a further CMC. The Ds then applied to recover the costs incurred due to the unreasonable conduct of the Cs’ solicitors in refusing to agree to the terms of the order. Held, by Edwards-Stuart J, that the Cs’ solicitors had drafted an order that reflected the directions that they and their clients would have liked to have, and not the directions that the court had actually ordered, which verged on the contumelious. Per curiam: What had occurred should not happen again. Solicitors and counsel are to give effect to court orders; they are not to attempt to manipulate them to their own, or to their client’s, perceived advantage: Webb Resolutions Ltd v JV Ltd193. (17) Facts: The principal claims were threefold, regarding building works to C’s property amounting to £1.6m, which was later reduced to about £1.1m. The parties engaged in a mediation, which rendered them unable to comply with the directions set by the judge in the initial CMC. The matter was listed for a further CMC, at which the parties requested approval of revised costs budgets totalling £879,369 and £703,130 respectively. Held, by Coulson J, that these budgets were refused as being disproportionate and unreasonable, in light of the likely value of the claim; that no costs management order was to be made: Willis v MRJ Rundell and Associates Ltd194.

191 192 193 194

[2012] [2012] [2013] [2013]

EWHC EWHC EWHC EWHC

779 (TCC). 2628 (TCC). 509 (TCC). 2923 (TCC).

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(18) Facts: Higginson Securities (Developments) Ltd (C) retained Hodson (D) as architect for the construction of a new Spiritualist church and a block of flats. C’s solicitors sent a letter of claim to D alleging overcharging, overpayments and inadequate design. D’s solicitor replied, stating that the claim lacked particularity and that it could not succeed, inviting C to drop the claim. C challenged D’s response, but no pre-action protocol meeting was suggested by either party. Proceedings were issued and C later stated its willingness to have a meeting before the pleadings to be held and D applied to stay the proceedings so as to enable without prejudice meetings. A second letter from C offered to engage in a without prejudice meeting, which would imply staying the proceedings, including service of the defence, if agreed by D, until such a meeting had taken place. D responded, offering not to proceed with the application as long as C agreed to stay and to pay its costs. Held, by Akenhead J, that: (1) The wording of the pre-action protocol did not impose upon a party any particular obligation to arrange the meeting; usually, if one party expressed the view that it wanted a meeting, that would be a good reason for a meeting to take place, but the architect had not suggested it: Alfred McAlpine Capital Projects Ltd v SIAC Construction (UK) Ltd195 and Orange Personal Communications Services Ltd v Hoare Lea196 considered; (2) A pragmatic response to the issue of proceedings would have been along the lines of seeking to reserve the costs of and occasioned by any purported non-compliance with the Protocol, securing a without prejudice meeting and, pending that, securing an extension of time for service of the defence: Higginson Securities (Developments) Ltd v Hudson197.

22–121 Litigation is a public process (justice must be seen to be done) and except in matters that may compromise the security of the state, the public are encouraged to sit in on the proceedings to hear of the matters in dispute. Judges must give reasons for their decisions and important decisions are published and recorded in law reports and released electronically, around the world198. 22–122 In England and Wales, the procedure is governed by the Civil Procedure Rues published by the Ministry of Justice.

Statements of case 22–123 The drafting of statements of case is one of the most important functions of counsel199. Whether the action is before an arbitrator, Technology and Construction Court judge, or county court judge, there is a considerable art in drafting statements of case and it is a wise combatant who takes specialist advice in setting out its claim or defence. In Bruce v Odhams Press Ltd, in relation to earlier versions of the Rules of the Supreme Court, the purpose of pleadings was described thus: “The cardinal provision in Rule 4200 is that the statement of claim must state the material facts. The word ‘material’ means necessary for the purpose of formulating a complete cause

195 196 197 198 199 200

[2006] BLR 139. [2008] EWHC 223 (TCC). [2012] EWHC 1052 (TCC); [2012] TCLR 6. See http://www.bailii.org/ (accessed July 2010). D Barnard, The Civil Law Court in Action (London: Butterworths, 1977). Previously RSC, Ord.18, r. 7 (1). Now CPR, r.16.4.

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of action, and if any one, ‘material’ statement is omitted, the statement of claim is bad; it is ‘demurrable’ in the old phraseology, and in the new law is liable to be ‘struck out’ under RSC Order 25, Rule 4201. . . or ‘a further and better statement of claim’ may be ordered under Rule 7.”202

22–124 In principle, unless the parties can agree between them on the procedure to be adopted, the Arbitration Act 1996203 confers upon the tribunal, amongst other things, a power to make orders in regard to: “(c) whether any and if so what form of written statements of claim and defence are to be used, when these should be supplied and the extent to which such statements can be later amended . . . (g) whether and to what extent the tribunal should itself take the initiative in ascertaining the facts and the law.”

22–125 Section 34(1)(g) does not provide the arbitrator with the power to decide what case C is to put forward so much as a power to put the parties’ respective cases in order for them. It provides a conceptual departure from the adversarial character of common law procedures and permits the arbitrator or tribunal to take on a role more often found in civil law jurisdictions. 22–126 The character of statements of case in arbitrations may follow that of their counterparts in litigation, or comprise a blend of case and evidential submission as is described in the JCT/CIMAR arbitration rules204. Typically, this composite comprises all those argumentative matters essential to the statement of case, together with all the evidence in support of them. For example: “The parties shall exchange statements of claim and defence in accordance with the following guidelines: (a) (b) (c) (d) (e)

each statement should contain the facts and matters of opinion which are intended to be established by evidence and may include a statement of any relevant point of law which will be contended for; a statement should contain sufficient particulars to enable the other party to answer each allegation without recourse to general denials; a statement may include or refer to evidence to be adduced if this will assist in defining the issues to be determined; the reliefs or remedies sought, for instance, specific monetary losses, must be stated in such a way that they can be answered or admitted; all statements should adopt a common system of identification of sections to facilitate analysis of issues. Particulars given in schedule form should anticipate the need to incorporate replies.”205

22–127 Whilst this imposes a useful discipline upon the party’s pleading, in delayrelated claims it also tends to cause some difficulties because: 1.

not all the documents upon which C wishes to rely may be available to C at the time of its presentation of the case;

201 Previously RSC, Ord.18, r. 4. Now CPR, r.3.4. 202 [1936] 1 All ER 287 at p.294, per Scott LJ. 203 Section 34(1). 204 Joint Contracts Tribunal, Construction Industry Model Arbitration Rules (London: Sweet & Maxwell Ltd, 2005). 205 Ibid., r.9.2

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2. 3.

a degree of duplication will necessarily flow from both parties following the same procedural protocol; and the presentation of evidence often requires either computerised evidence, or a considerable amount of space at each party’s experts’ and lawyers’ offices for the storage of the filed case206.

22–128 Apart from the necessity of annexing the documentary evidence, witness statements and experts’ reports upon which the arguments rely, there is no difference between the requirements of a statement of case and a statement of claim. In both High Court and county court actions, the parties are required to set out in writing the factual bases of their respective cases in formal statements of case. The principal purposes of these statements of case are: 1. 2.

to clarify the matters in dispute between the parties so that the court can readily understand the real issues in the case; and to enable both sides to know in advance the allegations being made against them so that they will not be taken by surprise at the trial.

22–129 In arbitration, depending on what is agreed between the parties, or the rules under which the reference is conducted, the arbitrator can determine the form and timing in the most appropriate way for determining the issues between the parties207. Typically, under the JCT/CIMAR Rules, the order and timing of the procedures is dependent upon whether the arbitration is carried out under Rule 7, Rule 8 or Rule 9.

Claim 22–130 The statement of claim should set out, chronologically, every fact that must be proved by the evidence at the trial if C is to succeed in his claim. Thus, most statements of case in contract will set out: 1. 2.

3. 4. 5.

the parties in dispute and their respective roles; the date of the contract, whether it was written, or oral, and if in one of the standard forms, the form of contract and the relevant clauses, or implied terms of the contract; any term that it is alleged has been broken by D; the nature of the breach; and the damage suffered that is alleged to flow from the breach.

22–131 Under CPR, para. 9.3 of the Pt 16 Practice Direction provides that, where a claim is based upon a written agreement (as will usually be the case with

206 Experiences of large voluminous hard copy pleadings are rife. Cases in which, under the previous JCT Arbitration Rules, a statement of case and evidence-in-chief has comprised 51 lever-arch files and another, under ICC Rules, in which, whilst the statement of claim was a single binder and the defence and counterclaim ran to five volumes, the statement of defence to the counterclaim extended to nine packing cases, each of which contained between four and six lever-arch files. In a recent international arbitration of the previous author’s experience under UNCITRAL Rules, the statements of case and evidence-in-chief ran to 1,500 files. 207 Arbitration Act 1996, s 33(1)(b).

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construction disputes), the particulars of claim must have attached “a copy of the contract, or documents constituting the agreement”. 22–132 Paragraph 16.3 of the Practice Direction has radically changed the nature of formal pleadings. Under an innocuous-looking provision tagged to the end of the Practice Direction a party may: “(1) (2) (3)

refer in his statement of case to any point of law on which his claim or defence, as the case may be, is based, give in his statement of case the name of any witness he proposes to call, and attach to or serve with this statement of case a copy of any document which he considers necessary to his claim or defence, as the case may be (including any expert’s report to be filed in accordance with Part 35).”

22–133 A well-constructed claim will contain at the outset all the argument (legal, factual and evidential) and information (documentary, including witness statements and expert’s reports) to justify the claim. In any substantial claim that has been well presented it will be difficult for D to respond in time to every aspect of C’s statement of case, and under CPR r.16.5(5) where D fails to deal with an allegation they are taken to have admitted it. Arguably, this puts the claimant under CPR in a position in which it can ambush D, although the pre-action protocols are designed to avoid this. 22–134 The statement of case should set out in numbered paragraphs the matters of fact that have to be proved before C can ask the court or arbitrator for judgment or an award for the relief claimed. D is entitled to know precisely the case it has to answer. The important and overriding stylistic principle is, of course, that the statement of case should be simple and easily understood. 22–135 The powers of the court to indicate their preferred method of pleading are limited. In GMTC Tools and Equipment Ltd v Yuasa208, the Court of Appeal criticised the Official Referee for trying to “force [C’s] damages claim into a strait-jacket” by imposing on C a requirement that it plead by means of a Scott Schedule the causal connection between the cause and effect alleged. In this case, the court had ordered C to demonstrate an absolute requirement that a direct link be asserted and established between each defect in the machine so found, each period of consequent down time and each resultant item of loss. But in reviewing the judge’s action the Court of Appeal held that: 1. 2.

it is not open to a judge to require a party to establish causation and loss by a particular method; and C should have been entitled to amend its case in the “rational way” that it ultimately resorted to.

22–136 Thus, in litigation, C must decide for itself how it wishes to set out its case and it cannot be ordered to state its case in the form in which the judge would like to receive it. This is in contrast to the position of C under the Arbitration Act 1996 in which, in default of the agreement of the parties, the arbitrator’s powers are extremely wide209 and if, for example, C sought to set out a case by Scott Schedule that depended

208 (1995) 11 Const LJ 370. 209 See section 34 referred to above at paras 22–128 to 22–129.

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on the changed durations of activities necessarily requiring a critical path analysis to expose the facts, in the absence of agreement between the parties to the contrary, it seems that the arbitrator could order it to be produced.

Defence 22–137 The statement of defence should set out clearly D’s answers to every material allegation in the statement of claim. It is sensible to begin by considering each paragraph individually. D may then take one of three possible steps in respect of each allegation: 1.

2.

3.

It may “admit” the allegation, ie it may concede that the particular point is not in dispute. This relieves C from the necessity of producing any evidence to prove the particular point at the trial, or hearing. It may “not admit” the allegation. This will require C to prove their allegation without D specifically denying it. It is an expression used to deal with matters that are essential elements in C’s case, but upon which D has insufficient information to make a definitive response. It may “deny” the allegation. This means not only that C will be required to prove its allegation, but also puts C on notice that D intends to put forward a contrary case. It is not sufficient for D merely to deny the allegation without stating its reasons for doing so and, if it intends to put forward a different version of events, stating its own version210. The burden of proof of the contrary case that it relies upon is then adopted by D.

22–138 Strictly speaking, a “blanket denial” should not be necessary since every point should have been covered by specific responses. Some comfort may be drawn from CPR r.16.5(3) which provides that, if D fails to deal with a particular allegation, but it has set out in its defence the nature of its case in relation to which the allegation is relevant, D is taken to have required C to prove the allegation. However, under r.16.5(5) where D fails to deal with an allegation (without more) it is taken to have admitted it. 22–139 If C does not include particulars of claim in the claim form, the particulars of claim must be served within 14 days after the service of the claim form211. The time for serving a defence is 14 days after service by C of the particulars of claim or, if D files an acknowledgement of service, 28 days after service of the particulars of claim212.

Counterclaim 22–140 It very often happens that D not only wishes to defend the claim made by C, but also desires to bring a claim against C. In theory, it would be possible for C to bring a separate action, but, in practice, in order to save expense and time,

210 CPR, r.16.5(2). 211 CPR Pt 16, Practice Direction, para.3.2. 212 CPR, r.15.4(1).

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D often raises cross-action by adding a counterclaim to its defence213. This might comprise: 1. 2. 3. 4. 5.

an admission of the names of the parties to the dispute; an admission of the contract under which the work was carried out; denial that the work was carried out satisfactorily; denial of liability for the amount claimed; and allegations as to: 5.1. the contract, specification and drawings which dictate the quality required; 5.2. the nature of the defects, or departures from the design requirements, which constitute the breach; 5.3. the consequences that flowed from the breach in terms of the repairs and the time taken to carry out the repairs; 5.4. the effect on the updated as-planned schedule of the extended period of performance demonstrating the criticality or otherwise of the activity to completion; 5.5. the additional site costs, if any, incurred during the period of disruption to progress and the method of calculation; 5.6. the additional extended overhead costs, if any, during the period of delay to completion and the method of calculation; and 5.7. any consequential losses, for example liquidated damages attributable to this delay deducted under the main contract.

22–141 Proof of the allegations in such a counterclaim will normally include such details as: 1. 2. 3. 4. 5. 6. 7. 8. 9.

the design requirements shown in the drawings and specifications and fabrication details comprising erection and shop detail drawings; proof of lack of prompt response from the subcontractor; proof of a need to move a labour gang from other work to correct and complete the subject-matter; proof of any additional supervision, plant, or other site preliminary costs; time sheets for any labour involved; delivery notes and invoices for any material or equipment; proof of the idle time caused while the problem was determined; proof of head office overheads incurred in the period of prolongation; and proof of head office engineering time spent in attempting to ferret out the reason why the work could not be performed.

22–142 Where the counterclaim arises directly out of the facts constituting the claim, it may also be a defence to the claim. For example, if the subcontractor sues for the price of the subcontract works, C may set up a counterclaim for damages for breach of contract arising out of defects in the work. This will have the effect of reducing, or extinguishing the amount of the claim. A counterclaim expressed in this way is known as a “set-off”. 22–143 Where a counterclaim amounts to a defence and is a set-off, it is important to plead it as such since this has an important effect on costs. The basic rule is that,

213 In litigation this will be in the form of a CPR Pt 20 claim. Unless the court permits otherwise, r.20.8(1)(a) provides that a Pt 20 claim must be served at the same time as the defence.

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if C wins its claim and D wins its counterclaim, each is awarded costs for that particular part of the action. For example, if both claim and counterclaim succeed where C’s costs are £100,000 on the claim and the D’s costs are £30,000 on the counterclaim, the net result is a partial set-off and D pays C £70,000 in costs. If, however, the counterclaim is a good defence and acts as a set-off to the claim, C’s claim will fail and it will have to pay D’s reasonable costs. When D wishes to make it clear that its counterclaim is to be treated as a set-off, it will normally add a paragraph at the end of the defence and before the counterclaim, saying: “Further or in the alternative, [D] claims to set-off against [C’s] claim herein such damages as he may be awarded upon his counterclaim as set out hereafter in extinction or diminution thereof.” 22–144 In arbitration proceedings the rules as to costs following the award are similar to those of the High Court214, but, under the Arbitration Act 1996, unless the parties have agreed otherwise, the arbitrator can put a ceiling on the amount of costs the winning side may recover215. Under CPR the court may limit the amount of recoverable costs in respect of expert evidence216.

Reply and defence to counterclaim 22–145 Under CPR, C must serve a defence to any Pt 20 claim within 14 days. Where the defence raises an issue that is a good answer to C’s claim as it stands, so that C cannot succeed unless he raises another matter in answer, C may file a reply217. 22–146 For example, if in a counterclaim by C for recovery of its costs expended on putting right the subcontractor’s defective work, the subcontractor alleges in its defence to the counterclaim that: “[C] failed to give the subcontractor the notice of his intention to carry out repairs which he was contractually obliged to do, promptly, and before taking any further action”, C will have the right to reply to that allegation (so long as it does not raise any new matters) dealing solely with the allegation that they failed to give prompt notice.

Amendment of statements of case 22–147 At almost any stage in an action, one side, or the other may realise that it needs to alter its statement of case so as to enable it to deal with a new point that has emerged, or to correct a mistake. 22–148 The basic rule is that, after service of the relevant statement of case, the party wishing to amend requires the written consent of all other parties, or the permission of the court218 or arbitrator219. In arbitration that will be by an application, and, in litigation, it must apply under CPR Pt 23 for such permission. Leave will then

214 Arbitration Act 1996, s 61(2). See also Fence Gate Ltd v Nel Construction Ltd (2002) 82 Con LR 41, in which HH Judge Thornton QC dealt with an appeal against an arbitrator’s decision on costs. The correctness of this decision has been doubted, however. See J Tackaberry, QC and A Marriott, QC (eds), Bernstein’s Handbook of Arbitration and Dispute Resolution Practice, 4th edn (London: Sweet and Maxwell, 2003), vol. 1, at para.2–923. 215 Ibid., s 63. 216 CPR, r.35.4(4). 217 CPR, r.15.8. 218 CPR, r.17.1(2). 219 JCT/CIMAR r.9.3.

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normally be granted to make the proposed amendment on terms that the party wishing to amend pays the costs of and occasioned by the amendment. 22–149 An amendment will generally only be refused if the other side can show prejudice, eg if it raises an issue upon which that other party can no longer hope to obtain evidence, although such evidence would have been available had the issue been pleaded at the correct time. The basic principle was expressed in Clarapede v Commercial Union220, as follows: “. . . however negligent, or careless may have been the first omission, and however late the proposed amendment, the amendment should be allowed if it can be made without injustice to the other side. There is no injustice if the other side can be compensated by costs.”221

Illustrations (1)

(2)

220 221 222 223

Facts: Birse provided a collateral warranty to the Co-op in respect of its works constructing a warehouse. The Co-op issued proceedings against Birse, alleging numerous defects to three distinct areas of the development: (a) the external concrete hard standing: (b) the drainage system, and (c) some of the concrete floor slabs in the warehouse, based upon their inadequate thickness (the primary defect). The Co-op later sought to amend the claim out of time to allege that the steel fibre content of the concrete used by Birse for the construction of the internal slab warehouse floor was substantially less than the value that had previously been assumed. The Co-op made a further application to amend the particulars of claim to claim the costs of wholesale replacement of the floor slabs, caused by the disparate defects that had already been pleaded within the limitation period. Held, by Akenhead J, that the proposed amendment did not arise out of the same, or substantially the same, facts as those already pleaded; that re-amendment would, however, be allowed, as the Co-op was entitled to claim that the incorrect thickness of the slabs led to them needing to be replaced in their entirety and this was not a new claim; that the re-amendment would be permitted, subject to the Co-op submitting further particularisation and further explanation as to why the wholesale replacement of the slabs was necessary: Co-operative Group Ltd v Birse Developments Ltd222. Facts: Corelogic (C), issued proceedings against Bristol City Council (D), seeking an order to set aside D’s award of a contract to Liquid Logic and the suspension of the procurement process; an order restraining D from awarding the contract and/ or from continuing with the current procurement; a declaration that D is and was in breach of the regulations, general treaty obligations and principles and/or the terms of an express tender contract as between C and D; alternatively, damages for breaches of the regulations, general treaty obligations and principles and/or for breach of the terms of an express tender contract as between C and D, together with interest thereon; such further, or other, relief as seemed just and appropriate, together with costs. C then applied to amend the claim form. Held, by Akenhead J, that the amendments raised new claims within the meaning of the Limitation Act 1980 and CPR r.17.4; that, those new causes of action were, or would be, time-barred judged, as at the date of the amendment hearing; and that, applying the rules relating to extension of time, permission to amend should not be granted: Corelogic Ltd v Bristol City Council223.

Clarapede & Co v Commercial Union Association (1883) 32 WR 262. Ibid., at p.263, per Brett MR. [2013] EWHC 1790 (TCC). [2013] EWHC 2088 (TCC).

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22–150 In arbitration, unless the parties cannot agree to the amendment of statements of case, leave to amend must be sought from the arbitrator, who, for the proper discharge of the case, must then deal with the application. Generally, unless there is good reason to do otherwise, the arbitrator would deal with the application by reference to the same criteria as would a court.

Request for further information “In a case where there is no omission of material facts under Rule 4, whether particulars should be ordered, is very often a matter of pure discretion because it depends on a view of fairness or convenience which is essentially a matter of degree. But where particulars are asked because the statement of claim is defective in that it omits some essential averment, ie some ‘material fact’ the question is not one of discretion, and the adoption by [D] of the lenient remedy of an application for particulars instead of the more stringent remedy of striking out does not turn an issue of right into an issue of discretion.”224

22–151 Often the party upon which a statement of case has been served will feel that it gives it insufficient information to enable it to answer the case, or prepare its own case for trial. In such a case the party may file its defence on the best information it has and seek further information regarding the statement of case. 22–152 Thus, where C, in claiming relief from liquidated damages and compensation for disruption and prolongation, presents its case by reference to a bar chart, unless D is given C’s construction logic and the make-up of the various activity durations, D can at first produce little more than a denial of C’s case. This does not promote settlement. Subsequent disclosure of this information in expert reports also tends to result in delay to the proceedings and increased costs as a result of the need to amend the defence by particularisation at a later date. The failure to include such critical information in delay-related claims should therefore be avoided. When further information is required, D’s solicitors will first write to C’s solicitors asking them to provide further information about the statement of case and setting out the request in a formal document so that the request and answer become part of the statement of case at the trial. 22–153 Sometimes the other side will answer such a request without any formal order, but if the request is refused, or not sufficiently answered, the party seeking information can apply to the court for an order that the other party give the information sought within so many days225. 22–154 Under the Arbitration Act 1996, unless the parties agree otherwise, the arbitrator may decide: “Whether any and if so what questions should be put to and answered by the respective parties and when and in what form this should be done.”226

Striking out statements of case “The history of litigation is littered with cases where one party has made an application to strike out where the claim against him is simply poor as opposed to being utterly unsustainable. It is quite true that this is often a potent weapon in forcing a settlement since it may cause a party to speculative

224 Bruce v Odhams Press Ltd [1936] 1 All ER 287 at p.294, per Scott LJ. 225 See para.5 of the Practice Direction to CPR Pt 18. 226 Section 34(2)(e).

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litigation to revise his expectations. The motto of such applications tends to be ‘nothing ventured, nothing gained, not a great deal lost’.”227

22–155 However, as was observed in the Wharf Properties case itself: “the failure even to attempt to specify any discernible nexus between the wrong alleged and the consequent delay provides, to use [counsel’s] phrase, ‘no agenda for the trial’”228. 22–156 Therefore, in the absence of sufficient detail for the other party to know the case it has to meet, rather than ask for further information about C’s case, it may seek to have the claim struck out on the grounds that: 1. 2. 3.

on the face of the statements of case there is no reasonable ground for bringing or defending the claim; the statement of case is an abuse of the court’s process, or is otherwise likely to obstruct the just disposal of the proceedings; or there has been a failure to comply with a rule, practice direction, or court order229.

Illustration Facts: UK Highways A55 Ltd (C1) was a special purpose company incorporated to design, build, finance and operate (DBFO) the A55 in North Wales. Carillion and Laing (C2 and C3) were members of a joint venture, which contracted with C1 to fulfil its DBFO obligations. Hyder Consulting Ltd (HCL) was engaged to provide design services in relation to the design of the road, whilst Hyder Limited (D) (now in voluntary liquidation) was the parent company and guaranteed HCL’s performance. Within a year, or two, the road showed signs of surface degradation and investigations were put in train to discover the cause. C1 claimed that the upper and lower road bases were inadequately bonded throughout the entire length of the road and that the road surface was not properly waterproofed. On 13 October 2009, C’s solicitors wrote to D a letter in accordance with the Pre-Action Protocol for Construction and Engineering Disputes (“the Protocol”) and, on 9 March 2010, D’s solicitors responded. On 6 May 2010, C1’s solicitors served the claim form and response to D’s letter. On 10 May 2010, C1’s solicitors wrote to the other parties, inviting them to agree to a stay of the proceedings in order to allow the Protocol to run its course. D agreed and a consent order was issued on 17 May 2010, staying the proceedings until 17 August 2011. Between 2011 and 2012, there were various communications between the C’s and the D’s solicitors regarding a possible mediation. On 28 August 2012, D’S solicitors wrote to C1’s solicitors, requesting the issue of a notice of discontinuance, based upon what they described as “the extraordinary delays” in the progress of the claim, failing which they would apply to the court for the claim to be struck out. C1’s solicitor responded that the delays were merely attributable to D and that, if no mediation was agreed, the litigation would be resumed, asking the court to list a case management conference. C1 served an application for an extension of time within which to serve the particulars of claim two days before the hearing of the applications. There were three applications before the court, the first two by D for summary judgment, or to strike

227 N Carnell, “Wharf Properties v Eric Cumine Associates: the effect on rolled-up claims” (1991) 7 Const LJ 303. 228 Wharf Properties Ltd & The Wharf (Holdings) Ltd v Eric Cumine Associates (1991) 52 BLR 1 (PC) at p.21, per Lord Oliver. 229 See CPR, r.3.4(2) and para.5 of the Pt 3 Practice Direction.

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out the claim, C1 having failed to serve particulars of claim within 14 days of the service of the claim form. The third application was by C for an extension of time to 12 September 2012, within which to serve the particulars of claim, and to 28 September 2012 within which to serve the particulars of quantum. In the end, C1’s primary case was that such an extension of time was not required. Held, by Edwards-Stuart J, that, in regard to the delay that had occurred between June 2011 and service of the particulars of claim, it would not be just to allow D to place any reliance upon that part of the delay that occurred up to the end of April 2012, or shortly before, because they must be taken to have acquiesced in this; that D had been prejudiced by the overall delay, which had occurred since the conclusion of the design some 12, or more, years ago, by loss of documents, unavailability of witnesses and the impairment of individual memories; that a design of a project like this ought to be recorded in the project documents and, accordingly, the impartment of memories of (UK) those involved was much less likely to result in any significant prejudice to D; that, if C1 was allowed to pursue a claim based solely upon negligent design, the balancing exercise which the court is required to carry out having regard to the matters listed in CPR r.3.9, in the context of the history and circumstances of these proceedings, should be resolved in favour of allowing the claim to proceed: UK Highways A55 Ltd v Hyder Consulting (UK) Ltd230.

22–157 In Wharf Properties it is clear from the judgments of the Court of Appeal that C’s default was aggravated by the fact that it had failed to provide the particulars pursuant to a peremptory order made by consent, a default from which it is not easy to recover231. On the other hand, in How v Lindner232, the claimants had admitted that they were: “. . . not able to specify and to differentiate between the direct and indirect acts or the direct and indirect omissions concerned in apportioning responsibility for the prevention of the performance of the works by the claimant, or to identify the individual members of the claimant’s workforce affected.”

22–158 The respondent sought an order to the effect that, unless their claim was particularised, the claimants would be estopped from pursuing their claim for loss and expense, which the arbitrator had refused. In refusing applications for the arbitrator to be removed for misconduct, Judge Hicks QC said: “. . . it is, in my view not possible to conclude that the arbitrator has even erred in law, let alone been guilty of misconduct, [for not determining] . . . that no part of a claim for loss and expense can be allowed to go to a hearing as a global claim for loss arising from a combination of breaches, or both. . . What an arbitrator, like any other tribunal acting judicially, must have in mind is the requirement of natural justice that a party should have adequate notice of the nature of the case that he has to meet. There is no reasonable ground for believing that this arbitrator will not seek to fulfil that requirement. How he seeks to achieve it is a matter for his discretion . . . I cannot see any ground for contending that it is misconduct on the arbitrator’s part not already to have struck out [the respondent’s] claim.”233

230 231 185. 232 233

[2012] EWHC 3505 (TCC); (2013) 29 Const LJ 234. Samuels v Linzi Dresses Ltd [1981] QB 115 and Siebe Gorman & Co v Pneupac [1982] 1 WLR How Engineering Services Ltd v Lindner Ceilings Floors Partitions plc (No 1) [1996] ADRLJ 45. Ibid., at p.61.

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22–159 In arbitration proceedings under the JCT Rules, there is no power to strike out a defective pleading but, if a pleading is not served in time, then the arbitrator may proceed to decide the dispute as though the defaulting party did not intend to serve any pleading234. The Arbitration Act 1996 also contains wide powers for the control of proceedings in the event of a party’s default, including the power to dismiss a claim for failure to comply with a peremptory order235 and order costs to be paid that arise out of the non-compliance236.

234 See for example, JCT/CIMAR procedure issued under r.6.5, at 9.2.3(c). 235 Arbitration Act 1996, s 41(6). 236 Ibid., s 41(7)(d).

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Adjudication in the United Kingdom

Introduction Update on adjudication in the United Kingdom Limitation periods Complex decisions and human rights aspects Costs and interest Definition of a construction contract Sequential adjudications and single disputes Complex decisions and human rights aspects Costs and interest Definition of a construction contract Residential occupiers Sequential adjudications and single disputes Recovering adjudication costs

23–001 23–001 23–002 23–003 23–004 23–005 23–006 23–007 23–023 23–038 23–045 23–048 23–063

Introduction “The [Housing Grants, Construction and Regeneration] Act provides that a party to a construction contract is to have the right to refer a dispute arising under the contract for adjudication under a procedure, complying with its requirements1, which are that the contract must:

(a) enable a party to give notice at any time of their intention to refer a dispute to adjudication; (b) provide a timetable with the object of securing the appointment of the Adjudicator and referral of the dispute to the Adjudicator within seven days of such notice; (c) require the Adjudicator to reach a decision within 28 days of referral, or such longer period as is agreed by the parties after the dispute has been referred; (d) allow the Adjudicator to extend the period of 28 days by up to 14 days, with the consent of the party by whom the dispute was referred; (e) impose a duty on the Adjudicator to act impartially; and (f) enable the Adjudicator to take the initiative in ascertaining the facts and the law2. The contract must also provide that the decision of the Adjudicator is binding until the dispute is finally determined by legal proceedings, by arbitration (if the contract provides for

1 Housing Grants, Construction and Regeneration Act 1996 s 108(1). 2 Housing Grants, Construction and Regeneration Act 1996 s 108(2).

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arbitration, or the parties otherwise agree to arbitration), or by agreement, although the parties may agree to accept the decision of the Adjudicator as finally determining the dispute.”3,4. “. . .the purpose of adjudication might not unreasonably be seen as the serious erosion by the construction industry of Employers’ long-established rights under construction contracts. . .it is bound to be asked whether the interest of the customers of the construction industry have been well served by this legislation.”5

Update on adjudication in the United Kingdom 23–001 May 2013 marked the fifteenth anniversary of statutory adjudication in UK construction contracts, adjudication now being well established as part of the panoply of construction dispute resolution mechanisms. Given the particular features that distinguish it from litigation and arbitration, however, it continues to produce issues that are particular to itself and that emerge primarily from the decisions on enforcement delivered by the Technology and Construction Court (TCC) and through further statutory changes. This new chapter considers in further details below the following topics which have been addressed since the 4th edition.

Limitation periods 23–002 An adjudicator’s decision is contractually binding, unless and until it is reviewed, or reversed, by the final dispute review tribunal chosen by the parties. What, however, is the period of limitation? Is it six years from the original breach (which is the subject-matter of the dispute), or six years from the date of the adjudicator’s decision? See, further, the Aspect Contracts case, illustrated below.

Complex decisions and human rights aspects 23–003 Adjudication is a process in which certainty can sometimes be sacrificed in the interest of speed, given the limited timetable laid down. Is such a process nevertheless suitable for complex and detailed disputes? Does the European Convention on Human Rights and, by implication, the UK Human Rights Act, have any impact upon its use? See, again, the Aspect Contracts case, illustrated below.

Costs and interest 23–004 The amendments to the HGCRA brought in by the local Democracy Economic Development and Construction Act (on 1 October 2011 in England and Wales and on 1 November 2011 in Scotland) supposedly eliminated the abuse of Tolent clauses6. These were clauses under which one party wrote into the contract a pre-determined allocation of costs in the event of its adjudication. In statutory adjudications and most contractual adjudications, there is no provision for recovering legal costs (save for those of the adjudicator), there being a minor exception where the claim in adjudication can be characterised as the pursuit of a debt, where fixed sums could be claimed under the Late Payment of Commercial Debts (Interest) Act 1998. However, a professional negligence case in 2013 has upset the consensus that costs in adjudication are never recoverable and amendments 3 Housing Grants, Construction and Regeneration Act 1996 s 108(3). 4 Atkin Chambers, Hudson’s Building and Engineering Contracts, 12th edn (London: Sweet & Maxwell, 2010), para.11–021. 5 N Dennys QC, M Raeside QC and R Clay, Hudson’s Building and Engineering Contracts, 12th edn, (London: Sweet & Maxwell/Thomson Reuters, 2010), at para 11-002. 6 Bridgeway Construction Ltd v Tolent Construction Ltd [2000] CILL 1662, [2000] WL 1027055.

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to the Commercial Debts Act have meant the possibility of being able to claim more than fixed nominal amounts in debt claims in adjudication.

Definition of a construction contract 23–005 The somewhat circular definition contained in the HGCRA provides that it is an agreement to carry out “construction operations”, which are those then extensively defined in ss 104 and 105 of the statute. A major exclusion from the operation of statutory adjudication is contracts involving residential occupiers, one recent case on that issue being examined further below, as is a case in which, on the face of it, collateral warranties are also now held to be construction contracts for the purposes of adjudication.

Sequential adjudications and single disputes 23–006 One further feature which distinguishes adjudication is that only one “dispute” should be referred to an adjudicator at any one time (in the absence of agreement of the parties to more than one dispute being submitted). This gives rise to much argument on enforcement as to whether a single dispute has actually been referred and partly because of this, but also because of the restricted timetable, it is often sensible for parties to engage in sequential adjudications. They first obtain a decision on one issue (say, extensions of time), and then proceed in the next adjudication to seek a decision on the consequential loss and expense. This throws up a number of issues, namely what has the adjudicator decided in the first adjudication? To what extent is that binding in the second? To what extent should the second adjudicator have regard to the decision in the first adjudication if the first adjudication is in fact not binding upon him?

Complex decisions and human rights aspects 23–007 When Sir Michael Latham recommended that adjudication should be the customary method of dispute resolution in construction contracts and that there should be no restrictions placed upon the issues capable of being referred to an adjudicator, it was perhaps not fully appreciated what that would mean in practice, given that adjudication applies to all construction contracts, subcontracts, or professional appointments for whatever size or complexity, of project concerned. 23–008 There had been several subsequent attempts to resist enforcement of adjudication decisions on the basis that the issue to be decided is too complex to be dealt with within the time limits imposed by the HGCRA and the Scheme. This argument against enforcement was advanced in London and Amsterdam Properties v Waterman Partnership7, in which HH Judge Wilcox agreed that there might be some disputes that fall into that category, but decided that the particular dispute before him was not one of them and this was not the eventual reason for his refusal to enforce the particular adjudication decision. Similarly, in AWG Construction Services Ltd v Rockingham Motor Speedway Ltd 8, the late HH Judge Toulmin CMG QC also raised the possibility of certain disputes being so complex, and the scales so weighted against the defendant, that there would be a conflict between the adjudicator’s duty to provide a decision and his duty to act impartially. 23–009 However, in the later case of CIB Properties Ltd v Birse Construction Ltd 9, the same judge somewhat softened those conclusions. CIB’s claim was for some £16m and 7 [2004] BLR 179. 8 [2004] EWHC 858 (TCC). 9 [2005] 1 WLR 2252.

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initially involved some 50 lever-arch files, which increased to 150 files during the course of the parties’ submissions in the course of the adjudication. The dispute was referred in November and the decision was rendered at the end of February the following year. Again, there was a challenge that the size and complexity of the dispute made it impossible for it to be resolved fairly by adjudication. Judge Toumlin QC concluded that the proper test was not whether the dispute was too complicated to be referred to adjudication, but whether the adjudicator is able to reach a fair decision within the time limits allowed by the parties. As appears from the length of the adjudication, the respondents had acceded to requests for extensions to the timetable (as, of course, had the claimants, beyond the initial 14 days that it was in their gift to grant) and this had enabled the adjudicator to give the parties a fair opportunity to argue their case and for him to reach a fair determination. 23–010 With the coming into force of the Human Rights Act 1998 (HRA), art. 6 of the Convention now has direct applicability, providing that: “In the determination of his civil rights and obligations . . . everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. Judgment shall be announced publicly.”

23–011 A considerable volume of litigation has subsequently ensued where this and other provisions of the HRA are cited, to the extent that the standard litigation claim form now has a box to tick whether human rights issues are to be argued. Whilst the decision of the adjudicator is only temporarily binding, the same is also true of a number of orders made by the courts, including, for example, interim custody orders and interim injunctions. In order to determine that art. 6 does not apply to such proceedings because they are not finally determinative, would, as Coulson J (in the second edition of his book on adjudication) observes, “remove much of the scope and effect of article 6”. 23–012 An early challenge to an adjudication decision upon this basis was made in Elanay Contracts v The Vestry10, in which the losing respondent objected that he had not been provided with a fair hearing, because he had had to spend the majority of the 28 days allowed caring for his dying mother. HH Judge Havery QC pointed out that the adjudicator was actually bound to complete the process within 28 days, even though this may have been inherently unfair and that, since the decision was not finally determinative and neither was the hearing in public, art. 6 was not engaged. He went on to observe that, if it was to be engaged, this would in effect “drive a coach and horses” through the adjudication process. 23–013 HH Judge Bowsher QC gave somewhat more full consideration to art. 6 in Austin Hall Building Ltd v Buckland Securities Ltd11 concluding that an adjudication was neither a public hearing, nor legal proceedings for the purposes of the HGCRA; this latter was, perhaps, the key point, since the adjudicator’s decision is not a judgment and is not in itself enforceable. A separate application to enforce has to be made to a tribunal that is art. 6 compliant and provides the open public hearing. 23–014 Somewhat surprisingly perhaps, this challenge has not been made on many occasions since then, RG Carter Ltd v Edmund Nuttall Ltd 12 being one such rare instance. However, in the Outer House Court of Session (the Scottish equivalent of the High 10 [2001] BLR 33. 11 [2001] HT 00 477. 12 [2000] HT 00 230.

