Posts

Extension of Time in Construction Contracts

An Extension of Time (EOT) is a clause in most of construction contracts offering the contractor the possibility to extend the construction period when a delay occurs. That delay must not be the contractor’s fault but caused by a distinct relevant event. There is a wide variety of events that could potentially disrupt a construction process and entitle the contractor to an EOT. Some relevant events are frequent, like failure to provide information, variations, or delay in giving the contractor possession of the site. Other relevant events are rare and rather unpredictable in the long term, like civil unrest, exceptionally adverse weather, or war.

When a delay happens or is about to happen, the contractor has to give written notice to the consultant/client. Such notice must clearly identify the relevant event responsible for the delay, as well as prove the causality between the disrupting force and the delay itself. If the other party shares the same view on what caused the delay, they usually grant the EOT and adjust the completion date accordingly. The completion date is a vital temporal landmark in the life of a construction project. Such a date establishes a clear limit for the main scope of works included in the contract to be completed.

EOT requests have to be thoroughly prepared before submission to maximise clarity and facilitate agreement. After identifying the responsible relevant event, the contractor has to link it to the contract clause that allows for the request. However, that is not always enough. The construction project can deviate from the baseline programme produced at the start of the contract, without that programme being updated to account for drops in productivity. In that case, the contractor might have difficulties separating delays occurring from its own fault from delays related to the relevant event. Besides causality, the claim for extension should also address liability. In other words, the contractor provides proof that they fully understand their responsibilities. Often, EOT requests have to be submitted in a certain time window to retain their validity.

Successful claims are reliant on good practices regarding documenting the delays. The contractor should be able to record when and why the relevant event occurred and output a list of resources, tasks, and activities that it directly or indirectly affected. It helps to have proof of all actions or alternative solutions taken to minimise the delay, as well as quantify all associated costs. Once all the available information is gathered, the contractor deploys a Delay Analysis meant to estimate the impact on the project completion date. Construction contracts are generally geared on allowing the construction period to be extended when the contractor has no fault in the delay and has formulated an EOT application. However, not all claims are successful. An application can be rejected when it is proven that the contractor has actually underperformed. Judging claims for extensions of time is more complicated when concurrent delays occur. For example, a contractor already not keeping up with the programme due to a force outside their control (excusable delay) might also have been the cause for a different delay (inexcusable) where both of these delays’ effects are felt simultaneously. Usually, in this case, the contractor would claim for an EOT award and avoid paying liquidated damages while the owner is relieved from compensating the contractor for its prolongation costs.

Concurrent Delay

A concurrent delay occurs when independent delays overlap, each affecting the schedule and completion date of a construction project. Depending on project scale and complexity, two or more concurrent delays can act at the same time. True concurrency means the delay events of the client and the contractor both start and finish at the same time. However, true concurrency is very unlikely to occur. Reality shows that delays need only to overlap for a given period of time to qualify as concurring delays.

The most relevant aspect of concurrent delays is that courts, boards of contract appeals, arbitration panels, and experts, are inconsistent in defining and assessing concurrent delays. That is a direct consequence of contracts failing to include terms for matters of concurrency or doing it in an ambiguous way. Concurrent delays represent unique situations in which establishing liability is not a straightforward process. Although the consequences overlap, the causes are usually traced at various dates back in time. This leads to the difficult task of establishing the presence or absence of correlation. The most common bias here is to assume that if one event came after another, it must have been influenced by it.

While normal delays generate well-known contractual consequences, supported by either the client or the contactor, concurring delays leave many ends that are open to interpretation. Owners use concurrent delays to avoid being billed for extended overhead, change orders and other claims. On the other side, contractors invoke concurrent delays to escape paying liquidated damages and to recover extra costs associated with delays. A common example occurs when the contractor is already behind schedule by its own fault and the client triggers a second delay-producing event. Concurrent delays also take place when a delay caused by one party overlaps with an abnormal neutral event (extreme weather, social or political disturbance) causing an excusable event.

Judging concurring delays is complicated and verdicts are often unpredictable. An investigation is launched to establish culpability, with the first focus on confirming that the delays are indeed independent of each other. That is usually done through an analysis that proves the impact on the critical path of one delay persists when all the other concurrent delays are neglected. Another condition for concurrency as defined in AACE International RP 29R-03 is that none of the delays are voluntary. In addition, the delayed work has to be substantial and not easily correctable to constitute a claim. One possible outcome when no dominant cause of delay is found is apportioning delay. The decision must be fair for all parts, as verdicts on concurrent delays are often judged based on legal precedent. How cases are solved today will influence future cases.

