Extensions of Time, Delay Analysis and Prolongation:

Where are we? Where are we going?

SCOTT ADAMS, SCOTT ADAMS CONSULTANTS LTD.,UNIT A5, 17/F MAI LUEN INDUSTRIAL BUILDING,23-31 KUNG YIP STREET,KWAI CHUNG, HONG KONGTEL: 2512 1708

Topics:• Programmes and Project Management• SCL Delay and Disruption Protocol Rider 1

(Delay Analysis Techniques)• Recent Cases on Delay and EOT• Prolongation Costs - Costain v Charles

Haswell• Liquidated Damages: A New Test for

Penalties

Programmes & Project Management:• A programme is a project management tool …• … and nothing more• Not devised for political, or tactical purpose• “The programme … is not contractual in the

same sense as the specification, since neither the contractor or the employer are bound by it. The programme is what it is – a document indicating the intent of the contractor at the time he furnishes it …” (Max Abrahamson)

Programmes & Project Management:• Vivergo Fuels v Redhall Eng’r’g Solutions [2013]• Contractor’s employment terminated for not

keeping programme up to date• [374]: “In summary therefore the need for the revised

programme was not some mere unimportant obligation. Rather it went to an important aspect of the project, the time of completion and on a Project such as the present that was relevant not only as a matter of management of Redhall's works but the entire Project. It was not made less important by the existence of the Rev 3 Programme, the draft Rev 4 Programmes in December 2010 and January 2011 or the look-ahead programmes.”

Programmes & Project Management:1. Devise a sound, logical programme (and method

statement)2. Work to the programme until it becomes

impossible for any reason;3. Record the reason as fully as possible;4. Update/Revise the programme to account for the

reason (show any delay honestly and fearlessly);5. Repeat steps 2-4 in respect of each change which

occurs

Programmes & Project Management:1. Should lead to an incrementally updated / revised

programme, showing all delays as they unfold2. Backed up with detailed records of what changes

have occurred, and why3. … reading like the chapters of a book4. And then no need for any further/new substantive

analysis of the delays.5. So why does this never happen …?

Programmes & Project Management:1. Contractors often do not have the time/resources to

devise a logical, sound and resource-loaded programme and/or keep such a programme up to date with all changes;

2. All parties have an aversion to having their delays shown on a programme

3. GCC Clause 50(4): (After EOT award) “… the Contractor shall revise the programme referred to in Clause 16 accordingly.”

4. Programme incorrectly regarded as ‘binding’5. PROGRAMME OFTEN NOT WORKED TO!

SCL Delay Protocol: Rider 1 (2015)1. Original SCL Delay Protocol 2002 (Reprint 2004):2. Widely quoted (although not so widely adhered to)3. “Delay and disruption issues that ought to be

managed within the contract all too often become disputes that have to be decided by third parties. The number of such cases could be substantially reduced by the introduction of a transparent and unified approach to the understanding of programmed works, their expression in records, and identifying delay and disruption.”

SCL Delay Protocol: Rider 1 (2015)1. Original SCL Delay Protocol 2002 (Reprint 2004);2. “The Protocol recommends that, in deciding

entitlement to EOT, the judge or arbitrator should so far as is practicable put himself in the position of the CA at the time the Employer Risk Event occurred.”

3. [3.2.11] “The methodology described in this section is known as ‘time-impact analysis’. The Protocol recommends that this method be used wherever circumstances permit, both for prospective and retrospective delay analysis.”

SCL Delay Protocol: Rider 1 (2015)1. “ [A] key difference introduced by Rider 1 to the

Protocol is the removal of a preference for a particular delay analysis where that analysis is carried out at a time distant from the delay event or its effect.”

2. [Other main difference] “… the contemporaneous submission and assessment of EOT claims is elevated to a core principle.”