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Court) in Whyte and Mackay Ltd v Blyth and Blyth Consulting Engineers Ltd13 Blyth and Blyth was engaged as the consulting engineer for the construction of a new bottling plant for Whyte and Mackay. After completion of the works, it was found that the foundations were defective and the dispute was referred to adjudication, the adjudicator awarding some £3m in damages to Whyte and Mackay. Those damages were not paid and enforcement was resisted, in the event successfully, because it was found that the adjudicator had failed to address one of Blyth and Blyth’s principal arguments, which (if it had been accepted) would have been a complete answer to the claim. 23–015 Piling had been removed from the project, following a value engineering exercise, Blyth and Blyth contending that, even if it had in fact specified piling, it was to be inferred that Whyte and Mackay would not have accepted the associated costs and delay and would have excluded it in any event. The challenge to enforcement also included grounds based upon art. 6 of the Convention (the right to a fair trial) and also art. 1 of the First Protocol to the Convention, which requires that any interference with the defendants’ possessions involved in enforcing the award must be justified under the law. The enforcing judge observed that the losses claimed would not actually be incurred until 2035 and the adjudicator appeared not even to have discounted for the effective immediate receipt of damages, nor factored in the saving in not engaging in piling. 23–016 Lord Malcolm had this to say: “As is clear from the jurisprudence on this subject, when the court is asked to enforce an adjudicator’s award, in most cases, it will do so; and this notwithstanding the disadvantages inherent in adjudications and the risk of injustice. If faced with a Convention challenge, the court will usually be able to justify an enforcement of award by reference to the wellunderstood counter argument of the general interest benefits arising from adjudication. But what is the correct position when a large sum is awarded based on a finding of professional negligence, and those benefits are largely, if not entirely, absent? In my opinion, no general or public interest was served by the pursuers taking this dispute to adjudication – not least since it will be many years until the costs savings gained by the absence of piling will be outweighed by the projected losses. The bulk of the claimed losses will not occur until 2035/36. In truth, there was no need to have a quick answer to this dispute, at least not in the sense discussed by Chadwick LJ in Carillion Construction Ltd v Devonport Royal Dockyard Ltd14. Perhaps the pursuers saw a potential advantage for them in referring the issue to an adjudication, as opposed to some other form of dispute resolution more likely to provide the correct outcome. However, the private interests of one party cannot justify an interference in the defenders in Article 1, Protocol Rights.”

23–017 He continued as follows: “I shall proceed on the basis that enforcement of the award would constitute an interference with that entitlement . . . it is important to appreciate that defenders are not challenging the legislative scheme itself on Article 1 grounds, not least because of the ability of the court to refuse enforcement if, in a particular case, to do otherwise would involve a violation of the parties’ Convention rights . . . the question before me is would enforcement of this award involve a violation of Article 1 rights? As indicated earlier, at present, I am assuming that notwithstanding the insurance considerations, enforcement would amount to an interference with the defenders’ entitlement to peaceful enjoyment of their possessions. Is such interference justified? Would there be a fair or an unfair balance between the competing interests?

13 [2013] Scot CS CSOH 54. 14 [2005] EWCA Civ 1358.

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Would enforcement require the defenders to bear an individual and excessive burden keeping in mind that there has been no identification of the parties’ true rights and obligations? In my opinion, the issues can be approached as follows. There was no pressing need for a speedy provisional decision in respect of the pursuers’ large claim based on the alleged professional negligence of the defenders. The dispute arose long after the completion of the contract.”

23–018 He continued: “if ultimately the defenders are successful, there is no guarantee that the defenders will recoup any monies paid to the pursuers, and there is no provision for state compensation for any such loss. Furthermore, none of the public interest justifications which underpin the compulsory statutory scheme set out in the 1996 Act apply in the present case unless they are given the most extended definition.”

23–019 In answer to the claimant’s submission that to not enforce on article 1 grounds would undermine the whole adjudication scheme which, to date, in general, has worked well, he was not convinced. In this regard, he observed: “In the circumstances of the present case, the well-known problems, disadvantages and potential injustices of an adjudication are not counter-balanced, let alone outweighed, by any of the aims and purposes lying behind the 1996 Act. It is those public interest benefits which would justify enforcement of an adjudicator’s award, even a substandard and obviously wrong award (as in Diamond v PJW Enterprises Ltd15), but they are more or less wholly absent in the present case. It follows that repayment in the event that the defenders are ultimately successful when the true merits of the claim come to be decided. The Strasbourg case law indicates that the absence of compensation for losses caused by an interference in property rights will be an important factor to be weighed in the overall balance. Given the very particular circumstances of this case, to enforce this award would not be justifiable as a proportionate measure in pursuit of a legitimate aim. It would not strike a fair balance between protection of the defenders’ fundamental rights and the protection of any public interest reasons for the interference.”

23–020 The learned judge also considered whether the adjudicator’s decision contravened art. 6. The defenders submitted that, in light of the decision of the Grand Chamber in Micallef v Malta, provisional decisions can engage art. 6. Elanay Contracts Ltd v The Vestry (supra) should be revisited and a different view taken. The judge confirmed his agreement with the decision in Elanay Contracts Ltd, borrowing from the language in Micaleff that enforcement of an adjudicator’s award is not “directly decisive for the right in question”. 23–021 This was a complex dispute, whereas the judge remarked: “The adjudicator was presented with a next to impossible task. Even a judge would struggle to identify a procedure which would allow the complex issues of fact and law arising between the parties to be determined in any semi-satisfactory manner within six weeks.”

23–022 Whilst the primary ground for refusing enforcement was a failure to abide by the rules of natural justice, the extensive reasoning in this case to also deny enforcement on the basis of this article of the Convention may well be persuasive in other cases where enforcement of equally difficult adjudication decisions is sought.

15 [2004] SC 430.

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Costs and interest 23–023 As a general rule, any legal (and other) costs that a party incurs in an adjudication are not recoverable in that adjudication unless: (a)

There is an express provision permitting the adjudicator to award the parties their costs, such as in the RIBA suite of appointments and the GC Works Contracts, or (b) The parties have expressly granted the adjudicator the power to award costs, as was the case in Northern Developments Ltd v J and J Nicholl 16 where both parties (each of whom was legally represented) requested the adjudicator to award them costs and neither submitted that the adjudicator did not have the jurisdiction to award costs. 23–024 In Total M&E Services Ltd v ABB Building Technologies Ltd 17, the successful party argued that their costs should be recoverable by way of damages. Its argument was that, if a party to a contract failed to pay sums due to it, it was foreseeable that a referring party would seek to refer that matter to adjudication and properly incur costs as a consequence. The judge in that case rejected this argument, stating that the HGCRA failed to provide for the recovery of costs. That appeared to put the issue to rest until the recent case of National Museums and Galleries Ltd on Merseyside v AEW Architects and Designers Ltd18. 23–025 One head of damages in that case was the legal costs, professional fees and adjudicators’ fees that the Museum had had to pay in an unsuccessful defence of an adjudication claim by the contractor, which was seeking a declaration that the steps and seating in a theatre did not form part of the contractors’ design portion. In simple terms, the judge expressed the view that, had AEW carefully designed and co-ordinated the design of the steps and seats, no dispute between the Museum and the contractor would have arisen and the incidence of an adjudication was therefore reasonably foreseeable as a direct consequence of that failure properly to design and co-ordinate. 23–026 The Museum was represented in the adjudication by experienced construction lawyers, who invited co-operation from AEW and, indeed, proposed openly that AEW should accept liability for the design. AEW argued, that if the Museum had sought to reverse the decision of the adjudicator in subsequent proceedings, it was aware that, even if successful, it could not recover the costs incurred in the adjudication and, in those circumstances, it should not be possible for them to recover those costs “by the back door”. 23–027 However, the judge ruled that the costs were recoverable and that it was reasonable foreseeable that there could be an adjudication, which had, in fact, arisen. He further found that there was a sufficient causative link as between the defaults of AEW and the adjudication. That causative link would only have been broken if the Museum had acted unreasonably, or if its solicitors had acted negligently in advising the museum that it had an arguable defence in the adjudication. Significantly, he went on to say that it had not been suggested that either of those eventualities arose and he therefore considered that the claim was a good one.

16 [2000] BLR 158. 17 [2002] Adj LR 02/26. 18 [2013] EWHC 2576 (TCC).

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23–028 Whilst this claim is unlikely to reverse the finding in Total M&E Services Ltd v ABB Building Technologies Ltd cited above, it does create some precedent which those defending claims for professional negligence should be conscious of. If in a contractor/employer adjudication, the real point of contention is the scope of performance of the professional’s duties, the risk of having to pay the employers’ costs of the adjudication are to be weighed in the balance as to whether or not to support a vigorous defence of the contractors’ claim. 23–029 The EU Directive on Late Payment19 came into force on 16 March 2013 in England and Wales and on 29 March 2013 in Scotland, the original EU directive of 16 February 2011 recording in para. 12 as follows: “Late payment constitutes a breach of contract which has been made financially attractive to debtors in most members states by law or where no interest rates are charged on late payment and/or slow procedures for address. A decisive shift to a culture of prompt payment including one in which the exclusion of the right to charge interest should always be considered to be a grossly unfair contractual term or practice, is necessary to reverse this trend and to discourage late payment. Such a shift should also include the introduction of specific provisions on payment periods and on the compensation of creditors for the costs incurred and, inter alia, that the exclusion of the right to compensation for recovery costs should be presumed to be a grossly unfair.”

23–030 The initial Late Payment of Commercial Debts (Interest) Act 1998 (“the 1998 Act”) originated in an EU Directive, applying to all commercial contracts and was implemented in stages, initially to large commercial concerns and, ultimately, by June 2002, to all commercial concerns, both private and public. The Directive that led to the 1998 Act was motivated by the view that late payment of commercial debts was endemic in Europe and was threatening economic efficiency. It provided a statutory rate of interest of 8% above the Central Official Lending Rate, unless the contract provides a contractual rate, which, according to the 1998 Act provides a “substantial remedy”. That substantial remedy was the inclusion within the contract of a requirement that interest be payable upon late payment; those drafting contracts for employers after the introduction of the 1998 Act therefore included a rate of interest that would be payable if payment was late, since otherwise the statutory rate would apply. 23–031 Whether the rate is “substantial” depends upon the economic conditions at the time the contract is entered into. A contract concluded in 2007 with a rate of 4% would not therefore be substantial, but, given the fallen interest rates subsequently, if a contractual rate of 4% was agreed today, then the likelihood would be that it would be classified as “substantial”. 23–032 Under s 4 of the 1998 Act, statutory interest ran from the date that the debt fell due, or, in the parlance of the HGCRA the final date for payment. Absent any specific time period, this was to be 30 days from the date of the invoice or when the obligation creating the debt was formed, whichever was the later. 23–033 The latest amendment (which came into force on 14 May 2013) now states that, in any contract entered into after that date by public authorities, the payment period is to be 30 days and, in the case of non-public authorities, it is again to be 30 days, unless the parties have otherwise agreed. If non-public bodies have agreed to a period longer than 60 days, it must not be “grossly unfair to the supplier”.

19 2011/7/EU.

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23–034 When determining whether the period is grossly unfair, all relevant circumstances are to be considered, in particular: • • •

anything that is a gross deviation from good commercial practice and contrary to good faith and fair dealing; the nature of the goods and services being provided; whether the purchaser has any objective reason to deviate from a 60-day period.

23–035 In August 2002, one of the amendments to the 1998 Act brought in the ability to claim statutory compensation upon outstanding debts of sums of £40 (for debt less than £1,000), £70 (for debts between £1,000 and £9,999) and £100 (for sums of £10,000 and above). Section A(1) of the 1998 Act states as follows: “Once statutory interest begins to run in relation to a qualifying debt, the supplier shall be entitled to a fixed sum (in addition to the statutory interest on the debt).” That provision introduced in 2002 has been taken to mean that these fixed sums are not recoverable where there was a contractual interest which constitutes a “substantial remedy’ ”. The more recent amendment to s 5A(2A) reads as follows: “If the reasonable costs of the supplier in recovering the debt are not met by the fixed sum, the supplier shall also be entitled to a sum equivalent to the difference between the fixed sum and those costs.”

23–036 As again, with the original amendment 5A, this only applies if there is not a contractual rate of interest already included in the contract. It therefore appears that, if employers wish to avoid the provisions relating to fixed costs and now further costs, all that they need to do is to include a proper rate of interest (a substantial remedy) in their contracts. In circumstances where a supplier of goods, or services, under a construction contract has not been paid, and the contract does not provide a substantial remedy for late payment, the supplier could claim, in an adjudication, in addition to the fixed sums of costs attaching to each debt, the further reasonable costs of recovering the debt. 23–037 We have yet to see a construction contract entered into after March 2013, in which no substantial remedy, or interest, for late payment has been provided, which has gone to adjudication and on to enforcement. If and when such a case does arise, it will be of note to see to what extent the adjudicator awards the successful party their costs of pursuing the debt. This amendment does not provide for the award of costs against a creditor and in favour of a debtor who has fought off a claim for an unpaid debt. Even where there has been an award of such costs, there may be an application pursuant to CPR Part 8 for a declaration by the court to disallow, or at least to limit, the costs awarded, although, given that no one has seriously challenged the award of fixed costs to date (which adjudicators have found no trouble in awarding), one must question what the basis of that declaratory challenge would be, unless the costs awarded were entirely disproportionate.

Definition of a construction contract 23–038 Virtually any contract for the design, supervision, or erection of a permanent structure in England, Wales, or Scotland, is covered by the definition in ss 104 and 105 of the HGCRA, the most notable exclusion being that of contracts with residential

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occupiers. Since the inception of statutory adjudication, the definition of a construction contract has been found not to stretch to the interpretation of a settlement agreement between two parties to a construction contract: see Shepherd Construction Ltd v Mecright Ltd20. It must be said, however, that that decision was made at a time when a restrictive view was placed upon disputes arising “under” the contract (the wording of the adjudication clause in the DOM/1 sub-contract in question) and that this interpretation of that clause excluded matters that might be connected with the contract, such as the settlement of a dispute under the contract. 23–039 However, the decision of the House of Lords in Fiona Trust v Privalov21 has considerably widened the presumption as to the scope of disputes likely to be encompassed by a dispute resolution clause: “An arbitration clause (and by implication, an adjudication clause) should be construed in accordance with the presumption that the parties intend any dispute arising out of their relationship . . . to be decided by the same Tribunal.”

In FenceGate Ltd v James R Knowles Ltd 22, JRK had provided professional, constructionrelated services to Fencegate in relation to an arbitration in which they were engaged with their building contractor. A dispute arose as between Fencegate and JRK as to the latter’s fees and JRK commenced an adjudication to recover these. The adjudicator awarded an amount of fees, but the court refused to enforce that decision on the basis that “quasi-legal” advice in an arbitration (albeit relating to a building dispute) did not equate to advice relating to actual construction and did not therefore amount to “construction operations”. 23–040 Shortly before the HGCRA came into force, an exclusion order was made on 6 March 1998 (pursuant to s 106(1)(b) of the HGCRA) that finance agreements were to be excluded from the operation of Part II of the Act. Section 2 identified the types of finance agreements being excluded as, amongst others, any contract of insurance and any contract under which the principal obligation included an undertaking by a person to be responsible as surety for the debt, or default, of another person, including fidelity bonds, advance payment bonds, retention bonds, or performance bonds. Many construction lawyers considered that reasoning would also apply to collateral warranties, except, perhaps, those collateral warranties with “step-in” rights. 23–041 However, on the particular facts of the case, in Parkwood Leisure Ltd v Laing O’Rourke Wales and West Ltd 23 Akenhead J found differently. Parkwood sought a determination under CPR Part 8 on the question as to whether or not a collateral warranty was granted in their favour by the defendants (Laing O’Rourke), the designers and builders of the facility, of which they were the sub-lessees. That collateral warranty was a bespoke form and the relevant clauses read: “(1) The contractor warrants and acknowledges and undertakes that: (a) It has carried out and shall carry out and complete the Works in accordance with the contract. (b) Subject to this deed, it owes a duty of care to the Beneficiary in the carrying out of its duties and responsibilities in respect of the Works.

20 21 22 23

[2000] [2000] (2001) [2013]

BLR 489. ILLR 254. 84 Con LR 206. EWHC 2665 (TCC).

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(c)

(d)

(e)

(f ) (g)

In the design of the Works, or any part of the Works, insofar as the contractor is responsible for such a design under the Contract, it has exercised and will continue to exercise all reasonable skill and care to be expected of an architect or, as the case may be, other appropriate professional designer. All materials and goods supplies for incorporation into the Works are, or shall be, of a quality, kind and standard which complies with the expressed and implied terms of the contract (the contract being defined as the original contract as between the contractor and the employer). Materials and goods recommended or selected or used by or on behalf of the contractor shall be in accordance with good building practice and the relevant provisions of British Standard documents to the extent required by the contract. All workmanship, manufacture and fabrication shall be in accordance with the contract. It has complied and will continue to comply with the terms of regularly and diligently carrying out its obligations under the contract.”

23–042 There were then subsequent clauses regarding liability under the collateral warranty being no greater than under the original contract, overall liability being limited to £2.5m with other boiler plate clauses. The judge went on to consider whether the collateral warranty fell within the definitions in the HGCRA. The fact that a contract was retrospective, ie entered into after the works had commenced, he found was no bar, and he considered that, where one party agrees to carry out, or complete, construction operations, it will be an agreement “for the carrying out of the construction operations”. 23–043 Interestingly, the claimant’s counsel sought to pray in aid the exclusion order of 6 March 1998 (referred to above), arguing that, since these specific exclusions had been made, this had been done so because they potentially might have been included in the wider definition of construction contracts and, therefore, by analogy, this would mean that collateral warranties should also be considered as construction contracts. The judge rejected this particular argument, attributing this late exclusion to representations by the insurance and bond industry made shortly before the HGCRA came into force, but nevertheless concluded that this particular collateral warranty was to be treated as a construction contract. He stated: “There has been no suggestion that the formal collateral warranty used was in a particular standard form. Indeed, there are only a few standard forms for collateral warranties.”

23–044 He then gave the following reasons: (a)

The recital itself sets out the underlying construction contract (the contract) for the design and carrying out of completion of the construction of a pool development; there can be little, or no, dispute that the contract was a construction contract for the purposes of the HGCRA. (b) The wording is replicated in Cl.1 of the collateral warranty, which relates expressly to carrying out and completing the works. (c) Clause 1 contains express wording whereby LORWW “warrants, acknowledges and undertakes”; one should assume that the parties understood that these three verbs, while intended to be mutually complementary, have different meanings: a warranty often relates to a state of affairs (past, or future); a warranty relating to a motor car will often be to the effect that it is fit for purpose. An acknowledgment usually seeks to confirm something. An undertaking often involves an obligation to do something. It is difficult to say that the parties

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simply meant that these three words were absolutely synonymous. The judge went on to say that not all collateral warranties will necessarily be construction contracts. Their particular wording need to be considered and a strong pointer being as to whether or not the contractor (which could include a designer) was undertaking to carry out construction operations. A pointer against that may be that all works are completed and the contractor is simply warranting a past state of affairs. Taking the example of a standard collateral warranty, the JCT Contractor Collateral Warranty for Purchase or Tenant, CWA (a) P/T, para. 1.1, specifically states that the contractor warrants “As at and with effect from practical completion.” On the judge’s analysis, that would preclude it from being a construction operation. However, bespoke collateral warranties abound. This avenue of recourse may well suit certain parties, particularly as it would be a one way street, ie the beneficiary would not risk claims for unpaid amounts due under the original contract as these are routinely excluded under collateral warranties, even as counterclaims, except where step in rights have been granted and exercised.

Residential occupiers 23–045 As mentioned above, this is one of the principal exclusions that were written into the Act at s 106. This precludes the right to statutory adjudication, but not to contractual adjudication, although there are conflicting authorities as to whether adjudication is an “unusual procedure” that must be specifically drawn to the attention of the consumer (ie, a residential occupier) to be validly involved. See Picardi v Cuniberti 24. This view is directly opposed in Domsalla v Dysaon25. These cases relate to contractual adjudication clauses in professional appointments. The position in relation to building contracts where the consumer has professional assistance, via an architect or surveyor, or whether he or his advisors themselves have proffered a standard form of contract containing an adjudication clause is fairly clear. It is established that such clauses are binding upon consumers. 23–046 There have been a number of cases where employers have argued that they enjoyed a residential occupier exemption and should not therefore be subject to adjudication. One of the earliest cases was Absolute Rentals Ltd v Gencor Enterprises Ltd. The name of the case suggests that the contract was with a company that owed a flat, which was occupied by a director of that company. The director attempted to argue that he enjoyed the residential occupier exemption. The reality of that argument was not pursued at the action enforcement hearing, but it was later confirmed in Edenbreath Ltd v CREB Development Ltd 26 that a company cannot be a residential occupier. Other cases, such as Christopher Shaw v Massey Foundations and Pilings Ltd 27 concerned situations where part of a collection of buildings was being worked upon, and that part was not actually occupied by the employers. In that case, work was to one of the lodge buildings that formed part of a large country estate centred on Great Morteon Hall. Mr and Mrs Shaw occupied the hall, but the lodge was a separate building, which they

24 25 26 27

[2003] [2007] [2008] [2009]

BLR 487. EWHC 174 (TCC). EWHC 570 (TCC). EWHC 493 (TCC).

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did not occupy, nor did they intend to live in it. The judge on enforcement concluded that the residential exemption did not apply and this was confirmed on appeal. 23–047 In Westfield Construction Ltd v Clive Lewis28, an adjudication was pursued against Mr Lewis by his building contractor. Mr Lewis argued that he had intended to occupy the property as his main residence once building works were complete. One significant point conceded by his counsel and highlighted by Coulson J was that a defendant cannot occupy as a resident more than one property at the same time. This observation (albeit obiter), may well be of assistance in situations where work is being done to an individual’s secondary property, or holiday home, where, on a factual basis, he cannot be said either to be resident, or intending to reside. The judge there found that, whilst the intention to occupy at the time the contract was entered into was important, occupation was an on-going process and there must be a continuing intention to reside, or return to the property once works had been completed. In this case, the judge found (having heard oral evidence) that there was no intention to occupy as a residence, rather there was an intention to let out the property. The judge was not persuaded that residence, or an intention to reside at the time of the making of the contract, was sufficient to invoke the exception (the snapshot argument). In arriving at his judgment, the judge stressed the limited extent of this s 106 exclusion, which he described as being intended to protect ordinary householders not otherwise concerned with property or construction work. He concluded by asking rhetorically whether it was not time that the s 106 exemption should be respected, given that adjudication had demonstrated that it has worked well and has certainly saved costs.

Sequential adjudications and single disputes 23–048 It is well established that a second adjudicator cannot open up matters decided by a first adjudicator, nevertheless this does present a problem on enforcement when the challenge is raised that a decision sought to be enforced has in fact already been decided. HH Judge Thornton QC in Sherwood & Casson Ltd v McKenzie29 said that due weight could be given to the adjudicator’s decision to be enforced, and an investigation into whether there was an overlap with an earlier decision would only be undertaken if there were real grounds for concluding that the adjudicator had erred in that case; he concluded that there had been no overlap. 23–049 The first adjudication had been concerned with interim applications and contra-charges, and the second a claim for a final account. It can nevertheless be seen that superficially at least the adjudicator was dealing with similar issues (amounts sought in the interim applications would be replicated in claims in the final account). 23–050 In Mithen Ltd v Lighting Technology Projects Ltd 30, the claimant had been successful in the first adjudication largely due to the fact the respondent had not served any withholding notices. The respondent subsequently issued withholding notices and sought to recover the sums that it said it had overpaid as a result of the first adjudication. Lighting Technology Projects (LTP), the respondent in the second adjudication, refused to repay the money saying that the second adjudication was a re-run of the

28 [2013] EWHC 376 (TCC). 29 [2000] TCLR 418. 30 [2001] ADJCS 04/09 (TCC).

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first. The judge found that the second adjudication was concerned with matters in the withholding notices and was therefore a distinct and separate dispute. 23–051 There remains plenty of potential for argument as Skanska Construction UK Ltd v ERDC Group 31 and Birmingham City Council v Paddison Construction Ltd 32 illustrate. In the first, the initial adjudication claim failed due to lack of sufficient information. There was then a second adjudication relating to the final account in which more information was available and an award was made. In an enforcement of that award in the second adjudication, the court rejected the submission that the second decision transgressed on the first decision. By the time of the second adjudication, a different stage of the contract had been reached with more information available. In essence, “the fundamental nature and parameters of the dispute” were different. 23–052 By contrast, in the second case cited above, the loss and expense claim pursued in the first adjudication had failed due to lack of information. The judge found that the second adjudicator did not have the power to award Paddison any loss and expense as “it would be unmeritorious and technical to conclude that there was a difference between the two disputes; to arrive at that conclusion would permit Paddison to have a second bite of precisely the same cherry”. 23–053 In Arcadis UK Ltd v May and Baker Ltd t/a Sanofi 33 the issues raised by sequential adjudications were brought into sharp relief. 23–054 Arcadis had engaged Sanofi as a contractor to carry out remediation works at a site for a new bottling plant in Rainham. During the course of the project, the boundaries of the site were extended both north and south, but certain work done in those extended boundaries was not certified for payment and eventually Arcadis initiated an adjudication relating to payment arising out of the extension of the north boundary of the site. 23–055 They asked the adjudicator, Dr David Ross, to resolve the following three issues: (a)

Is the project manager entitled to reverse his decision that a matter constituted a compensation event and/or his assessment of the effect of a compensation event? (b) If it is denied that the project manager is entitled to withdraw acceptance of the compensation event, do the works to the northern boundary in fact constitute a compensation event? (c) If it is found that the project manager is entitled to withdraw acceptance of a compensation event or his assessment thereof or that, if he can withdraw it, the works to the northern boundaries still form a valid compensation event, then we will ask the adjudicator to decide the assessment of the resultant change to the prices and changing the completion date that the project manager should have accepted and/or assessed. 23–056 The decision that was ultimately delivered was honoured (favourable to Arcadis) by Sanofi. A second adjudication was then initiated by Arcadis in relation to the southern boundary raising the identical issues as enumerated above. Sanofi objected to the reappointment of the first adjudicator, Dr Ross, on the basis of alleged excessive fees, and exceeding his jurisdiction. In his place, M Rogers, an engineer, was appointed. 31 [2003] SCLR 296. 32 [2008] EWHC 2254 (TCC). 33 [2013] EWHC 87 (TCC).

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Voluminous submissions were exchanged and a meeting held by the adjudicator with the parties. In his decision, the adjudicator had this to say about the first adjudicator’s decision: “Whilst the referring party considers that I am bound by the previous adjudicator’s decision, it suggests I should adopt the previous adjudicator’s reasoning should I not feel bound by it [sic] decision. The responding party contends that I am not bound by the previous adjudication on the basis that the scheme for construction contracts does not bind an adjudicator in a successful adjudication to the reasoning or analysis employed by an earlier adjudicator. I am bound by a previous adjudicator’s decision and whilst I am not empowered to decide my own jurisdiction, I do have a duty to consider the matters raised regarding whether, and to what extent I should be bound be the previous adjudication”.

23–057 His eventual award of £480,231 was not honoured and Sanofi commenced enforcement proceedings. Arcadis’ defence, albeit in its skeleton argument, rather than in its defence, was: (a)

That the second adjudicator took an erroneously restrictive view of his own jurisdiction, with the result that he decided that he was bound by adjudication decision number 1 and by the first adjudicator’s reasoning in adjudication decision number 1, and that Arcadis brought about the adjudicator’s error by a misguided attempt to seek a tactical advantage or otherwise influence him. (b) The second adjudicator went off on a frolic of his own in relation to quantum by splitting the difference between the project manager’s figures (adjusted for prolongation) and the Arcadis slightly adjusted forecast figure. This frolic involved him deciding the case upon a basis that had not been argued or put forward by either side without giving the parties an opportunity to comment. (c) The second adjudicator failed to consider Sanofi’s defence on delay. (d) The second adjudicator’s decision was invalid on the grounds of apparent bias in effect because he was put in the position in which he had to have regard to the first adjudicator’s decision. 23–058 It can be seen that the challenge to the second adjudicator’s decision was a portmanteau of a number of possible reasons for non-enforcement. Taking his lead from Carillion Construction Ltd v Devonport Royal Dockyard Ltd 34, Akenhead J took the view that when the court comes to consider what an adjudicator has said and done, it should bear in mind that often adjudicators are not legally qualified, that they have limited time for the adjudication to produce their decision and digest substantial amounts of material, and their decisions should not be compared unfavourably with the decision of a detailed reserved judgment of the High Court. 23–059 So far as breaches of natural justice, the judge referred to Cantillon Ltd v Urvasco Ltd 35, that it must be established that: (a) The adjudicator has failed to apply the rules of natural justice. (b) Any breach of the rules must be more than peripheral, thus they must be material.

34 [2006] BLR 15 at para.85. 35 [2008] EWHC 282 (TCC).

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(c)

Breaches of the rules will be material in cases where the adjudicator has failed to bring to the attention of the parties a point or issue which they ought to be given the opportunity to comment upon if it is one which is either decisive or is of considerable potential importance to the outcome of the resolution of the dispute and is not peripheral or irrelevant. (d) Where the issue is decisive or of considerable potential importance or is peripheral or irrelevant, obviously involves a question of degree that must be assessed by any judge in a case such as this. (e) It is only if the adjudicator goes off on a frolic of his own, that is wishing to decide a case upon a factual or legal basis that has not been argued or put forward by either side, without giving the parties an opportunity to consider. Following Balfour Beatty Construction Ltd v The London Borough of Lambeth, if either party does not come back on the point, there is no breach of the rules of natural justice in relation thereto. 23–060 The test for bias is established and set out in the judgment of LJ Dyson in Amec Capital Projects Ltd v Whitefriars City Estates Ltd36. The test for apparent bias is not in doubt. It is whether a fair-minded and informed observer, having considered all the circumstances that have a bearing on the suggestion that the decision maker was biased, would conclude that there was a real possibility that he was biased. Having considered these authorities and the arguments of the defence, the judge had this to say, with particular reference to issues that arise in sequential adjudications: “The first issue was whether there was anything improper or a breach of the rules of natural justice in the decision of the first adjudicator being put before the second adjudicator in the second adjudication. I have no hesitation in saying that it was neither improper nor contrary to the rules of natural justice. Although there were some distinctions (principally the fact that the northern boundary work had been implemented before the project manager withdrew his acceptance or endorsement that it comprised a compensation event, whereas that withdrawal occurred before the south boundary work was done) the first adjudicator’s findings on what the contract meant were at the very least germane and could well be thought at the very least to be persuasive. It was not, obviously or at all, improper or even necessarily misguided for Arcadis to consider that it was or might be binding or wish to put it before the second adjudicator.”

23–061 He went on to draw analogy with a similar situation in the courts where no one could conceivably complain that a judge should not at least look at previous decisions: even if not binding, they could be persuasive. Indeed there may be circumstances where it would be positively wrong for a party not to refer the later adjudicator to a decision of an earlier adjudicator. The fact that the second adjudicator happened to agree with the first adjudicator on a particular point does not mean the he was restricting his jurisdiction or acting otherwise unfairly. He was simply agreeing that, as a matter of contractual interpretation on that point, the first adjudicator was right. It is not impeachable. 23–062 When considering the argument about bias, it was not improper or wrong for Arcadis to put before the second adjudicator the first adjudicator’s decision. He then had this to say about the allegation that he had gone off on a frolic of his own by splitting the difference between the two parties’ figures by stating that he was effectively choosing between the two figures, both of which had an evidential basis and, in

36 [2004] EWCA Civ 1418.

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doing so, he was not coming up with the basis of assessment upon which the parties had not had an opportunity to comment upon: “Each series of sequential adjudications will be based on their particular facts. Akenhead J’s analysis does have general application in response to many of the criticisms and defence raised in resisting enforcement of second and subsequent adjudications, the task for the adjudicator is to decide what are the decisions that the previous adjudicator has made which are binding upon him and what is not a decision but rather reasoning or analysis, by which he may be properly persuaded, but which he is not bound to adopt.”

Recovering adjudication costs 23–063 The parties’ costs of adjudicating are generally not recoverable unless both parties submit to the adjudicator’s jurisdiction to award them. The question has been raised whether the Regulations would permit a referring party to claim its legal costs of adjudicating to recover a debt. Commentators have queried whether that would be contrary to s 108A of the Housing Grants, Construction and Regeneration Act 1996 (as amended by s 141 of the Local Democracy, Economic Development and Construction Act 2009), which prohibits any contractual provision preceding the notice of adjudication which concerns the allocation of the costs of the adjudication as between the parties. It seems that the provision in the Regulations creates a right to recover reasonable costs where payment is late and not met by the fixed sum (which adjudicators have regularly awarded since before the amendments were made to the Housing Grants, Construction and Regeneration Act 1996), rather than to the allocation between the parties of the costs of the adjudication. Nevertheless, it remains to be seen what will happen.

Illustrations (1)

Facts: Higgins Construction plc (C) engaged Aspect Contracts (Asbestos) Ltd (D) to conduct an asbestos survey of the Ivybridge Estate in Hounslow (the Estate). C contracted with a third party for the demolition and redevelopment of the Estate and that third party subcontracted the asbestos removal and demolition. More asbestos containing material (ACMs) was found than that discovered by D. According to C, this caused 17 weeks of critical delay by 27 September 2005. C later served notice referring the dispute to an adjudicator and the adjudicator decided that D should pay C the sum of £658,017, which D did. D later began proceedings to recover this sum on 3 February 2012 (much more than six years after their supposed breach of contract, or duty, in 2004, but less than six years after making the payment). D’s claim was met by a defence and counterclaim, claiming the amount claimed in the adjudication. The parties agreed to ask the court to decide four preliminary issues, as follows: (1) Was it an implied term of the parties’ contract that an unsuccessful party to adjudication would be entitled to seek a final determination by litigation and, if successful, recover payment made? (2) If there was such an implied term, what was the applicable limitation period for a claim seeking to enforce it? (3) What was the limitation period applying to Higgins’ counterclaim? (4) Did Aspect have a claim in restitution? Held, by Longmore LJ, that there was an implied term that a party to adjudication would be entitled to seek a final determination by litigation; that the limitation period for enforcement is six years from payment (as subsequently upheld by the Supreme Court); that the limitation period is six years

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(2)

(3)

from alleged breach and that no claim in restitution exists: Aspect Contracts (Asbestos) Ltd v Higgins Construction Plc37. Facts: Thames Water Utilities Ltd (TWU) engaged Thames Water Services Ltd (trading as Subterra) to carry out works and Subterra subcontracted this work to Tony McFadden Ltd (D). This was known as the NLSDA subcontract. On 31 August, Enterprise (C) agreed to buy the business and assets of Subterra. Subsequently, in 2005 and 2006, C engaged Subterra on another subcontract referred to as the “Lot 8 sub-contract”. Subterra later went into administration and liquidators were appointed. In 2009, D took an assignment from the liquidators of the NLSDA subcontract, amongst other things. Later, in 2009, TWU served a referral notice in an adjudication regarding the valuation of Subterra’s final account in relation to that subcontract. C commenced proceedings seeking 12 declarations against TWU, with the following principal issues: (a) Can D as assignee adjudicate the NLSDA claim against the C? (b) Does the adjudicator have the necessary jurisdiction to undertake this adjudication? Held, by Coulson J, that (1) an adjudicator can only deal with one dispute under one contract; thus, absent specific agreement, an adjudicator could never undertake the necessary task under r. 4.90 of the Insolvency Rules if there was more than one contract between the parties; (2) C had a cross-claim and considered that it would be entitled to the net balance from D; in order for this to happen, they would have to join the assignors, which could not happen in adjudication, because it is not possible to have a tripartite adjudication; (3) r. 4.90 envisages that the account will be taken and the balance decided in one set of proceedings, where the result will be final and binding; this would therefore rule out adjudication, because the results could only be obtained contract by contract; in addition, the adjudicator did not have the necessary jurisdiction to deal with the dispute; (4) the only extant claim between the parties was the claim by D as assignee for the net balance under r. 4.90; that was not the claim which was purportedly referred to the adjudicator; (5) no dispute had crystallised, since D did not notify C of the existence of their claim as assignees until the date they purported to refer the dispute under the NLSDA subcontract to adjudication: Enterprise Managed Services Ltd v Tony McFadden Utilities Ltd38. Facts: City and General (Holborn) Ltd (D/the respondent) was the freehold owner of a property in London (the property), which was divided into the following separate parts: Quality Court, 10 Furnival Street, the Library and Staples Inn. The profitshare agreement signed between the D and Cambridge Gate Properties Ltd (Cambridge) and Temple Guiting Manor Ltd (No 2) (Temple) contained the share of profits and losses of the development of the property as between these three parties, including the following provision: “On completion of the development it is intended to let on best terms reasonably obtained on the open market and thereafter sell the completed investment to enable the disbursement of profits being increased, with the option to take place at the earliest possible date.” D entered into a building contract with Kier Regional Ltd (C/the appellant) to carry out the development of the Library and Staples Inn. As the relationship between C and D deteriorated, there were a number of adjudications. One such came before Mr Ellis, where C was awarded £719,295.40 for loss and expense resulting from delays, for which C had already received extensions of time pursuant to previous adjudications. D did not pay this sum and C applied for summary judgment. Judgment was obtained and C later obtained a charging order in respect of the property. C subsequently made an application for third party debt orders against Cambridge and Temple and an interim order was made by Akenhead J, based upon Cambridge’s and Temple’s accounts

37 [2013] EWHC 1322 (TCC). 38 (2010) 26 Const LJ 204, [2010] EWHC 1506 (TCC).

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(4)

(5)

recording that the defendant was a creditor for substantial sums relating to the property. C sought to make the order final and Cambridge and Temple sought to persuade the learned judge that: (1) no debt was in fact due under the profit-share agreement until at least completion; and (2) in the alternative, to use his discretion pursuant to CPR Pt 72 not to make the orders final. Held, by Coulson J, that no debt was due; that the proper construction of the profit-share agreement was that no payment was due until completion, the building costs were ascertained and the profit and loss payable under the agreement could be fully assessed; that, if there were a debt, the discretion should be exercised against making final orders; that, in this case: (1) the order would significantly prejudice Cambridge and Temple since the adjudication principle of “pay now and arbitrate later” would not apply to them, they not being parties to the building contract; (2) the fact that the original adjudicator’s decision was based upon the adjudicator’s failure to take into account the two experts’ reports, as pointed out by Jackson J; that a stay of execution should be ordered as there were two ways to enforce Jackson J’s judgment: by way of a charging order and by way of a third party debt order; that imminence of the arbitration and the issues to be resolved within it justified making the stay sought by D: Kier Regional Ltd (trading as Wallis) v City and General (Holborn) Ltd39. Facts: Parkwood Leisure Ltd (Parkwood) provided facilities management services for a number of projects, including the Cardiff International Pool (the CIP). Cardiff City Council (the Council) owned the CIP, and let it to Orion Land and Leisure (Cardiff) Ltd (Orion). Orion sub-let the facility to Parkwood. Parkwood operated the facility for Orion and the Council. Orion engaged Laing O’Rourke Wales and West Ltd (LORWW) under a standard JCT design and build contract to complete the design of the facility and to carry out and complete its construction. On 6 December 2007 and before the works were completed, a deed was executed as between Parkwood and LORWW, under which the latter gave certain warranties, acknowledgements and undertakings to Parkwood (the collateral warranty). Problems arose over the following 30 months, with Parkwood making numerous complaints regarding alleged construction and commissioning defects, particularly in regard to certain air handling units (AHUs). Parkwood, its holding company, Orion and LORWW entered into a commercial settlement agreement. About a year later, Parkwood sought to enforce its rights under the collateral warranty, with claims of defective design and/or installation of the AHUs during the construction of the CIP. They claimed that these issues were entirely new and separate issues from those the subject-matter of the settlement agreement. Parkwood sought a declaration as to whether it was entitled to institute adjudication. Held, by Akenhead J, that, where one contracting party agrees to carry out and complete construction operations, it is an agreement “for the carrying out of construction operations”; that it needs to be determined in the light of the contract wording and of the relevant factual background to each such warranty to see whether, properly construed, it is a construction contract for the carrying out of construction operations, a very strong pointer to that end being whether, or not, the relevant contractor is undertaking to the beneficiary of the collateral warranty to carry out such operations; and that the collateral warranty in this case was indeed a construction contract for the purposes of Pt II of the HGCRA: Parkwood Leisure Ltd v Laing O’Rourke Wales and West Ltd40. Facts: Witney Town Council (C) entered into a contract on the JCT Design and Build form 2005 with Beam Construction Ltd (D) for the design and construction of a community hall in Witney, Oxfordshire. D submitted a “draft final account” and the claimant’s agent issued a certificate, which was subject to a 5% retention.

