EOT’s, Delay & Disruption – How to Minimise your Risk with Proper Documentation

This guest article is authored by Stephen Pyman from our friends, CDI Lawyers

EOT and delay cost claims make up the majority of the largest and most contentious claims in the construction industry. Consequently, basic misapprehensions about EOT clauses can severely impact on defence of claims. It is therefore important to review, consider and amend:

1. Programming clauses; and
2. Time and completion clauses.

(1) Programming Clauses

Programming clauses in unamended Australian Standards (AS) contracts are relatively weak as they were drafted in an era when programming was not always electronically based. As such, areas of difficulty for contract administrators arise when there is:

• a failure to incorporate an initial program into the contract at time of execution; and
• a failure to provide an updated or revised construction program as the work progresses.

Accordingly, AS contract programming clauses should be amended to:

• require the contractor to proceed with the work under contract with due expedition and without delay;
• enable the superintendent to direct in what order and at what time various stages or parts of the work are to be performed;
• require the contractor submit a program showing major activities in work under contract; and
• disallow departure from the contractors program without reasonable cause.

Baseline Construction Program – Amended Clause

Prior to execution of the contract, the “Baseline Program” should be approved by the Superintendent and incorporated into the contract as the Baseline Program, against which performance will be measured.

No changes shall be made to the Baseline Program without the prior agreement, in writing, of the Superintendent. A regular (at least monthly or when directed by the Superintendent) submission of updated baseline programs should be made, to take into account progress of the works, delays, approved EOTs and changes in construction logic. Updated programs are to be reviewed and approved by the Superintendent to be used as Revised Baseline Programs.

(2) Extension of time clauses

AS contract EOT clauses typically include:

1. Notice of delay
2. Written claim for an extension of time
3. Notice of number of days claimed (with written claim, or as soon as practicable thereafter)
4. Updated notices of delay or extension of time claims

Notice – when must it be given?

A common misconception is that the claim must be given within 28 days of the delay ending, because otherwise the impact of the delay is not known. However, in State of Qld v Multiplex Constructions [1997] QCA 447 at page 7:

“…on the proper construction of cl.35.5 of the General Conditions of Contract, the written claim referred to in the third paragraph should be given by the contractor no later than 28 days after the delay has first occurred notwithstanding that it may be continuing.”

Playing It Safe – what we recommend to contractors

Under typical AS contracts, the better approach is to firstly provide a notice of delay (NOD) as soon as the delay has started. A written claim should then be conveyed within 28 days of the delay first commencing. If the delay continues after 28 days, a follow up notice should be expressed detailing the duration of the delay once it has been realised.

Concurrency

CMA v John Holland at [326]:

“Where a subsequent delay event begins to operate concurrently, it is only taken to affect the critical path from when the event earlier in time ceases to be effective. It is the delay which first becomes critical which causes a delay in reaching practical completion”

Disruption & Extension of Time

A disruption claim is principally a claim for additional direct costs. Disruption only gives rise to Extension of Time and prolongation costs if it is shown to occur on a critical path activity (depending on the terms of the contract).

“The sequence of activities through a project network from start to finish, the sum of whose durations determines the overall project duration.

A delay to progress of any activity on the critical path will, without acceleration, mitigation or re-sequencing, cause the overall project duration to be extended, and is therefore referred to as a ‘critical delay’.”

The superintendent

In most construction contracts, the parties agree that the superintendent will act fairly and impartially when acting as a certifier and arbiter. In Peninsula Balmain Pty. Limited v. Abigroup Contractors Pty. Limited [2002] NSWCA 211, Hodgson JA noted that:

“The Superintendent is the owner’s agent in all matters only in a very loose sense …when exercising certifying functions in respect of which the superintendent must act honestly and impartially, the superintendent is not acting as the owner’s agent in the strict legal sense.”

In Kane Constructions v Sopov, it was held that the principal may be in breach of a contract if it exerts influence on a superintendent, so that the superintendent allows his judgement to be influenced by the acts of the principal; or is ultimately controlled (judgment and conduct) by the principal.

Contracts should be amended so that the superintendent has the ability to grant an EOT at the superintendent’s absolute discretion (whilst being under no obligation) so that an adjudicator or court cannot exercise discretion in favour of the head contractor to award time-barred EOT clauses.

Proper Administration of a contract to Deal with EOT and Delay Cost Claims

Practical application:

1. Amend the contract to contain a provision for the contractor to frequently submit statused programs, with a provision for the program to be deemed approved if not agreed to in a timely manner.
2. Ensure that notice requirements, if amended, set practical timeframes for contractors to submit EOT claims and for the claims to be assessed.
3. Specify the method of delay analysis to be used in assessing EOT claims.
4. Contain a provision for the assessment of EOT claims to be made as quickly as possible to the occurrence of the delay.
5. Following approval of an EOT claim, re-baseline the construction program to take into account the approved EOTs.