3. ‘Time-Impact’ analysis still recommended during the course of the project (Guidance Section 3)

SCL Delay Protocol: Rider 1 (2015)1. “ 4.1: This part of the Protocol addresses the

consideration of EOT applications after completion of the works, or considerably after the occurrence of the delay event or its impact. In those circumstances, the prospective analysis of delay referred to in Guidance Section 3 may no longer be relevant or appropriate.” [My emphasis]

2. But why not? And how long is ‘considerably after’, and what difference does it make compared to (say) ‘just after’?

SCL Delay Protocol: Rider 1 (2015)1. “ 4.3: The choice of delay analysis to be deployed

should be determined by reference to the following criteria:

• The relevant conditions of contract;• The nature of the causative events;• The value of the project or dispute [proportionality]• The time available;• The nature, extent and quality of available records• The nature, extent and quality of programming• The forum in which the assessment is made”

SCL Delay Protocol: Rider 1 (2015)1. “ 4.3: The choice of delay analysis to be deployed

should be determined by reference to the following criteria:

• The relevant conditions of contract;2. My view: only this criteria matters; if requisite records,

programming etc. have not been kept, then it should only go to make execution of the delay analysis (or prosecution of the claim) more difficult

SCL Delay Protocol: Rider 1 (2015)1. But – beyond the seven bullet points - the Rider does

not clarify what types of factors would lead to narrowing the choice down to any particular method

2. The disadvantages of each method are mentioned, but only in a few words.

3. Arguably, in cases where records have not been kept, the Rider could permit lazy or inferior delay analyses to succeed under the guise of “common sense”.

“As-Planned Impacted”1. Take the initial programme (‘as-planned’)2. Impact (add) claimed delays to it (as extra activities).3. The overall delay = the claimed EOT

1 2 3 4 5 6 7 8 9

9d

1 2 3 4 5 6 7 8 9 10 11

D1 = 2d

D2 = 3d

D3 = 3d

11d

“As-Planned Impacted”1. Very simple and easy to present and understand

(and cheap!!)2. But criticised because it does not take account of

progress made at the time of delay events, or acceleration, or resequencing

3. Results tend to ‘favour’ delays to activities which are on the initial critical path

4. Rarely accepted by judicial tribunals because of the problems in (2)

“As-Built Collapsed”1. Take the as-built programme 2. Subtract claimed delays from it, and collapse it.3. The overall delay ‘but for’ = the claimed EOT

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

D1 = 2d

D2 = 3d

D3 = 3d

16d

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

11d

“As-Built Collapsed”1. Very simple and easy to present and understand

(maybe not so cheap if ABP takes time to construct)2. Has the aura of ‘reality’, because it is based on as-

built programmes (but, note, result is theoretical)3. But criticised because it does not take account of

acceleration, or resequencing. Also introducing logic links into an as-built programme can be a very subjective task

4. Results tend to ‘favour’ delays to activities which are on the last critical path (longest path)

Dynamic Methods: (TIA; Windows)1. See the “Gold Star Slide” – these methods are based

on contemporaneous or re-constructed updates2. Because progress and changes in sequence are

accounted for, they are generally considered the best (most accurate) methods

3. But HUGE volumes of data, and (often) indigestible massive critical path networks involved. Also takes a long time and much $$$$$ … I speculate this is why the Rider is allowing choice of easier methods

4. Lots of opportunity to manipulate the analysis

SCL Delay Protocol: Rider 1 (2015)

Recent Cases1. Walter Lilly v MacKay [2012]2. Cleveland Bridge v Severfield-Rowan [2012]3. Discussion of actual v prospective delay4. Adyard Abu Dhabi v SD Marine Services [2011]5. Discussion on status of EOT Protocol Fig. 9 (“Fairness

vs. Criticality”)

Recent Cases1. Walter Lilly v MacKay [2012]2. [362] “Whilst the Architect prior to the actual