When supporting their claims, parties should provide evidence derived from records of documents and communication. Such evidence must focus on pinpointing the exact moment the event causing the delay occurred. A cause-effect relation has to be proven, most often through a critical path analysis. Parties have an advantage when they can provide proof of identifying and addressing the danger of the delay with written notices.

Contractors should invest time and resources into making sure the contract’s requirements are well-known by all their personnel having an administrative role in the project. This is crucial for notifying delays in a timely manner and in applying for time extension. Prompt notice on anything that can potentially impact project completion should become a priority as any delays can have weight in court, even if the other party is also responsible for much of the delay. A contractor invoking a concurrent delay should always back their claims against a solid construction schedule. Owners should also take a proactive stance by being careful that the contract terms are enforced from the very beginning. The danger here lies in a more relaxed and passive attitude being mistaken by the contractor as implied consent.

Invoking a concurrent delay can constitute a strong defence for both contractors and owners. However, for that to be achieved, parties need to familiarise themselves with accurate tools for schedule updates, analysis, and forecasts. Concurrency of delay will probably continue to remain one of the most complex matters regarding construction claims, a double-edged sword that introduces uncertainty and maximises the potential for conflict.

Acceleration Claims

An acceleration of a construction project defines the situation when work is performed at a faster pace than initially planned. In most cases, acceleration is needed to counteract accumulated delays and to meet the agreed completion date. Acceleration can also occur when the contractor has a direct interest in seeing a project completed ahead of schedule – either by receiving a performance bonus or by relocating resources to another project. The contractor can accelerate work on a project by requesting its workers to perform overtime, by adding a new shift, hiring additional labour, subcontracting, or changing the sequence of activities. Whatever method is chosen, it comes with extra costs that can or cannot be later recovered. Accelerating the project schedule is never free. In addition, when the acceleration is sudden, labour productivity decreases substantially because of fatigue (for current workers required to do overtime) or unfamiliarity to the project (new workers).

There are three types of acceleration that are different based on their causes: Voluntary Acceleration, Directed Acceleration, and Constructive Acceleration.

Voluntary Acceleration describes the situation when the contractor unilaterally takes the initiative of speeding up work on-site, without being previously asked by the owner to do so. This can result in costs that go beyond the original bid and which won’t be recovered unless the client is notified and agrees with the acceleration. Reasons for a client to accept a voluntary acceleration mostly relate to the ability to generate revenue faster by selling, letting, or starting production, which can counterweight the increase in construction costs.

Directed Acceleration is the simplest and most straightforward case of speeding up the construction schedule. The client requests the contractor to accelerate work and pays for the acceleration costs. Such a situation won’t lead to disputes if parties agree on the magnitude of additional costs.

Constructive Acceleration is a situation that is not explicitly voluntary nor directed. Constructive Accelerations typically occur when the contractor is able to invoke an excusable delay such as design changes, added scope, extreme weather, site conditions that differ from bidding specifications, or force majeure events. Owner-caused delays also qualify to justify a constructive acceleration, as well as any other factors beyond the contractor’s control that couldn’t be initially assessed as risks.

Each type of acceleration can lead to an acceleration claim. Voluntary Acceleration claims don’t entitle to extra payment unless agreed with the client. Directed Acceleration claims usually have a predictable outcome, as extra payment is granted to the contractor once an agreement is reached. Constructive Acceleration claims are the ones more prone to create a dispute. The client might argue the contractor wasn’t entitled to accelerate, and the contractor might argue that accelerating the project was the only choice. Acceleration claims must meet a set of preconditions to constitute a reasonable dispute and grant compensation to the contractor. First, the excusable delay must be clearly identified. Delays qualify as excusable only if they impact the critical path of the schedule. Second, the contractor must have made the request for time extension according to contract obligations and in a timely manner to accommodate a response. If the owner denied the request, thus implicitly requiring for project completion according to the initial schedule, it forces the contractor towards a constructive acceleration. The final condition states the contractor must attempt an acceleration to counteract the delays caused by the excusable event and prove such action incurred extra costs.

As always, solving acceleration claims in a mutually advantageous way requires for communication between parties to be prompt and explicit. The difficulty of proving delays and associated acceleration orders highlights once more the importance of proper document management.

To give an example, the contractor is mistaken if they speculate a time extension won’t be granted by the client and act according to that presumption. What might have constituted a valid constructive acceleration becomes a voluntary acceleration in the absence of written client consent. Another common issue regarding acceleration claims is when the granted time extension is insufficient. In that case, a contractor has to prove that the anticipated work requires additional time or additional cost compensation.

Lastly, acceleration is a topic that has to be addressed as early as possible in a complex project. It is always simpler and less disruptive to smoothly speed up works as they encounter the first signs of delays, instead of waiting for them to accumulate.