Are You Experiencing Delays to Your Project?
13th April 2016 | By TBH
Delays to progress and to completion occur, to varying extents, on a majority of projects. A severe drain on cash-flow and a ‘profits crash’ often result. While there are several potential causes of those delays, the risks of bearing the effects of those delays are allocated in various ways, under the terms of the Contract or at Law, between the Principal and the Contractor.
Very often the effects and costs for these delays are compounded when they result in prolonged and costly disputes. The problem is generally caused by the Principal, Contract Administrator or the Contractor failing to grasp the basic principles relating to project planning, programming and management and contract administration. Applying basic principles properly and quickly prevents/mitigates the cause or effects of the delays.
Before explaining the various standard practices for project planning and analysing delays,it is first important to recognise the general types of delays.
What is a Delay?
The term “delay” is commonly understood to be a comparative measure of the difference in time between two situations from which the “delay” is concluded. The measure of time may be by date, such as a start date or a completion date, or by the duration of any given activity.
There are a number of definitions for delay:
• to make something happen later than expected,
• to cause something to be performed later than planned, or
• to not be carried out in a timely manner.
Each of these definitions can describe a delay to an activity in a programme or contract.
The three possible combinations of the excusability/compensability factors referred to above result in the following three types of delay:
1. Non-Excusable (and, therefore, non-compensable) Delays
This is known as “Contractor‘s Delay” which is an expression commonly used to describe any delay caused by a Contractor‘s risk event. The SCL Protocol also calls it “Culpable delay”. For this source of delay, to the extent that it affects the critical path, the Contractor cannot obtain an extension of time or recover prolongation costs and may be held liable for the Principal‘s delay damages or be forced to accelerate to make up the time lost.
2. Excusable - Compensable Delays
This is known as “Principal’s Delay” which is an expression commonly used to describe any delay caused by a Principal’s Risk Event. The SCL Protocol also calls it “Excusable Delay” in respect of which the Contractor is entitled to an extension of time for the Completion Date and damages are then to be considered. In any event, the delay must affect the critical path to completion as described above.
3. Excusable - Non-Compensable Delays
These are delays caused by conditions outside the control of either party. The Contractor is entitled to an extension of time if the delay has an impact on the overall project duration. However, the Contractor is not allocated damages for excusable non-compensable delays.
In many construction contracts, Principal‘s damages resulting from delay to Completion Date will be expressly regulated by way of liquidated or general damages provisions. The measure of damage in the event of such a delay will be largely governed by the type of project undertaken.
What are the General Classifications of Delays?
Critical and Non-critical Delays
The Society of Construction Law (SCL) protocol distinguishes the type of delays as being “Delay to Completion” or “Delay to Progress” .
The “Delay to Completion” is identified as “either delay to the date when the Contractor planned to complete its works, or a delay to the Contract Completion Date”. This type of delay is generally considered as critical delay. A Critical Path Method (CPM) technique or schedule is generally used to identify which delays are critical and which are non-critical.
Conversely, the “Delay to Progress” is identified as “a delay which will merely cause delay to the Contractor‘s progress without causing a contract Completion Date not to be met”. Accordingly, this type of delay is generally considered as a non-critical delay. Whilst “Delay to Progress” may not lead to a time extension and time extension costs, it may still be compensable by way of other delays or disruption costs.
Excusable and Non-Excusable Delays
These types of delays are initially categorised by whether or not a time extension or other form of relief will be given to the Contractor as a result of the delay. In general, a delay is excusable if its cause is an unforeseeable event or beyond the contractor’s control. Non-excusable delays are events within the contractor’s control, or are foreseeable. Specifically, the circumstances of excusable and/or compensable delays are outlined in the particular contract for the project.
Compensable and Non-Compensable Delays
If an excusable delay is compensable, the contractor is entitled to additional monetary compensation. Conditions of contracts generally distinguish between compensable and non-compensable delays as well as how compensation is to be determined.
Why Do We Need to Analyse Delays?
When a construction programme is in delay, the obvious questions are what is the delay, how did it occur, why did it happen and who is responsible? More often, there are multiple delay events, often overlapping or related, causing delays to progress and completion and it is not always easy to see which events have caused the delay and to what extent. A proper method of analysis such as CPM, is therefore indispensable to establish the cause of these delays, who is responsible and what the relevant effect is on the completion date.
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Disclaimer: This article does not constitute advice, legal or otherwise, and is provided only as general commentary. Appropriate professional advice should always be obtained before taking or refraining from taking any action in relation to such information and/or the application of applicable law. This article and the materials contained in it are provided on the basis that all liability for any loss or damage, whether direct or indirect, arising out of or in connection with any use or reliance upon this article is excluded to the fullest extent permitted by law.