Practical Completion can grant a prospective extension of time, which is effectively a best assessment of what the likely future delay will be as a result of the Relevant Events in question, a court or arbitrator has the advantage when reviewing what extensions were due of knowing what actually happened.” [my emphasis]

Actual vs. Prospective Delay1 2 3 4 5 6 7 8 9

9d

1 2 3 4 5 6 7 8 9 10 11

D1 = 2d

C's culpable delay

11d

1 2 3 4 5 6 7 8 9 10 11 12

D1 = 2d

Contractor's culpable delay

12d

Recent Cases1. Cleveland Bridge v Severfield [2012]2. [98]: “In all these delay cases, it is necessary to

show that the claiming party was actually delayed by the factors of which it complains; it simply does not follow as a matter of logic, let alone practice, on a construction or fabrication project, that, simply because a variation is issued or that information is provided later than programmed or that free issue materials are issued later in the programme than envisaged originally, the claimant is delayed.”

Recent Cases1. Cleveland Bridge v Severfield [2012]2. [98]: “If the real cause of the delay is, say,

overwork or disorganisation within the claimant, the fact that there have been variations, late instructions or information or late issue of materials is simply coincidental.”

Recent Cases1. Adyard Abu Dhabi v SD Marine Services [2011]2. Delays after prevailing Date for Completion3. [262]: [SD Marine’s delay expert] gave a helpful example of the

extreme consequences in practical terms of this approach:"Assuming (as is in fact appropriate in the present case) that the Contractor is many months in delay by reason of its own default. The Employer decides a week before the (original unextended) contract completion date that he wishes a wall to be painted blue instead of the contractually specified red. At the time of the instruction, because of the Contractor's delays, the wall is not even built yet. The paint will take 5 weeks to procure, but will still arrive before the completion of the wall and the date upon which the Contractor would require the paint in line with his delayed progress.

Recent Cases1. Adyard Abu Dhabi v SD Marine Services [2011]

Mr Swan's analysis would appear to entitle the Contractor to 4 weeks' extension of time (by adding 5 weeks to the date of impact, and comparing with the original contract completion date). However, I would suggest that common sense tells the observer that such an extension was neither fair nor reasonable, where the employer's actions have not actually delayed the progress of the Contractor by a single day."

1. [263]: In my judgment Adyard's approach is wrong as a matter of both principle and authority. It is also contrary to common sense, as the above example illustrates.

Recent Cases1. Adyard Abu Dhabi v SD Marine Services [2011]2. [291(4)]: “In so far as reliance was also sought to

be placed on Figure 9 of Appendix D of the SCL Protocol, I find that, as put to [Adyard’s delay expert] in cross examination, it can be read as showing that the introduction of the employer's event on path 2 makes that path critical and causative of concurrent delay in which case again it puts forward the orthodox position.”

Recent Cases

Recent Cases

Delay and Disruption in Construction Contracts, 5th Ed.(Pickavance, Burr)

Recent Cases

Delay and Disruption in Construction Contracts, 5th Ed.(Pickavance, Burr)

Prolongation Costs: Costain v Haswell1. Costain, main contractor constructing a water

treatment plant (design & build); Haswell its engineer2. Plant consisted of 10 separate buildings/structures3. Works were delayed due to design problems with

piling of two of the ten structures; Costain claimed against Haswell

4. At trial, both delay experts agreed that the piling delay was on the critical path; but nevertheless, the claim for prolongation costs failed

5. Court held that delays to all 10 buildings needed to be proved, not just the 2 with critical delays

Prolongation Costs: Costain v Haswell1. Court also held that the piling delays were not

proved in any case, despite the experts’ agreement as to criticality

2. The Court held that the early piling delays may have been mitigated or neutralised by later events

3. This appears to be at odds with the results which would be obtained from a time-impact delay analysis

Prolongation Costs: Costain v Haswell1. Court held that delays to all 10 buildings needed to

be proved, not just the 2 with critical delays2. [184]: “… the contractor 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 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.”