39 [2008] EWHC 2454 (TCC), (2009) 25 Const LJ 36. 40 [2013] EWHC 2665 (TCC).

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D later sent in a “final account” with some changes. C purported to terminate D’s employment on the grounds of a failure to proceed regularly and diligently. D’s staff arrived at site to find the locks changed, so that they could not obtain access. D’s claim consultant claimed that this was a fundamental breach of contract and, as a result, C’s right to withhold any retention moneys had been lost. C served a notice of adjudication and an adjudicator was appointed. C told the adjudicator that it considered that more than one dispute was being referred to adjudication and reserved its position. The adjudicator decided that £69,819 plus interest was due to D, which applied for summary judgment on the decision and C brought proceedings for declarations to the effect that it was unenforceable on the grounds that four disputes had been referred: (1) concerning the draft final account; (2) the actual final account; (3) a claim for interest on underpayment of retention, and (4) a claim for the payment of the whole retention based upon repudiatory breach. Held, by Akenhead J, that: (1) a dispute can comprise a single issue, or any number of issues within it, but does not necessarily comprise everything that is in issue between them at the time that one party initiates adjudication: Fastrack Contractors Ltd v Morrison Construction Ltd 41 considered; (2) one dispute (which was, what was due and owing to D) had been referred to adjudication and the adjudicator had had jurisdiction: Witney Town Council v Beam Construction (Cheltenham) Ltd 42.

41 [2000] BLR 168, [2000] All ER (D). 42 (2011) 27 Const LJ TL55, [2011] EWHC 2332 (TCC), [2011] 1 BLR 707.

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Dispute boards

Introduction Dispute boards in context The advantages of dispute boards Standing or ad hoc dispute boards DRBs, DABs and CDBs Dispute board rules Independence of the dispute board members Dispute board operations Enforcement of dispute board decisions Referral to a dispute board prior to arbitration Costs of dispute boards National and international developments

24–001 24–005 24–017 24–026 24–036 24–042 24–048 24–053 24–067 24–073 24–075 24–082

Introduction “. . .but with fairness to all involved. Above all, it needs teamwork. Management jargon calls that ‘seeking win-win solutions’. I prefer the immortal words of the Dodo in Alice’s Adventures in Wonderland, ‘Everybody has won and all must have prizes’. The prize is enhanced performance in a healthier atmosphere. It will involve deeper satisfaction for clients. It will lead to a brighter image and better rewards for a great industry.”1

24–001 The construction industry has been a paradoxical leader in both dispute occurrences and dispute resolution systems for many years2. 24–002 Dispute Boards (DBs) provide a contractual mechanism for proactive dispute avoidance and for rapid, real-time dispute resolution by a panel of normally three or one independent, impartial, experienced specialists. They have been used extensively on major construction projects worldwide, and are beginning to be used on other types of long-term contracts where rapid, cost-effective resolution of disputes is considered important. 1 Taken from the Foreword to the Latham Report, Constructing The Team (HMSO, 1984), in which Sir Michael Latham quotes from Lewis Carroll’s Alice in Wonderland. See also the article by Murray Armes at (2011) 27 Const LJ 552. 2 Richard J Gebken II and G Edward Gibson, “Quantification of Costs for Dispute Resolution Procedures in the Construction Industry” (July 2006) Journal of Professional Issues in Engineering Education and Practice.

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24–003 DBs have an established track record of (1) facilitating the parties to resolve differences and disputes that arise during construction; and (2) providing rapid recommendations or decisions on matters referred to them, which in most cases bring the dispute to an end without the need for arbitration or litigation. Users also report advantages in savings in cost and time in project delivery. 24–004 The DB works to assist the parties in the process of resolution of disagreements and disputes. It is in the hands of the parties, of course, as to whether a dispute will be resolved without the need for arbitration or litigation.

Dispute boards in context 24–005 The DB concept was developed in the United States, and has since been adapted and developed internationally, including within hybrid DB structures, which are discussed further below. The earliest reported use was on the Boundary Dam in Washington in the 1960s, where a technical ‘Joint Consulting Board’ was empowered to make decisions on matters in dispute. This was followed by a study in 1972 to improve contracting practices on tunnelling projects in the United States, and the publication in 1974 of ‘Better Contracting for Underground Construction’3. 24–006 In 1975, what is generally thought to have been the first DB was established for the Eisenhower Tunnel project in Colorado. As a consequence of the success of this approach, DBs started to become widely accepted in the United States. 24–007 The first international project using a DB was the El Cajon dam and hydropower project in Honduras commenced in 1980, where it was also found to be a success. The project was funded in part by the World Bank, and as international use of DBs began to grow, the World Bank also began to embrace and to promote the use of DBs. 24–008 The 1995 edition of The World Bank’s Standard Bidding Document was the first edition to incorporate a mandatory requirement for DBs, which were to be used on projects of value over US$50m4. At this stage, the concept was still for the DB to provide a recommendation for the resolution of a dispute referred to it – what is normally referred to now as a ‘DRB’. 24–009 FIDIC5 first adopted the DB in 1995 in its ‘Orange Book’ contract for DesignBuild and Turnkey6, which provided for the DB to give decisions rather than recommendations, under a mechanism described as a Dispute Adjudication Board, or ‘DAB’. 24–010 These decisions were binding, unless and until modified by arbitration. In 1996, FIDIC published a Supplement to the fourth edition of its Conditions of Contract for Works of Civil Engineering Construction, providing an optional clause for the use of a DAB; and DAB provisions were also introduced in 1997 into FIDIC’s pre-1999 ‘Yellow Book’, the Conditions for Electrical and Mechanical Works7.

3 Peter Chapman, “Dispute Boards on Major Infrastructure Projects”, DRBF conference paper, Brussels, November 2011; and Cyril Chern, Chern on Dispute Boards (Blackwell, 2008). 4 For contracts between US$10–50m, the borrower had the option of choosing a three-person DB or a one-person Disputes Review Expert (DRE) or could use the engineer where the engineer was independent from the employer/owner; however if the contract was for US$50m or more, a three-person DB was required. For establishing money amounts, contingency allowances were to be included. 5 Federation International des Ingenieurs-Conseils / International Federation of Consulting Engineers, see www.fidic.org. 6 Conditions of Contract for Design-Build and Turnkey, 1st edn (1995). 7 1997 Supplement to the 1987 3rd edn.

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24–011 The DAB was incorporated into the new FIDIC suite of contracts published in 19998, in the form of a “standing”, or “full-term”, DB for employer designed projects; or an “ad hoc” DB for design-build projects9, as discussed further below. 24–012 Other multilateral and bilateral lending banks have also embraced the incorporation of DBs into the projects that they finance10. The Japan International Cooperation Agency (JICA) in particular has initiated and financed a programme to establish and train DB users and members, and has published a Dispute Board Manual11 and a Dispute Board Training Kit for use in training those who wish to serve on DBs. 24–013 The DAB has since become the overriding form of DB on international projects outside the United States and Australia, promoted as it is through the FIDIC standard forms and many of the multilateral and bilateral lending banks. However in some regions, the standard construction contract clauses are still regularly amended to omit the DAB provisions. This is commonly the case in the Middle East, for example. 24–014 The concept has also been developed further, to extend beyond construction and into the operation of long-term concession projects; as seen, for example, in the FIDIC DBO standard form contract12 and the Sydney Desalination Plant project, Australia13. 24–015 The Dispute Resolution Board Foundation14, a not-for-profit worldwide foundation dedicated to promoting the understanding and use of DBs, now records DBs having been used on over 2,700 projects worldwide15.

8 The 1999 first edition, known as “the rainbow suite”. 9 When the FIDIC 1999 Editions were first published in their “Test Edition” and made available for comment, all of the DABs were “full-term” boards, established at the outset: there was no provision for an “ad hoc” board. A last-minute change was made to introduce ad hoc boards into the designbuild contracts, which was considered a controversial change by many. 10 A group of multilateral development banks participated in the preparation of the FIDIC MDB Harmonised Edition contract, a modification of the FIDIC Red Book, for adoption in their Standard Bidding Documents. This contract provides for the inclusion of DABs. The participating banks are: African Development Bank; Asian Development Bank; Black Sea Trade and Development Bank; Caribbean Development Bank; Council of Europe Development Bank; European Bank for Reconstruction and Development; Inter-American Development Bank; International Bank for Reconstruction and Development (World Bank). 11 See http://www.jica.go.jp/activities/schemes/finance_co/procedure/guideline/pdf/DisputeBoardManual_ 201203_e.pdf. 12 FIDIC Conditions of Contract for Design, Build and Operate Projects, 1st edn (2008), known as “the Gold Book”. Under this contract a DB is convened for the design-build period in the normal way, which appointment expires upon the issue of the Commissioning Certificate. The parties then jointly appoint a one-person Operation Service DAB for the Operation Service Period. 13 AU$1bn, design, build, operate and maintain project, delivered on time and under budget with no disputes, all matters settled by practical completion. See paper by Prof. Doug Jones for DRBF Singapore Conference 2014; and George Golvan QC, “Practical Issues in the Establishment and Operation of a Dispute Resolution Board: Some reflections on the operation of Sydney’s desalination plant project dispute resolution board” (2009) 132 Australian Construction Law Newsletter 30, 31. 14 See www.drb.org. 15 In Afghanistan, Australia, Austria, Bahamas, Belgium, Bosnia Herzegovina, Brazil, Bulgaria, Canada, Chile, China, Denmark, Dominican Republic, Ecuador, Egypt, Ethiopia, France, Honduras, Hungary, India, Indonesia, Italy, Kazakhstan, Kenya, Lesotho, Luxembourg, Madagascar, Mali, Mauritius, Moldova, Mozambique, Namibia, New Zealand, Pakistan, Panama, Paraguay, Peru, Philippines, Poland, Qatar, Romania, Slovak Republic, South Africa, Sri Lanka, Sudan, Tanzania, Trinidad, Turkey, Uganda, United Kingdom, Ukraine, United States, Vietnam and Zambia.

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24–016 There are also other dispute resolution procedures being developed internationally, which have parallels with some aspects of DBs: statutory and contractual adjudication, such as seen in the United Kingdom, Singapore, Australia, New Zealand and Malaysia; the use of Technical Panels for independent determinations. For example, on concession agreements in Chile by the “Panel Técnico de Concesiones”16; and on certain construction projects in Hungary by the Expert Body for Performance Certification17.

The advantages of dispute boards 24–017 The costs of disputes in the construction industry absorb a significant element of project investment; effectively diverting public and private funds away from capital projects. 24–018 A paper published in the United States in July 2006, ‘Quantification of costs for dispute resolution procedures in the construction industry’18 assessed transactional costs19 from 46 recently completed construction projects totalling over US$2bn of total installed costs, and concluded that the US construction industry was probably incurring transactional costs for construction dispute resolution of US$4–12bn or more each year20. 24–019 The 2009 US National Research Council paper, ‘Advancing the Competitiveness and Efficiency of the US Construction Industry’21, refers to estimated yearly transactional costs of disputes also at US$4–11bn per year. 24–020 In Australia following an extensive survey in 2005–200622 and assessment by a dispute avoidance and resolution task force23, the wasted costs of disputes is

16 Created in 2010 under Chilean Law No 20.410 of 20 January 2010, for Public-Private projects. Formed of a panel of five – two lawyers, two engineers and a specialist in finances or economics – with six-year appointments. It provides recommendations on technical and financial issues within 30 days of referral. 17 Under Legislation Act XXXIV of 1 July 2013. 18 Richard J Gebken and G Edward Gibson, published in the Journal of Professional Issues in Engineering Education and Practice. 19 Transactional costs are defined as the costs that are incurred because of the presence of a dispute including direct costs (such as fees and expenses paid to lawyers, accountants, claims consultants, and other experts), indirect costs (such as salaries and associated overheads of in-house lawyers, company managers and other employees who have to assemble the facts, serve as witnesses and otherwise process the dispute), and (to the extent that they can be measured) hidden costs (such as the inefficiencies, delays, loss of quality that disputes caused to the construction process itself, and the costs of strained business relations between the contracting parties). Transactional costs do not include monies paid out in settlement of a dispute. 20 The authors state that, looking at the aggregate data, almost 2% of the entire contract amount was expended on transactional costs. 21 National Academies Press, 2009, pp.11 and 18. 22 See Blake Dawson Waldron (now Ashurst), “Scope for improvement: a survey of pressure points in Australian construction and infrastructure projects”, 2006, https://www.ashurst.com/doc.aspx?id_ Resource=6134. 23 For the Cooperative Research Centre for Construction Innovation.

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estimated as exceeding AU$7bn a year indicating that approximately 5.9% of investment is being lost on disputes24. 24–021 It comes as no surprise, therefore, that public bodies looking to achieve best value of capital investment have looked to use DBs as a form of dispute avoidance to ensure effective project delivery. The Florida Department of Transport conducted an in-depth survey during 1999–2001 comparing projects using DBs with projects without DBs. As a consequence of the results of this survey they initiated the use of DBs on all of their projects. FDoT found that: Cost increases on projects were reduced where DBs were used. The average project cost growth during the survey period for projects without DRBs was 11.92%; the comparative average project cost growth projects with DRBs was 8.05%. Average increases in programme period were also reduced where DRBs were used. For projects without DRBs the average project time growth during the survey period was 28.96%. The comparative figure for projects with DRBs was 12.92%. There was also a progressive reduction in the number of disputes being referred to arbitration. At the commencement of the survey period, the number of arbitrations per year was varying between approximately 7–11; after the full implementation of DRBs the number dropped away to 0–2 per year. 24–022 The experience of the Washington Metropolitan Area Transit Authority in the United States (Washington Metro) shows similar benefits in project cost, programme and the reduction in disputes. As is explained by James R Haggins25: “In the early 1990s, litigation was taking an increasing toll on the Washington Metro’s resources, especially in the construction claims area. We were fast approaching several hundred million dollars in claims . . . The time and effort required of our people was mounting – not only the time needed by an attorney to prepare a case, but also the amount of management time needed for litigation support. The disruption to management was becoming unbearable. At one point there were nearly 350 docketed cases pending resolution before the Board of Contract Appeals and 70 Contracting Officer’s or Engineer’s Final Decisions were issued annually. The Board of Contract Appeals rulings were averaging five years and most contract disputes were never resolved until years after construction was completed . . . It doesn’t take long to realise that there must be a better way of doing business, avoiding disputes and building cooperative relationships . . . The Washington Metro made efforts to implement a combined 3-member DRB with a separate partnering process.

24 Queensland Department of Transport and Main Roads, Queensland Roads-edition 12, paper October 2012 by Prof Phil Evans, Deputy Dean and Professor of Law, Murdoch University, refers to the Australian construction industry undertaking some AU$120bn of non-residential construction work annually, and total wasted costs on disputes are estimated to exceed AU$7bn annually. Avoidable costs of 5.9%, and overall costs of more than AU$7bn – although it has been estimated at two or three times that – is presented as the cost of disputes to the Australian construction industry, according to a dispute avoidance and resolution task force publication Guides to Leading Practice for Dispute Avoidance and Resolution (2009), from the Cooperative Research Centre for Construction Innovation, see http://www. construction-innovation.info/images/pdfs/DAR_Guide.pdf. See also Dr P Gerber and B Ong, Best Practice in Construction Disputes (Lexis Nexis, 2013) and P Gerber and B Ong, “Look before you leap: avoiding the traps and maximising the benefits of your DRB” (2012) 28 Const LJ 310. 25 Article by James R Haggins in DRBF Forum magazine, vol.13, issue 3, August 2009.

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The results from partnering and the DRBs proved very beneficial . . . Where the principles of a three-member DRB providing non-binding and/or advisory recommendations have been utilised, we experienced better cost control, reduction in schedule growth, a significant reduction in paperwork, and successful attainment of our valued engineering objectives. However, most importantly, NONE of the contracts that embraced the principles of the DRB using non-binding recommendations and partnering have resulted in litigation. Also, other positive by products have been realised – no late deliveries, no fatal accidents, a significant reduction in work injuries and loss work day cases, improved quality work and a reduction in the amount of punch list work. I do not think these results are coincidental. I firmly believe that the success is directly attributable to the use of the principles of the Dispute Resolution Board through non-binding recommendations and partnering process.”

24–023 The Washington Metro has since invested US$1.5bn over nearly two decades, incorporating DRBs and partnering. In that time, there have been only six DRB traditional hearings and one informal hearing. The Board of Contract Appeals was discontinued within five years of including DRB and partnering provisions in the Metro’s major construction contracts. 24–024 Turning to China for another example, on the massive Ertan hydroelectric project, constructed over a nine-year period, all 40 of the DRB’s recommendations were adopted by the parties during the final settlement negotiations, thus resulting in a final account agreement in under six months after substantial completion of the works26. 24–025 Naturally, there will be various projects where the implementation of DRBs and DABs has not been so successful. Resolution of a dispute ultimately lies in the hands of the parties, and many factors may influence whether a recommendation or a decision from a DB is accepted, or is rejected and taken forward to arbitration or litigation.

Standing or ad hoc dispute boards 24–026 Dispute boards are established under the terms of the contract between the parties, and under an additional set of tripartite contracts between each DB member and the two contracting parties. The DB operational procedures, powers and duties are established under these contracts. 24–027 The contracts establish the procedural rules in all respects, including the process for formation of the DB27, operation of the DB28, co-operation of the parties29, payment, termination, and a limitation of liability of the DB members30, amongst other matters. 24–028 Importantly, the contract will provide for whether the DB is to be formed: 1. 2.

at the commencement of the project, and thereafter making regular visits to the site (‘Standing’ or ‘Full Term’ Dispute Board)’; or after a dispute has arisen which the parties have been unable to resolve by negotiation, and a party refers it to the DB for a recommendation or decision (“ad hoc” Dispute Board).

26 Peter Chapman, “Dispute Boards on major infrastructure projects”, DRBF conference paper, November 2011. 27 See for example Cll.20.2 and 3 of FIDIC MDB Harmonised Edition, Red and Yellow Books. 28 FIDIC 1999 suite, Appendix General Conditions of Dispute Adjudication Agreement and Annex Procedural Rules. 29 See FIDIC 1999 suite, Cl.20.4 para.3 and Annex Procedural Rules, para.4 (Red Book/MDB) or para.1 (Yellow Book); and ICC DB Rules art.11. 30 FIDIC 1999 suite, Appendix General Conditions of Dispute Adjudication Agreement, ss 6, 7 and 5(c) respectively;

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24–029 In either case, the normal process for the nomination and appointment of a three-person DB is that each party nominates one member for agreement of the other party, and then the two members propose and agree with the parties the chairman. In the case of one-person DB, the parties agree on the DB member. In the event of non-agreement, the contract normally provides for a binding appointment to be made by a named appointing entity or official, such as the President of FIDIC. 24–030 Standing DBs are considered to bring to the project an important advantage over ad hoc DBs; that of proactive dispute avoidance31. In this respect, a standing DB is unique in the range of alternative dispute resolution options, since all other options – for example mediation, conciliation, early neutral evaluation or arbitration – commence once a dispute exists. By comparison, a standing DB, being in place from the outset of the project32 when relationships are still at their best, and therefore with the opportunity to build up a detailed knowledge and understanding of the project and the parties during its site visits, is able to assist the parties in facilitating their resolution of differences as they arise, and before a difference escalates into a significant dispute which has the potential to impact on the delivery of the project. Standing DBs are provided for in typical standard form construction contracts such as the FIDIC 1999 Red Book33, 2010 MDB Harmonised Edition34 and 2008 Gold Book35 contracts, and in the ICC Dispute Board Rules 2004/2011. 24–031 By comparison, ad hoc DBs are formed only once a dispute exists and either party, having been unable to resolve it, decides to refer the dispute to a DB for a decision or recommendation. Thus the ad hoc DB procedure still retains the advantage of rapid dispute resolution, but loses the facility provided within the standing DB for proactive dispute avoidance. Ad hoc DBs are provided for in typical standard form construction contracts such as the FIDIC Yellow Book36 and Silver Book37 contracts38,39.

31 See for example the express terms in the FIDIC 2010 MDB Harmonised Edition contract in the Annex, Procedural Rules, para.2 final clause; the FIDIC 2008 Gold Book contract Cl.20.5; and ConsensusDocs DRB Addendum 200.4, para.5.6. 32 The appendix to tender/contract data will specify the time period within which the DB is to be appointed; FIDIC contracts typically provide a default period of 28 days after the commencement date. Disputes are known to have arisen where parties have failed to follow the contract procedure, and neither party has chosen to take steps to appoint the standing DB within the specified time period. If disputes later arise, and one party at that stage seeks to implement the contract terms for putting in place a DB, and if necessary turns to the default appointing body where the other party fails to co-operate, difficulties can often arise since the contract makes no express provision for how a late appointment should be effected. In this situation the construction contract and also the tripartite contracts with the DB members provide for a standing DB procedure, but because the parties have failed to follow this procedure they are now seeking to put into place what is effectively an ad hoc DB on different terms. 33 Conditions of Contract for Construction, for building and engineering works designed by the employer. 34 Conditions of Contract for Construction, MDB Harmonised Edition, for building and engineering work designed by the employer. 35 Conditions of Contract for Design, Build and Operate Projects. 36 Conditions of Contract for Plant and Design-Build. 37 Conditions of Contract for EPC Turnkey Projects. 38 A one-person ad hoc DB procedure will have many similarities to the well-established adjudication procedure found in the United Kingdom. 39 It is generally said that the reason for providing ad hoc DBs in the design-build FIDIC contracts was the consideration, at the time of the finalisation of the 1999 first editions, that due to the different balance of risk in a design-build contract and the contractor’s greater control over the process, that there was less need for a DB to be available to assist in the resolution of differences as the project proceeded. There is now, however, widespread consensus that even on design-build contracts, a standing DB is preferable.

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24–032 With an ad hoc DB, since the parties are already in dispute, attempting to reach agreement on the selection of DB members is difficult. Parties are more likely to be obliged to revert to the named appointing entity, such as the FIDIC President, and therefore the parties have no control of the choice of DB member. As a consequence, a feature of the DB process – that the parties can select and agree a mutually acceptable DB – is likely to be lost. 24–033 Additionally, if further disputes later arise, the parties may need to go through the same process each time to form an ad hoc DB, since experience shows that whilst it would be logical for the same DB member to be reselected by agreement, in practice at least one party is unhappy with the decision of the original ad hoc DB and so is unlikely to agree to re-select the same DB member for a subsequent dispute. 24–034 Accordingly there is strong support for standing boards in favour of ad hoc boards, and for ad hoc boards to be omitted from the subsequent editions of the FIDIC Yellow and Silver books in favour of incorporating standing boards. 24–035 The key stages of DB operation can be considered at four levels. Levels 1 and 2 are proactive roles that apply only to standing DBs. Levels 3 and 4 are reactive roles, responding to requests from the parties; level 3 applies only to standing DBs; level 4 applies to both standing and ad Hoc DBs. 1.

2.

3.

Invisible presence: feedback from users of DBs, as well as from the DB members themselves, indicates that where a standing DB is in place, the parties generally are more diligent in seeking to resolve matters between themselves in accordance with the provisions of the contract. Often the parties take exceptional steps to achieve resolution of disagreements, rather than “escalate” the issue to the DB, and high-level meetings may take place immediately prior to the visit of a DB to the project site, to reach agreement. Equally, the project engineer is mindful of the existence of the DB and its ability to review his/ her actions. This often leads to all matters being resolved directly between the parties, without the need for discussion with the DB. Informal assistance: an experienced DB will normally provide a valuable service to the parties during their site visits, in being able to facilitate effective communications between the parties to assist them in focusing on areas of potential risk to the project and resolving them on an ongoing basis40. Opinions: contracts typically provide that where the parties both agree, a DB may be requested to give its opinion on a matter referred to it41. It is then for the parties to decide how to continue their negotiations in the light of that opinion. The DB rules normally state that the DB and the parties are not bound by their opinion in the event of a future referral for a decision or recommendation42.

40 See for example, Gwyn Owen and Brian Totterdill, Dispute Boards, Procedures and Practice (Thomas Telford), Ch.6: “It is also often the case that the DB’s visit is also the only occasion when the senior project participants will actually visit the working areas of the site together. During these visits invaluable contact is made by these individuals and problematic matters are often discussed and appreciated during the visits for the first time, such that remedies and solutions are agreed to problems and a win-win and co-operative work ethic is built up through constructive dialogue and common understanding.” 41 See for example FIDIC MDB Harmonised Edition contract, Cl.20.2, para.7. 42 See for example ICC Dispute Board Rules, art.16, para.3.

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4.

Decisions/Recommendations: finally, and in its most formal guise, the DB is empowered by the contract to give decisions or recommendations (see further below) on disputes formally referred to it by either party.

DRBs, DABs and CDBs 24–036 In the event that a party formally refers a dispute to a DB, the contract terms will dictate whether the DB is required to provide a recommendation or a decision. DBs providing recommendations typically are described as Dispute Review Boards (DRB) and those providing decisions are described as Dispute Adjudication Boards (DAB). 24–037 Under the ICC Dispute Board Rules, there is also provision for a Combined Dispute Board (CDB)43, which, subject to the particular terms of these rules, may have the power to give either a recommendation or a decision. 24–038 For contracts incorporating DRBs, the contract terms provide that a recommendation is non-binding when issued. In some contracts the recommendation may become binding if neither party formally gives notice of its objection44 within a specified time-frame; or it may remain solely a recommendation and the contract requires a party expressly to accept it or reject it45. If a party chooses to object to a recommendation, then it can still negotiate to seek to agree a settlement on different terms. Equally, a party could choose to progress the matter to arbitration or litigation depending upon the provisions under the contract. In practice, there are numerous project examples that show that in the majority of cases DRB recommendations lead to the final resolution of the disagreement46. 24–039 For contracts incorporating DABs providing decisions, the contract terms normally provide that the decision is temporarily binding; the parties are obliged to comply with the decision promptly47 even if they object to the decision. If they register their objection within a specified period48 they may seek to re-negotiate or to overturn the decision by arbitration or litigation depending upon the provisions of the contract49 but such procedure does not escape the obligation to comply with the decision while that process is pursued. However a decision could become final and binding50, if neither party objects to the decision within the specified time-frame. 24–040 Around the world, with the different cultures of dispute resolution, different preferences have been established in favour of recommendations from DRBs or decisions from DABs. In some regions the prevailing view is that parties do not want a decision “forced upon them” by a DB, and would prefer to have a recommendation. This leaves them with greater flexibility to find a consensual resolution to the dispute, taking into account the recommendation of the DB. This is the common culture within the United States, for example, where almost all dispute boards are DRBs. In the case of the Washington Metro, as referred to above, US Federal agencies and those receiving 43 See ICC Dispute Board Rules 2004, art.6. 44 See AAA DRB Guide Specification, Cl.J.1, for example. 45 For example, see ConsensusDocs DRB Addendum 200.4, para.6.2.8.6. 46 See for example, the experience of the Washington Metropolitan Area Transit Authority in the United States as above. 47 See for example, FIDIC Red Book contract, Cl.20.4 para.4. 48 For example, FIDIC Red Book Cl.20.4 paras 5 and 6. 49 For example FIDIC Red Book Cl.20.6. 50 For example FIDIC Red Book Cl.20.4 para.7.

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federal funding did not have authority to use binding recommendations. Non-binding recommendations were found to be “very advantageous in the fair and equitable resolution of disputes”51. 24–041 In most other parts of the world, where DBs are used the preference is to have decisions from a DAB, and thus the resolution of the dispute is taken out of the hands of the parties. The parties are obliged to comply with the decision of the DB, at least in the short or medium term until the matter is further decided in arbitration or in court. In some regions, binding decisions are preferred because government officials (who are frequently the employer on major infrastructure projects) may not have the power to make payment solely on a recommendation; or, if making payment on a recommendation may be at risk of accusations of corruption52 since payment on a recommendation might be considered to be made voluntarily.

Dispute board rules 24–042 As described above, a DB exists by virtue of contractual agreement, and therefore the Dispute Board Rules forming part of the contract are critical in defining the procedures, powers and duties of the DB. 24–043 By far the most widespread sets of DB rules in use internationally are the rules bound into the FIDIC suite of contracts53. These are well established, well understood by many experienced users and DB members, and there are various, regular training workshops available for familiarisation with these rules. FIDIC specifically examines and accredits a very small number of potential DB members at the highest level to form its FIDIC’s President’s List of Approved Dispute Adjudicators54, and will select from this list when it is asked to appoint a DB member in the event of a party’s failure to make an appointment. 24–044 The ICC Dispute Board Rules55 are also in use internationally, particularly in Latin America for example. At the time of writing, the ICC has largely completed a review of these rules and is due to publish an update. These Rules are promoted for use in international commerce on any contracts that are expected to be mid and longterm contracts, not only for construction projects. 24–045 Within the United States, where the number of DBs is the greatest, the Dispute Board rules in use are most likely to be project specific; the AAA publishes a DRB Guide Specification56.

51 James R Haggins, as above. 52 The risk of government officials being exposed to allegations of corruption when making a commercial settlement of a dispute on the basis of a recommendation, is a recognised issue of concern in some regions. Local law may also prevent payment of a settlement amount by a public body made solely on the basis of a recommendation. 53 The 1999 edition Red, Yellow and Silver Books, the MDB Harmonised Edition 2004 and 2010 editions, and the Gold Book 2008 edition. Within the FIDIC contracts, the Dispute Board rules are found in Cl.20, in the General Conditions of Dispute Adjudication Agreement, and in the Procedural Rules. 54 See http://fidic.org/president-list. 55 The International Chamber of Commerce, Paris. See http://www.iccwbo.org/products-and-services/ arbitration-and-adr/dispute-boards/dispute-board-rules/. 56 See https://www.adr.org/aaa/faces/services/disputeavoidanceservices/disputeresolutionboards;jsessionid=D taiHF-uXhDOr msx2tHpmFH8ZMN3iZiT3EPLdzNTLt9XTlpuFL6a!657302444?_afrLoop=6263 89531547012&_afrWindowMode=0&_afrWindowId=null#%40%3F_afrWindowId%3Dnull%26_ afrLoop%3D626389531547012%26_afrWindowMode%3D0%26_adf.ctrl-state%3D4jke1fpsf_4.

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24–046 There are various other sets of Dispute Board rules published, some of which are quite recent, which are less used or not yet used. For example, the Institution of Civil Engineers (ICE) Dispute Board Procedure 2012; the Chartered Institute of Arbitrators (CIArb) Dispute Board Rules 201457; the Dispute Board rules forming part of the Engineering Advancement Association of Japan (ENAA) contract; the US ConsensusDocs DRB Addendum 200.458; the Centro de Análisis y Resolución de Conflictos de la Pontificia Universidad Católica del Perú Dispute Board Rules59; the Dispute Board Rules of the Centro de Arbitraje y Mediación, Cámara de Comercio de Santiago de Chile60; the Dispute Board Federation ad hoc Dispute Board rules61. 24–047 There are also hybrid Dispute Board rules62 which have been developed for specific, major projects often with multiple contracts, such as for: the London 2012 Olympics & Paralympics; the Rio 2016 Olympics and Paralympics “overlay contracts”; the European Union’s Joint Undertaking for ITER and the Development of Fusion Energy (F4E)63; the Channel Tunnel (UK/France)64; and Hong Kong International Airport65.

Independence of the dispute board members 24–048 The DB members must be independent, impartial and expert in the type of project. This is a cornerstone of the DB process. In many parts of the world owners, consultants and contractors express concerns about the impartiality of decisionmakers and tribunals, and parties turn to international DB members as being free from local allegiances and possible bias. The DB members are therefore, effectively, selected jointly by the parties66, such that each party has trust in the independence of all members. 24–049 FIDIC advises in its Contracts Guide: “In order to maximise the DAB’s chances of success in avoiding arbitration, its member(s) must be suitably qualified, impartial, and accepted and trusted by both Parties . . . It may therefore be reasonable to withhold approval to a proposed DAB member if it appears unlikely that he or she will ‘endeavour to reach a unanimous decision’. The reason for disapproval may be based upon reasonable grounds for anticipating that he or she will decline to discuss matters constructively with DAB co-members or to make a decision against one particular Party: typically, the Party nominating him or her. A member who is predictable (in the sense of generally favouring contractors or generally disfavouring contractors) may have difficulty with some of the finer points of one Party’s arguments, and/

57 See the Chartered Institute of Arbitrators’ website. 58 See the Chartered Institute of Arbitrators’ website. 59 See http://consensos.pucp.edu.pe/wp-content/uploads/2013/12/Carc-PDF.pdf. 60 See http://www.camsantiago.cl/Dispute_Board-reglamento.html. 61 See http://www.dbfederation.org/downloads/new-website-ad-hoc-rules.pdf. 62 Including “Panel of Experts” operating in the same way as a DB. 63 The F4E project has a six-person panel of experts/DAB. 64 The Channel Tunnel project had a five-person DRB. 65 The Hong Kong Airport had a six-person dispute review group plus a convener to cover approximately 20 main contracts awarded by the Hong Kong Airport Authority, with panels of one to three members selected depending upon the nature and complexity of the dispute. 66 The procedure under a FIDIC contract is that for a three-person DB, each party shall nominate one member for the approval of the other party; and the parties consult both of these members in order to agree upon the third member who shall act as chairman. See FIDIC Red Book Cl.20.2, para.3. The procedure under the ICC Dispute Board Rules is that the parties jointly appoint the DB members. See ICC Dispute Board Rules, art.7.

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or may have difficulty reaching a unanimous decision in favour of such Party. . .. Each Party should endeavour to nominate a truly independent expert with the ability and freedom to act impartially, develop a spirit of teamwork within the DAB, and make fair unanimous decisions.”67

24–050 Accordingly, the standard form tripartite agreement between DB member and the parties invariably requires the DB member to warrant his/her independence68. Some DB rules may also require the DB member to provide a separate declaration of their independence69. To assist in determining matters of possible conflict DB members may also make reference to international guidance used in arbitration, the International Bar Association “IBA Guidelines on Conflicts of Interest in International Arbitration”70. 24–051 The Dispute Resolution Board Foundation (DRBF) publishes a “Practices and Procedures Manual” which includes a Code of Ethics, and notes “The DRB’s role makes it essential that all Board members be trusted implicitly by the contracting parties. To this end, DRBF has established a Code of Ethics, which sets forth the key elements of the behaviors to which all Board members must subscribe in order for the DRB process to function effectively.”71 24–052 In order to avoid a risk of perception of possible bias FIDIC also advises in its Contracts Guide that for international contracts where the parties are of different nationalities, “The DAB may therefore perform better if the nationality of each member is not the same as that of either Party or of the other members (if any).”72

Dispute board operations 24–053 A consideration of DB operations can occupy an entire book; what follows here is therefore, inevitably, a brief summary. 24–054 Site visits are a key feature of a standing DB, which differentiates it from all other forms of ADR. When the DB is put in place at the outset of the contract, relationships are still at their best and there are no disagreements or disputes. The DB members build up knowledge of the project and of the parties during their successive visits in a co-operative environment. Equally the parties build up knowledge and trust in the expertise, independence and impartiality of the DB. 24–055 Typically the DB will agree with the parties to visit site three or four times a year73, starting as soon as their appointment is in place. During each site visit, the DB will meet with the parties and the engineer/architect together, with reference to an agenda prepared by the DB and agreed with the parties and the engineer/architect. It is important for the purpose of transparency of communications and the perception

67 The FIDIC Contracts Guide, p.307. 68 See for example the FIDIC Red Book Appendix General Conditions of Dispute Board Agreement, Cl.4(a)–(g). 69 See for example the Dispute Board Rules for Rio 2016 Olympics & Paralympics overlay contracts; and for the Centro de Arbitraje y Mediación, Cámara de Comercio de Santiago, Chile. 70 See http://www.ibanet.org/Publications/publications_IBA_guides_and_free_materials.aspx. 71 See http://www.drb.org/manual/Ethics.pdf. 72 The FIDIC Contracts Guide p.304. However, for projects where both parties are of the same nationality, the FIDIC guide recognises that the members of the DAB could also be residents of the same country. This could assist in the reduction of the cost of the DB via the reduction in travel expenses of the DAB members. 73 See ICC DB Rules art.12.1; and FIDIC 1999 Red Book, Annex Procedural Rules, para.1.

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of the independence of the DB that such meetings are conducted with all parties present, and the DB seeks at all times to avoid being with any one party alone. If agreed, a subcontractor might also attend the meeting in order to be available to discuss important subcontract works. 24–056 At the meetings, the DB will hear from the contractor, the engineer/architect and from the owner/employer, for an update on progress and to hear of any issues arising or matters of concern. The parties also hear each other’s presentations, of course, and often this is a chance for senior management who are not normally on site to hear about the project from all perspectives. The DB will avoid expressing an opinion on any controversial issue during these meetings, but may well ask questions for clarification and may ask to see further documents not previously provided. The DB rules typically provide that the parties have agreed to co-operate and to provide such further information to the DB as it requests. 24–057 During the site visit, the DB will tour the site together with the parties and the engineer/architect, to see the current status and progress of the works. The parties may take the DB to see specific parts of the works that are problematical, and equally the DB may request to see specific parts of the works. This site tour normally takes place after an initial meeting, such that the DB has already has received a briefing on progress and issues. After the tour of the site, meetings can continue. 24–058 With a DB of three or more members, the parties are often unaware of the dynamics between the different DB members. The DB members need to have time to discuss issues between themselves and will typically seek to build in some time during each site visit to allow them to confer together away from the parties, such that, so far as possible, they are able to work as a unified team. Over the course of successive site visits the DB members get to know each other and become used to working together, and understand and respect the different skills and experience that each member brings to the board’s discussions. 24–059 Upon conclusion of the site visit, the DB will prepare a site visit report. The DB rules typically require this to be issued before the DB leaves site74. 24–060 Between site visits the DB may also be provided with regular information by the parties. Typically the DB may request certain information, such as monthly contractor’s reports, and also the parties may choose to copy the DB in on material correspondence such as notification of a claim75. 24–061 Subject to the terms of the construction contract, the parties may jointly request the DB to provide an informal opinion on a matter where they have been unable to reach agreement. This can be a powerful tool to assist the parties in resolving a difference and avoiding it escalating into a formal dispute. The matter is often dealt with during a site visit. 24–062 In so far as the parties have been unable to reach agreement on a dispute, either party may refer it to the DB for a formal recommendation or decision, according to the procedures set out under the contract. The contract will provide an overall

74 FIDIC 1999 Red Book, Annex Procedural Rules, para. 4. 75 Whether a DB member undertakes work on the project between site visits may depend on the terms of his/her remuneration. Typically, the DB appointment provides for the DB member either to be paid a monthly retainer which includes for remaining conversant with all project developments, or to be paid on a per diem basis for work undertaken between site visits, as well as for the site visits themselves.