Prolongation Costs: Costain v Haswell1 2 3 4 5 6 7 8 9 10 11

Major Structure

C's culpable delayMinor Structure

7d 11d

1. Critical delays to major structure

2. But prolongation costs only recoverable for 11th day

3. A ‘but-for’ test is applied

4. Consider implications for pacing; ‘hospital jobs’

Prolongation Costs: Costain v Haswell1 2 3 4 5 6 7 8 9 10 11

Major Structure

C's culpable delayMinor Structure

7d 11d

1. Contractor might only recover small/nil prolongation monies despite Employer’s critical delay (Costain v Haswell)

Prolongation Costs: Costain v Haswell1. Contractor might

receive no EOT and thus be liable for full amount of LD (Adyard v SD Marine); SCL Protocol Figure 9 apparently does not apply

2. Does this seem equitable?

1 2 3 4 5 6 7 8 9 10 11C's culpable delay

Major Structure

Employer's delays non criticalMinor Structure

7d 11d

Liquidated Damages:1. Several types of defences may be advance to LDs2. But LDs provisions are seen as a source of certainty,

simplicity of proof and party agreement and so are not lightly set aside by courts / arbitrators

3. In increasing order of desperation (my opinion), the main defences to LDs are:

• EOT award Insufficient and/or Practical Completion achieved earlier than certified

• Time at Large (Peak v McKinney)• LDs are a penalty (Dunlop v New Garage)• Void for Uncertainty (Bramall & Ogden)

Liquidated Damages:1. Dunlop Pneumatic Tyre v New Garage (1915)2. Lord Dunedin: “… the essence of liquidated

damages is a genuine covenanted pre-estimate of damage.”

3. “If the sum is extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed the breach, it will be regarded as a penalty and unenforceable.”

Liquidated Damages:1. ParkingEye Ltd v Beavis [2015]2. Parking charge for overstay (lump sum, £85) in a

shopping mall car-park3. [28]: “A damages clause may properly be justified

by some other consideration than the desire to recover compensation for a breach.”

4. Thus socio-economic factors may be brought into consideration

5. ParkingEye argued (successfully) that they had a legitiate interest in managing the car-park and influencing the conduct of drivers

Liquidated Damages:1. Therefore, we now seem to have a ‘two-stage’

test:

Is Sum a genuine pre-estimate of

loss?

NOT A PENALTY

Yes

Any Socio-Economic factors

giving rise to legitim’t interest

to charge more?

NOT A PENALTY

Yes

No No PENALTY

Liquidated Damages:1. Not law in HK (yet) … but persuasive2. Many construction projects have a socio-economic

justification. Will this new test give employers carte blanche to levy higher LDs?

3. Note that the judgment offered no guidance on what the level of parking charge would have been in order to ‘outweigh’ the legitimate interest.

4. Thus the ‘penalty’ defence to LDs has become harder and (arguably) even more hazy

Recap:• Programmes and Project Management• SCL Delay and Disruption Protocol Rider 1

(Delay Analysis Techniques)• Recent Cases on Delay and EOT• Prolongation Costs - Costain v Charles

Haswell• Liquidated Damages: A New Test for

Penalties

Programmes & Project Management:1. Devise a sound, logical programme (and method

statement)2. Work to the programme until it becomes

impossible for any reason;3. Record the reason as fully as possible;4. Update/Revise the programme to account for the

reason (show any delay honestly and fearlessly);5. Repeat steps 2-4 in respect of each change which

occurs

Extensions of Time, Delay Analysis and Prolongation:

Where are we?

WE ARE AT THE END

THANK YOU.

SCOTT ADAMS, SCOTT ADAMS CONSULTANTS LTD.,UNIT A5, 17/F MAI LUEN INDUSTRIAL BUILDING,23-31 KUNG YIP STREET,KWAI CHUNG, HONG KONGTEL: 2512 1708