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timetable for the issue of this recommendation or decision: normal periods are 84 days (FIDIC) or 90 days (ICC) from receipt of the referral, unless a longer period is agreed. 24–063 The procedure to be adopted for the DB to reach its recommendation or decision, allowing for the parties to make their submissions and for the DB to consider those, is typically a matter to be determined by the DB76. Some DB rules, such as the ICC DB Rules, provide a framework structure. The general principle expressly provided for in the contracts is that each party must have a reasonable opportunity to present its case and to hear and respond to the case of the other side, subject to the overall time allowed77. The DB will manage the process taking into account the time limitations. A hearing may be necessary, but it should not be presumed that a hearing is required since some matters can be dealt with on a documents-only basis. 24–064 The DB appointment agreements normally require the DB to endeavour to reach a unanimous recommendation or decision; and in so far as is this is not possible, a majority recommendation or decision may be issued. Contracts vary as to whether any opportunity should be provided, or whether it is required, for the minority member in such situations to publish his/her own opinion78. 24–065 DB decisions normally remain private between the parties when issued. However, the DB rules typically provide that unless otherwise agreed, a DB decision shall be admissible in any subsequent judicial or arbitral proceedings involving the same parties79. Some public authorities, such as the Florida Department of Transport80, publish the DRB recommendations. 24–066 Further guidance can be found in the Dispute Resolution Board Foundation (DRBF) Practice and Procedures Manual81; and in the Dispute Board Manual published by the Japan International Co-operation Agency (JICA), March 201282. Guidance is also available in publications from experienced practitioners83.

Enforcement of dispute board decisions 24–067 For a decision given by a DAB, standard form contracts provide that the decision must be complied with promptly84. For such contracts courts and arbitral tribunals have confirmed the requirement of a party to comply promptly with a DB decision notwithstanding the issue of a formal objection to the decision and the referral of the dispute to arbitration or litigation.

76 For an example, refer to Table 7.1 of Gwyn Owen and Brian Totterdill, Dispute Boards: Procedures and Practice (Thomas Telford). 77 See for example, FIDIC 1999 Red Book, Annex Procedural Rules, para.5(a). 78 FIDIC 1999 Red Book provides at para.9(b) of the Annex Procedural Rules that it is for the majority of the members to decide whether they require that a minority member is to prepare a written report for submission to the employer and the contractor. ICC DB Rules makes it mandatory that a DB member who disagrees with the majority’s determination shall give reasons for his/her disagreement in a separate written report (art.23). 79 See ICC DB rules, art.25. 80 See http://www.dot.state.fl.us/construction/CONSTADM/drb/DRBMain.shtm. 81 http://www.drb.org/manual.htm. 82 See http://www.jica.go.jp/activities/schemes/finance_co/procedure/guideline/pdf/DisputeBoardManual_ 201203_e.pdf. 83 See Gwyn Owen and Brian Totterdill, Dispute Boards: Procedures and Practice (Thomas Telford) and Cyril Chern, Chern on Dispute Boards (Blackwell, 2008). 84 See FIDIC MDB Harmonised Edition Contract, Cl.20.4, paras 4–6.

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24–068 In a long running and much reported dispute between PT Perusahaan Gas Negara TBK (PGN) and CRW Joint Operation (CRW)85 (Persero), concerning a contract to design, procure, install, test and pre-commission a pipeline to convey natural gas from South Sumatra to West Java, under modified FIDIC Red Book contract terms, the Singapore Supreme Court stated in its judgment of the final appeal: “In our judgment, the following propositions cannot persuasively be disputed and bear emphasis: (a) (b) (c)

A DAB decision is immediately binding once it is made. . . The corollary of a DAB decision being immediately binding once it is made is that the parties are obliged to promptly give effect to it until such time as it is overtaken or revised by either an amicable settlement or a subsequent arbitral award. The fact that a DAB decision is immediately binding once it is made until and unless it is revised by either an amicable settlement or an arbitral award is significant. . . . the issuance of an NOD [notice of dissatisfaction] self-evidently does not and cannot displace the binding nature of a DAB decision or the parties’ concomitant obligation to promptly give effect to and implement it.”86

24–069 Courts in South Africa have been similarly clear in their support for the prompt implementation of a DAB decision even where the losing party has served a notice of dissatisfaction. In Tubular Holdings (Pty) Ltd v DBT technologies (Pty) Ltd 87, regarding a contract under the standard FIDIC Conditions of Contract, and the effect of Cll.20.4 and 20.6, Plessis AJ stated “The effect of these provisions is that the [DAB] decision shall be binding unless and until it has been revised as provided. There can be no doubt that the binding effect of the decision endures, at least, until it has been so revised . . . The notice of dissatisfaction does not in any way detract from the obligation of the parties to give prompt effect to the decision until such time, if at all, it is revised in arbitration. The notice of dissatisfaction does, for these reasons, not suspend the obligation to give effect to the decision. The party must give prompt effect to the decision once it is given.”88 In Stefanutti Stocks (Pty) Ltd v S8 Property (Pty) Ltd 89 Wepener J referred to the unreported decision in Esor Africa (Pty) Ltd/Franki Africa (Pty) Ltd JV v Bombela Civils JV (Pty) Ltd SGHC case no 12/7442, which concerned a DAB decision given under Cl.20.4 of the FIDIC Conditions of Contract, stating “whilst the DAB decision is not final, the obligation to make payment or otherwise perform under it is . . .” and further that “. . . The DAB process ensures that the quid pro quo for continued performance of the contractor’s obligations even if dissatisfied with the DAB decision which it is required to give effect to is the employer’s obligation to make payment in terms of the DAB decision and that there will be a final reconciliation should either party be dissatisfied with the DAB decision . . . .” Thus the court held that the 85 See PT Perusahaan Gas Negara (Persero) TBK v CRW Joint Operation [2010] 4 SLR 672; CRW Joint Operation v PT Perusahaan Gas Negara (Persero) TBK [2011] 4 SLR 305; and PT Perusahaan Gas Negara (Persero) TBK v CRW Joint Operation (Indonesia) and another matter [2014] SGHC 146. 86 Para.57, [2014] SGHC 146. 87 SGHC case no 06757/2013. 88 At paras 8 and 13. 89 SGHC case no 20088/2013.

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respondent was not entitled to withhold payment of the amount determined by the adjudicator. 24–070 In Persero the court addressed the process of enforcement of a DAB decision by arbitration. The court held that a dispute over a paying party’s failure promptly to comply with its obligation to pay a sum that a DAB decided it is liable to pay is a dispute in its own right that is capable of being referred to a separate arbitration, distinct from any arbitration that may have been commenced regarding the merits of the dispute which was before the DAB90. 24–071 There are also several ICC arbitration awards of relevance to enforcement of DAB Decisions, as published, anonymised, by the ICC: see ICC Cases nos 10619; 16122; 16948; 11813; and 16119. 24–072 For many practitioners, the problems, including cost, of enforcement and the consequences to future business relationships arising from enforcement proceedings suggest that in many cultures a DB which makes non-binding recommendations may be preferable to one that makes binding decisions, especially if the contract also has provision for international arbitration of disputes that cannot be negotiated to an amicable conclusion.

Referral to a dispute board prior to arbitration 24–073 Under the FIDIC contracts, a dispute may be referred to arbitration where a DB decision has not become final and binding, and has not been settled through the process of amicable settlement91; or alternatively where a DB is not in place92. 24–074 Courts have recently considered whether there is an obligation on a party to refer a dispute to the DB prior to having the right to proceed to refer the dispute to arbitration. Swiss Supreme Court decision 4A_124/2014, concerned a road contract under FIDIC terms. The Swiss Supreme Court held that, at least for international arbitrators sitting in Switzerland, the DAB procedures must be treated as mandatory, and an arbitration could not be commenced without going first to the DAB if the contract provided for this. Peterborough City Council v Enterprise Managed Services Ltd93. A case from the Technology and Construction Court, London in October 2014. This was a FIDIC Silver Book contract to design, supply, install, test and commission a 1.5 MW solar energy plant. A dispute arose and following an unsuccessful mediation the council sought to initiate court proceedings against EMS. Clause 20.8 had been modified to omit the arbitration provisions. The judge held that the contract required a dispute to be referred to adjudication by a DAB as a 90 PT Perusahaan Gas Negara (Persero) TBK v CRW Joint Operation (Indonesia) and another matter [2014] SGHC 146, para.83. 91 The FIDIC contracts do not define what, if any, steps must be taken in respect of attempts to resolve the dispute by “Amicable Settlement”. However, note the English case of Emirates Trading Agency LLC v Prime Mineral Exports Private Ltd [2014] EWHC 2014 (Comm) in which the judge, Teare J, held that a contract term requiring that “the parties shall first seek to resolve the dispute or claim by friendly discussion” before a matter could be referred to arbitration, was a condition precedent to the right to refer a claim to arbitration. 92 See FIDIC Red Book Cll.20.6 and 20.8. 93 [2014] EWHC 3193 (TCC).

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precondition of any action of the court. However since the contract had been amended to remove the arbitration clause, the point may still be arguable for an unamended FIDIC contract incorporating an arbitration clause.

Costs of dispute boards 24–075 Parties considering the use of DBs regularly ask about the likely costs compared with the benefits. 24–076 The costs of a DB are said to be offset by lower bid prices that are known to result when contractors prepare tenders on contracts that include DBs, particularly when working overseas. Whilst a tenderer will include half of the cost of the DB in their tender94, they should not need to inflate their price to cover what, without the DB, may be a risk of injustice or delay95. 24–077 Owners such as the Washington Metro and the Florida Department of Transport also record savings when a DB is used on a contract, gained from a reduction in increases in price and a reduction in delay to completion. Further savings are also recorded as a consequence of the reduction in number of disputes going forward to arbitration or litigation. 24–078 The actual costs of fees and expenses paid to DB members will vary depending upon the project and the DB96, and the degree to which the parties resolve or formally dispute their differences. At one extreme of the range will be a one-person DB on a national project, such as is found on many of the smaller Florida Department of Transport Road projects97. At the other extreme of the range is likely to be a major international infrastructure project where a three-person DB is appointed, formed from international members sourced worldwide and with associated travel and accommodation expenses. 24–079 Therefore a project-specific budget should be prepared for each project, taking into account likely daily fee rates for a DB member, whether transport and accommodation costs will be required, and considering the need for a monthly retainer fee and if so whether the retainer fee is to be a fixed fee per month, or a set number of working days per month. 24–080 With these factors in mind, statistics need to be interpreted accordingly. Research undertaken by the Dispute Resolution Board Foundation indicates DB costs varying between 0.05% and 0.3% of total project costs. However, equally, on major international infrastructure projects, higher costs have been reported, typically 0.5–1.0%

94 DB agreements normally provide that the parties share the DB fees and expenses equally. See for example FIDIC MDB contract appendix, general conditions of dispute board agreement, para.5. 95 Peter Chapman, “Dispute Boards on Major Infrastructure Projects” DRBF conference paper, Brussels, November 2011. 96 See for example Kathleen Harman, “To be or not to be – that is the question: is a DRB right to for your project?” (February 2011) Journal of Legal Affairs and Dispute Resolution in Engineering and Construction. 97 For smaller projects (typically less than US$3m) in each region, FDoT has a standing group of five DB members that hear all of the issues in the respective region.

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of total project cost98. This compares with reported savings on the outturn cost of the project of 3–5%, which savings substantially exceed the cost of the DB99. 24–081 The cost of a DB compares very favourably with the comparative cost of resolution of disputes via arbitration. In the 2006 paper, “Quantification of costs for dispute resolution procedures in the construction industry”100, based on analysis of data from 44 US construction projects of which 11 went to arbitration, the authors identify that for those disputes settled in arbitration, mean total transactional costs of approximately US$1.15m were incurred, with a median claim size of US$1.8m.

National and international developments 24–082 In the United Kingdom there have been several examples of the use of DBs in conventional one- and three-person form and in “hybrid” arrangements where there are more than three DB members: The Channel Tunnel project, which had a DRB of five persons. All five members heard all the disputes; with the final decisions made by a three-person panel composed of the chair and two other members chosen for their particular expertise. The Channel Tunnel Rail Link project, with a technical panel of engineers giving decisions on construction-related disputes and a finance panel giving decisions on disputes concerning the financial provisions of the concession agreement. The Docklands Light Railway extension to Lewisham which used three-person technical and financial panels chaired by the same person101. The London 2012 Olympics and Paralympics, which established a separate independent disputes avoidance panel and a disputes adjudication panel, in order to overcome concerns of compatibility with the particular requirements of local legislation. 24–083 The United States has long had an established use of DRBs, as noted above. The Dispute Resolution Board Foundation project database102 records over 2,400 such projects in the United States. These extend across projects for tunnels, highways, water projects, buildings of all types103, bridges, airports, hydro-electric power projects, sports stadia and others. 24–084 In Australia DRBs and DABs are gaining a significant, successful track record across more than 50 major projects including PPP projects. Details can be seen on the Australian chapter website of the Dispute Resolution Board Foundation104 covering

98 One experienced practitioner also refers to DB fees and expenses extending up to 2% of total project costs on confrontational projects. 99 See Graeme Peck, “The benefit/cost equation for dispute boards – Australian experience” (2014) 18(2) DRBF Forum magazine. 100 Richard Gebken II and G Edward Gibson, Journal of Professional Issues in Engineering Education and Practice. 101 Peter Chapman, “Dispute Boards on Major Infrastructure Projects” DRBF conference paper, Brussels, November 2011; and Cyril Chern, Chern on Dispute Boards (Blackwell, 2008). 102 http://www.drb.org/. 103 High-rise towers, science buildings, justice centre, correctional facility, convention centre, art gallery, business school and others. 104 http://www.drbf.org.au/.

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major road projects, complex plant, port expansion, rail links and suburban train sets, tunnels, dams, tunnels and power projects amongst others. 24–085 In Latin America DBs are in use on major projects such as the Panama Canal widening contract, the Coca Codo Sinclair hydroelectric project in Ecuador105, and in 35 “overlay contracts”106 for the 2016 Olympic and Paralympic Games in Rio de Janeiro. In Peru, country-specific Dispute Board rules have been published and in 2013 amendments were made to the Framework Law for Public–Private Partnerships to include DBs as a dispute resolution mechanism prior to arbitration, which are expected to be developed further by the government in 2015–2016. In Chile, in 2014 the Centro de Arbitraje y Mediación (CAM) entered into a collaboration agreement with the Dispute Resolution Board Foundation for the training of DB members for the establishment of a list of members for national projects, in collaboration with the Cámara Chilena de la Construcción. 24–086 In Europe DBs are in use on a wide variety of energy projects including wind farms and major power projects, as well as road, rail, water supply, sanitation and building projects. 24–087 In Africa, DBs are in use on a range of power, infrastructure and road projects as well as building and high-rise projects. 24–088 Projects in Asia and the Far East continue to make use of DBs on major dams and hydro projects, road and water supply projects, amongst others. 24–089 Further growth in the use of DBs is expected as the drive for effective procurement continues and the need for collaboration in effective dispute resolution is highlighted when compared with the cost of arbitration or litigation.

105 http://www.cocacodosinclair.gob.ec/el_proyecto/. 106 For non-permanent works.

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CHAPTER 25

Mandatory laws in international construction contracts

Introduction Private international law Time-bar clauses Liquidated damages Taking-over (practical completion) Decennial liability

25–001 25–006 25–010 25–013 25–017 25–023

Introduction “Speak in French when you can’t think of the English for a thing. . . .He’s an Anglo-Saxon Messenger – and those are Anglo-Saxon attitudes.”1

25–001 The vast majority of legal literature generally discusses the “law” of construction contracts by first providing an overview of the parties’ freedom to choose the “governing” law2 of their contract followed by a discussion of the national courts in which the parties intend any disputes to be resolved (“jurisdiction”). Such a line of review will then move onto discussing the choice of law, conflicts of law and international disputes resolution, in particular, arbitration. These issues are of pertinent relevance to parties in construction contracts and there exists a plethora of legal literature relating to this legal topic; however, what about the operation of the mandatory law on the construction contract? What issues ought parties to consider when dealing with the mandatory law of their construction project? In what manner does the mandatory law affect a party’s ability to claim delay and damages, or argue extension of time, for disruption claims? This new chapter will endeavour partly to fill the “black hole” in construction law literature on mandatory laws in construction contracts, by providing a brief overview of the significance of mandatory law and how such law affects the operation of construction contracts under various legal “families” around the globe. 25–002 There exist various definitions of “mandatory laws”3, with the most consistently quoted amongst legal scholars as follows: “A mandatory rule [law] . . . is an imperative provision of law which must be applied to an international relationship irrespective of the law that governs the relationship. . . In 1 Lewis Carroll, Through the Looking Glass (1877), chs 2 and 7. 2 The term “applicable law” will be used at times interchangeably with “governing law”; however other legal literature may use the term to mean mandatory law. 3 The definition may vary in accordance with (or within) the legal instrument which it is used, for example, provisions with respect to mandatory rules under Art.3(3) differ from Art.9 of Council Regulation (EC) 593/2008 of 17 June 2008 (“Rome I”). The difference is discussed below.

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matters of contract, the effect of a mandatory rule of law of a given country is to create an obligation to apply such a rule, or indeed simply a possibility of doing so, despite the fact that the parties have expressly or implicitly subjected their contract to another country.”4

25–003 Thus, irrespective of the governing law that parties agree to under the construction contract, the mandatory laws will take priority and, where stated, invalidate any term or condition to the contrary. This may be explicitly stated in the statute or civil code or determined by the courts as being mandatory law. For example, the Housing Grants, Construction and Regeneration Act 1996 (“Construction Act”) explicitly states that the part dealing with construction contracts will apply irrespective of the applicable law5 (note that the Construction Act only relates to carrying out construction works in England, Wales or Scotland6). Thus if the construction works are in England, D is from Germany, C from Serbia and Swiss law applies, the provisions of the Construction Act will still apply irrespective of parties choosing Swiss law. Generally, mandatory laws focus on protecting political, social and economic interests driven by public policy, whether national or international7. These can be either procedural, such as the method of determining the damages amount, or they can be substantive, matters relating to rights and remedies available to parties, for example the remedies available to parties upon terminating a contract. The application of the mandatory laws on construction contracts are best understood by the following examples: 25–004 Example 1: In England, the Construction Act allows parties to a “construction contract” to refer a dispute to adjudication under the procedure outlined in the Construction Act8. For instance, the appointment of an adjudicator should take place within seven days of notice being given9 and the adjudicator must reach a decision within 28 days of referral10. If the construction contract does not contain terms and conditions reflecting these statutory requirements for adjudication, irrespective of the governing law selected by parties, the statutory scheme under the Construction Act will apply11. Thus, if parties are using the FIDIC form of contracts as the “construction contract”, this will have to be amended to reflect the requirements of the Construction Act – the adjudication dispute resolution procedure in sub-cl.20 does not comply with the Construction Act. For example, the adjudicator has a lengthy period of 84 days to reach a decision from the date of first referral12.

4 Prof. Pierre Mayer, “Mandatory Rules of Law in International Arbitration” (1986) 2 Arbitration International 274, 275. 5 Section 104(7), Part II. 6 Section 104(6)(b), Part II. 7 See Article 9(1) of Rome 1; Marc Blessing, “Impact of the Extraterritorial Application of Mandatory Rules of Law on International Contracts” (1999) 5. 8 Section 108(1). 9 Section 108(2)(b). 10 Section 108(2)(c); note that parties can agree to a longer period than the 28 days required under statute. 11 Section 108(5). 12 FIDIC, Conditions of Contract for Construction: For Building and Engineering Works Designed by Employer, 1st edn (1999) (“FIDIC Red Book”). References to any sub-clause in this section shall mean a sub-clause from the FIDIC Red Book.

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25–005 Example 2: In France, the Law on Subcontracting13 protects subcontractors against the risk of non-payment by C14. The highest court in France (the Cour de Cassation) has ruled that this is mandatory law in France and thus any contractual clause aiming to avoid it is null and void15. In this matter, a Belgian D contracted with a German C for delivery of certain products and erection of machines for construction works of a fibreboard plant in France, the contract being governed by Swiss law16. The German C commissioned three German subcontractors for its works, such subcontracts being governed by German law. When one of the subcontractors was not paid because of bankruptcy proceedings against one of the other German subcontractors, it started a direct claim before the French courts against the Belgian D. The French court determined that the Law on Subcontracting was mandatory law in France and protected subcontractors involved in any project being carried out in France. The subcontractor was permitted directly to claim against the Belgian D, despite the subcontract containing no term allowing a direct claim against the Belgian D (or German law).

Private international law 25–006 Private international law is the body of legal rules and principles that focus on governing legal issues such as private contracts or torts with an international element between businesses and individuals (the converse to this is “public international law” which deals with the legal relationship between nation countries). Private international law rules are local rules particular to a country or “community” such as the European Community. The rules traditionally revolve around three subject areas: the jurisdiction, governing law and recognition and enforcement of foreign judgements (this chapter will not deal with the latter two). The principle of party autonomy holds that parties are free to select the governing law for their contractual arrangement17. The legal literature strenuously encourages parties to determine governing law from the outset so as to avoid lengthy and costly court proceedings determining this issue18. Where parties have failed to insert a governing law clause or the clause is ambiguous then rules (whether by conventions or statute) are required to resolve this issue, that is “conflict of law” rules. 25–007 In comparison to other countries the European Community has been quite progressive with respect to introducing European conflict of law rules for determining 13 Law on Subcontracting (n°75–1334). 14 Under art.12, Law (n°75–1334), a subcontractor has the right to commence direct action against D should C fail to pay the monies due by virtue of the subcontract, one month after notice to pay is given; however Article 13 limits this to the amount D still owes to C. 15 Cour de cassation, 3 civ., 25 February 2009, No P07–20.096; Cour de cassation, 3e civ., 30 January 2008, No 06–14.641; Cour de cassation, chamber mixte, 30 November 2007, No 06–14.006. 16 Cour de cassation, 3e civ., 30 January 2008, No 06–14.641. 17 This principle of law is found in both common and civil law countries, for instance in England and Wales in the case Vita Food Products Inc v Unus Shipping [1939] AC 277, or in France in the case American Trading v Quebec Steamship, Cour de cassation (Chambre civile), 5 December 1910. 18 In Apple Corps Ltd v Apple Computer Inc [2004] EWHC 768 (Ch) was a dispute between parties on the proper jurisdiction for a trademark claim under their Trade Mark Agreement. Parties were represented by experienced lawyers (English and US) and negotiated the jurisdiction and governing law clause of the agreement over many months; however given that no acceptable ground was reached it was decided that these clauses would be omitted. Thus the court in England was to decide the issue where HH Mann J succinctly stated, “If their [the parties’] intention in doing so was to create obscurity and difficulty for lawyers to debate in future years, they have succeeded handsomely.”

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the governing law of a contract when this does not exist, in particular, the Rome I Regulation19. This regulation has broad exposure where parties do not even need a European Community connection – any law may be agreed as the governing law of the contract, whether or not it is the law of a European Community member state20. The general rule followed under Rome I when no governing law clause exists in the contract is that the law of the country most closely connected to contract will apply21. However there are various types of contracts that have their own rule prevailing over the general rule, such as contracts for the sale of goods22 or services23 where in these instances the laws of the habitual residence of the supplier or service provider, respectively, shall apply24. For other contracts the applicable law is the law of the country where the party required to effect the characteristic performance has his habitual residence25. However, there is an “escape clause” that will allow a court to apply the laws of another country to the contract, other than provided under the regulations such as habitual residence, if the contract is manifestly more closely connected with another country26. Additionally, there is reference to a second set of contracts such as contracts of carriage or consumer contracts that have own their regime for determining the applicable law27. 25–008 Although parties have the right to “party autonomy” there are limits on the freedom to choose the governing law for the contract. First, Art. 3(3) of the Rome I Regulation prevents parties from avoiding mandatory laws of a country where all elements relevant to the situation at the time of choosing concern one country, but the parties selected a different country’s law – the rules of the first country that cannot be derogated from by contract will nevertheless be applied. For example, English D and C enter into a construction contract for construction works in England; however parties have chosen German law. Secondly, Art. 9 of the Regulation permits a forum to apply “overriding mandatory provisions” to a contract being neither the agreed applicable law between parties nor the applicable law in the absence of any agreement. The term “overriding mandatory provisions” is defined as provisions regarded as crucial for safeguarding a country’s public interests28, ie when public policy interests are at stake. Thirdly, the regulations are quite clear in stating that nothing in the regulations shall restrict the overriding mandatory provisions of the law of the forum29. Fourthly, in 19 Rome I Regulation replaced the Convention (EEC) No 80/934 of 19 June 1980, “Rome Convention”. Rome I applies to all contracts entered into between parties post 17 December 2009 whereas the Rome Convention will apply to contracts prior to this date. 20 Preamble 6, Rome I. 21 Article 4(4), Rome I. 22 Article 4(1)(a), Rome I. 23 Article 4(1)(b), Rome I. 24 Art.4(1), Rome I, covers other types of contracts which include immovable property, franchise contracts or distribution contracts; however these contracts are not relevant to the contents of this chapter. 25 Art.4(2), Rome I, contracts other than those stated in Art.4(1) or if the contract is covered by more than one point of the contracts referred to in Art.4(1). 26 Art.4(3), Rome I. 27 Art.5, Contracts of Carriage; Art.6, Consumer Contracts; Art.7, Insurance Contracts and Art.8, Employment Contracts, Rome I. Each form of contract has its own regime, for instance for contracts involving the carriage of goods, the country of the habitual residence of the carrier is the applicable law, provided the place of receipt or delivery or habitual residence of consignor is not situated in that country. If these requirements are not met, the laws of the delivery country shall apply, Art.5(1). 28 This includes, political, social or economic organisations, Article 9(1), Rome I. 29 Art.9(2), Rome I; “Law of the forum” means the law of the court or arbitration which is allowed to hear and determine disputes under the contract. This is covered under the jurisdiction clause of a contract.

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contractual claims, effect may be given to overriding mandatory rules of a country other than that of the forum or the governing law, which render unlawful the performance of the contract in that other country30. Finally, and only in the most exceptional cases, Art. 21 of the Regulation provides the forum with the authority to refuse to apply the law of the country if such application is manifestly incompatible with public policy (“ordre public”) of the forum. 25–009 The following parts of this chapter are now dedicated to giving some examples of how the mandatory law operates irrespective of the construction contract terms or the governing law that may apply to common construction law principles under different systems of law.

Time-bar clauses 25–010 In English construction, contracts time-bar clauses are readily used and state that upon failure of one party to perform an event within a specified time period then that party loses certain rights and benefits permitted under the contract. The FIDIC forms of contract follow the English position and state if C believes he is entitled to claim an extension of time or additional payment then he must give D 28 days’ notice of when he became aware of the event giving rise to the claim. Failing this, C shall lose his entitlement and D will not be required to pay31. Under English law time-bar clauses construed as “condition precedent” are strictly upheld with C losing his right to claim an extension of time or additional payment32. In Germany the mandatory laws predicate the complete opposite wherein time-bar clauses in a construction contract similar to FIDIC forms will be held void. Under German law the FIDIC forms of contract would be construed as general terms and conditions (“Allgemeine Geschäftsbedingungen”) (AGB). In short, AGB are general terms and conditions used in commercial dealings between the consumer and business or business to business. The German Civil Code § 305 defines the AGB as: “Standard business terms are all contract terms pre-formulated for more than two contracts which one party to the contract (the user) presents to the other party upon the entering into of the contract.”

25–011 The relevant sections of the German Civil Code dealing with AGB provide protective measures for consumers or businesses using the AGB. The central norm of the AGB section is found in German Civil Code § 307, which reads as follows: “Provisions in standard business terms are ineffective if, contrary to the requirement of good faith, they unreasonably disadvantage the other party to the contract with the user.”

25–012 This open-ended norm has paved the way for granting German courts broad scope in interpreting whether a clause is void or not. With respect to time-bar clauses, these have been interpreted by the German Supreme Court (Bundesgerichtshof) as void. 30 Art.9(3), Rome I. 31 Cl.20.1, however the Gold Book provides for an extension of the 28-day notice period. 32 Notice requirements in construction contracts have been determined by the English courts as directory, not mandatory and that C may not necessarily lose its entitlement to a claim (Temloc v Errill Properties (1988) 39 BLR 30), unless expressly stated in the contract that C will lose its rights to additional time and/or money for non-compliance (Bremer Handelgesellschaft mbH v Vanden Avenne Izegem PVBA [1978] 2 Lloyd’s Rep 113). Note that in Obrascon Huarte Lain SA v Attorney General for Gibraltar [2014] EWHC 1028 (TCC), Akenhead J determined that Cl.20.1 was a condition precedent clause.

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This was decided in the case BGH 20 December 1990 where D amended Cl.2(6) of the VOB/B General Terms and Conditions (ie German standard form of construction contract) from allowing C to claim additional payment for works not provided under the contract to a time-bar clause stating that if no notice was given within a certain time period, then C would lose his right to claim (ie a condition precedent similar to Cl.20.1). C encountered an unforeseen event and did not provide notice within the requisite time period. The court held that an attempt to exclude the right to claim additional payment was void. The rationale was simple: D cannot be expected to obtain the benefit of works free of payment because of C failing to notify within the time period.

Liquidated damages 25–013 Construction contracts customarily contain a clause for C to pay liquidated damages (or liquidated and ascertained damages (LADs) to D for breach of contract, generally for delay caused in failing to complete the construction works by take-over date (or practical completion date) or failing to meeting a particular performance requirement. Liquidated damages are the level of damages agreed between parties representing a genuine pre-estimate of D’s likely loss that it will suffer from a specified breach occurring. Under English common law, if they are not a genuine pre-estimate then this can be considered a penalty by the courts and will be unenforceable33. D does not have to prove that it actually suffered the loss amount and will be entitled to the agreed liquidated damages amount even if the actual loss suffered is lower. Over time, the English courts have developed basic principles to differentiate between penalties and liquidated damages, for instance the amount must not be extravagant and unconscionable34 and must have a commercially justifiable purpose35. Additionally, the liquidated damages clause must encourage compliance with the contract rather than coerce, with the primary purpose being to compensate the innocent party36. Under the FIDIC forms of contract C is required to pay delay damages (liquidated damages) for failing to complete works within the relevant time for completion37. The amount is a fixed daily rate as agreed between parties with the FIDIC Guide suggesting this should be a reasonable estimate of the employer’s (D’s) losses38. 25–014 The English law position is quite clear, but how are delay damages dealt with under the mandatory law of the UAE? UAE Civil Code recognises liquidated damages and allows parties to determine a fixed amount of “compensation” in advance39. Article 390(1) read as follows: “The contracting parties may fix the amount of compensation in advance by making a provision therefore in the contract or in a subsequent agreement, subject to the provisions of the law.”

25–015 Although in the UAE there is no specific distinction between genuine preestimate of damages and penalties, Art. 390(2) of the Civil Code grants the courts

33 34 35 36 37 38 39

Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1914] UKHL 1. Alfred McAlpine Capital Projects Ltd v Tilebox Ltd [2005] EWHC 281 (TCC). M&J Polymers Ltd v Imerys Minerals Ltd [2008] 1 All ER (Comm) 893. CMC Group v Michael Zhang [2007] EWHC 3454 (TCC). Cl.8.7, FIDIC Red Book. The FIDIC Contracts Guide, 1st edn (2000), p.177. Art.390(1), UAE Civil Code.

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discretion to vary the parties’ agreement on the agreed compensation to reflect the amount actually suffered by the injured party. Article 390(2) is the mandatory law that parties cannot contract out of and reads as follows: “The court may, on the application of either party, vary such agreement so as to make the compensation equal to the loss and any agreement to the contrary shall be void.”

25–016 The Dubai courts have shown that they will modify the liquidated damages to the amount actually suffered by D if this is challenged by C. For instance, in case number 138/94 before the Dubai Court of Cassation, C contended that the liquidated damages provision was expressed in the contract to be a “penalty” for delay in completion and the judge amended this to reflect an amount actually suffered by D40. This approach clearly differs from the English courts, which will generally enforce the conditions agreed and not interfere between parties. Noteworthy is that if C’s default has caused D to suffer more than the liquidated damages agreed in the contract D may also apply to the courts and request an increase in the liquidated damages amount payable by C. The burden of proving the actual loss suffered (and its variance from the damages specified in the contract) will be on the party seeking the variation. In the context of C’s delay in the time for completion, if Cs claim for a liquidated damages amount is too high then he will need to provide evidence of the loss actually suffered by D. D may also have to submit evidence if it is argued by C that the loss suffered was minimal. Conversely, if the loss suffered by D is more than the liquidated damages agreed then D must provide evidence that the amount agreed does not reflect D’s actual losses.

Taking-over (practical completion) 25–017 Taking-over (or “practical completion” as it is known in English standard construction contracts) appears to be a term that has no authoritative definition. The two leading House of Lords decisions (and two courts of the first instance) limited to dicta and construction law literature define taking-over as follows41: 1. 2. 3. 4.

practical completion means the completion of all the construction work that has to be done; a certificate of practical completion may not be issued if there are patent defects; the works can be practically complete notwithstanding that there are latent defects; the architect (or CA) has a discretion to certify practical completion where there are very minor items of work left incomplete, on de minimis principles.

25–018 It is possible to surmise from this that taking-over means C has finished all works and D can take occupation of the works with some small insignificant items

40 The courts also have the option of determining the liquidated damages clauses as unenforceable. 41 S Furst and V Ramsey, Keatings on Construction Contracts, 9th edn (London: Sweet & Maxwell, 2012), p.894. Note that this definition is given in the context of practical completion under the JCT form of construction contract. The two House of Lords cases cited as obiter are Jarvis & Sons v Westminster Corp [1970] 1 WLR 637 and P&M Kaye v Hoiser & Dickson Ltd [1972] 1 WLR 146.

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incomplete. Under the FIDIC forms of contract, works (or each section) are taken-over by D when works have been completed in accordance with the contract42 and a takingover certificate has been issued. The FIDIC forms do not provide a definition for takingover; however the point at which taking-over occurs (or is deemed to occur) is clear. C applies to CA for a taking-over certificate when believing the works are (or will be) complete and CA is required to either issue the same certifying works are completed except for minor outstanding works and defects that will not substantially affect the use of the works or their intended purpose or reject C’s certificate request43. Takingover has a pivotal effect on the construction contract as the consequences that follow taking-over change the rights, liabilities and obligations of D and C considerably – the most notable being that D can no longer claim for delay damages44, the risks for the care of the whole works passes to D45 and half of the retention monies must be returned to C46. 25–019 Unlike taking-over in England, which is normally outlined under the construction contract, in Romania the procedure for taking-over is governed by mandatory laws. Article 3 of Regulation 273/1994 provides for a two-step procedure for taking-over as follows: Step 1: “Receptie la terminarea lucrarilor” – taking-over after the completion of works being similar to taking-over under the FIDIC forms. C informs D that the works are complete and D commences the procedure of “receptie la terminarea lucrarilor” by prompting the “Taking-over Commission”47. The Taking-Over Commission inspects all the documentation and determines the following: 1.

2.

Compliance with the requirements of the building permit and of the relevant authorities (“Avize”), for instance, health and safety authorities such as fire department; and Compliance with all the contractual and essential legal requirements.

25–020 The Taking-over Commission submits a proposal by issuing a “process verbal” for acceptance of the taking-over with or without objections, delay of taking-over or rejection of taking-over, depending on the nature and severity of the determined defects (Art. 15, Regulation 273/1994). D has the option to either accept or reject the proposal and must notify C of its decision and attach a copy of the “process verbal” (Art. 21, Regulation 273/1994). 25–021 Step 2: “Receptie finala” – taking-over after final inspection and “acceptance” following expiry of the warranty period (defects notification period) being similar to the performance certificate issued under the FIDIC forms at the end of the defects notification period. D is required to commence the procedure no later than 15 days after expiry of the defects notification period in contract. The Taking-over Commission will examine all the relevant documentation to ensure that there are no defects or any notified defects have been rectified. The Taking-over Commission has the 42 Cl.10.1, FIDIC Red Book. 43 Note that if CA fails to issue a taking-over certificate or rejects the certificate request within 28 days and the works are substantially complete then a certificate will be deemed issued: Cl.10.1(a) and (b). 44 Cll.8.7 and 10.2, FIDIC Red Book. 45 Cl.17.2, FIDIC Red Book. 46 Cl.14.9, FIDIC Red Book. 47 The Taking-over Commission is required to be created by law and includes persons nominated by D such as local council, engineer and any other persons determined by D. The size of construction works will determine how many people and who ought to be on the Taking-over Commission.

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option to reject issuing the final process verbal proposing the final taking-over if essential requirements have not been met. If the final taking-over is rejected, the building cannot be occupied and used (Arts 37 and 38, Regulation 273/1994). D has the option to accept or reject the decision of the Taking-over Commission and must notify C accordingly (Art. 38, Regulation 273/1994); note that only in rare circumstances is one of the two process verbal not issued favourably for D. Once D has notified C of the final taking-over the decennial warranty period for defects commences and C is liable for any hidden defects in the building within ten years from acceptance of the works48. 25–022 It is evident from this brief outline of the taking-over procedure in Romania that parties must amend their construction contracts to reflect the taking-over procedure under the mandatory laws, particularly if parties are using the FIDIC forms of contract.

Decennial liability 25–023 Construction contracts will generally contain a defects liability period for remedying defects to the construction works after taking-over by D. For instance under the FIDIC forms of contract parties agree to a defects notification period commencing after taking-over whereby C is required to remedy any defects notified by D up to the date of issuing the performance certificate49. Before continuing, a vital distinction must be made between C’s defects liability period under contract and the governing law. The former is a period of time agreed between parties in the construction contract requiring C to remedy defects occurring after taking-over (usually one or two years). After the performance certificate has been issued at the end of this period C is not required to return and rectify any defects; however, generally, C will be liable for damages or losses arising for any defects allowed under the governing law50. The latter, defects liability period provided by the governing law, may commence after taking-over or after the performance certificate (final completion) is issued and continued for the period as prescribed by law. The statutory defects liability period differs considerably between each country on its commencement, the obligations of the C to rectify (if any), the circumstances in which it will apply, the damages and losses claimable and the time period. In England there is no statutory defects liability period; once the performance certificate has been issued D cannot demand C to return and rectify defects. If the construction contract does not contain a defects notification period clause or if C refuses to carry out any defects rectification notified during the defects notification period then D must commence legal proceedings to recover any damages or losses

48 Law No 10/1995. C is also liable for the whole period of the construction existence, for the flaws affecting its structure, resulted from breaches in design and building practices in force on the date of its performance. The liability for hidden flaws in materials shall differ depending on whether these were procured by C. 49 Cl.11.1, FIDIC Red Book. 50 This is envisaged by the FIDIC forms of contracts in Cl.11.10 where C remains liable for defective works even after the defects notification period has ended and the performance certificate has been issued; however, this does not extend to C returning to the site and rectifying defects.

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suffered51. The time period for commencing proceedings is found under the Limitation Act 1980 and provides as follows: 1. 2. 3.

Contract claims – six years from the date the cause of action accrues52; Tort claims – six years from the date the cause of action accrues53; and Deed – 12 years from the date the cause of action accrues54.

25–024 Where D only discovers the defective works (latent defects) after the end of the normal limitation period, D may still bring an action in tort for negligence in relation to such defective works six years from the date the causes of action accrued55, or three years56 from the date D knows or should have known the material facts about the damage or loss suffered and that the damage was attributable to the act or omission that is alleged to constitute negligence57. The obligation for defective works is not indefinite and the Limitation Act contains a longstop date of 15 years from the date of the defendant’s negligent act or omission to which the damage is attributable58. Note finally that at all times parties are free to increase or decrease the limitation of liability period under their construction contract. 25–025 In France, the mandatory law is very much in favour of D and states that C will be liable for a ten-year decennial liability period for defective building works. Article 1792 of the French Civil Code states: “Any builder of a work is liable as of right, towards the building owner or purchaser, for damages, even resulting from a defect of the ground, which imperil the strength of the building or which, affecting it in one of its constituent parts or one of its elements of equipment, render it unsuitable for its purposes.”

25–026 The decennial liability may also be extended to damages affecting the strength of the elements of equipment of the works, “but only where the latter are an indissociable and integral part of the works of development, foundation, ossature, close or cover”59. Any clause in a construction contract that attempts to limit the application of this mandatory law is void60. The time period for decennial liability commences from the date of “acceptance” – this is the act by which D declares he accepts the work with or without reservations. By way of comparison to the FIDIC forms of contract this would be the date of the performance certificate, not the date of issuing the taking-over certificate (practical completion)61. The decennial liability requirement only applies to latent defects that occur after the date of “acceptance”. One final point worth mentioning is that the C is required by mandatory law to provide two additional 51 Note that if there is no defect notification period clause, D will only be allowed to commence proceedings rather than demanding C to rectify the defects. 52 Section 5, Limitation Act 1980. 53 Section 2, Limitation Act 1980. 54 Section 8, Limitation Act 1980. 55 Section 14A(4)(a), Limitation Act 1980. 56 Section 14A(4)(b), Limitation Act 1980. 57 Section 14A(5) and (6), Limitation Act 1980. 58 Section 14B(1), Limitation Act 1980. 59 Article 1792–2, French Civil Code. 60 Article 1792–5, French Civil Code. 61 A crucial stage that makes the decennial liability period start is the “acceptance” of the work without reservations, i.e., without mentioning visible defects. The concept of “acceptance” or “reception” is a principle found in many civil law codes.

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guarantees; the first being a good functioning guarantee (garantie de bon fonctionnement) or manufacturer’s warranty for a period of two years for other elements of equipment of works62. This means a warranty for all damages that are not subject to the above ten-year decennial liability (ie damages affecting elements of equipment that are not separable from the construction and that affect neither the stability nor the purpose of the building), for example mechanical and electrical equipment such as the airconditioning unit. The second guarantee is known as perfect completion guarantee (garantie de parfait achievement), which applies to the repairs of all patent defects, irrespective of how serious the defect, notified by D either through an itemised list of defects (reserves) in the minutes of acceptance of the work (proces-verbal de reception), or by way of a written notice of those defects that appeared after acceptance of the construction works for a period of one year63.

62 Art.1792–3, French Civil Code. 63 Art.1792–6, French Civil Code.

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APPENDIX 1

Glossary of terms and definitions

A201. Standard form of building contract published by the American Institute of Architects, 1997. ACA. See Association of Consultant Architects. ACA82. ACA Building Contract 1982. Includes 1984 and 1992 revisions. ACA98. ACA Building Contract 1998. Includes 1999 revision. acceleration. The execution of work in a shorter time than previously intended. This may be achieved by re-sequencing, by the adoption of increased working hours, overtime and double/ triple day shifts or by parallel working and trade stacking1. activity. An operation or process consuming time and resources2. The work content that can be managed by an individual or work team. It contains effort, which can be formally defined and programmed, and consumes resources. It is a measurable element of the total project programme. activity float. Unallocated time within a planned duration of a single activity. The float is established simply by dictating an activity duration that is greater than the actual time needed to complete that activity with the planned resources and productivity. Alternatively, it may be created automatically by some project-programming software products. An activity with float so created can be referred to as a “discontinuous”, an “interruptible”, or “stretched” activity. Where C intends to use this unallocated time as a contingency (qv) it should be separately identified as such. In Figure A1, below, the activity float relates only to activity 6 and is equal to A(6)1 + A(6)2 + A(6)3. start 0

completion 2

4

6

8

10

12

14

16

18

20

24

22

26

28

30

1 2 3

T(2,3,4)

4 5

A(6)-1

A(6)-2

A(6)-3 F(6)

6 7 X

Figure A1 – Activity float, free float and external float 1 See Ch.11, “Mitigation, recovery and acceleration”. 2 BS 6079–2:2000 Part 2, 2.7.

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GLOSSARY OF TERMS AND DEFINITIONS

activity-on-arrow network. The activity-on-arrow method of planning was developed by EI du Pont de Nemours Company in the late 1950s and was the first planning method to be called a CPM (qv). It is a network in which the activity durations are indicated by arrows linked in sequence and relationships by identifiable nodes. The arrows are connected together to indicate precedence. The first activity is situated on the left-hand side of the diagram with the last activity on the right. Activities are usually placed at different levels (not in a single row) to accommodate activities that are performed simultaneously. The arrows represent events and the event has not occurred until all the activities that terminate it have been completed. The tail of the arrow represents the beginning of an activity and the arrowhead the end of it. The number of the node that starts and ends the arrow activity usually identifies activities. activity-on-node network. A network in which the nodes symbolise the activities3. A precedence diagram. This is the form in which almost all modern computerised project-planning programmes illustrate their output. (See also activity-on-arrow network for converse.) In this form of network the nodes are the activity and the arrows represent the logic between them. adjudication. A dispute resolution process involving a determination by a third party. In the context of construction contracts, a binding but non-final process to which parties have statutory recourse pursuant to, in the United Kingdom, the HGCRA (qv). adjusted as-planned programme. An as-planned programme which, for analytical purposes, has been amended to include all those activities on the as-built programme that were not anticipated at the time of tender but that, in order to maintain the construction logic of the original plan, are incorporated in the programme with “zero” durations. adjusted master programme. A master programme that has been corrected by removing programming errors so as to render it suitable for analytical purposes. AIA. See American Institute of Architects. American Institute of Architects (AIA). The main professional association for architects in the United States, which also produces a set of standard form contracts for building works. arbitration. A traditional form of dispute resolution whereby disputants agree that a third party “arbitrator” hear their submissions in private but provide a resolution that is enforceable by the courts. A very common means of dispute resolution in the construction industry. AS2124. Australian Standard Conditions of Contract 1992. AS4000. Australian Standard Conditions of Contract 1997 (supersedes AS2124). as-built but-for analysis. Sometimes referred to as the “collapsed as-built” method. A method of analysis that uses the as-built programme as a baseline from which the effect of delaying events are removed in order to calculate what would have been the completion date but for those events4. as-built critical path. The sequence of immediately critical activities, as traced through the history of a project. as-built programme. The record of the history of the construction project in the form of a programme. The as-built programme does not necessarily have any logical links. It can be merely a bar chart record of the start and end dates of every activity which actually took place. as-planned impacted programme. A method of analysis based on the as-planned programme as baseline. In this method of analysis an objective assessment of the effects of delaying events is added to the as-planned programme to demonstrate the impact of those events on the planned programme5. as-planned programme. The updated and amended programme illustrating C’s intent for the future conduct of the works at the time of its publication (qv). Depending upon the circumstances of its publication, it may also be referred to as the master programme (qv). Association of Consultant Architects (ACA). An organisation whose membership consists of architectural practices and that produces the ACA and PPC contract forms.

3 BS 6079–2:2000 Part 2, 2.5. 4 See Ch.14, “Cause and effect”. 5 See Ch.14, “Cause and effect”.

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GLOSSARY OF TERMS AND DEFINITIONS

Association of Forensic and Advanced Valuation Executives (AFAVE). International body for claims and disputes professionals. average progress. The rate of progress at any time that C expected to make with the degree of productivity allowed for and upon which C’s tender was based. bar chart. A graphic display of activity durations in which the size of the bar is proportionate to the duration of the activity it represents. Activities are listed with other tabular information on the left-hand side with time intervals over the bars. Activity durations are shown in the form of horizontal bars. Sometimes called a Gantt chart (qv). baseline. A fixed criterion by reference to which a variable can be measured. In the context of construction programmes, the baseline is frequently an earlier version of the programme, thus enabling changes between the two programmes to be identified. BCA. See Board of Contract Appeals. BCIS. See Building Cost Information Service. Board of Contract Appeals (BCA). One of a set of specialist tribunals in the United States founded to decide contractual claims against Federal Government departments. The tribunals include Boards of Contract Appeals for the Department of Agriculture (AGBCA), the Armed Services (ASBCA), the Department of Energy (DOEBCA), the Department of Interior (DOIBCA), the Department of Labor (DOLBCA), the Department of Transportation (DOTBCA), the General Services (GSBCA), the US Postal Service (USPBCA) and the Department of Veterans Affairs (VABCA). British Standards (BS). The main organisation in the United Kingdom for administering standards. BS. See British Standards. Building Cost Information Service (BCIS). An organisation established by RICS (qv) in 1962 to collate and analyse data submitted by members of the BCIS and other relevant sources. Information is made available to the construction industry through several publications and an on-line service. building forms of contract. Those standard forms of contract specifically intended for, but not necessarily used for the construction of building works. They include those published by the JCT (qv), ACA (qv) and include FIDIC/Build98 (qv) and FIDIC/SF98 (qv). Building Information Modelling (BIM). Please refer to paras. 13–067 and following. burden of proof. The rule that it is for the party who makes the assertion to satisfy the deciding tribunal as to the truth of its allegation. When that party has put forward sufficient evidence to raise a presumption that what it asserts is true, the burden of proof shifts in that the allegation is then assumed to be true unless the other side can produce evidence to rebut the presumption. C. See contractor. C21. New South Wales Government (Department of Commerce) Standard Form. The standard form government construction contract in the Australian state of New South Wales. Remarkable primarily for its unconventional extension of time clause. CA. See contract administrator. calendar. Calendars are diaries that are a vital component of all project management systems and without them it is impossible to programme activities or resources. They are used to specify the number of hours to a day, days in a week, and weeks in a year for working or not working. This arrangement defines the amount of time available for programming activities to be carried out and people-related resources to be organised. Each calendar can be customised with its own holidays and extra work days or suspensions and they can be used to identify the effect on activity of a suspension of work. Some software packages support multiple calendars for individual projects, the whole organisation, and individual resources if necessary and in some software packages calendars can also be applied to the relationship between activities to enable periods of lag to be more closely defined. cascade diagram. A graphic display, sometimes referred to as a “linked bar-chart” (qv), in which the critical path network is illustrated by arrows linking nodes representing the activities.

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On this type of diagram the nodes are proportionate in size to the duration of the activities and are positioned on the diagram according to their calendar dates. The logical links between activities indicate the order in which the activities are intended to be commenced and completed, and which activities must logically follow from preceding activities. CDM Regulations. The Construction (Design and Management) Regulations 1994. A set of regulations relating to construction site safety introduced as a result of a European Union Directive intended to harmonise certain practices across Europe. The Regulations are aimed at improving the overall management and co-ordination of health, safety and welfare throughout all stages of a construction project, and accordingly impose statutory duties of care on the various parties to a project and their personnel. CESMM. See Civil Engineering Standard Method of Measurement. change. The term is used to describe any difference between the circumstances, method and/ or content of the contract works as carried out, compared with the method, content and/or circumstances under which the works are described in the contract documents and intended to be carried out. This is a wide definition of change to be distinguished from the US synonym for variation, where, in some contract forms, changes for which D bears the risk are called “variations” (qv). Change Management Supplement (CMS). One of a series of supplements amending various standard forms of contract with the intention of improving D’s ability to manage its risks of change6. Chartered Institute of Building (CIOB). The CIOB is the professional institute charged with establishing, promoting and maintaining standards of excellence in the construction industry; it represents the construction industry in nearly 100 countries. The right to use the initials MCIOB or FCIOB is recognised internationally as achievement of the premier professional qualification in construction management. CIOB. See Chartered Institute of Building. CIOB Complex Projects Contract (CPC). Please refer to para. 4–325 and following. Civil Engineering Standard Method of Measurement (CESMM). A set of measurement rules, similar to the SMM (qv), produced and intended for use in relation to civil engineering projects. Now in its third (1991) edition. Civil Procedure Rules (CPR). The Rules of Procedure of the Supreme Court initiated by the Woolf Report7 to streamline and make more cost effective the process of civil litigation in England and Wales. On 29 July 1998 the Lord Chancellor told the House of Lords that this was “the most fundamental reform of the civil justice system since the Judicature Acts of the 1870s”. The Rules became effective to govern all litigation in England and Wales in which a new step was taken after 26 April 1999. claimant. The title given in court and arbitration proceedings to the party asserting a right and upon whom the burden of proof rests in respect of any claim. Previously, before the introduction of CPR (qv), termed the “plaintiff”. CMS. See Change Management Supplement. COFC. See Court of Federal Claims. collapsed as-built. Sometimes referred to as the as-built-but-for method (qv)8. A method of delay analysis where the effects of events are “subtracted” from the simulated as-built programme to determine what would have been the effect upon completion but for those events. compensation. The recovery or payment of money for work done or time taken up whether by way of valuation, loss and/or expense or damages9. compensable delay. See reimbursable delay (qv).

6 See App.4 to the 3rd edn. 7 The Rt Hon the Lord Woolf MR, Access to Justice (HMSO, 1996). The Final Report to the Lord Chancellor on the Civil Justice System in England and Wales. 8 SCL Protocol (Oct 2002), App.1 to the 3rd edn. 9 SCL Protocol (Oct 2002) App.1 to the 3rd edn.

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GLOSSARY OF TERMS AND DEFINITIONS

compensable event. See reimbursable event (qv). completion date. The date by which C is contractually obliged to achieve practical completion10 or substantial completion11 of the contract and hand the works over for beneficial use. The “completion date” may not be the same as the “date for completion” (qv). concurrency. A term used to describe two or more causative events occurring over a calendar period (at least one of which is at D’s risk and at least one at C’s risk) and where the effects of each may also be experienced over another single calendar period. Concurrency is sometimes used to describe the circumstances of the effects being experienced over a single calendar period but where the causative events giving rise to the effects occur over different calendar periods. This is more correctly termed the “concurrent effect” of sequential events. concurrent delay. A delay to progress, to completion, or to the date for completion where at least one of the causes of the causative events is at C’s risk and at least one is at D’s risk. Confirmation of verbal instruction (CVI). A document issued by C, to confirm oral instructions issued by the CA or D. In some contracts such confirmation must be issued within a limited time and not dissented from with a limited time before it becomes of contractual effect. constructive acceleration. Acceleration which C is impliedly required to implement as a result of the actions or omissions of D, or the CA acting on D’s behalf. constructive change. A change that C is impliedly constrained to implement as a result of the actions or omissions of D, or the CA acting on D’s behalf. contemporaneous documents. The documents that come into being as a result of the performance of the works12. contingency period. A fixed time duration allocated for an unspecified purpose in relation to a particular activity, sequence of activities or the works as a whole to be taken up or deducted as required. It may be for C or D’s use depending upon whether C has set it aside in its programme for its use or D has required it to be set aside in C’s programme for D’s use. It is to be distinguished from float (qv), which is unallocated time13. contingency sum. A fixed sum of money, which C is required to include in its tendered price for unallocated purposes, usually to be expended, or deducted from the contract sum as required by D. It is to be distinguished from prime cost and provisional sums, which are sums allocated for a purpose yet to be particularised. contract administrator (CA). The term given to the person responsible under the contract for administering the provisions of the contract including determining and certifying what delay may be excused by the grant of an extension of time, or what losses, or expenses, are to be reimbursed. contract documents. The documents, usually signed by both parties, defining what is to be done in consideration for the contract sum. These are the most important of all and form the starting-point for any analysis of change. contractor (C). The party responsible for carrying out the works. contractor improvements. C may offer to introduce changes when superior methods or materials become apparent. When C initiates such changes purely for its own advantage, D may avoid increased costs and time allowances provided it chooses its words of acceptance carefully, otherwise they may constitute a constructive change14. contractor’s delay to completion. A culpable delay to completion (qv). contractor’s delay to progress. A culpable delay to progress (qv). contractor’s risk event. An occurrence, the effects of which are at C’s risk under the contract.

10 11 12 13 14

The term generally used by the building contractors (gn). The term generally used by the engineering contracts (gn). See App.2 to the 3rd edn. See Ch.16, “Float and time contingencies”. See GC/Works/I and GC/Works/I/98, Cl.52.

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GLOSSARY OF TERMS AND DEFINITIONS

cost data. The documents referable to the calculation of loss and expense in relation to any event. counterclaim. The claim asserted by a defendant or respondent against the claimant. Under the CPR it is referred to as a Part 20 claim. In principle a counterclaim stands in its own right. But for the fact that the claim originated earlier, it would have been the claim. critical activity. An activity that has a connection to the critical path in a network. Critical activities may have float and may not necessarily be critical to completion throughout their duration. For example, an activity that has a start-start relationship with an activity that is on the critical path (qv) will, by virtue of that connection, have a critical start. Because of that critical start, it will remain a critical activity even if there is no constraint at all on its completion. Most computer software programmes indicate critical activities by either a red outline or as red bars. Court of Federal Claims (COFC). A US Federal court that frequently hears constructionrelated disputes, including appeals from the Boards of Contract Appeals. CPM. See critical path method. CPR. See Civil Procedure Rules. critical delay. A delay to progress that adversely affects a critical activity and causes the critical path to be extended. critical path. The sequence of activities through a project network from start to finish, the sum of whose durations determines the overall project duration15. In any network there will be one or more critical paths to each key date (qv). critical path analysis. The adoption of the critical path method (qv) in the analysis and/or management of the cause and effect of a type of delay. critical path method (CPM). A schematic and written description of the sequence of work that C plans to use to manage the progress and completion of the works, based upon a network illustrating the activities that must be accomplished with their mutual logical dependencies and durations. culpable delay. A delay to progress or a delay to completion caused by an event, which is at C’s risk and for which it is not entitled to relief nor compensation for the effects thereof. The SCL Protocol describes this as “contractor delay”16. culpable delay to completion. A delay to the completion date caused by a contractor risk event (qv). culpable delay to progress. A delay to progress caused by a contractor risk event (qv). cumulative impact. The impact identified as caused by the consequential effects of an event as opposed to the direct effect of an event. cumulative impact costs. Costs associated with the impact on work not directly associated with the event itself. CVI. See confirmation of verbal instruction. D. See developer. dangle. An activity in a network that has no dependent successor. Also referred to as an “open end” (qv). data date. The date upon which the status of an as-planned programme (qv) is established in relation to progress actually achieved prior to that date. The start of the planned sequence from which the critical path (qv) will be calculated. database. An organised collection of information. The essence of a database is that information is categorised by information type or subject, referred to as a “field” in which the data is entered and which can be retrieved on many different occasions in a variety of combinations depending upon which fields are selected and in which order they are selected for retrieval. At its simplest level, it may comprise a list of names, addresses, phone numbers and other details that can be sorted, filtered and retrieved in differing combinations. The sort of project-planning software commonly used for the preparation of a CPM network is often constructed as a database with 15 BS 6079–2:2000 Part 2,2.41 and SCL Protocol, App.I to the 3rd edn. 16 SCL Protocol (Oct 2002), App.I to the 3rd edn.

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a graphic “front end”17 although not all software used for project planning is constructed around a database. date for completion. The date indicated from time to time on C’s programme as the date by which C plans to complete the works. Referred to in the SCL Protocol as the “contractor’s planned completion date”18. DB2005. JCT Standard Form of Design and Build Contract, 2005 Edition. defence. A defendant’s (qv) formal response to a claimant’s (qv) claim. One principle of stating one’s case formally is that any allegation not specifically disputed by the defendant is deemed to be admitted. The defence must indicate which parts of the claim the defendant admits, which it denies, which it doubts to be true (and why), which it neither admits nor denies because it does not know whether they are true but which it wishes the claimant to prove. The defendant must give its version of the facts in so far as they differ from those stated in the claim; say why it disputes the entitlement to any particular remedy, or the value of the claim, or assessment of damages; and specify any document vital to the defence. defendant. The title given in litigation to the party denying a right claimed and upon whom, in respect of any counterclaim, the burden of proof rests. delay. An adverse effect upon timing in relation to what was intended; there are many different types of delay, each having different consequences under different contracts, depending upon which party is responsible for it. delay to completion. An instance of an entire project (or section of a project) being completed later than intended. delay to progress. An instance of an element of works being performed or completed later than intended. developer (D). The party who agrees to pay for the construction works. developer’s change. Commonly referred to as a variation (qv). developer’s cost risk event. Also referred to as a compensable or reimbursable event. A developer’s risk event (qv) for which D is liable to compensate C for loss or expense suffered but which is not necessarily eligible for an extension of time (qv). developer’s delay to progress. A delay to progress (qv) caused by a developer’s risk event (qv). developer’s risk event. An event specified under the contract to be at D’s risk as to time and/ or cost. developer’s time risk event. Also referred to as “an excusable event”. A developer’s risk event (qv) for which D is liable as to time by way of an extension of time to complete (qv), but not financial compensation. direct impact. The foreseeable consequences of an event. direct impact costs. The costs foreseeable as a direct consequence of an event. direct loss or expense. The term used to describe direct impact costs under the JCT family of contracts. disclosure. Previously known as “discovery” under Rules of the Supreme Court Ord. 24. Disclosure is a process whereby the parties to a dispute disclose to each other the documents in their power, custody, or control relating to the matters in dispute. Disclosure is compulsory in litigation under CPR Part 31, but it is usually discretionary in arbitration. Rule 31.2 of CPR defines disclosure as the admission by a party to litigation that a document exists or has existed. Rule 31.6 requires a party to litigation to disclose to the other side the documents on which it relies, and those that adversely affect its own case; adversely affect another party’s case; or support another party’s case; and the documents that it is required to disclose by a relevant practice direction. discovery. Another term for “disclosure” (qv) This was the term used in England and Wales prior to the CPR (qv) reforms.

17 The Primavera suite of project management software. 18 SCL Protocol, App.1 to the 3rd edn.

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discrepancies. Differences between two or more of the plans, specifications, details, dimensions or drawings to which C is contractually obliged to conform and later editions or instructions given during the course of the works. disruption. Disturbance, hindrance, or interruption, of a contractor’s normal work progress, resulting in lower efficiency, or lower productivity, than would otherwise be achieved. disruption damages. Commonly referred to as loss and expense19. The increased cost arising out of the lost productivity caused by disruption (qv). DMS. See document management system. document. According to Rule 31.4 of CPR “anything in which information of any description is recorded”. document management system (DMS). A database (qv) that compiles information about a document generally including such objective information as its author, recipient, date of creation, date last edited, subject-matter, and so on and can also be attributed with fields to record subjective information such as to what it is considered to be referable under a variety of fields. It can be compiled with a scanning system to provide an image recovery system. By the definition of “document” within CPR the DMS is itself a document. DOM/1. Standard form of domestic subcontract for use with JCT80. domestic subcontractor. A subcontractor selected by C and with which C enters into a subcontract for work. C generally remains responsible for the subcontractor’s performance. Many standard forms contain provisions requiring the express approval of the CA to the employment of a subcontractor. draft programme. Any programme that has not been accepted as a master programme (qv). dummy. A logical link that absorbs neither time nor any other resource. In activity-on-arrow networks (qv) relationships that are not in themselves activities are indicated by dummy activities. duplication. Where the same item is specified in different specification sections or the same item is specified in different areas of the same specification it is referred to as duplication. Duplication often results in disputes about which nominated subcontractor or works contractor is intended to perform the work or which method or material the CA actually had in mind. duration. The amount of time needed to complete an activity. The time period can be determined inductively, by determining the start and finish date of an activity or deductively by calculation from the planned productivity of applied resources. early finish. The earliest programmed calendar date on which the activity can be finished before any of its succeeding float is consumed. See Figure A2. early start. The early start is the earliest programmed calendar date on which the activity can be started before any of its preceding float has been consumed. See Figure A3. early finish

late finish

float

Figure A2 – Early and late finish early start

late start

float

Figure A3 – Early and late start 19 Under the JCT suite of contracts.

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GLOSSARY OF TERMS AND DEFINITIONS

earned value. The measurement of how much work has been accomplished on a project in relation to its value. Earned value is synonymous with performance measurement, calculated by multiplying a task’s planned cost by the percentage of work complete. employer. The term used under UK, Hong Kong and Singapore standard forms of building contract for the developer (qv). ECC2. Engineering and Construction Contract 2nd Edition (2002). The primary standard form in the NEC2 suite. ECC3. Engineering and Construction Contract 2nd Edition (2005). The primary standard form in the NEC3 suite. EDI. See Electronic Data Interchange. Electronic Data Interchange (EDI). A system that enables parties to it to share electronic information from a common platform. engineering contracts. Those standard forms of contract specifically intended for, but not necessarily always used for, civil engineering work, including the ICE and FIDIC contracts. EPC. Engineer, procure and construct. A form of procurement in which C is required to design the works together with the equipment and plant and commission the project ready for use. Sometimes called a “turnkey” contract (qv). event. The direct cause of a change (qv). excusable delay. A delay to progress (qv) caused by a developer’s time risk event (qv). extension of time. Additional time granted by D to C to relieve it from liability for liquidated damages (qv) and to provide an extended contractual time period or date20 by which the works, or a defined part of it are to be, or should have been completed. extras. A term commonly used to describe the performance of additional work. Fédération Internationale des Ingénieurs-Conseils (FIDIC). A Geneva-based international engineering organisation responsible for producing a set of standard form contracts designed for international construction projects under this name. FIDIC. See Fédération Internationale des Ingénieurs-Conseils. FIDIC4. FIDIC Conditions of Contract for Works of Civil Engineering Construction, Fourth Edition 1987 (revised 1992, termed the “Red Book”). FIDIC/Build99. FIDIC Conditions of Contract for Building and Engineering Works Designed by the Employer, 1st Edition 1999 (the “Red Book”). FIDIC/DB99. FIDIC Conditions of Contract for Design Build and Turnkey, First Edition, 1999 (the “Silver Book”). FIDIC/M&E87. FIDIC Conditions of Contract for Electrical and Mechanical Works, Third Edition, 1987 (the “Yellow Book”). FIDIC/PD+B99. FIDIC Conditions of Contract for Plant and Design-Build, First Edition, 1999 (the “Yellow Book”) FIDIC/SF98. FIDIC Short Form of Contract, Test Edition, 1998 (termed the “Green Book”). field costs. An American expression for site related “preliminaries” (qv). finish-to-finish. In the example at Figure A4, of a finish-to-finish relationship, activity B cannot finish until activity A has finished. It implies that B can finish at the same time as A, but not before it. 0

1

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activity A activity B

Figure A4 – Finish-to-finish 20 Depending upon the forms of contract.

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0

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activity A activity B

Figure A5 – Finish-to-start

finish-to-start. The convention in Figure A5 shows the normal sequential relationship of one activity following another. For example, activity B cannot start until activity A has finished. fitness for purpose. The standard of performance statutorily required under the Sale of Goods Act 1979 and a term that may be implied in design and build contracts in the absence of express words to the contrary. Under this standard, in any contract for the design and supply of a finished product, if that product is proved unfit for the intended and mutually understood purpose for which it was supplied, then, irrespective of whether the provider of the product has been negligent, there will be a liability for failure of that product21. float. Unallocated time in a critical path network. It may be more precisely described as “free float” (qv)22,”interfering float” (qv), “total float” (qv)23, or “activity float” (qv) depending upon its position in the network24. force majeure. A compendious expression used in some contracts to denote defined types of unforeseen occurrences that are caused by neither D or C, but which may give rise to an extension of time entitlement on C’s part. Typical examples include exceptional weather events, terrorist acts, earthquakes, war and civil disorder. fragnet. This is a term used in proactive project planning for a pre-defined segment of a network devised for particular sequences of work. In delay analysis the term is used to describe a section of a programme in which an activity is broken down into a number of sub-activities for the purpose of detailed analysis. In effect a fragnet is the obverse of a hammock (qv). In Figure A6, a fragnet has been developed for an activity initially comprising only “foundations” to produce a fragnet containing activities for “excavation”, “formwork”, “reinforcing steel”, “concrete pouring” and “concrete curing”. The start date of “excavation” is the same as the start of “foundations” and the finish date of “concrete curing” is the same as the finish date of “foundations”. free float. The amount of time that an activity can be delayed beyond its early start/early finish dates without delaying the early start or early finish of any successor activity25. Gantt chart. A chart developed by Henry L Gantt and Fredrick W Taylor in the early part of the twentieth century. The Gantt chart was the first formal programming system to be used in conjunction with scientific management techniques. It is normally constructed with the time periods along the horizontal axis with personnel, organisations, plant, materials and so on along the vertical axis. The bar of a Gantt chart is usually open, as opposed to the closed box of the bar on a bar chart (qv) and contains details of the activity time of units of work for each piece of plant, person or organisation. GC/Works. A suite of contracts designed for projects developed by the UK government. Prior to 1998 the Department of the Environment was responsible for developing this suite of contracts; since then it has been the Property Advisers to the Civil Estate, Central Advice Unit.

21 See Cl.10 (alternative B) of GC/Works/IDB/98. 22 At Figure A1 above, that identified as F (6) is free float. 23 At Figure A1 above, that identified as T (2,3,4) is internal float and that identified as “x” is external float. 24 See Ch.16, “Float and time contingencies”. 25 At Figure A1 above, that identified as F (6) is free float.

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start 0

completion 1

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foundations superstructure fitting out services finishes

As-planned start 0

completion 9

excavation formwork

fragnet of ‘foundations’

reinforcement concrete pour concrete cure superstructure fitting out services finishes

As-planned with fragnet Figure A6 – Fragnet

GC/Works/1. General Conditions of Contract for Building & Civil Engineering – Lump Sum with Quantities, Third Edition, 1989 (revised 1990). GC/Works/1/98. General Conditions of Contract for Building and Civil Engineering – Major Works with Quantities, 1998. GC/Works/1/98. General Conditions of Contract for Building and Civil Engineering – Major Works with Quantities, 1998. GC/Works/1DB. General Conditions of Contract for Building and Civil Engineering – Design & Build Version, 1993. GC/Works/1DB/98. Contract for Building & Civil Engineering – Design and Build Version, 1998. GC/Works/2. General Conditions of Contract for Building and Civil Engineering – Minor Works, Second Edition, 1980 (revised 1989). GC/Works/2/98. General Conditions of Contract for Building and Civil Engineering – Minor Works, 1998. global claim. A claim in which the amount claimed to be lost is not causally linked to the breaches alleged. A claim in which the contractor seeks compensation for a group of developer

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risk events but does not or cannot demonstrate a direct link between the loss incurred and the individual developer’s risk events26. hammock. A project-planning device used to summarise the early-start and early-finish dates of a set of activities. It is generally used for reporting durations of work packages as opposed to activities. When a series of activities is designated as a hammock the computer software generally calculates the duration by measuring the time period between the earliest start date of the hammock’s predecessor activities and the latest early-finish date of its successor activities. In Figure A7, a hammock called “foundations” has been developed for a group of activities containing activities for “excavation”, “formwork”, “reinforcing steel”, “concrete pouring” and “concrete curing”. The start date of “excavation” is the same as the start date of “foundations” and the finish date of “concrete curing” is the same as the finish date of “foundations”. hanging activity. Also referred to as an open end (qv). head office overheads. The incidental costs of running C’s business as a whole. They are “indirect costs” that cannot be directly allocated to production as opposed to “direct costs” that are the costs of production. Amongst other things, overheads may include such things as rent, start

completion

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excavation part to be reconfigured as a hammock called ‘foundations’

formwork reinforcement concrete pour concrete cure superstructure fitting out services finishes

As-planned start

completion

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foundations superstructure

hammock for foundations

fitting out services finishes

As-planned with a hammock Figure A7 – Hammock

26 See Ch.19, “Total time, total loss and global claims”.

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rates, directors’ salaries, pension fund contributions, and auditors’ fees. In the United States “head office” is referred to as “home office”. In accountancy, head office overheads are generally referred to as “administrative expenses” whereas the direct costs of production are referred to as “costs of sales”. HGCRA. See Housing Grants, Construction and Regeneration Act 1996 (as amended). High Court. In England and Wales, the highest court of first instance for civil disputes. It is divided into the Queen’s Bench Division, Equity Division and Family Division. The Queen’s Bench Division further incorporates some specialist courts, including, relevantly, the Commercial Court and the Technology and Construction Court. In Australia, conversely, the “High Court” is the ultimate court of appeal. histogram. A chart that illustrates quantitative values along one axis. It is often used for illustrating the effect of changes in resources over time. HKBC05. Hong Kong Special Administrative Region of the People’s Republic of China, General Conditions of Contract for Building Works (2005). HKGC99. Hong Kong Special Administrative Region of the People’s Republic of China, General Conditions of Contract for Civil Engineering Works (1999). HKRICS86. Hong Kong (Royal Institute of Chartered Surveyors) Contract. Standard Form of Building Contract (1986) Private Edition, With Quantities published by RICS Hong Kong, 1999 Amendment. House of Lords. In the United Kingdom, formerly the ultimate court of appeal. See now Supreme Court (qv). Housing Grants, Construction and Regeneration Act 1996 (HGCRA). An Act of Parliament affecting construction contracts (as defined in the Act) entered into on or after 1 May 1998, which implies into such contracts (i) a statutory right to refer disputes to adjudication and (ii) certain rights of payment for contractors. ICE. See Institution of Civil Engineers. ICE/MW/98. ICE Conditions of Contract – Minor Works, Second Edition 1995 (revised March 1998). ICE6. ICE Conditions of Contract, Sixth Edition, 1991 (revised March 1998). ICE7. ICE Conditions of Contract, Measurement Version, Seventh Edition, September 1999. ICE6DC. ICE Design and Construct Conditions of Contract, Sixth Edition, 1992 (revised March 1998). IChemE. See Institution of Chemical Engineers. IChemE. Institute of Chemical Engineers lump sum contract, 4th edition, 2001 (the Red Book). D is referred to as “the Purchaser” and the CA is referred to as “the Engineer”. IEE. See Institution of Electrical Engineers. IFC84. JCT Intermediate Form of Building Contract, 1984 Edition (revised 1995). IFC98. JCT Intermediate Form of Building Contract, 1998 Edition. IFC2005. JCT Intermediate Form of Building Contract, 2005 Edition. IMechE. See Institution of Mechanical Engineers. impact. The effect of a change. impossibility. The inability of a party to a contract to fulfil its contractual obligations as a result of external circumstances. A cause of frustration of a contract at common law. inconsistencies. The differences between information given on one document in relation to another in respect of the same element of work. independent standards. Reference documents relevant to specific issues that are not necessarily referred to in the contract data. information release schedule (IRS). The name given under JCT contracts to the document issued to C at the time of tender as the CA’s programme for the issue of post-tender information, drawings, details and levels. Under ACA82 and ACA9827 it is referred to as a “Time Schedule”. 27 Time Schedule TS3.

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Failure to provide such information in accordance with the IRS is an excusable and compensable event under those forms. The essential character of an IRS is that it is prepared by, or on behalf of D as a contract document upon which C intends to rely. Institution of Electrical Engineers (IEE). A professional body that controls the education and conduct of electrical engineers in the United Kingdom. Together with the Institution of Mechanical Engineers (IMechE), it produces the MF/1 contract form (qv). Institution of Chemical Engineers (IChemE). The professional body that controls the education and conduct of chemical engineers in the United Kingdom and also produces a series of standard form contracts intended for use with projects in the process and petrochemical industries. Institution of Civil Engineers (ICE). The professional body that controls the education and conduct of civil engineers in the United Kingdom and also produces a series of standard form contracts intended for use with civil engineering projects. Institution of Mechanical Engineers (IMechE). A professional body that controls the education and conduct of mechanical engineers in the United Kingdom. Together with the Institution of Electrical Engineers (IEE), it produces the MF/1 contract form (qv). interfering float. That proportion of total float which, if used, will not delay the completion date, but will nevertheless interfere with the timing of successor activities. The difference between total float and free float. IRS. See information release schedule. JCT. See Joint Contracts Tribunal. JCT63. JCT Standard Form of Building Contract with Quantities, 1963 Edition (revised 1976). JCT80. JCT Standard Form of Building Contract – Private with Quantities, 1980 Edition (revised 1995). JCT98. JCT Standard Form of Building Contract – Private with Quantities, 1998 Edition. JCT2005. JCT Standard Form of Building Contract – Private with Quantities, 2005 Edition. JCT Major Projects Contract (MPC). Please refer to para. 4–325 and following. Joint Contracts Tribunal (JCT). The organisation responsible for the most widely used suite of standard forms in the United Kingdom for building works. The organisation’s membership includes representatives of the Royal Institute of British Architects (RIBA) and other representative industry bodies. The forms have evolved since the early twentieth century from what were previously known as the “RIBA forms”. key date. Sometimes referred to as a milestone date or critical date. A key date is a date by which an identifiable accomplishment must be started or finished. For example “power on”, “weathertight” or the start or completion of phases of construction or of phases or sections of the contract or work of particular subcontractors. ladder. An arrangement consisting of a chain of lagged start-to-start and lagged finish-to-finish (qv) activities. It can produce some anomalous results in delay analysis and should be avoided. lag. The minimum necessary lapse of time between the start or finish of one activity and the start or finish of another activity28. It may also be described as the amount of time required between the start or finish of a predecessor task and the start or finish of a successor task. lagged finish-to-finish. In Figure A8, “d” indicates a finish-to-finish relationship but with a delay, ie activity B cannot finish until “d” days (or whatever time period has been used) after activity A has finished. This convention provides a second means of overlapping the timing of activities. lagged finish-to-start. In Figure A9, “d” implies a normal lag relationship between activities A and B; that is, B cannot start until “d” days after activity A is finished. An example of this might be the curing time of concrete between completion of the pour and the commencement of work on it. lagged start-to-start. In Figure A10, however, “d” indicates a start-to-start relationship with the delay imposed showing that activity B cannot start until the period “d” has elapsed after

28 BS 6079–2:2000 Part 2, 2.83.

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0

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Figure A8 – Lagged finish-to-finish

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Figure A9 – Lagged finish-to-start

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Figure A10 – Lagged start-to-start and finish-to-finish

activity A has started. This convention provides one of the facilities to overlap the execution of activities. lagged start-to-start and lagged finish-to-finish. There may be occasions where a lag is required both on the start and finish of related activities. This is achieved by the convention shown in Figure A10, sometimes referred to as a ladder (qv). In this arrangement, activity B cannot start until “d” days after activity A has started and activity B cannot finish until “d” days after activity A has finished. For example, in the case of a pipeline, the activity to “lay pipes” cannot start until “x” days after the start or until “y” days after the finish of activity “excavate”. Thus, “lay pipes” has a lag start of “x” days and a lag finish of “y” days after the start and finish date of the activity “excavate”. late finish. The latest programmed calendar date on which an activity can be finished when all its succeeding float (if any) has been consumed but the activity can still be completed without delaying the commencement of a successor activity (See Figure A2 above). late start. The late start is the latest programmed calendar date on which an activity can be started when all float preceding it has been consumed (See Figure A3 above). latent conditions. The underlying conditions of the site upon which construction work is to take place. If latent conditions diverge significantly from what C could have reasonably foreseen at the time of tender, C will, under many contracts, be entitled to a variation. lead. The opposite of lag (qv), but in practice having the same meaning. A preceding activity may have a lag to a successor activity – from the perspective of the successor activity, that is a lead. link line. The connecting flow lines between activities on a flow chart or in a network using precedence network notation. The direction of flow is indicated by an arrow head.

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linked bar chart. Sometimes referred to as a cascade diagram (qv). liquidated and ascertained damages. A fixed sum, usually per week or per day, payable by C to D in the event that the specified work is not completed by the specified date. In some forms of contract, liquidated damages are referred to as “delay damages”. liquidated damages. Also referred to as “liquidated and ascertained damages” (qv). logic. The sequence in which activities are planned to be performed, with the start and/or finish of some activities independent, dependent, or restrained, by the start and/or completion of other activities. M&E. See mechanical and electrical. management contractor. The party contracting with the works contractors (qv) and responsible to D for programming their work but not, generally, the sufficiency of their work. master programme. The accepted programme from time to time, which represents C’s intentions for the future conduct of the works at the time it is published (qv). It illustrates the major sequencing and phasing requirements of the work. At inception it may be the same as the tender programme and as it is reviewed and updated it becomes the as-planned programme. mechanical and electrical (M&E). Design and/or work comprising mechanical and electrical engineering. method statement. A written description of the programme setting out the assumptions underlying the programme, the reasoning behind the approach to the various phases of construction and a listing of all the work encapsulated in the programme activities. It should contain the activity resource and productivity assumptions and hence justify the duration calculations. MC87. JCT Standard Form of Management Contract, 1987 Edition. MC98. JCT Standard Form of Management Contract, 1998 Edition. MF/1. Model Form 1, lump sum contract, 4th edition, 2000. Microsoft ProjectTM. A proprietary software package for creating and managing construction programmes, produced by Microsoft Corporation. milestone. A project event of zero duration that represents a checkpoint, a major accomplishment or a measurable goal. Sometimes referred to as representing a key date (qv). A key event selected for its importance in the project29. mitigation. Mitigation means making less severe or less serious. In connection with delay and disruption, it means minimising the period or cost of delay and disruption. Generally, it is the duty of the party whose legal rights have been infringed to act reasonably in the mitigation of damages when that party seeks to assert a legal right. Failure to mitigate can be a defence, or a partial defence, to a claim. Monte Carlo simulation. An estimating and simulation technique based on the use of random numbers and probability statistics to investigate the likely effect of potential outcomes from an event being simulated. Monte Carlo simulation tends to be used widely from economics to nuclear physics and can be used to predict the likely pattern of activity durations having an overall effect on completion of a construction project. MPF. JCT Major Project Form 2003 Edition. MTC89. JCT Standard Form of Measured Term Contract, 1989 Edition (revised 1994). must finish constraint. A manually applied calendar date specifying when the activity must finish. It functions in the same way as a must start constraint (qv). Using the software in this way can restrict the flexibility of the network to react dynamically to change and can produce false criticality. must start constraint. A manually applied calendar date specifying when the activity must start. Most project management software products permit the user to specify that an activity must start on a specific date in spite of the construction logic, if any, that may dictate otherwise. MWA80. JCT Agreement for Minor Building Works, 1980 Edition (revised 1994). MWA98. JCT Agreement for Minor Building Works, 1998 Edition. MW2005. JCT Agreement for Minor Building Works, 2005 Edition. 29 BS 6079–2:2000 Part 2, 2.92.

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NEC. See New Engineering Contract. NEC/SF99. NEC Short Form 1999. A contract intended for relatively small construction projects. negative total float. An expression sometimes used to describe the time by which the duration of an activity or path has to be reduced in order to permit a limiting imposed date to be achieved30. Negative total float only occurs when an activity on the critical path is behind programme. It is a programming concept, the manifestation of which is, of course, delay. neutral event. An event caused by acts for which the risk as to cost is with C, but where the risk as to time remains with D. New Engineering Contract (NEC). This suite of contracts was developed in the 1990s in the United Kingdom and is designed to be simpler and more versatile than the JCT and ICE forms. It includes the ECC and NEC/SF99 forms (qv). node. In an activity-on-arrow network (qv) the node is the point at which the activity arrows meet. In an activity-on-node network (qv) it is the activity itself that is represented by the node. nominated subcontractor. A contractor who is selected by the CA, often for specialist work within a main contract, and sometimes with design responsibilities. Where there are provisions for nomination, the CA may instruct C to enter into a subcontract with the nominated subcontractor. Although C generally remains responsible for the nominated subcontractor’s work and materials, it may not be responsible for the sufficiency of the nominate subcontractor’s design (which may be covered by a collateral warranty with D). Depending upon the terms of the contract, C may also be relieved of liability for liquidated damages (qv) arising out of delay to completion caused by an nominated subcontractor31. non-compensable event. An American expression used to describe a non-reimbursable event, the financial consequences of which remain with C under the contract. non-excusable delay. An American expression used to describe a delay to a completion date for which no extension of time (qv) may be granted. NSC/4. JCT Standard Form of Subcontract for nominated subcontractors for use with JCT80 and JCT98. OCR. See optical character recognition. Official Referee. Prior to the establishment of the Technology and Construction Court (qv) a specialist judge appointed by the High Court of England and Wales to hear construction-related matters. omissions. Work can be instructed to be omitted from a given work content or an accidental omission from the contract documents can be supplemented by an instruction to change by addition. Where a necessary specification design or work content is not included in C’s contract documents it is also said to be an omission from the contract works. open end. An open-ended activity is one that is not constrained by any logic controlling its completion. It is sometimes called a “dangle” (qv) or “hanging activity” (qv). This type of activity has a start-only constraint and no successor that depends upon its completion. It is to be avoided as it can create false criticality. optical character recognition (OCR). A computerised method of connecting the pattern of dots in a scanned bitmap image into readable characters which can be searched and edited with word-processing software. The system by which a computer programme is able to convert, via a scanner printed text to a file that other software can read and understand as a text file. parallel delay to progress. A delay to progress involving at least two events both of which are at the risk of the same party. Contrast with concurrency (qv)32.

30 BS 6079–2:2000 Part 2, 2.94. 31 JCT80, JCT98 (Part 2) and NSC/4 contain some extremely complicated provisions for the administration of the selection and appointment of nominated subcontractors and any delay caused to and/or by them. 32 See also Ch.18, “Concurrency, parallelism and pacing”.

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path. An activity or an unbroken sequence of activities in a project network33. PCC92. JCT Standard Form of Prime Cost Contract, 1992 Edition (revised April 1998). PCC98. JCT Standard Form of Prime Cost Contract, 1998 Edition. PDA. See personal digital assistant. PDM. See precedence diagram (method). personal digital assistant (PDA). A small hand-held computer that can synchronise with an office-based computer by wire or wireless technology. PERT. Program Evaluation and Review Technique. A programming technique developed in the United States between 1956 and 1958 in relation to the programming of the development of the Polaris missile. In this method of planning, time was estimated on three assumptions: “pessimistic”, “optimistic” and “most likely” and then mathematically assessed to determine the probable completion date. Originally, cost data was assumed to be constant and not reviewed although later developments of the PERT chart permitted costs to be reviewed on a similar basis. A PERT chart is a form of network diagram. It is a graphical depiction of task dependencies shown by connecting lines or arrows indicating the workflow between nodes. It is similar to a PDM diagram (qv) and there is often confusion between the two. Indeed, some software programs refer to their PDM diagram as a “PERT” diagram34. Pertmaster Project RiskTM. A project-planning software package that allows project simulations to be conducted using the Monte Carlo method (qv). PFI. See Private Finance Initiative. PIX Protocol. A standard, developed in the United Kingdom, that sets out a process for parties to a construction project to follow in an effort to ensure that electronic information is shared among them with optimal efficiency. The acronym derives from the phrase “project information exchange”. plaintiff. Prior to CPR, the title given in litigation proceedings to the party asserting a right and upon whom the burden of proof rested in respect of any claim. planned completion date. The date for completion (qv). positive total float. A positive total float at any one time represents the period that any activity on the critical path may slip before it will affect the completion date. In Figure A1 above, the positive total float for all activities on the programme is “x”, activities 2, 3 and 4 also have additional total float of T(2,3,4). PowerProjectTM. A proprietary software package for creating and managing construction programmes, produced by ASTA Developments Ltd. Popular in the United Kingdom. PPC2000. ACA Project Partnering Contract 2000 Edition. This is the UK’s first standard form contract based around a “partnering” philosophy. C is referred to as “the Constructor”, D as “the Client” and the CA as “the Consultants”. PPP. See Public-Private Partnership. PQS. See project quantity surveyor. practical completion. The term used to describe the state of the works at the date the works are fit to be taken into beneficial use. It is generally the date when the obligation to insure passes from C to D and the date from which the latent defects liability period runs. This is the term used under the JCT family of contracts. Under the ICE forms and in FIDIC forms it is referred to as “substantial completion” (qv). precedence diagram. A form of notation for illustrating project workflow in which the activities are on the node (qv) and workflow is indicated by arrows connecting the nodes. It is sometimes called activity-on-node (qv) notation. Each activity is assigned a unique identifier and workflow direction is indicated by showing each of the activity’s predecessors and their lag relationships. A number of project-planning software products refer to this as a PERT diagram (qv)35.

33 BS 6079–2:2000 Part 2, 2.105 and SCL Protocol (October 2002), App.1 to the 3rd edn. 34 For example, Microsoft Project™. 35 See, for example, Primavera Project Planner (P3)™ Primavera SureTrak™ and Microsoft Project™.

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pre-contract documents. The documents that come into being before the parties agree to proceed with the works36. predecessor. In a dependency relationship between two tasks, the predecessor is the task that must start or finish before the start or completion of the following task. preliminaries. The costs of running a site as a whole (rather than any particular zone of the site or any particular activities) together with the head office overheads (qv) and profit that the project as a whole has to finance. Amongst other things, these costs may include such things as site management, huts, safety precautions, job-related insurances, bonding costs, telephone, water and electricity costs, director’s salaries, rent and capital finance. The essential characteristic of “preliminaries” is that they serve more than one activity, eg tower crane, skips, general site labour etc. However, in practice some resources that could be allocated to an activity, eg scaffolding for falsework, are included in the preliminaries section of C’s contract price because of its preferred method of pricing37. Thus it is essential that each case is inspected on its facts to determine which resources are affected by a delay or disruption irrespective of how C has priced that resource. Primavera Project PlannerTM (P3). A proprietary software package for creating and managing construction programmes, produced by Primavera Corporation. Primavera Project Planner (Enterprise Edition)TM (P3E). A variant on Primavera Project Planner (qv) with enhanced capabilities. Private Finance Initiative (PFI). A form of project procurement in which C (usually a joint venture) is responsible for financing the project, design and construction of building works, and may also be responsible for design, selection and installation of plant and equipment, commissioning and also management of the end product for a fixed term. In this form of contract, D is usually a special purpose vehicle devised for the purpose of the project with whom the end beneficiary is in contract for the purpose of the project. Privy Council. Previously, the final court of appeal for many Commonwealth jurisdictions, including Australia, Canada and New Zealand. Nowadays, the final court of appeal for a few small Commonwealth jurisdictions. product data management. Process management systems normally have three broad functions: they manage what happens to the data when someone works on it; they manage the flow of data between people; and they keep track of all the events and movements of data during the history of a project. A PDM system is a database that captures all new and changed data as it is generated, maintaining a record of which version is in use, recalling it on demand and effectively keeping track of change. productivity. The efficiency of a process, measured by the ratio of input to output. programme. Commonly referred to in the United States as a schedule. A chart of activities identifying their descriptions and start and finish dates. Depending upon the level of sophistication it could be a bar chart (qv) at its lowest, or, at its highest, a fully resourced CPM network (qv). project manager. The person responsible to D for managing communications between D and the design team. It is sometimes the case that the project manager is also responsible for communications between the design team and C although this is less common. In government contracts the CA is referred to as the project manager. This can cause significant problems in the drafting of appointment service contracts when there is also an architect responsible for the leading of the design team and administration of the construction contract. project quantity surveyor (PQS). A quantity surveyor (qv) appointed by D to advise it on appropriate methods of procurement, techniques to be used to obtain and monitor appropriate

36 See App.2 to the 3rd edn. 37 In practice it is generally the case that contractors include the costs of trade foremen, supervisors and co-ordinators in “preliminaries” with other administrative staff whereas they are actually trade specific.

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cost information, the credibility of contractor bids and to advise during the course of the works on the valuation of the work in progress. prolongation. The period between the date C planned to cease funding the site-related and head office overheads attributable to the project and the date it actually ceased to fund them. prolongation damages. The loss and expense that is directly related to and incurred during the period of time between the contract completion date or such earlier date for completion as may have been agreed between the parties, expressly or implicitly, and the prolonged completion date. They are costs that would not have been incurred but for the later completion date. Public-Private Partnership (PPP). An alternative term for Private Finance Initiative (PFI) (qv). publish. The term used by the Change Management Supplements to describe the process of electronic distribution to the designated parties of submittals in editable form in the software in which the submittals were created. QS. See quantity surveyor. quantity surveyor (QS). The person generally responsible for advice on construction economics during the design phase, for preparation of bills of quantity and tendering documentation, valuation of work (but not certification) and agreeing (but not certifying) the final account. quantum meruit. As much as has been earned. At law a claim in unjust enrichment would be a claim for reasonable recompense calculated pro rata for work actually done38. reasonable skill and care. The standard of performance imposed on a professional who provides advice or a service. It is a matter for professional judgement whether in producing that advice or service the consultant has exercised all the skill and care that can reasonably be expected. Only if “professional negligence” can be proved is the consultant liable for the failure of the end product. reimbursable delay. Also known as a compensable delay. A delay to progress or the date for completion, for which the contract provides for C to be compensated in respect of any adverse financial effect flowing from the event. In so far as C is entitled not only to be paid for the cost of the work element in question, but also for any direct loss or expense that flows from the event, the event is said to be reimbursable or compensable. reimbursable event. An event for which D bears the risk as to cost and for which C is entitled to compensation for loss or expense suffered. It is usually described in the contract between the parties. It is an event that causes a reimbursable delay (qv). relevant event. The term used to describe an event that is specified to be at D’s risk under the JCT suite of contracts. Under the NEC forms of contract it is referred to as a “compensation event” and in the engineering forms it is referred to as a “notified event”. reply. In litigation, a form necessary in order to set out a claimant’s challenges to a defence (qv). Replies should not produce any new head of claim and should deal solely with the other side’s statement of case in so far as it has not already been addressed. resource. A person, item of equipment, service or material used in accomplishing a project task. resource levelling. Expression used to describe the process of amending a schedule to reduce the variation between maximum and minimum values of resource requirements39. The process removes peaks, troughs and conflicts in resource demands by moving activities within their early and late dates and taking up float. Most project-planning software offers an automated resourcelevelling routine that will defer the performance of a task within the imposed logical constraints until the resources assigned to the tasks are available. resource monitoring. The process of determining activity duration, remaining duration, and percentage complete as a result of computing the actual resource usage against the planned resource usage. The resource requiring the greatest time to complete the specified amount of work on the activity will determine its duration. respondent. The title given in arbitration proceedings to the party disputing a right claimed.

38 MP Levine and JH Williams, “Restitutionary Quantum Meruit – The Crossroads” (1992) 8 Const LJ 244. 39 BS 6079–2:2000 Part 2, 2.144.

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GLOSSARY OF TERMS AND DEFINITIONS

request for information (RFI). A formal request issued by C to the CA, usually for further particulars or for an explanation of information already provided. Some contracts specify a limited period of time within which the CA may respond before the delay in response becomes an event at D’s risk as to both time and cost. RFI. See request for information. RIBA. See Royal Institute of British Architects. RICS. See Royal Institution of Chartered Surveyors. risk. Any potential future consequence; measured by reference to both the probability that it will materialise and the magnitude of those consequences if it does materialise. risk manager. The title given by the Change Management Supplements to D’s advisor in regard to the techniques to be used to prepare the programme and other time-management information and to advise on its use in practice in the management of the time and cost effects of change (qv) contemporaneously throughout the construction phase. The role of the risk manager is not one normally played by any member of the design or construction teams under the standard forms of building contract but it is analogous to the role as to time that a PQS (qv) has to money. Royal Institute of British Architects (RIBA). The professional body that controls the education and conduct of architects in the United Kingdom. Royal Institution of Chartered Surveyors (RICS). The professional body that controls the education and conduct of both general practice and quantity surveyors in the United Kingdom. scanning. The process of converting a printed image into a digitised bit-map planned programmed image or computer file. A bit-map planned programmed image is defined by computer software as a pattern of dots. schedule. An American term used to describe the CPM (qv) network or other programme (qv). SCL Protocol. SCL Delay and Disruption Protocol (October 2002) published by the Society of Construction Law (UK)40. Scott Schedule. A form of pleading (qv) named after its inventor, HH Judge George Scott, QC, Official Referee 1920–1933. The Scott Schedule is a peculiar device used in construction disputes in the United Kingdom to clarify claims and defences that involve complex factual allegations. The shape and content of a Scott Schedule will depend upon the nature of the matters in dispute and the process of reasoning adopted by the analyst. However, a Scott Schedule differs from other methods in that, if it is to be an effective clarification of the issues in dispute, it requires the active participation of both sides to the dispute in its drafting. sectional completion. Where a contract is split into separable parts, each of which has a defined scope of works and a commencement and completion date it is said to be a sectional completion contract. In such an arrangement, liquidated damages (qv) and extensions of time (qv) apply to each individual section as well as the contract as a whole. Reference to “completion” may then apply to the completion of a section, key date (qv) or phase as well as the contract as a whole. sequence. The order in which activities will occur in relation to one another. This establishes the priority and dependencies between activities. Successor and predecessor relationships are developed in a network format that enables those involved in the project to visualise the workflow. set-off. A claim in a liquidated amount made by a defendant or respondent as a defence to a claim formulated on the basis of a right to reduce the amount of debt by the amount the creditor owes the debtor41. SI. See site instruction. SIA. See Singapore Institute of Architects. SIA80. Singapore Institute of Architects Lump Sum Contract (1980) 1999 Revision. Notable primarily because it was drafted by prominent UK construction law commentator, Professor Ian Duncan Wallace QC. 40 See App.3 to the 3rd edn. 41 See CPR, r.16.6.

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simulated as-built programme. The as-built programme that has been converted to a CPM programme for the purposes of statistical analysis by removing the actual start and completion dates of activities and replacing them with start and completion dates with logical links and lags to maintain the activities at the same dates as the as-built programme. simulation. The processing of a project model programme to reproduce what would be expected to happen in the project, with different conditions and different starting points. Singapore Institute of Architects (SIA). The main professional association for architects in Singapore, which also produces standard form contracts for construction works. site instruction (SI). An instruction in writing issued by the CA to C on site, which constitutes an instruction under the contract. slack. Float (qv). slow progress. Progress falling behind programme due to failures which are at C’s risk. SMM. See Standard Method of Measurement. standard of proof. The degree to which something must be proved. In civil litigation and arbitration, the standard of proof required for most claims or counterclaims is proof “on a balance of probabilities”. Standard Method of Measurement (SMM). A set of rules governing how quantities of materials in building projects are to be measured and intended for incorporation into building contracts that use bills of quantities. It is now in its 7th edition (1988), and is incorporated by reference into the JCT family of contracts. Standards Australia. The central standards authority in Australia, responsible for producing that country’s most widely used standard form construction contracts. See AS2124 and AS400. start-to-start. In the relationship shown in Figure A11, activity B cannot start until activity A has started or perhaps, more accurately, activity B can start at the same time as activity A but not before it. statement of case. The expression used in both litigation and in arbitration to describe a party’s pleading, which comprises not just the arguments but also documentary evidence upon which the arguments rely. The content of a statement of case in litigation is governed by CPR42. In essence the statement of case must contain a concise statement of the nature of the claim, specify the remedy sought, give a statement of the value of the claim (where it is a claim for money) and set out any other matters required by a relevant practice direction. Contrary to the position in regard to statements of case under CPR, “statement of case” procedures under the JCT Arbitration Rules do not imply that anything not disputed is admitted, nor is there any firm rule that complaints that come to light during the proceedings may not be raised. statutory requirements. It is generally the CA’s responsibility to make sure that the project design meets all applicable building legislation and regulatory requirements. In build-only forms of contract (as opposed to design and build) additional work or changes required to meet statutory or other regulatory requirements constitutes a variation. subcontract works. The subject-matter of the construction contract between a subcontractor and C, the completion of which is the responsibility of the subcontractor, and which result in the execution of that part of the construction project. The contract agreement may be for the construction only, or for the assembly of a building or part of a building, or it may involve civil 0

1

2

3

4

activity A activity B

d

Figure A11 – Start-to-start 42 See CPR Pt 16. Specific requirements of the particulars of claim are set out in CPR, r.16.4.

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GLOSSARY OF TERMS AND DEFINITIONS

engineering work in, over, or under ground, which is designed by others, or it could also include design by the subcontractor. sub-network. A fragnet (qv). sub-project. A group of activities usually comprising the work in connection with a definable section or zone of the works that is treated as a single task in a master programme. Computer programs use the concept of sub-projects to keep all the data relevant to a group of activities in a single project file that can be linked with other sub-projects for ease of management in complex projects/programmes. substantial completion. Practical completion (qv). successor. In a dependency relationship between two tasks, the successor is the task that cannot start or finish before the start or completion of the former task. Supreme Court. In the United Kingdom, a collective term for the English High Court, Court of Appeal and House of Lords. In Canadian provinces and Australian and US states, typically the highest court of first instance and/or a high appellate court. In the US Federal jurisdiction, the ultimate court of appeal. SureTrakTM. A simplified version of Primavera Project Planner (qv), designed for smaller projects. Produced by Primavera Corporation. TCC. See Technology and Construction Court. Technology and Construction Court (TCC). The UK court previously known as the Official Referees’ (qv) Court. It is the specialist court concerned with disputes arising out of construction or technology matters. It is part of the Queen’s Bench Division of the High Court. tender programme. The programme prepared by C in support of its tender. This may form part of the tender and become a representation of C’s intentions before the contract is agreed. Sometimes referred to as a “bid programme”. It is often produced from very little data. time impact analysis. Sometimes referred to as “time slice analysis”. It is a method of analysis of causation in which the impacts of events are calculated from the date upon which they occur in relation to the programme identified as representing C’s intent at that time43. total float. The overall time by which an activity may be delayed or extended without affecting the total project duration44. turnkey. A form of project procurement in which the contractor (usually a joint venture) is responsible for design and construction of building works, design, selection and installation of plant and equipment and commissioning ready for use. trade stacking. The undertaking of work of disparate trades in the same calendar period. Often attempted by logic changes to compress the work sequences. unabsorbed overheads. The accrual of unrecovered head office overheads (qv). updated programme. The as-planned programme (qv) with actual start dates, actual completion dates and percentage complete added against the activities progressed up until the data date (qv). The last updated programme should be the as-built programme (qv). variation. An express or implied instruction for change (qv). Under the standard forms of contract, D is deemed to have instructed variations in relation to some occurrences and has the express power to order changes specifically described. In this kind of change, D tells C to perform an activity in a way that differs from the original specifications of the contract in terms of quantity, quality, timing or method. Although variations usually affect the content or quality of the work, they can affect a project’s layout or space configuration and can also affect C’s programme and/ or sequence of work through changes in programmed deliveries of developer-supplied equipment or work. The Change Management Supplements also provide for variations to the resources to be used, the sequence and timing of work and also the requirements for programmes, method statements and progress records.

43 See Ch.14, “Cause and effect”. 44 BS 6079–2:2000 Part 2, 2.175. At Figure AI above, by the definitions adopted in Ch.15, that identified as T (2,3,4) is internal total float and that identified as “x” is external float.

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GLOSSARY OF TERMS AND DEFINITIONS

variation order (VO). A formal instruction in writing issued by the CA to C to carry out a variation (qv). VO. See variation order. WBS. See work breakdown structure. WC/87. JCT Works Contract Conditions (Works Contract/2), 1987 Edition. WC/98. JCT Works Contract Conditions (Works Contract/2) 1998 Edition. WCD81. JCT Standard Form of Building Contract With Contractor’s Design, 1981 Edition (revised 1995). WCD98. JCT Standard Form of Building Contract With Contractor’s Design, 1998 Edition. window. A period of time selected for the purposes of delay analysis in which all delays that affect the project within that period are taken together. work breakdown structure (WBS). A project-oriented “family tree” in which the elements or work are related to each other and to the project as a whole. It is a system for organising activities wherein each level consists of the subordinate divisions of the level beneath it. In other words, each level is a more detailed breakdown of the previous level. work package. A distinguishable unit of work at the level of performance, assignable to a single organisational element; it has programmed start and completion date (with interim milestones, where applicable) and may have budget cost or assigned value usually expressed in pounds, man-hours, or other measurable units. The duration of a work package is relatively short unless it is subdivided by discrete value milestones to assist in the monitoring of work performed and other work packages. works. The term used to describe the subject-matter of the contract between D and C in all standard forms of contract. works contractor. The party required to carry out a limited portion of a construction contract, often limited to a single trade, such as “brickwork”, or a single element of the works, eg “substructure”. The label “works contractor” is used here to identify the party actually carrying out the works in both management contracting and construction management. In the United States, under the arrangement for construction management the works contractor is known as a “multiple prime” contractor. zero activity. Sometimes referred to as a “zero duration activity”. An activity that has no allocated duration and is not designated as a milestone or as a flag. When an activity with zero duration is added to a project, it displays both the start and finishing date, but they are both represented at the same point in time45. The purpose of zero-duration activities is generally to indicate a position in the construction logic for an activity to take place, the duration of which is not known at the time that the project is developed or which, whilst originally allowed for, has since been omitted. The process of demonstrating the effect of the omission of an activity by replacing its planned or actual duration with zero days’ duration is referred to as “zeroing”. zero free float constraint. A manually applied limitation on the free float (qv) that would otherwise be available between one activity and another. It can function in the same way as a must start constraint (qv) to interfere with the flexibility of the network and may produce false criticality. However, it can also usefully be used in connection with lag to indicate dynamically the period that must lapse between the supply of information and the activity for which the information is required. zero total float constraint. A manually applied limitation on the total float (qv) that would otherwise be available between the last activity and the date for completion. It can function in the same way as a must start constraint (qv) to interfere with the flexibility of the network and may produce false criticality.

45 Some software illustrates the finish date as occurring before the start date when a duration of zero is applied, e.g. Primavera SureTrak™.

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APPENDIX 2

Types of document

There are six basic types of records that should be maintained during a project. 1. 2. 3. 4. 5. 6.

pre-contract documents; contract documents; contemporaneous documents; programme information; cost data; and independent standards and authorities.

The following guidelines are intended to serve as a checklist for the types of construction project information that will help to support any claim for relief from liquidated damages for excusable delay and/or to demonstrate entitlement to loss and expense for compensable delay:

Pre-contract documents • • • • • • • • • • • • • • • • •

Pre-tender correspondence; Pre-tender minutes of meetings; Invitation to tender or provide a quotation; Tender drawings, specifications, bills of quantities and schedules; Nominated subcontractor or named subcontractor details; Site investigation report; Any programme showing work by others; Tender estimate worksheets; Tender estimate worksheets, calculations and quantity takeoffs; Manpower resource analyses and levelling curves; Cash flow forecast curves; Subcontractor tenders and quotations; Supplier quotations; Site photographs; Method statement; C’s tender programme for the works; and The submitted tender or quotation.

Contract documents • • •

Contract agreement and conditions of contract; Contract drawings; Contract specification and schedules;

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TYPES OF DOCUMENT

• • • • • • • •

Contract bills of quantities; Bills of reduction; Letters of intent; Subcontract documents; Pre-contract minutes of meetings; Telephone attendance records; Instructions to commence work; and Drawings and specifications issued for consideration.

Contemporaneous documents •

•

• • • •

Correspondence1 • Relevant correspondence should be reviewed to identify all delays and the parties to whom they may be attributable for each project activity, • Avoid making unnecessary copies of documents: in some circumstances an original document is privileged, but copies of it are not2; • Restrict distribution of copies to people who are directly involved in the matter; • Be aware that the term “without prejudice” is not effective as a blanket protection against subsequent disclosure when such correspondence may prejudice a party’s position. Without prejudice privilege extends only to documents that represent a genuine attempt to settle a subsistent dispute3. Minutes of meetings: • Minutes of meetings sometimes contain controversial statements that are not agreed between the parties and thus can give the impression that they are not an accurate record of project progress. On the other hand, if statements made in minutes are not rejected when thought to be inaccurate, it may be difficult to dispute them at a later date4; • Costly disputes can arise as a result of the failure of the parties to agree contemporaneous records of agreements; Conversation memoranda; Telephone attendance records; Internal office correspondence and e-mail5; Inspection notices to local authority and building control departments;

1 For some of us, when reading a letter that we find particularly annoying, our immediate response is to fire off a reply written in similar terms. This may provide some emotional relief at the time, but it can be very damaging when it comes to be read out in court. 2 The general rule that copies of documents may be used as secondary evidence to by-pass privilege was established in Calcraft v Guest [1898] 1 QB 759, subject to the equitable jurisdiction of the court to grant an injunction. The use of copies of privileged material which have not already been used as secondary evidence was affirmed in Goddard v Nationwide Building Society [1986] 3 WLR 734 at p.743 per May LJ. 3 South Shropshire District Council v Amos [1986] 1 WLR 1271. 4 In Foundation Co of Canada Ltd v United Grain Growers Ltd (1993) 25 CLR (2d) 1 (BS SC) the defendants objected that the claimant’s minutes were subjective and reflected the claimant’s interest. There had been no formal objective to the minutes at the times and thus the court took the view that in the absence of contemporary objection they could reasonably be taken to present a generally accurate record of the proceedings at the meeting. 5 It is worth remembering the internal memoranda are usually discoverable in litigation and internal memoranda between staff blaming each other for what has gone wrong are seldom helpful.

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TYPES OF DOCUMENT

• • • • • • • • •

• • • • • • • • • • •

Drawing specifications revisions6; Submission and approval of C’s design; Fabrication drawing submission and approval records7; Drawing submission log8; Defects and snagging lists; Clerk of works’ daily reports; Clerk of works’ diaries; Site agent’s and foreman’s diaries9; Daily labour records: • Contractors should keep detailed labour records tied to specific work activities identifying each particular task, where the work was performed, what materials and plant were utilised, and who performed it; • There is a significant difference between the information necessary to build a cause and effect analysis of delay and that necessary to recover costs. It is virtually impossible to build a retrospective delay analysis based on as-built records unless the records contain details entered on a regular basis, of: • the nature of the work carried out; • the place where the work was carried out, eg zone, floor, room, etc; • the company which carried out the work; • whether the activities were related to the original contract and set out on the master programme or pursuant to a change; • the activity reference on the master programme or the CVI or AI referable to the work. Equipment use reports; Weather data; Safety reports; CA’s written instructions (AI); Confirmation of verbal instructions (CIV)10; Variation Orders (VO); Variation Proposals (VP); Requests for Information (RFI)11; Request for Variation Order (RFV); Rejections of requests for variations; Variation Log: • There is often a multitude of ordered variations that directly contribute to project delays. Apart from recording the documents themselves, a separate log should be kept:

6 The dates of revision letters or drawings should be recorded and the actual variations (which should be noted in the legend on the drawing if the CA and consultants have done their job properly) should be studied. All drawings, and revisions, should be retained and must be compared with subsequent revisions and notes in the legend. 7 Contracts often require that submissions be returned within a stated period (usually within 21 calendar days) with approval or comment. 8 A full log of all submissions, rejections and re-submissions should be kept independently of the submissions themselves. 9 The diary entries of the project site staff should be reviewed regularly to identify all delays to programme activities. 10 Verbal instruction given on size can represent a type of variation. 11 RFIs are frequently the result of defective or deficient drawings specifications or bills of quantity.

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TYPES OF DOCUMENT

• As a guide to proper documentation, C should keep the following information on every variation: • Date of discovery of change; • Person and/or company making discovery of change; • Detailed description of variation condition; • Documents supporting assertion that a variation does exist; • Notification to CA (date and person); • Relevant records and documents, such as: • affected plans or sketches; • daily reports; • meeting minutes; • letters, notes, memos and telephone records; • payroll records; • equipment report; • material invoices; • photographs; • subcontractor/supplier cost and programme impacts; • impacted programmes; • notification to subcontractors/suppliers; • notification to bonding company; • drawing request and issue records; • working drawings issued during the course of the work; • free-hand sketches by the CA or consultants12; • estimates from and orders placed with suppliers and subcontractors; • delivery notes; • C’s records should identify the quantity of material installed on a weekly or even daily basis depending on the circumstances; • Plant and tool programmes; • Labour and plant daily allocation sheets; • Meteorological Office records; • Progress photographs and videos of problem activities; • General progress record photographs and videos; • “Special event” photographs and videos: • It is important that whatever photographs and videos are taken, the following in relation to them are also recorded: • the date of the record (automatically recorded on the negative or film, if possible); • the positions and circumstances under which they were taken; and • the name of the photographer. • The negatives should be preserved with the prints, for future reproduction; • If record photographs are known to be required13 for evidential purposes in a dispute, it is advisable to have them taken by an independent third party, normally the expert, or taken under the expert’s directions; • The same applies to tape recordings of site meetings14; • Schedules of defects and snagging lists; • Certificates of partial completion; • Certificates of sectional completion; • Certificate of practical completion; • Certificate of final completion;

12 These are often used to illustrate site instructions. 13 Such as the state of particular forms of construction which are likely to be covered up. 14 See Vaughan v London Borough of Lewisham UKEAT 4/0534/12.

1100

TYPES OF DOCUMENT

• • • • • • • • • • • • • • • •

Notices of delay15; Programme information; Method statements; Bar-charts; Planned and actual manpower planning histograms; Planned and actual plant planning histograms; Programming meeting minutes16; Tender programme; Original master programme; As-planned short-term programmes; Programme update reports and logs; Programme update narratives from progress reports; Short-interval/look-ahead programmes; Planned and actual resource loading; Programming meeting minutes; Transcripts of telephone calls and SMS messages.

Cost data • • • • • • • • • • • • • • • • • • • • •

Tender analysis; Control budget; Day work-sheets and supporting records; Weekly labour distribution records; Labour time sheets coded to work activities; Labour overtime records; Payroll records; Daily equipment cost records; Purchase orders; Material delivery notes; Cancelled accounts payable checks; Applications for payment; QS’s recommendations; Progress payment reports; Project cost reports; Subcontractor cost reports; Progress and payment reports; Job cost reports; Subcontractor cost reports; Revenue records; and Bank loan and interest data.

Independent standards and authorities • • •

Codes of practice; British Standard specifications; and Reports by Royal Commissions.

15 The JCT family of forms requires that the CA be advised as soon as any delaying event occurs, irrespective of whether it will cause delay to completion or whose responsibility it is thought to be. 16 It should be made a term of the contract that official statements as to progress are to be agreed between all relevant parties, and issued and circulated on at least a monthly basis (and, in some circumstances, more frequently, eg where acceleration is instructed).

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A PPENDIX 3

The Society of Construction Law Delay and Disruption Protocol: a retrospective analysis1 By Julian Bailey2

A. Introduction Harmonisation is one of the great ambitions of humanity. Instinctively, we understand that if we all do something a particular way, life should be easier. We can see this ambition manifested in multi-faceted ways. Most prominently, it is through communication (and finding a common language) that we seek to fulfil our yearning for equivalence. Language unites us when we understand each other, but creates a cold, invisible wall when we do not. The critical need for a common language has long been recognised in our cultures and institutions. In the Judeo-Christian tradition, following the Flood, the people of the world spoke one language, and sought to build a city and a tower “whose top may reach unto heaven”3. Following the construction of the city and the tower, the Lord saw the vanity and effrontery of man, and resolved to “confound their language, that they may not understand one another’s speech”, and scattered the people across the face of all the earth. As a building project, the Tower of Babel was made a disaster because its participants could no longer communicate with one another4. If we move forward in time to the late nineteenth century, a major attempt was made to develop a common language for all humans by the Esperanto movement. Esperanto was invented by Ludwik Zamenhof, who grew up in Białystok in what is now eastern Poland. Białystok had a large Jewish community, who spoke mainly Yiddish, and also Polish-speaking Poles and Russianspeaking Belarussians. Zamenhof’s great belief was that much of the resentment and misunderstanding between ethnic groups arose from the fact that they spoke different languages. He envisaged Esperanto as a neutral second language which, if learnt universally, could be used to work a peaceful coexistence of people from diverse cultural and linguistic backgrounds. Despite its noble and sincere objective, it is fair to say that the Esperanto project has not been a success. Few people outside the academic world speak the language. Worse still, in Stalin’s Soviet Union, speakers of Esperanto were usually suspected of being spies and almost invariably sent to the Gulag5. In the present day, there are many respects in which finding a common means of communicating is essential to our modern living. Computer technology enhances our lives, but it is essential for communications protocols to be deployed between devices in order to ensure that computer systems work. In the construction industry itself, protocols are now regularly used for Building

1 This appendix is based upon a paper originally presented at the Society of Construction Law International Conference, in Kuala Lumpur, Malaysia on 20 September 2014 and is reprinted with the kind permission of the Society of Construction Law. See also the article at (2015) 31 Const LJ 69. 2 Solicitor, White & Case LLP. 3 Genesis 11. 4 However, the Book of Genesis provides no indication as to whether force majeure, or similar relief, was claimed by the builders involved. See also Jackson LJ, “Denning Lecture 2006 – The Tower of Babel: what happens when a building project goes wrong?” (2006) 24 Cons LJ 87. 5 J Hugo-Bader, Kolyma Diaries (Portobello, English translation 2014), p.38.

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DELAY AND DISRUPTION PROTOCOL

Information Modelling (“BIM”), so as to regulate the contributions of project team members to BIM computer systems6. This leads us to the subject-matter of this paper – The Society of Construction Law Delay and Disruption Protocol (the Protocol)7. The Protocol was published by the Society of Construction Law UK (SCL) in October 2002. As we shall see, in a broad sense, the Protocol endeavours to establish common principles and approaches to the analysis of delay and disruption issues affecting construction projects. It entreats us to “speak the same language” when it comes to such matters.

B. General observations B.1 The structure and presentation of the Protocol The Protocol is divided into a number of sections. The primary section consists of 21 Core Principles, setting out principles which the Protocol regards as essential or best practice, followed by four Guidance Sections which detail how those Core Principles should be implemented in practice. The Protocol also contains four appendices (A–D), which include a glossary of terms used; a model clause for adapting the Protocol’s recommendations on the preparation and use of programmes into a construction or engineering contract; a similar clause on contractors’ record-keeping obligations; and finally a section consisting of graphics illustrating the workings of the Protocol’s recommendations. One of the strengths of the Protocol is that it is laid out clearly and logically and written in language which is accessible by both delay experts and non-experts (including lawyers and judges). One may contrast the Protocol, in this regard, with its equivalent document in the United States, namely the Association for the Advancement of Cost Engineering’s (‘AACE’) Forensic Schedule Analysis publication, which although being significantly more detailed than the Protocol is almost impenetrable to a non-expert8.

B.2 What is the purpose of the Protocol? To understand what the Protocol is, what it attempts to do, and whether it has been successful in operation in the 12 years it has been in existence, we must start by considering the Protocol’s objective. This is stated to be the following: “The object of the Protocol is to provide useful guidance on some of the common issues that arise on construction contracts, where one party wishes to recover from the other an extension of time and/or compensation for the additional time spent and the resources used to complete the project. The purpose of the Protocol is to provide a means by which parties can resolve these matters and avoid unnecessary disputes.”9 Two interrelated observations may be made regarding this objective. First, the Protocol is concerned with the operation of construction contracts, specifically the mechanisms under those contracts for adjusting the contractor’s time for completion, and compensation for time-related matters. What the Protocol does not attempt to do, however, is to

6 By way of illustration, the British Construction Industry Council published a BIM Protocol in 2013 (see www.cic.org.uk). See also D Mosey, “BIM and related revolutions: a review of the Cookham Wood trial project”, SCL paper D171 (July 2014) www.scl.org.uk. 7 The Protocol may be downloaded from SCL’s website: www.scl.org.uk/resources. It has been questioned whether the Protocol should even be regarded as a “protocol”: A Burr and N Lane, “The SCL Delay and Disruption Protocol: hunting snarks” (2003) 19 Const LJ 135, p.135. 8 AACE International (formerly the Association for the Advancement of Cost Engineering), AACE International Recommended Practice No 29R-03 Forensic Schedule Analysis: see www.aacei.org. 9 Protocol, Introduction, para.A.

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proffer guidance on how to manage time in the execution of a construction or engineering project. The Protocol is to be used in analysing, for contractual purposes, what has happened and is likely to happen on a project, not how to deliver the project in the most timely way. This failure of the Protocol to present itself as a delivery-focused project management tool has prompted criticism. As one prominent delay expert has written: “The key weakness in the Protocol, for me, is that it was all drafted through the prism of dispute avoidance. Noble certainly, but the primary purpose of a programme management system should not be dispute avoidance; the purpose should be effective, efficient and practical project delivery. Dispute avoidance will be a by-product of such a system, not its core principle (to use a much loved Protocol term).”10 Secondly, the Protocol seeks to avoid disputes. The way in which it contemplates avoiding disputes is by the parties agreeing to adopt the recommendations in the Protocol for analysing delay and disruption issues. It is, however, unclear as to how the use of the Protocol may in fact resolve contractual issues, so as to act as a prophylactic to any dispute arising. The adoption of the Protocol may reduce the incidence of disputes over the methods of analysis to be used in resolving delay and disruption issues, but it seems unlikely that the Protocol’s application will reduce the incidence of disputes themselves.

B.3 Whose views does the Protocol reflect? The full title of the Protocol is The Society of Construction Law Delay and Disruption Protocol. The cursory reader of the Protocol may, given the reference to the SCL, be entitled to assume that the Protocol represents the views of SCL itself. But it is made clear in the text of the Protocol that it expresses the views of the Protocol’s drafting sub-committee, the members of which are listed at the end of the Protocol document11. The Protocol, therefore, is an SCL-branded document, without purporting to expostulate the views of SCL. Indeed, given the vast, diverse and changing membership of SCL, it is doubtful that one could accurately express a common or agreed statement of principles which represented “the SCL view” on how to analyse delay and disruption. SCL members are united by their abiding affection for construction law, but do not see eye-to-eye on all construction law issues. It is this opportunity for healthy debate which SCL encourages, and is arguably its raison d’être. Perhaps, as we shall see, the Protocol’s greatest contribution is through fomenting debate on matters of delay and disruption.

B.4 The legal status of the Protocol The Protocol has no intrinsic legal status. It is not a statute or regulation which prescribes how delay and disruption analysis is to be performed, whether for the purposes of a construction project or in adversarial dispute resolution. Nor, unless the parties to a project agree, will the Protocol operate at any contractual level12. And although the Protocol makes numerous recommendations which it describes as best practice, those recommendations – as noted – represent the views of the Protocol’s drafting subcommittee, and do not necessarily constitute generally held industry views on best practice. Hence, the fact that a delay or disruption expert takes an approach to delay or disruption analysis not recognised or advocated by the Protocol would not without more constitute evidence of him having acted negligently. 10 D Barry, “The SCL Delay and Disruption Protocol – 10 years on” (2013) 29 Const LJ 367, p.367. 11 Protocol, Introduction, para.I. 12 The Protocol states in the Introduction, para.B, that “It is not intended that the Protocol should be a contract document.”

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The Protocol, therefore, may be characterised as a legally inert document, yet a document which has provoked powerful and sometimes heated discussion amongst those in the construction industry. To understand why the Protocol has been such a polarising publication, we need to delve into its precepts and processes. Let us now do so, albeit (for reasons which will immediately be explained) in something of a reverse order13.

C. Disruption Although the full title of the Protocol is The Society of Construction Law Delay and Disruption Protocol, the topic of disruption is relegated to the last of the Protocol’s 21 Core Principles and a little over two pages of Guidance is given regarding disruption. And when it comes to papers, articles and seminars concerning the Protocol, it is fair to say that the focus (largely, if not exclusively) is usually upon what the Protocol says about delay rather than disruption. More generally, disruption as a topic is under-done, which is remarkable given that some of the largest and most complicated claims arising out of construction and engineering projects are for disruption. So what does the Protocol have to say about disruption? Surprisingly little, as it turns out. Core Principle 21 states: “Disruption (as distinct from delay) is disturbance, hindrance or interruption to a Contractor’s normal working methods, resulting in lower efficiency. If caused by the Employer, it may give rise to a right to compensation either under the contract or as a breach of contract (see Guidance Section 1.19).” Guidance Section 1.19 then discusses the nature of disruption, and the importance of the contractor keeping and providing to the contract administrator “good site records in order that the [contract administrator] may carry out proper assessments of disruption”14. The Protocol’s advice on disruption, as far as it goes, is – generally speaking – both conventional and sound. What, however, is signally absent from the Protocol in relation to disruption is the type of detailed recommendations that the Protocol offers in relation to delay. So, insofar as delay is concerned, the Protocol recommends that the contractor be required to submit to the contract administrator a “properly prepared programme”15 which, if kept updated during the course of a project, may be used as a basis for assessing any extension of time (‘EOT’) applications that the contractor may make. In relation to disruption, the Protocol makes no equivalent recommendation. It simply entreats contractors to keep adequate records to demonstrate the existence of disruption. One may conclude, given the Protocol’s stated purpose, that is “to provide a means by which parties can resolve” issues of delay and disruption arising during the course of a live construction or engineering project, that the Protocol does not go far enough insofar as disruption is concerned. If best practice dictates that, as a means of resolving or avoiding disputes over delay, a contractor provides and updates a programme of the sequence and timing of its proposed works, why is not equally best practice for a contractor to be required on a regular basis to provide to the contract administrator, for the purpose of resolving or avoiding disputes over disruption, records indicating its planned productivity levels in relation to key activities, and updates recording actual productivity as the works progress? If, at the outset of a project, a contractor were required to provide an indication of its anticipated productivity levels, and the basis upon which it had calculated or estimated those productivity levels, and if during the course of the project the contractor’s actual productivity levels

13 The following examination of the details of the Protocol is not intended to be comprehensive. Instead, it focuses upon some of its key aspects. 14 Guidance Section, para.1.19.11. 15 As required by Core Principle 1.

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were then determined (to provide a measured mile, of sorts), one would expect the incidence of disputes over disruption to be reduced, as the contractor’s productivity levels will be monitored by itself and the contract administrator throughout the course of the project. This could be expected to be a proactive measure for managing disruption issues, just as the Protocol advocates the proactive management of delay issues. But the Protocol does not go this far in relation to disruption. As noted, it simply advises the keeping of good site records by contractors, and that contractors make those records available to the contract administrator when assessing the contractor’s disruption claims. This, in essence, is a reactive approach, which does not envisage the continuous provision of information by the contractor to the contract administrator of anticipated and actual productivity on site. The development of a proactive measure for addressing productivity issues is no idle or academic matter. Disruption claims are, forensically, one of the most difficult types of claim to make successfully. This, in no small measure, is due to the fact that claims for disruption are often predicated on after-the-event reconstructions of projects, or segments of a project, which sometimes involve conjecture as to what resources the contractor planned to deploy, how productive it expected (or could reasonably have expected) them to be, and whether the lower productivity of those resources was attributable to the contractor, or to matters for which the contractor takes legal responsibility. If resource productivity were treated as a matter to be addressed at the outset of a project, and measured during its life, one would expect the incidence of disputes over disruption to be reduced.

D. Extensions of time (EOTs) D.1 Introduction Unsurprisingly, many of the Protocol’s Core Principles are concerned with the determination of EOT applications. Core Principle 4 is the primary provision in this regard. It provides as follows: “The EOT should be granted to the extent that the Employer Risk Event is reasonably predicted to prevent the works being completed by the then prevailing contract completion date . . . The goal of the EOT procedure is the ascertainment of the appropriate contractual entitlement to an EOT; the procedure is not to be based on whether or not the Contractor needs an EOT in order not to be liable for liquidated damages.” The essence of this Core Principle is perfectly clear. It commends the contract administrator to make a contemporaneous, prospective assessment of the probable effect of an employer risk event on the contractor’s works, to determine whether the contractor will be delayed by the event, and if so to what extent. If the employer risk event will cause the contractor to miss the current completion date, the contractor is to be given an EOT to the extent of the predicted delay. As far as it goes, and provided it is consistent with the EOT provision of the contract to which it is applied16, there is nothing peculiar about Core Principle 4. It, as most contracts do, requires a contractor to be given an EOT to the extent it will be delayed by an employer risk event. What, however, Core Principle 4 does not indicate is how one should determine whether a contractor is entitled to an EOT, and if so to what extent. The detail of the Protocol’s recommendations is to be found elsewhere, in Guidance Section 3, which offers guidelines for dealing with EOT applications during the course of a project, and Guidance Section 4, which is concerned with dealing with disputed EOT issues after the completion of the project.

16 A critical issue which is elaborated upon below.

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D.2 EOT applications during the course of a project Guidance Section 3 details a procedure which the Protocol recommends be applied to the making and assessment of EOT applications. In short, this procedure envisages the contractor providing to the contract administrator an updated programme, reflecting its progress and intended work schedule just prior to the event occurring, together with information showing the anticipated impact of the event giving rise to the EOT application. This form of presenting the anticipated effects of a delaying event is referred to as “time impact analysis”17. The contract administrator then assesses the EOT application, and if an EOT is justified awards an appropriate EOT based on the predicted effect of the event. The strength of assessing EOT applications in this prospective way is that it gives the parties immediate certainty over the contractor’s time for completion, and consequential rights and obligations concerning time. Its principal weakness is that it may lead to EOT applications being determined largely on a theoretical basis, based upon the predicted effect of an event18, which may ultimately be discordant with the actual effect of that event. Nevertheless, the recommendations of the Protocol in this respect are consistent with the EOT provisions of standard forms of construction contract. Construction contracts contemplate EOT applications being made and assessed during the course of the project, possibly before the full effects of an event are fully known. Where the Protocol seeks to make a difference is in its recommendation that time impact analysis be used as the basis for assessing EOT applications. To consider the potential effect of the Protocol’s application to EOT assessments in construction and engineering projects, it is necessary to examine representative EOT provisions from standard forms of contract. Three such EOT provisions are considered below. 1. The FIDIC Red Book, 1st edition 1999, sub-clause 8.4, provides that the contractor is entitled to an EOT “if and to the extent that completion . . . is or will be delayed” by various events for which the contractor is not responsible19. The Engineer is required by Sub-Clause 20.1 to “agree or determine . . . the extension (if any) of the Time for Completion (before or after its expiry)” in accordance with Sub-Clause 3.5. Sub-Clause 3.5 then provides relevantly that: “. . . the Engineer shall consult with each Party in an endeavour to reach agreement. If agreement is not achieved, the Engineer shall make a fair determination in accordance with the Contract, taking due regard of all relevant circumstances”. 2. In the JCT Standard Form of Building Contract 2011, edition, being the principal standard form of construction contract currently used in Britain, the EOT provision requires the contractor to give notice of a delay (or potential delay). Once the requisite notice has been given, the obligation of the Architect/Contract Administrator is as follows: “If, in the Architect/Contract Administrator’s opinion, on receiving a notice and particulars under clause 2.27: 1. 2.

any of the events which are stated to be a cause of delay is a Relevant Event; and completion of the Works or of any Section is likely to be delayed thereby beyond the relevant Completion Date,

17 See Guidance Section 3, para.3.2.11. 18 The English courts have been critical of theoretical delay analyses, unrelated to the facts of the particular project. For example, in Bluewater Energy Services BV v Mercon Steel Structures BV [2014] EWHC 2132 (TCC), para.[324], Ramsey J held: “However, [the defendant] has not properly analysed what, if any, delay to the fabrication work was caused by the delay in producing the AFC drawings. [The defendant’s delay expert’s] analysis is purely a theoretical exercise and does not consider what actually happened.” 19 FIDIC Conditions of Contract for Construction for Building and Engineering Works Designed by the Employer, 1st edn (1999).

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then, save where these Conditions expressly provide otherwise, the Architect/Contract Administrator shall give an extension of time by fixing such later date as the Completion Date for the Works or Section as he then estimates to be fair and reasonable.”20 3. In Malaysia, the PAM Contract 2006 (Without Quantities) entitles a contractor who is delayed by a relevant event to apply for an extension of time, where “the completion of the Works is or will be delayed beyond the Completion Date” by a relevant event21. If the contractor does duly apply for an EOT with the necessary supporting information the Architect must either ‘reject the Contractor’s application or issue a Certificate of Extension of Time . . .”22. The PAM form is not prescriptive or even indicative as to how the Architect is to go about the task of deciding whether to award an EOT, and if so for what period. The only specific guidance which is given by the PAM contract is that the Architect “may” consider, in evaluating the contractor’s EOT claim, omissions to the works and any other relevant events “which in the Architect’s opinion will have an effect on the Contractor’s entitlement to an extension of time”23. The common features of these three EOT regimes are that (a) they permit the contractor to claim an EOT during the course of the project; (b) they require a determination of the EOT to be made contemporaneously, that is during the project as opposed to at the end of or after the completion of the works (assuming no agreement is reached regarding the EOT); and critically (c) they are non-prescriptive both as to the method which is to be applied to the assessment of any EOT application, and to the determination of the extent of the EOT. It is largely with respect to this last aspect of the EOT process that the Protocol seeks to grapple. EOT provisions in construction contracts have historically been non-prescriptive, sometimes to the point of being opaque. The FIDIC form requires the contract administrator to make a “fair determination” in the particular circumstances, and the JCT form contemplates there being a “fair and reasonable” time extension, where a relevant event will delay the contractor’s completion of the works. Under the PAM form, the Architect is either to reject an EOT application or “issue a Certificate of Extension of Time”. The contract, as noted, provides little clue as how the architect should go about determining an EOT application, and deciding what time extension to grant. Non-prescriptive EOT provisions have been a feature of construction contracts since standard forms of contract emerged in the nineteenth century. To illustrate the point, here is an example of an EOT provision used in the Builders’ Association Conditions of Contract, an English form from the 1890s: “15. The contractors are to complete the whole of the works . . . within [X] calendar months after the commencement of the same, unless the works be delayed by reason of any inclement weather, or causes not under the contractor’s control, or in case of combination of workmen, or strikes, or lock-out affecting any of the building trades, for which due allowance shall be made by the architect, and the contractors are to complete the works within such time as the architect shall consider to be reasonable, and shall from time to time in writing appoint, and in case of default, the contractors are to pay or allow to the employer as and by way of liquidated and agreed damages, the sum of £[Y] per week . . .”24 [emphasis added]

20 Joint Contracts Tribunal Ltd, Standard Building Contract with Quantities (SBC/Q 2011), Cl.28.2.1 21 The Pertubuhan Akitek Malaysia (PAM), Standard Form of Building Contract (Without Quantities), 2006, Cl.23.1. 22 The PAM Contract 2006, note 19, Cl.23.4. 23 The PAM Contract 2006, note 19, Cl.23.5. 24 Alfred Hudson, in his Law of Building, Engineering and Ship Building Contracts, 2nd edn (1895), vol.2, p.385, wrote that this form was “in general use, having been agreed upon between the representative body of architects (the Royal Institute of British Architects) and the representative body of builders (the Builders’ Society), and adopted by the Central Association of the Master Builders of London”.

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The simple and rudimentary nature of the EOT mechanism is understandable, given that people involved in construction projects in the nineteenth century were not blessed with computer technology, and the powers of assembling and analysing information concerning progress and delay which we now have were not available then. Primavera, perhaps to the more cultivated project architect, may have connoted a period of good weather for productive working, as opposed to a software tool for digesting data. Notwithstanding advances in programming technology, the role of the architect or contract administrator then, as now, is essentially the same25. Their role, when it comes to EOTs, is to arrive at a fair and reasonable time extension if it is evident that the contractor is or will be delayed by an event which the contract acknowledges is not one within the contractor’s sphere of accepted risk. The potential difficulty with such a mechanism for assessing delay is that it is vague, and confers upon the contract administrator a very large measure of discretion in deciding whether an EOT is due, and if so for what period. Such a wide discretion, although not “at large”26, may be satisfactory when conferred upon a sanguine and rational contract administrator, but in the hands of a satrapic individual it may constitute an instrument of oppression. The Protocol exhorts time impact analysis as a means of assisting a contract administrator in reaching a decision as to an appropriate EOT, and indeed it may prove to be a useful means of analysing delay – depending upon the quality of the analysis performed, and the quality of data used in the analysis27. However, it is critical to bear in mind that if a contract uses a traditional, non-prescriptive EOT mechanism such as any of the ones described above, the contract administrator is not required to go about his EOT assessment in any particular way. Time impact analysis and other forms of critical path analysis may be used, but they need not be. It is only if a contract is drafted so as to be prescriptive as to the method of EOT assessment, for example by providing for time impact analysis to be used, that the contract administrator will be required to use such a method. And this, it may be suggested, has been one of the major problems faced by the Protocol in the 12 years since its publication. The major standard forms have maintained their traditional, non-prescriptive EOT provisions. Furthermore, in bespoke construction and engineering contracts it is very rare to encounter provisions which contemplate programmes being developed and updated, and EOT applications submitted and assessed, in the manner most favoured by the Protocol (that is, time impact analysis). It may even be said that the uptake of the Protocol has been minimal, and is possibly now non-existent28. This, it may be added, has occurred despite the efforts of some of the progenitors and advocates of the Protocol in publishing addenda to amend standard forms of contract

25 There is, however, a valid point which the Protocol implicitly recognises, namely that advantages for construction and engineering projects may be obtained through harnessing the computer technology which is available to us for project planning. See also in this regard RH Lowe, EM Barba and GB Lare, “A view from across the pond: an American perspective on the SCL Delay and Disruption Protocol”, SCL Paper D78 (May 2007) www.scl.org.uk, pp. 6–7 and D Barry, “Beware the dark arts! Delay Analysis and the Problems with Reliance on Technology”, SCL paper D95 (January 2009) www. scl.org.uk, pp. 11–13. 26 Global Time Investments Ltd v Super Keen Investments Ltd [2000] HKCFA 104 (reported [2001] 1 HKLRD 387, (2000) 3 HKCFAR 440), paras [18]–[21], per Lord Hoffmann NPJ. 27 It is not the purpose of this paper to examine the merits or weaknesses of time impact analysis or indeed other methods of delay analysis – including those identified in the Protocol, and those which are not. However, see in this regard S Adams, “Better ways than ‘the best way’? Improving the Society of Construction Law Delay and Disruption Protocol”, SCL paper D80 (July 2007) www.scl.org.uk, where “critical chain project management” and the “last planner” system are advocated as more suitable alternatives to the critical-path method used in “time impact analysis”. Furthermore, the AACE publication (note 6) identifies nine methods of delay analysis against the Protocol’s four. 28 D Barry, note 8, p.367.

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so as to “implement the Protocol” as part of the contract29. Equally, because the Protocol goes beyond detailing the ideal way of treating EOT claims for analytical purposes, in such a way as to affect the allocation of risk between contracting parties using standard forms of contract, its recommendations would perforce be unattractive to the drafters of standard forms of contract to the extent that the Protocol’s application would displace accepted risk allocations.

D.4 Disputed EOT applications decided after the completion of a project One of the more curious (if not, controversial) aspects of the Protocol is its recommendation for the determination of EOT applications at the end of a project. A typical situation in which this could occur is where a contractor claimed an EOT during the project, the EOT was either rejected or not awarded to its full extent, and after the project’s conclusion the contractor seeks through a binding legal procedure (adjudication, arbitration or litigation) a decision that it was entitled to the full EOT claimed. The reasons for a contractor seeking an after-the-event EOT may be to deflect a claim for delay damages for late completion, or even further the contractor may prosecute a positive claim for its additional costs and loss of profit owing to the project being delayed. The curiosity of the Protocol in this respect is that it, in effect, invites the person deciding the matter (the adjudicator, arbitrator or judge) to step back in time and make a decision based on the information available at the time the EOT application was originally made, and not on the basis of subsequent events. The Protocol recommends that time impact analysis be used as the method of delay analysis, if the project records are sufficiently detailed to permit performing such an analysis30. This approach to after-the-event delay analysis is set out in Core Principle 12: “The Protocol recommends that, in deciding entitlement to EOT, the adjudicator, judge or arbitrator should so far as practicable put him/herself in the position of the CA at the time the Employer Risk Event occurred.”31 The justification which is given for this recommendation is that “EOT is a matter of entitlement, not need”32, and that: “The practice of some CAs of waiting to see what the full effect an Employer Risk Event has on the works before dealing with the Contractor’s application for EOT is not good practice. If the Contractor is entitled to an EOT, it should receive it, and the CA should not wait to see if the Contractor actually needs the EOT, in order not to be liable for liquidated damages.”33

29 See, most notably, the “PFE Change Management Supplement”, which may be found at App.2 of Keith Pickavance, Delay and Disruption in Construction Contracts, 4th edn (London: Sweet & Maxwell, 2010). For a critique of the PFE Change Management Supplement, see Peter Aerberli, “The PFE Change Management Supplements: are they what the industry wants?” SCL paper D59 (December 2005) www.scl.org.uk. 30 If not, the Protocol suggests that one of three other methods, namely (i) “As-planned vs as-built”; (ii) “impacted as-planned”; and (iii) “collapsed as-built” be applied. A lacuna in the Protocol is that it does not define the term “impacted as-planned”, nor does it identify the differences between “impacted as-planned” and “time impact analysis”. 31 Incidentally, the Protocol’s recommendation in Core Principle 12 to adjudicators, judges and arbitrators does not sit easily with the Protocol’s objective, being “to provide a means by which parties can resolve” issues concerning delay and disruption “and avoid unnecessary disputes”. If the Protocol is intended to be a project management tool which acts to avoid disputes, one may ask why the Protocol, in Core Principle 12, seeks to enter upon the arena of adversarial dispute resolution once a dispute has arisen. 32 Guidance Section 4, para.4.19. 33 Guidance Section 1, para.1.2.13.

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One of the difficulties with this approach is that it proceeds from the premise that an “EOT is a matter of entitlement, not need”. Implicit in that statement is the notion that an entitlement to an EOT is a free-standing legal right (or entitlement) of a contractor. However, an entitlement to an EOT is purely a creature of contract, and must therefore be understood and considered on the basis of the particular EOT provision in the contract. A contract may require that any EOT assessment after the completion of a project is to be made by adopting the retrospective/prospective analysis called for by Core Principle 12, but few contracts do. The reason for this is obvious: if a person (a contract administrator, adjudicator, arbitrator or judge) is called upon to examine the effect of an event upon a contractor’s works, the best information concerning the event’s effect will be derived from what subsequently happened. To require, as the Protocol does, that a decision maker should put himself in the position of the contract administrator at the time the event occurred, and then somehow shut from his mind the subsequent course of events, invites a highly artificial exercise which removes delay analysis from the real world and puts it into an abstract realm of prediction if not conjecture. The notion that a fact finder should be steeped in Cimmerian darkness, and exclude from his consideration evidence of actual delay, is as unattractive from a “doing justice” perspective as it is abstruse from an intellectual one34. Moreover, the retrospective/prospective exercise envisaged by Core Principle 12 is inconsistent with most forms of contract, which contemplate there being a retrospective review of the contractual time for completing the works once the works have been performed and in light of the actual impact of events35. Many contractual provisions condition this exercise, as the Protocol notes, so that any retrospective adjustment to the time for completion may only occur by way of the contractor being granted an EOT (or a further EOT), without the time for completion being reduced36. Each of the FIDIC37, JCT38 and PAM39 forms referred to above contain provisions to this effect. There may accordingly be two stages to EOTs under a contract: first, when the EOT is applied for and considered at around the time the event took place, and secondly at the end of the project, once the full effect of each event is known (or better known). Given that construction

34 As Lord Macnaghten held, in reference to an arbitrator’s duty in determining compensation payable under a statutory scheme: “Why should he listen to conjecture on a matter which has become an accomplished fact? Why should he guess when he can calculate? With the light before him, why should he shut his eyes and grope in the dark?”: Bwllfa and Merthyr Dare Steam Collieries (1891) Ltd v Pontypridd Waterworks Co [1903] AC 426, p.431. See also Lowe, Barba and Lare, note 23, pp.20–24 and D Barry, note 23, pp.4–7. 35 Further still, one may even observe that Core Principle 12 is inconsistent with Core Principle 6. Core Principle 6 provides that ‘Where the full effect of an Employer Risk Event cannot be predicted with certainty at the time of initial assessment by the CA, the CA should grant an EOT for the then predictable effect. The EOT should be considered by the CA at intervals as the actual impact of the Employer Risk Event unfolds and the EOT increased . . . if appropriate’. What Core Principle 6 therefore envisages is that the EOT awarded to a contractor will reflect the actual impact of the event. 36 Which could occur, for example, if the contractor were granted an EOT during the course of the project which it did not fully need. 37 FIDIC Red Book, note 17, Cl.8.4, “When determining each extension of time under Cl.20.1, the engineer shall review previous determinations and may increase, but shall not decrease, the total extension of time.” 38 JCT Form 2011, note 18, Cl.2.28.5: “After the Completion Date for the Works or of a Section . . . the Architect/Contract Administrator may . . . fix a Completion Date for the Works or for the Section later than that previously fixed if in his opinion that is fair and reasonable having regard to any Relevant Events, whether on reviewing a previous decision or otherwise . . .”. 39 PAM Contract 2006, note 19, Cl.23.10 (which is essentially in the same terms as the JCT form in this respect).

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contracts predominantly use this type of EOT mechanism40, it is unsurprising that standard form drafting committees did not embrace the Protocol41.

D.4 Float The Protocol helpfully provides a simple definition for float. Float is “The time available for an activity in addition to its planned duration”. When used in relation to the totality of a contractor’s works, “total float” refers to the difference between the contractor’s planned date for completion of the works, and the contractual date for completion. One of the recurring issues concerning the operation of EOT provisions in contracts, expressed compendiously, is “who owns float?” In more detailed terms, the question is one of whether the contractor is entitled to an EOT if there is total float in its programme, and conduct for which the employer is contractually responsible causes delay to the contractor, thus reducing and possibly even eliminating its float. The answer which the Protocol gives to this question is set out in Core Principle 7, which provides as follows: “Unless there is express provision to the contrary in the contract, where there is remaining float in the programme at the time of an Employer Risk Event, an EOT should only be granted to the extent that the Employer Delay is predicted to reduce to below zero the total float on the activity paths affected by the Employer Delay.” In short, the project “owns” the total float in the contractor’s programme. This means that float may be used by either the employer or the contractor until it is all gone. Of Core Principle 7, it may be observed that the question of “float ownership” under any construction or engineering contract is purely a function of the EOT mechanism used in the contract. The legal question is: properly interpreted, will the contractor be entitled to an EOT if employer delay eats into the total float in the contractor’s programme? The issue is entirely one of contractual interpretation and not, as the Protocol puts it, a matter of good practice in delay analysis, or even a matter of policy42. Thus, under the FIDIC Red Book, an EOT is to be granted if completion of the contractor’s works will be delayed – the contractor therefore owns the float. Under the JCT and PAM forms (which are substantially in identical wording), an EOT is only due if the effect of the event is to cause the works to be completed after the contract completion date. In other words, the project owns the float under those forms. The JCT and PAM forms are consistent with the Protocol in relation to float ownership, but FIDIC goes against the Protocol43. There is, however, no reason – whether legal, moral or even practical – for suggesting that the FIDIC approach is wrong – or

40 One of the few notable exceptions in this regard is the NEC3 form (Institution of Civil Engineers, Engineering and Construction Contract, June 2005) which provides in Core Clause 65.2 that: “The assessment of a compensation event is not revised if a forecast upon which it is based is shown by later recorded information to have been wrong.” 41 There may also have been other reasons, including that the Protocol’s recommendations were perceived to be overly prescriptive, and that they were likely to add to the administrative burden, and therefore the cost, associated with construction and engineering projects: see Bridgewater, Sanderson and Watson, “Correspondents’ Reports – England and Wales” [2004] ICLR 485, p.491. 42 Although at least one commentator has suggested, appealing to policy grounds, that it is “. . . fairer, and logical, for any EOT entitlement to depend only on whether or not the ERE [Employer Risk Event] affects the likely actual completion date, at least in respect of EREs that relate to employer culpability rather than non-compensable EREs”: Jim Garner, “A South African view on float and other aspects of the Delay and Disruption Protocol”, SCL paper D82 (August 2007) www.scl.org.uk, p.2. 43 Although in relation to the JCT form, see Royal Brompton Hospital NHS Trust v Hammond (No 8) [2002] EWHC 2037, 88 Con LR 1 (TCC), para.[246], HH Judge LLoyd QC (considering the JCT standard form, 1980 edition).

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at least not reflective of best practice – whereas the JCT and PAM approach is right. Float ownership is entirely a question of risk allocation, as agreed by contracting parties. To these observations, a reader of the Protocol may well respond by pointing out that the float ownership position, as stated in Core Principle 7, is “. . . what the Protocol considers is appropriate where the parties in their contract have not made clear provision for how float should be dealt with . . .”44. [emphasis added] That situation, however, is unlikely to arise. In every construction contract, whether clearly or obscurely drafted, the ownership of float can be determined as a matter of construction of the contract. Furthermore, there is no rule of contractual interpretation which calls for the application of Core Principle 7 as some kind of default position in relation to float ownership. Similar observations may be made in relation to Core Principle 8, which posits that where a contractor’s float is reduced as a result of an employer delay, “. . . the Contractor should in principle be entitled to be paid the costs directly caused by the Employer Delay . . .”. Core Principle 8, like Core Principle 7, therefore contrives to allocate the financial risk associated with the use of float by placing such risk with the employer. There is, however, no reason in principle why risk should be allocated along such lines – it is entirely a matter for the parties to decide upon, in the circumstances of their particular project. As it happens, the JCT45 and PAM46 forms confer an entitlement on a contractor to compensation for prolongation in the event that employer delay consumes the contractor’s float. The FIDIC Red Book takes a more granulated approach, conferring an entitlement to compensation in relation to specific employer risk events, without conferring any general entitlement to compensation in the event of an employer delay occurring47. But the fact that these standard forms (and others) take such approaches does not elevate their common approach to the status of a legal or commercial principle. Stepping back from Core Principles 7 and 8, it may have been expected that the Protocol, in relation to float, would simply seek to identify analytical principles which may be deployed in considering the impact of events on a contractor’s programme – to create a protocol for reviewing information and dealing (from a technical viewpoint) with float. Instead of this, the Protocol seeks to intrude into the area of contractual risk allocation, and its recommendations in relation to float will either comport with parties’ expectations (as reflected in any standard forms they may choose), or it will be inconsistent with them. Either way, the Protocol adds little to the question of risk allocation, which is pre-eminently a matter for contracting parties to decide upon.

D.5 Concurrent delay One of the more perplexing issues arising in relation to construction and engineering projects is how EOTs should be dealt with in circumstances where there are simultaneous delays for which both the contractor and the employer are responsible. Of concurrent delay48, the Protocol makes the following recommendation in Core Principle 9: “Where Contractor Delay to Completion occurs or has effect concurrently with Employer Delay to Completion, the Contractor’s concurrent delay should not reduce any EOT due.”

44 Guidance Section 1, para.1.3.6. 45 JCT Form 2011, note 18, Cl.4.23. 46 PAM Contract 2006, note 19, Cl.24.1. 47 See E Baker, B Mellors, S Chalmers, A Lavers, FIDIC Contracts: Law and Practice (Informa, 2009), pp.473–484 (table 8.4). 48 As the Protocol notes in its definitions of “concurrency” and “concurrent delay”, a distinction may be made between events which occur at the same time (and are therefore “truly concurrent”) and those which occur at different times yet whose effects are manifested at the same time (ie sequential events which have a concurrent effect). For the purposes of the discussion in this paper, nothing turns on the terminology used.

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To a person examining for the first time a non-prescriptive EOT clause49, such as the three referred to above from the FIDIC, JCT and PAM forms, such a statement may seem surprising, or at least it may require explanation. If a contract entitles a contractor to an EOT in certain circumstances, but in determining the extent of the EOT the contract administrator is to come to a fair and reasonable time extension, does the contract contemplate (as the Protocol suggests) the contract administrator excluding from his consideration the effects of the contractor also being in delay? Or may the contract administrator take such circumstances into account, and weigh them up when awarding an EOT? Core Principle 9 tells us that the contract administrator must only consider the employer delay in determining the contractor’s EOT. This approach, it may be added, is partially consistent with a number of first instance decisions emanating from the English courts which hold that where the employer delay and the contractor delay are both effective causes of a period of delay, the contractor’s EOT entitlement is unaffected by the fact that it was also in delay50. Why should such a result obtain? An answer which the Protocol gives to this question is that the prevent principle requires such a result51. That is to say, an employer is not entitled to levy a financial remedy (ie damages, liquidated or unliquidated) from its contractor for delay in circumstances where the employer caused that delay, or where the employer was a partial cause of that delay (ie even if the contractor was also partially responsible for the delay). Such a conclusion is clearly right in circumstances where a contract does not contain a provision which entitles the contractor to an EOT in circumstances where the employer’s breach of contract puts the contractor into delay. But where, as is the case with modern standard forms of contract, there is such an entitlement, the extent of the entitlement is to be determined according to the terms of the contract itself. The contract provides for there being a remedy, and the remedy is to be that which is worked out under the contract. The prevention principle, which is by no means an inviolable legal principle, is not engaged in such circumstances52. Once this is recognised, it becomes apparent that a non-prescriptive EOT provision in a contract may, for any given EOT where there is concurrency, lead to a number of outcomes – and not a single outcome, as the Protocol suggests. The broad and non-prescriptive wording of EOT clauses, such as those found in the FIDIC, JCT and PAM forms, confers a large measure of discretion on contract administrators to engage in a multi-factorial and ultimately fair and reasonable assessment of the circumstances pertaining to the particular EOT claim. The operation of any non-prescriptive EOT clause does not involve any search for the truth in any absolute

49 And unencumbered by English case law, mentioned below. 50 Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 Con LR 32, page 37, Dyson J (as he then was) (where it was common ground between the parties, and apparently accepted by his Lordship, that this was the case); Motherwell Bridge Construction Ltd v Micafil Vakuumtechnik 81 Con LR 44, paras [142]–[143], HHJ Toulmin CMG QC; De Beers UK Ltd v Atos Origin IT Services UK Ltd [2010] EWHC 3276 (TCC), [2011] BLR 274, 134 Con LR 151, paras [177]–[178], Edwards-Stuart J; Walter Lilly & Co Ltd v Mackay [2012] EWHC 1773 (TCC), [2012] BLR 503, 143 Con LR 79, (2012) 28 Const LJ 622, paras [362]–[370], Akenhead J. Compare M Cocklin, “International Approaches to the Legal Analysis of Concurrent Delay: is there a solution for English law?” SCL Paper 182 (April 2013) www.scl.org.uk and (2014) 30 Const LJ 41. 51 See Guidance Section 1, para.1.4.12. 52 If the “prevention principle” were held to be engaged in every circumstance where an employer delay had caused the contractor’s works to be late, it would have the effect of sweeping away not only the EOT provisions of a contract, which regulate the granting of EOTs in circumstances of employer delay, but additionally it would render ineffective time-bar provisions in construction and engineering contracts. This result, it may be observed, was held to apply in the widely discredited Gaymark case from the Northern Territory of Australia: Gaymark Investments Pty Ltd v Walter Construction Group Ltd [1999] NTSC 143, 16 BCL 449, 21 Const LJ 71, para.[69]. The Gaymark approach was (rightly) criticised in Hsin Chong Construction (Asia) Ltd v Henble Ltd [2006] HKCFI 965, paras [132]–[135], Reyes J and Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd (No 2) [2007] EWHC 447, [2007] BLR 195, 111 Con LR 78 (TCC), paras [95]–[105], Jackson J (as he then was).

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sense. This is why it is suggested that, in relation to the analysis of concurrency issues and EOTs generally, precision must invariably yield to fairness, and the result called for by Core Principle 9 will not always hold53.

E. Mitigation Core Principle 13 is concerned with “mitigation of delay and mitigation of loss”. It provides: “The Contractor has a general duty to mitigate the effect on its works of Employer Risk Events. Subject to express contract wording or agreement to the contrary, the duty to mitigate does not extend to requiring the Contractor to add extra resources or to work outside its planned working hours . . . The Contractor’s duty to mitigate its loss has two aspects – first, the Contractor must take reasonable steps to minimise its loss; and secondly, the Contractor must not take unreasonable steps that increase its loss.” Core Principle 13 embraces two distinct matters. The first is whether a contractor has a duty (or indeed a general duty) to mitigate the effects of delay for which the employer is responsible, for the purposes of assessing the contractor’s EOT application. Insofar as Core Principle 13 suggests that contractors are subject to such a general obligation, as a matter of law, to mitigate for the purposes of an EOT application the effects of a delay caused by matters for which the employer is responsible, Core Principle 13 is inaccurate. It is true, as is alluded to in the Protocol54, that certain standard forms of contract require the contractor to take steps to mitigate the effects of employer delay55. But the fact that provisions to that effect are common does not somehow elevate a contractual duty to mitigate delay provision into a legal norm or principle. Put simply, there is no principle of English common law to the effect of the first sentence of Core Principle 13. If, however, a contract expressly provides that the contractor is to take steps to minimise or if possible eliminate the effects of an employer delay, the question arises as to what the content is of that obligation. What constitutes mitigation, for time purposes? Is a contractor required to accelerate its works, so as to overcome the effects of the employer delay? Or, if the contractor was otherwise working in a diligent manner prior to the employer event, may it continue to work in the same way, even if it means that the overall completion of its works will be delayed because of the employer event? The second sentence of Core Principle 13, quoted above, suggests that the contractor is only required to take accelerative measures if expressly required to do so by the particular contract56. There has been very little judicial guidance as to what is comprehended by an obligation to mitigate the delaying effects of an event. One example comes from Mowlem v Eagle Star Insurance, where the Court of Appeal considered the EOT provisions of a management contract57. The relevant provision entitled the management contractor to a “fair and reasonable” extension of time in the event of it being delayed by various employer events, with the contractor’s entitlement to an EOT being qualified by the following: “Provided that no extension shall be allowed in the case of delay which the Management Contractor has not used his best endeavours to prevent or in the case of the Management Contractor’s failure to do all that may reasonably be required to the satisfaction of the architect to proceed with the works.”58

53 In saying this, it is acknowledged that the obiter comments of Akenhead J in Walter Lilly v Mackay, note 48, para.[370] go the other way. 54 Guidance Section 1, para.1.5.2. 55 For example, the PAM form 2006, note 19, Cl.23.6. 56 Such as increasing resources, or working outside of its normal hours. 57 John Mowlem & Co plc v Eagle Star Insurance Co Ltd (No 2) (1995) 44 Con LR 134 (CA). 58 Mowlem v Eagle Star Insurance: note 55.

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The Court of Appeal interpreted the proviso thus: “. . . the proviso is addressing delays which occur as a result of a qualifying cause, not the cause itself; thus, for example, if a delay was caused by bad weather, the plaintiffs would prima facie be entitled to an extension, but the proviso would come into play to prevent them from obtaining one in relation to that period of delay which they could have prevented by use of their best endeavours (eg if they could mitigate the weather problem by resequencing the work, or by the construction of a protective canopy to permit work on the roof in bad weather).”59 The reference by the Court of Appeal to the “construction of a protective canopy” to allow the work to continue is instructive, because it suggests that (contrary to Core Principle 13) taking steps to mitigate delay may in fact necessitate the use of additional resources, such as a canopy. It is possible to think of many other examples where taking practical, additional measures requiring additional resources to allow work to continue with little interruption may be called for, in order to mitigate the effects of delay. The Protocol’s statement that any duty to mitigate delay does not (unless the contract stipulates otherwise) require the contractor to apply additional resources and to work additional hours is, it is suggested, unfounded. Indeed, taking accelerative measures, such as increasing resources and working extended hours, could well be said – as a matter of practical experience – to be the very sorts of actions that often need to be undertaken to minimise the impact of delay60. There is a further point of difficulty (or, at least, inconsistency) with regard to Core Principle 13’s exhortation that a contractor is under a duty to mitigate delay. The Protocol, as noted in relation to Core Principles 4 and 5, contemplates EOT applications being made and assessed contemporaneously, possibly before the event giving rise to the EOT has taken effect or, perhaps, before it has taken full effect. If, therefore, a construction contract were to require the granting of EOTs on a prospective basis, based upon the predicted impact of the event, the assessment of the EOT claim would (following the Protocol) assume that the contractor did not act unreasonably so as to exacerbate the delaying effect on an event, when by taking reasonable steps it could have avoided that delay61. Put simply, if an employer event is likely to cause ten days of delay to the contractor’s works, based on the contractor taking reasonable steps to minimise delay, the contractor should be entitled to an EOT of ten days. The contractor should not be entitled to a 15 day EOT, even if that is the impacted effect on its then current programme, if by reasonable re-sequencing of its works the period of delay can be reduced to ten days. If, therefore, the contractor’s EOT is as long as it needs, acting reasonably, to accommodate the employer event, what does it add to say that the contractor is under a duty to mitigate the delay? The contractor will only be entitled to such reasonable extra time as is needed because of the employer delay. The second matter covered by Core Principle 13 relates to the contractor’s duty to mitigate loss consequent upon an employer risk event. If an employer risk event constitutes a breach of contract by the employer, then Core Principle 13 is correct in re-iterating the axiomatic duty of a party claiming damages for breach of contract to take steps reasonably available to it to mitigate its loss.

59 Mowlem v Eagle Star Insurance, note 55, p.144, Hirst LJ (Sir Ralph Gibson and Nourse LJ concurring). 60 See, by way of recent illustration, Cleveland Bridge UK Ltd v Severfield-Rowen Structures Ltd [2012] EWHC 3652 (TCC), paras [142]–[143], Akenhead J (concerning the construction of the Shard building in London). 61 This, in effect, is what NEC3 (note 38) Core Cl.63.7 does, by providing that “Assessments [including for EOT claims] are based upon the assumptions that the Contractor reacts competently and promptly to the compensation event, that any Defined Cost and time due to the event are reasonably incurred and that the Accepted Programme can be changed.” In other words, the assessment of the contractor’s EOT application assumes that the contractor will take reasonably available steps to try to mitigate the effects of a delaying event.

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If, however, an employer risk event does not constitute a breach of contract, and it is a compensable event (such as where the employer or its agent directs a variation to the works), the valuation of that event falls to be determined by the provisions of the contract. Whether those valuation provisions contemplate the contractor taking reasonable steps to minimise the impact of time related losses will depend upon the wording of the relevant contractual terms. Absent any contractual stipulation to the effect that the contractor is under a duty to minimise its losses flowing from the delay, it is neither accurate nor indeed meaningful to say that the contractor, in such a case, is under any such duty.

F. Global claims Global claims have become a feature (welcome, or otherwise) of modern construction and engineering disputes. Global claim is defined by the Protocol as: “. . . one in which the Contractor seeks compensation for a group of Employer Risk Events but does not or cannot demonstrate a direct link between the loss incurred and the individual Employer Risk Events”. This definition of global claim is accurate, but it is also incomplete. The definition refers to a claim for compensation made by a contractor, and indeed a contractor could make a claim for a global amount of $X based on the occurrence of Y events for which the employer is responsible. However, what this definition elides is the common factual predicate of a global claim for compensation, namely where a contractor contends that it was delayed for a global period of Z days due to the occurrence of Y events for which the employer is responsible, where the contractor has not identified the individual periods of delay caused by each of the Y events. The Protocol has little to say about global claims, other than that they are “discouraged . . . and rarely accepted by the courts”62. The Protocol is surely right to discourage the presentation of global claims. Global claims, like their analogues total cost claims, are risky63. The central reason for global claims potentially being objectionable is that they are often unpersuasive as an explanation of why a contractor was delayed for a particular period of time. It is possible that 30 employer risk events caused a five month delay to a contractor’s works, but if a contractor makes a claim to such an effect – and it is to persuade a contract administrator that the contractor is due a five month EOT – the contractor must be able to rule out any other possible causes of there being such a delay, for example the contractor’s own inefficiencies. As to the Protocol’s statement that global claims are “rarely accepted by the courts”, three comments may be made. First, the acceptability of a claim presented as a global claim is ultimately a question of how persuasive it is. If a contractor adduces cogent evidence that 30 variations instructed by the employer (or its agent) caused a five month delay, and the employer cannot gainsay that position, the fact finder may well accept the contractor’s explanation of the causes of delay. If, however, the contractor’s evidence is flimsy, or the employer is able to point to other causes of the delay which undermine the contractor’s hypothesis, the claim may fail. To say that global claims are “rarely accepted by the courts” – if indeed that is accurate – may be reflective of the intrinsic quality (ie the persuasiveness) of global claims which have been made in court cases. But it does not tell us whether there is anything inherently wrong with a claim being pleaded as a global claim.

62 Core Principle 19. The notes in Guidance Section 1, paras 1.14.2–1.14.4 add little to this general statement. 63 See White Young Green Consulting v Brooke House Sixth Form College [2007] EWHC 2018 (TCC), para.[79], Ramsey J.

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Secondly, the law in relation to global claims has developed since 2002, when the Protocol was published. Certainly in England, the courts take a more relaxed approach to the form in which a delay claim is presented. Most notable, in this regard, is the case of Walter Lilly v Mackay. There, Akenhead J held: “(d) There is nothing in principle ‘wrong’ with a ‘total’ or ‘global’ cost claim. However, there are added evidential difficulties (in many but not necessarily all cases) which a claimant contractor has to overcome. It will generally have to establish (on a balance of probabilities) that the loss which it has incurred (namely the difference between what it has cost the contractor and what it has been paid) would not have been incurred in any event. Thus, it will need to demonstrate that its accepted tender was sufficiently well priced that it would have made some net return. It will need to demonstrate in effect that there are no other matters which actually occurred (other than those relied upon in its pleaded case and which it has proved are likely to have caused the loss). It is wrong, as counsel suggested, that the burden of proof in some way transfers to the defending party. It is of course open to that defending party to raise issues or adduce evidence that suggest or even show that the accepted tender was so low that the loss would have always occurred irrespective of the events relied upon by the claimant contractor or that other events (which are not relied upon by the claimant as causing or contributing to the loss or which are the ‘fault’ or ‘risk’ of the claimant contractor) occurred may have caused or did cause all or part of the loss.”64 If anything, the Walter Lilly case has given encouragement to contractors and subcontractors to present global claims. Various suggestions have been made as to how global claims can now be presented in a more attractive light65. But it would be a mistake to treat Walter Lilly as reflective of any general approach, across the common law world, to global claims. There is no unanimity in the treatment of such claims, as is demonstrated by the recent Australian case of DM Drainage & Constructions v Karara Mining, where a global/total cost claim was struck out on the basis that it did not sufficiently particularise the links between variations directed by the employer and the global amount claimed by the contractor, which was for many million Australian dollars66. Thirdly and perhaps most importantly, the statement that global claims are “rarely accepted by the courts” is a matter which should be peripheral or even irrelevant within the confines of the Protocol. The Protocol is concerned with claims presented under a contract, for assessment by a contract administrator. Contract administrators are not concerned with the niceties of pleadings and evidence for the purposes of court proceedings. Their only concern is to apply the terms of the contract, to determine whether the contractor is entitled to an EOT, and if so for what period. The author is not aware of any standard form of contract which expressly proscribes the making of a global claim as part of an EOT application. A contract administrator is, therefore, perfectly entitled to consider a global claim on its own terms, even if a court may take a more rigorous approach to the presentation of the same claim67.

G. Acceleration The Protocol defines acceleration as follows: “The execution of the planned scope of work in a shorter time than anticipated or the execution of an increased scope of work within the originally planned duration.” 64 Walter Lilly v Mackay: note 48; permission to appeal refused: [2013] EWCA Civ 142. 65 See the illuminating paper by B Patten QC, “Pleading Global Claims”, SCL paper D163 (November 2013) www.scl.org.uk. 66 DM Drainage & Constructions Pty Ltd v Karara Mining Ltd [2014] WASC 170 (Supreme Court of Western Australia). See also Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184 (New South Wales Court of Appeal), paras [203]–[205], Leeming JA. 67 See Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd [2012] VSC 99 (Supreme Court of Victoria), paras [612]–[615], Dixon J.

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The first part of this definition is clearly correct. Acceleration means working faster. But faster than what? It could mean working faster than the contractor is currently working. It could also (and overlappingly) mean completing activities ahead of when the contractor planned to complete them. The second part of the definition is, however, less straightforward. A contractor’s scope of work may increase because it is instructed to perform additional work. This additional work may or may not cause delay to the contractor’s works. Often it will, but not invariably. Let us assume, however, that a contractor is instructed by the employer or its agent to perform additional work, and that this additional work will cause delay to the completion of all the contractor’s works, as enlarged by the additional works. In such a case, the contractor will almost invariably have an entitlement to claim an EOT due to its increased work scope68. If the contractor is granted an EOT, and yet it completes all of its (enlarged) works within the original time-frame for doing so, on one view it has accelerated its works. It was given more time to perform the works, but it did not use that time. To say that, in this context, the contractor accelerated its works may be accurate if the contractor planned to complete the works within the enlarged timeframe for doing so, but then took measures to work more quickly. It is, however, difficult to say that the contractor worked faster (and therefore it accelerated) if it was granted an EOT which it did not actually need, and completed its works – without taking additional measures – within the time it originally planned. It is therefore suggested that the difficulty with this second part of the definition of acceleration is that it presupposes something which may or may not be the case, namely that the completion by the contractor of its enlarged works within the time for completion of its original works must result from accelerative measures being taken by the contractor. Whether, however, a contractor has worked faster to complete its enlarged works within the original time for doing so will be a question of fact. Definitional difficulties aside, the Protocol’s recommendations in relation to acceleration are largely conventional. In Core Principle 20, the Protocol states that “Where the contract provides for acceleration, payment for the acceleration should be based on the terms of the contract.” Core Principle 20 also mentions “constructive acceleration”, but says that “It is not recommended that a claim for so-called constructive acceleration be made”. The Protocol goes further, in its definition of “constructive acceleration”, by stating that constructive acceleration is “Not (currently) a recognised concept under English law”. Such a statement was not correct when it was made (in October 2002, when the Protocol was published), because in January of 2002 there was a Technology and Construction Court (TCC) decision which allowed a claim for constructive acceleration, although the legal basis upon which the court permitted the claim to succeed was not identified69. Nonetheless, the legal obstacles to making a successful claim for constructive acceleration are considerable, and the Protocol’s counsel against making such claims may therefore be regarded as prudent70.

H. Judicial consideration of the Protocol It has been observed that the Protocol has not been embraced by the UK construction industry, or indeed anywhere else. How, if at all, has it been received by the courts? The Protocol has been referred to in only eight cases: four English, three Australian, and one from Hong Kong.

68 It is, however, permissible for a contract to confer upon the employer the right to order additional work without necessarily entitling the contractor to an EOT: Jones v St John’s College (1870) LR 6 QB 115; Reynolds v Strelitz (1901) 3 WALR 143. 69 Motherwell Bridge v Micafil, note 48, paras [140]–[141], the late HH Judge Toulmin CMG QC. 70 See J Bailey, Construction Law (Informa, 2011), Vol.II, paras 11.186–11.188. Compare SC Nash, “Delay and Disruption: Legal Considerations”, SCL paper D14 (August 2002) www.scl.org.uk, p.9.

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(a) Balfour Beatty Construction v London Borough of Lambeth In Balfour Beatty Construction v London Borough of Lambeth, HH Judge Humphrey LLoyd QC noted that the adjudicator whose decision was subject to the TCC proceedings had relied upon the Protocol (which was at the relevant time in the form of a consultative draft). His Lordship held: “I was not referred to this consultative document [that is, the Protocol] and I am not concerned with it. No doubt because it is still in consultative or draft form, the adjudicator at one point appears only to have used it for a convenient description of some of the main methods available for delay analysis. However it is clear that from paragraph 6.5 of his decision that the adjudicator then used one of them, namely the “collapsed as-built” analysis (or a variant of it), ie the third on the list, to decide the criticality of each Event.”71 His Lordship therefore noted the adjudicator’s reliance upon the Protocol, but did not give consideration to its details or its merits.

(b) Leighton Contractors v Stelux Holdings In Leighton Contractors v Stelux Holdings, Reyes J considered an appeal from an arbitrator’s award where the arbitrator had rejected the time slice method of prospective delay analysis adopted by the contractor’s delay expert. His Lordship held relevantly as follows: “Mr Westbrook [counsel for the contractor] complains that the Arbitrator wholly rejected the time slice methodology employed by the parties for assessing delay. The parties (Mr Westbrook says) not only accepted that the method was apposite, but also spent considerable resources on their experts’ presentations. The Society of Construction Law Delay and Disruption Protocol describes the time slice method as the “most thorough method of analysis, although it is generally the most time-consuming and costly when performed”. How then (Mr Westbrook asks) could the Arbitrator have dismissed the method as being of merely ‘limited assistance’? Mr Westbrook contends that the Arbitrator’s rejection of the agreed method constituted a radical and surprising departure from both sides’ argument. The Arbitrator should at least have allowed the parties the chance to be heard orally before dismissing time slice analysis. By not giving the parties an opportunity to make submissions on the matter, the Arbitrator was guilty of technical misconduct. I disagree with Mr Westbrook. The Arbitrator found against Leighton on actual delay. She further held that, given Leighton’s pleaded case and the facts as found by her, she did not have to concern herself with ‘likely delay’ under cl. 23. In those circumstances, it is not surprising that the Arbitrator found time slice methodology of little help. Stressing prospective delay regardless of actual delay, time slice methodology would have been of limited relevance on Leighton’s pleadings of delay and the Arbitrator’s findings of fact. In any event, it is wrong to say that the Arbitrator wholly ignored time slice methodology.”72 As is evident, the Leighton Contractors case was concerned with whether the arbitrator had considered the contractor’s evidence and submissions on delay, as opposed to any analysis or assessment of the Protocol itself.

(c) Great Eastern Hotel Company Ltd v John Laing Construction In Great Eastern Hotel v John Laing Construction, the defendants sought to rely upon the provisions of the Protocol concerned with the analysis of concurrent delay. HH Judge Wilcox rejected 71 Balfour Beatty Construction Ltd v London Borough of Lambeth [2002] EWHC 597 (TCC), [2002] BLR 288, 84 Con LR 1, (2002) 18 Const LJ 405, [2002] TCLR 25, para.[32]. The adjudicator was a member of the Protocol’s drafting subcommittee. 72 Leighton Contractors (Asia) Ltd v Stelux Holdings Ltd [2004] HKCFI 804, paras [25]–[29].

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the defendants’ reliance upon the Protocol, because on the facts (as found by the judge) there was no concurrent delay – the defendants were liable for all the relevant delay, save in limited respects73. The judgment in this case gave no consideration to the terms of the Protocol itself.

(d) 620 Collins Street v Abigroup Contractors In 620 Collins Street v Abigroup Contractors, Osborn J considered an appeal from an arbitrator’s award, based on alleged misconduct by the arbitrator. The arbitrator had concluded that one of the party’s delay expert’s evidence, inter alia, “generally satisfies the guidelines for retrospective delay analysis published by the UK Society of Construction Law [2002]”, and that it accordingly provided “a reasonable basis for assessing the effect of the claimed delays using the programming methodology agreed by the Experts”. Osborn J concluded that there was nothing in the approach of the arbitrator which demonstrated misconduct on his part74. His Honour’s judgment, however, did not consider or discuss the Protocol in any way beyond this.

(e) Mirant Asia-Pacific Construction v Ove Arup In Mirant Asia-Pacific Construction v Ove Arup, HH Judge Toulmin CMG QC referred to the Protocol to support the propositions that (1) there may be more than one critical path for a project; and (2) critical path analysis, when performed on a contractor’s accurately updated programme, may (as Core Principle 1 suggests) reduce the incidence of disputes over changes occurring during the course of a construction project75. These propositions are largely uncontroversial. The judgment of the court does not, however, examine the provisions of the Protocol in any detail, and although in a limited sense the judgment endorses aspects of the Protocol, more generally it is neutral as to its provisions.

(f) Adyard Abu Dhabi v SD Marine Service In Adyard Abu Dhabi v SD Marine Services – a ship-building case – the ship-builder and its delay expert (Mr Swan) sought to rely upon the Protocol as a basis for concluding that the ship-builder was entitled to a full EOT (as opposed to a reduced, or apportioned time extension) due to matters for which the employer was responsible even if the ship-builder was also in delay. Hamblen J rejected that contention on the facts, as the ship-builder had not demonstrated that it was critically delayed by an employer event. His Lordship held that: “Adyard’s delay expert, Mr Swan, suggested that, at least in relation to its claim for an extension of time, Adyard’s contract completion date approach was supported by the SCL Protocol. However, as Mr Swan agreed in evidence, the SCL Protocol is not in general use in contracts in the construction industry and nor has it been approved in any reported case. There was no evidence that the parties were aware of it or that they contracted with it in mind. Further, the SCL Protocol itself says that ‘it is not intended to be a contractual document. Nor does it purport to take precedence over the express terms of a contract or be a statement of law’. In such circumstances the SCL Protocol can be of little assistance in relation to the legal causation issues which arise in this case.”76

73 Great Eastern Hotel Co Ltd v John Laing Construction Ltd [2005] EWHC 181 (TCC), 99 Con LR 45, paras [298] and [300]. Incidentally, the defendants’ delay expert was one of the members of the drafting subcommittee for the Protocol. 74 620 Collins Street Pty Ltd v Abigroup Contractors Pty Ltd (No 1) [2006] VSC 490, para.[55]. 75 Mirant Asia-Pacific Construction (Hong Kong) Ltd v Ove Arup and Partners International Ltd [2007] EWHC 918 (TCC), paras [123]–[126]. 76 Adyard Abu Dhabi v SD Marine Services [2011] EWHC 848 (Comm), [2011] BLR 384, 136 Con LR 190, (2011) 27 Const LJ 594, paras [289]–[290].

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(g) SMEC Australia v McConnell Dowell Constructors In SMEC Australia v McConnell Dowell Constructors, Vickery J referred to the fact that the plaintiffs had adduced an expert report in support of a disruption/loss of productivity claim, where the “expert report proceeds on the basis of a ‘Measured Mile’ analysis in accordance with The Society of Construction Law Delay and Disruption Protocol (October 2001) [sic]”77. The matter for decision by the court was whether the plaintiffs’ claim in this respect should be struck out. His Honour held that the plaintiffs’ pleading, when considered with their expert report, was sufficiently articulated and therefore the strike-out application failed78. In relation to the measured mile approach relied upon by the plaintiffs’ expert, Vickery J held that “Whether or not this analysis survives close scrutiny is not to the point for the purposes of this application”79. Accordingly, Vickery J’s judgment did not consider the disruption aspects of the Protocol.

(h) Alstom v Yokogawa Australia Finally, in Alstom v Yokogawa Australia80, Bleby J referred to the Protocol in the context of recording and discussing the parties’ respective delay experts’ understandings of what “the critical path” is81, including the nature and importance of “logic links” in a programme82, as well as the meaning of “resource levelling”83. In a later part of the judgment, his Honour went on to consider the recommendations of the Protocol as to appropriate methods of delay analysis, including the four methods of after-the-event delay analysis identified by the Protocol84. After doing so, His Honour relied upon the Protocol as a basis for rejecting the (little known) method used by one of the party’s experts, referred to as “resource analysis”85, and as supporting the “as planned vs as built” approach adopted by the other party’s delay expert – a method which the Protocol recognises86. Overall, the case law referred to above is largely neutral as to the Protocol’s operation and moreover its effectiveness. This is unsurprising, given that the purpose of the Protocol (and the measure of its success, or not) is to reduce the incidence of disputes over delay and disruption, by developing a common approach to delay and disruption issues. The Protocol’s purpose is not to intrude into the court room, and to tell delay and disruption experts how they must give their evidence, and how judges should assess such evidence. If anything, the modest body of case law concerning the Protocol demonstrates its utility as a reference for courts and tribunals, and experts giving evidence before them, in defining concepts and identifying approaches to delay and disruption.

I. Conclusion On 18 October, 2005, some three years after the publication of the Protocol, the “Great Delay Analysis Debate” was held at King’s College London, at which four forensic delay experts proffered differing delay analyses with respect to a given factual scenario, using different techniques

77 SMEC Australia Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd (No 3) [2012] VSC 557, para.[126]. 78 SMEC Australia v McConnell, note 75, para.[128]–[129]. 79 SMEC Australia v McConnell, note 75, para.[127]. 80 Alstom Power Ltd v Yokogawa Australia Pty Ltd (No 7) [2012] SASC 49, discussed by R Fenwick Elliott in his paper “East meets West: Delay Analysis – A view from Australia,” SCL paper D143 (October 2012) www.scl.org.uk. 81 Alstom v Yokogawa Australia, note 78, paras [412]–[413]. 82 Alstom v Yokogawa Australia, note 78, paras [415]–[418]. 83 Alstom v Yokogawa Australia, note 78, para.[466]. 84 Alstom v Yokogawa Australia, note 78, paras [1271]–[1276]. 85 Alstom v Yokogawa Australia, note 78, paras [1277]–[1289]. 86 Alstom v Yokogawa Australia, note 78, paras [1310]–[1323].

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to examine and apportion delay87. The motion under debate was: “This house considers that the time impact method is the most appropriate for the analysis of delay in construction disputes”. The debate was extremely popular, attended by around 300 people, and has subsequently been repeated in different formats. Professor Anthony Lavers reported and commented on the outcome of the Debate, in his typically clear and incisive manner: “For me and many other members of the large audience to whom I have spoken, the debate was fascinating. The four experts presented the options with skill and clarity. . . . The process was instructive, and sometimes entertaining, but the greatest significance for me was the results. The audience rejected the motion ‘This house considers that the time impact method is the most appropriate for the analysis of delay in construction disputes’. However, when the audience was asked in turn which of the four methods offered they favoured, none could command a clear majority and each had a committed band of supporters. While it is accepted that this was only an academic exercise, two points struck me, and others, with some force. First, one of the most influential writers and practitioners in the field, Keith Pickavance, twice failed even to secure a bare majority in favour of time impact analysis (although a second vote on the motion after further argument showed a decreasing vote against the method). Second, in an audience of around 300, including some of the UK’s leading experts in delay analysis, nothing approaching consensus could be found as to the correct methodology; indeed, the vote was split into four significant minorities. It is hardly necessary to emphasise the difficulty which this is capable of causing. Parties are likely to adopt the methods which best suit their respective positions, which is a recipe for conflicts between at least two approaches; in multi-party disputes it could well be more.”88 I would urge the reading (or re-reading) of the SCL paper recording this Great Debate, in which positions of the four delay experts are set out in great detail89. Reading their analyses, which proceed using the delay analysis techniques recognised by the Protocol, does not ineluctably take one to the correct analysis. Professor Lavers’ record of the outcome of the Great Debate is, therefore, unsurprising. If, then, the community of delay experts themselves is unable to agree upon the most appropriate method of analysing delay, it is unremarkable that the Protocol itself has not attracted widespread support amongst delay experts, since it only promotes a single method of delay analysis. Perhaps, therefore, the Protocol was overly ambitious in its attempt to set out “best practice” in the analysis of delay. Clearly, as Professor Lavers notes, minds differ amongst delay experts as to which method is best. Adding to Professor Lavers’ observations, there are two further interrelated comments this author would wish to add which he believes go to the very heart of the wider problem, which the Protocol attempts (in part) to address. The first comment concerns the work which the Protocol seeks to do. As mentioned at the outset of this paper, the Protocol’s avowed objective “. . . is to provide useful guidance on some of the common issues that can arise on construction contracts, where one party wishes to recover

87 See J Critchlow, “The Great Delay Analysis Debate”, SCL Paper 130 (March 2006) www.scl. org.uk. The four delay-analysis techniques considered were (i) the “impacted as-planned method”; (ii) the “as-planned versus as-built method”; (iii) the “collapsed as-built method”; and (iv) the “time impact method”. 88 J Critchlow, fn 85, pp.51–52. An earlier paper by K Pickavance, “Putting the SCL Delay and Disruption Protocol into Practice – is it what the industry wants?”, SCL Paper D52 (September 2004) www.scl.org.uk concluded with the following: “Does the industry want to put the Protocol into practice? In my submission, it does. It wants it in the broadest sense, and it wants it internationally” (p.5). Evidently, if that view were generally held in the construction industry in 2004, there had been a seismic shift of opinion by October 2005, when the “Great Debate” occurred. 89 J Critchlow: fn 85.

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from the other an extension of time and/or compensation for the additional time spent and the resources used to complete the project”90. The context in which the Protocol seeks to harmonise the analysis of delay is that of contract management – that is, where a contractor has submitted an EOT application, and the contract administrator is assessing that application. EOT applications are routinely made and assessed on construction and engineering sites, by busy people skilled at contract administration and scheduling, but who do not have the time to enter into great debates over methods of delay analysis, float, concurrency, global claims, acceleration and the like. They need to deal with paperwork issues quickly, so that they can focus upon the timely completion of the project. The Protocol (and the many issues arising out of it) may be of interest to project and contract managers, but only to the extent that it may save them time, or provides a short route to reaching a decision on an EOT application. If they belong anywhere at all, arguments regarding the most appropriate method of delay analysis belong in the courts, or in adjudication, or arbitration. The point which may be made is that, if the Protocol is to succeed for construction and engineering projects, it must prove itself to be useful to those involved in such projects. We may unhesitatingly conclude that it has not done this. The second comment concerns the function and application of EOT clauses in construction and engineering contracts. For more than a century, EOT clauses have been drafted in deliberately non-prescriptive terms, conferring upon contract administrators great flexibility and discretion in assessing EOT applications. The common formulation is that, if an EOT event happens and the contractor applies for an EOT, the contract administrator is obliged to award the contractor a fair and reasonable EOT. What is a fair and reasonable EOT? Is it one which is determined by feeding information into a computer and pressing “click” for the correct answer? Is it to be determined based upon subjective factors, such as whether the contract administrator believes the contractor deserves an extension of time and, if so, how much it deserves? Is it to be determined based upon a full set of available information, or only the information which the contract administrator has to hand at the time? If both the employer and the contractor have caused delay, so that there is fault on both sides, is it a fair and reasonable result that the contractor be awarded part only of its claimed EOT? The underlying issue, which becomes obscured by competing theories on the best way of analysing delay, is the precise manner in which EOT clauses operate – and what they do (and do not) require. For EOT clauses drafted in broad, flexible language (such as that entitling the contractor to a fair and reasonable EOT), the EOT question is to be examined in the context of the background and purpose of the parties’ transaction. For the busy contract administrator in the site cabin, the task of assessing an EOT application may involve examining the contract programme, the events relied upon by the contractor, attempting to forecast their impact (or gauging what impact they have already had); it may involve speaking to the contractor about the event and considering what can be done to ensure the project is not unduly delayed. Once the contract administrator has done this, he may weigh up the totality of events and, acting in an even-handed way, arrive at a fair and reasonable assessment of the contractor’s EOT claim. That, it is suggested, is what is usually involved and what non-prescriptive EOT clauses ultimately call for. If the contract administrator’s assessment is incorrect, or if further information becomes available which casts new light upon the contract administrator’s EOT assessment, that assessment may be capable of review in arbitration, litigation, or perhaps, even adjudication. This approach, it is suggested, provides the surest guide to the parties’ expectations for the resolution of EOT issues. It is to the contract itself that one must turn in order to solve the dilemma of a disputed EOT application. The Protocol may be of assistance in identifying ways of analysing and explaining delay, but that is as far as it goes91. When it comes to the application

90 Introduction, para.A. 91 Unless, that is, the parties to the contract agree that the Protocol is to have contractual effect.

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of contractual terms (including EOT clauses), the approach of the courts is to keep well in mind the reasonable expectations of the parties92. The laudable purpose of the Protocol is to harmonise approaches to delay and disruption issues amongst those involved in the construction industry. On this measure (it is suggested that the Protocol has been a failure. It is not widely used, or, indeed, used to any measurable extent suggested). However, the Protocol has been extremely successful in other, perhaps unintended, ways. Its greatest success has been in opening up a broad field of dialogue and debate on the legal treatment of delay and disruption issues in construction projects. It asks us to challenge the manner in which we examine these issues and to try to find a measure of common ground, or consensus. Let us therefore consider the Protocol not as a model, or an end point in itself, but as a step on a path which we must continue to create. We may not speak with one voice when it comes to the best way of analysing delay and disruption issues, but at least (thanks, in part, to the Protocol) we are speaking about them.

92 As Lord Steyn noted, in the 11th Sultan Azlan Shah Lecture given in Kuala Lumpur on 24 October 1997: see J Steyn, “Contract law: fulfilling the reasonable expectations of honest men” (1997) 113 LQR 433.

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APPENDIX 4

Selecting the appropriate delay analysis methodology: a decision-making model for facilitating the process1 By Nuhu Braimah2

Introduction The nature of the construction industry and a host of other factors have combined to make it an arena of a large volume of disputes. Much of the disputes are concerned with claims for delay and disruption (DD) on projects (OGC, 2003; Moura and Teixeira, 2006). Project delay is generally the result of multiple causes from multiple parties, thus making the task of justifying and quantifying the effect of each item of DD extremely difficult (Pickavance, 2010). This difficulty is exacerbated by the fact that most forms of contract seldom specify the method that should be used to perform this proof, either in the course of the project or after (SCL, 2002; Pickavance, 2010). Such specification has become very important given the myriad acceptable delay analysis methodologies (DAMs) that are available for use. Claim parties and their delay analysts therefore usually adopt their own DAM for proving or disproving the claims based on their own accumulated experience, expertise and intuition. This has been a recipe for disputes mainly because the various DAMs produce different results when applied to a given claims situation (Bubshait and Cunningham, 1998; Stumpf, 2000; SCL, 2006). Moreover, there is currently no industry-wide agreement on which of the methods are the most appropriate to use. The general view is that no single methodology is suitable for all claims situations and that the best methodology for any situation should be selected based on a number of criteria (SCL, 2002; Arditi and Pattanakitchamroon, 2006). Apart from the fact that the criteria vary from analyst to analyst, they are qualitative, subjective and imprecise in nature, making their use in methodology selection open to challenge. Inspired by the need to address this problem, a model for the selection of an appropriate DAM has been developed. This is intended to serve as a tool for assisting analysts in justifying their choice of DAM to their clients and/or the trier-of-fact when the contract is silent on the method of use. Claim parties can also rely on it if they have to come to an agreement on which DAM should be used for performing the claims analysis. The model is based on scoring competing DAMs on 18 selection criteria identified as relevant from a thorough review of the body of literature on DD and a nation-wide questionnaire survey of acknowledged delay analysis experts in the United Kingdom (Braimah and Ndekugri, 2008). As shown in Table 1, the criteria have been statistically regrouped, using factor analysis, into six generic selection factors. The third column shows their respective weights, as obtained by normalising relative importance rating values obtained from the survey. The application of the model involves first rating each DAM successively against each criterion in reflection of the extent to which the method is suitable to use given the criterion under consideration. The ratings from all criteria are then multiplied by their respective weightings to obtain the suitability scores of the various methodologies. The total suitability score for each methodology

1 See also the article at (2015) 31 Const LJ 97. 2 Lecturer in Construction/Infrastructure Management, Brunel University.

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Table 1 Factors influencing DAM selection and their weights Group factor

Selection factor

Weights

Record availability

Record availability

1.00

Baseline programme characteristics Contractual requirements

Timing of the analysis Project characteristics

Cost proportionality

Baseline programme availability

0.86

Nature of baseline programme

0.73

Updated programmes availability

0.72

Applicable legislation

0.37

Form of contract

0.61

Dispute resolution forum

0.56

Reason for the analysis

0.63

Time of delay

0.64

Project complexity

0.67

The amount in dispute

0.75

Size of the project

0.52

Duration of the project

0.47

Nature of delaying events

0.66

Number of delaying events

0.68

Number of delaying events

0.68

The other party to the claim

0.46

Cost of using method

0.59

Skills of the analyst

0.67

is then computed by summing up all the suitability scores from the various criteria. Finally, the methodology with the highest total suitability score is selected as the most appropriate methodology to be used for the delay analysis. Guidance on scoring the criteria and the computation of total suitability scores is provided in a worked example presented as follows.

1. Example application of the DAM selection model The selection model was applied to a hypothetical but realistic scenario of a construction delay claims dispute. Below is the description of the scenario assumed for the application example.

Case study scenario The project assumed is a £200 million contract for the construction of a new liquid waste treatment plant for a Metro city. The project consisted of a considerable amount of construction work with a scope of over 5,000 activities. This involved the construction of a number of treatment facilities organised in an intricate series to work collectively for the reduction of inflow waste concentration to an acceptable standard. Also included was the construction of a three-storey operations house for the control and management of the plant. The agreed contract duration for the project was six years but this overran by 20 weeks due to a number of DD events caused by the employer and the contractor. There were 43 of such events most of which were related to variations ordered by employer, design errors, unforeseen adverse ground conditions, delay in the release of necessary information to the contractor and contractors’ labour and plant problems. The delays were clearly definable and limited to

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specific definitive activities, although some employer-caused delays occurred concurrently with other contractor-caused delays. In addition to causing delayed project completion, the delays also led to many changes in the original planned construction sequence, acceleration and loss of productivity effects. For instance, there were cases where the contractor had to move crew from one area to another due to re-sequencing of the works and other acceleration measures and this led to inefficiencies or loss of crew productivity. Following these problems, the contractor issued claims for an extension of time (EoT) of 15 weeks plus loss and expense of £2m. These claims were prepared using the window analysis method and submitted a couple of months after the occurrence of the last delay event, contrary to the contractual requirement of notifying the employer of such claims early. Unfortunately, the claims went unresolved till towards the end of the project when it was assessed by the employer’s contract administrator (an Engineer) using the collapsed as-built methodology. The Engineer’s response following the assessment was that the contractor is rather entitled to ten weeks’ EoT and £800,000 for the loss and expense suffered. The contractor disagreed with this, maintaining that the Engineer’s assessment was based on a methodology that is not appropriate to use for this claim and referred the matter to adjudication. To buttress this point, the contractor’s delay analyst ought to prove to the adjudicator that his methodology is most appropriate for this case, which could be asserted using the proposed DAM selection model. Other facts surrounding this claims situation are as follows: 1.

2.

3. 4.

The form of contract used did not expressly provide for the use of a specific methodology for the analysis of delay claims. It however, stipulated that for the contractor to be entitled to EoT, delay events that are at the employer’s risk should actually cause project delay. There was also no provision made in the contract for the cost of settling claims and disputes. In compliance with contract specifications, a baseline programme in DPM network format was prepared and submitted to the employer by the contractor. This programme was, however, not updated on a regular basis in the course of the project as the contract did not require it. Further, the baseline programme was found to be inadequate on two aspects: it did not include all the project activities and also some relevant activities were not defined at an appropriate level of detail. An as-built programme showing how all the project activities were actually constructed was developed by the contractor at the end of the project. The contractor kept a site diary and monthly progress reports which contained information such as durations and start and finish dates on all the 43 delays and other relevant events.

2. Application of the model to the scenario Having outlined the claims situation, the next step is to apply the model to select the best methodology. It is assumed that the methodologies considered for selection by the analyst were: Asplanned vs As-built, Impacted As-planned, Collapsed As-built and window analysis, the most commonly commented upon DAMs. The model was applied to each of these in turn, but the detailed assessment of only one of the methodologies is presented in this paper, as this is enough in illustrating the application of the model. In this case, it is the window analysis method whose detailed assessment is followed through as follows.

Step 1: Rating of window analysis against selection criteria The rating is done by first comparing each selection criterion to a corresponding attribute of the window analysis method. Then using a scale of 0–1 (“1 for very suitable” and “0 for not suitable”), the method is given a rating score for each criterion in proportion to the extent to which the method is suitable to use based on the attribute and criterion under consideration. To

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facilitate rating, the different attributes of the various methodologies as reported in the literature have been gleaned and presented in Tables 2–6 and Figure 1, which are set out under the various criteria below. The methodology is rated against these criteria as follows:

Records availability (Rrec) Table 2 shows the project information required to use the various DAMs. In this example all the information required for applying window analysis are available except the dates of programme updates (ie 10 of the 11 required records are available). In the scale of 0–1 the suitability rate in respect of this criterion is Rrec = 10/11 = 0.91

Baseline programme availability (Rbas) Window analysis requires the use of a baseline programme and this was available for use in this case study. Therefore on the scale of 0–1, the suitability rating of the method for this criterion is, Rbas = 1.0

Nature of baseline programme (Rnab) Table 3 outlines important baseline programming requirements for the use of the various DAMs. The baseline programme of this case study was deficient in two of these requirements (ie 3 of the Table 2 Important project information required for the application of DAMS Record

As-planned v as-built

Impacted as-planned

Collapsed as-built

Window analysis

Outline of delay events

√

√

√

√

Start dates of delay events

√

√

√

√

Finish dates of delay events

√

√

√

√

√

√

Activities affected by delays Duration of delay events

√

√

Original planned completion date (or as extended)

√

√

Actual completion date

√

As-planned critical path(s)

√

As-built critical path

√

√

√ √

√ √

√ √

√

Updates critical or near critical paths(s)

√

Update, or schedule revision dates

√

Activity list with logic and lag

√

√

√

√

Table 3 Relevant baseline programming requirements for DAMs application Nature of baseline programme

As-planned v as-built

Impacted as-planned

Available in CPM diagram

√

√

√

Includes all relevant activities

√

√

√

Reasonable activity durations

√

√

√

Reasonable activity relationships

√

√

√

Activities defined in appropriate detail

√

√

√

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Collapsed as-built

Window analysis

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5 relevant requirements were satisfied by the programme). The suitability rating on the 0–1 scale is thus, Rnab = 3/5 = 0.60

Updated programme availability (Rupa) Table 4 outlines important programmes updates required for the use of some DAMs. For this case study, one of these requirements was lacking, ie the absence of regular programme updates. Since 1 of the 2 requirements was not available, the suitability rating for the method of the 0–1 scale is, Rupa – ½ = 0.50

Applicable legislation (Rapp) It is assumed in this example that no legal procedures or rules were required to be followed by the disputing parties which could have affected the use of window analysis. It is therefore very suitable to use this methodology and so rates on the 1–0 scale ie Rapp = 1.0

Form of contract (Rfmc) The terms of the contract require that the delay analysis should be based upon the actual effect of the delays on project completion. In this case the methodology suitable to use should therefore be one capable of performing retrospective analysis of delays, an example of which includes the window analysis method. Thus, on the scale of 0–1, the rating of the methodology on this criterion is Rfmc = 1.0

Dispute resolution forum (Rdrf ) It is assumed in this example that the window analysis method is one of the methods acceptable for use in adjudication. Therefore the methodology’s suitability rating on this criterion using the scale of 0–1 is Rdrf = 1.0

The reason for the delay analysis (Rrda) Table 5 shows the capabilities of the methodologies in proving important delay claims issues. The disputes in this case concerned claims on time extensions, acceleration, disruption and prolongation cost. Since window analysis is capable of proving all these entitlements, it is rated very suitable on the 0–1 scale for the criteria ie Rrda = 1.0 Table 4 Relevant programmes updates updates for DAMs application Updated programmes availability

As-planned v as-built

Impacted as-planned

Collapsed as-built

Intermediate regular programme updates available Final updated programme available (as-built programme)

Window analysis √

√

√

√

Table 5 Relevant programmes updates for DAMs application Claims update

As-planned v as-built

Impacted as-planned

Collapsed as-built

Window Analysis

Extension of time

√

√

√

√

Prolongation cost

√

√

√

Acceleration effects

√

Disruption effects

√

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Complexity of the project (Rcxp) Based on the attributes of the various DAMs, Figure 1 compares their suitability against a number of project characteristics criteria. For any given criterion, a number on the 1–10 scale is first selected in reflection of the characteristics of the project in dispute. A vertical should then be drawn through this number and the methodology that falls in line with this vertical or very close to it will be the most suitable method with a rate of 10/10 = 1.0. The other methods are rated in proportion to their relative positions to this vertical. On project complexity of this case study, the scale number that best describes it is 10 as the scenario description suggests that dependencies between the activities must be very complex. A vertical through this number falls in line with the window analysis method, making it the most suitable method in respect of this criteria and thus rated, Rcxp = 10/10 = 1.0 The selection criteria are: Project complexity, Size of the project, Duration of the project, Number of delaying events, Cost of using technique, Skills of analyst and the amo