Construction contracts manage risk of delay by identifying the key factors likely to cause it.
Delay analysis: where to start?
While most projects are likely to suffer delays, a key issue is identifying the factors that could cause delays and then apportioning the risk between the owner and the contractor. ADAM WEBSTER outlines the main techniques adopted to conduct delay analyses.
01 January 2008
Given the number of things that can go wrong on a construction site, it is not surprising that few – if any – construction projects go according to plan or schedule.
When this happens, construction contracts manage that risk of delay by identifying the key factors likely to cause it and then apportioning the risk between the owner and the contractor.
That appointment is sometimes made by way of a contractual “risk register” or - more commonly – by an "extension of time" provision. This provision identifies matters which – if cause a delay to the project's overall completion – would extend the amount of time a contractor has to complete it. In certain cases, they may also entitle the contractor to additional, time-related costs.
In contractual theory, this all seems simple; in the practical world, however, it is in fact far more complicated. This is because, in reality, there are a large number of factors that may have cause delay to the project, not all of which will be at the owner's risk and not all of which will be critical (that is causative of a delay to the completion of the project as a whole rather than to individual activities).
How is this practical problem resolved? The answer is by the application of one (or sometimes more) “critical path”-based methods of delay analysis. Although entire books have been written on each of these techniques, a very simple summary of each is as follows:
• As-planned versus as-built: This is a retrospective technique, in which the contractor will simply take the difference between the end date shown by the planned and as-built programmes and claim relief for that period by way of an extension of time.
• As-planned impacted: This method utilises the planned programme and adds owner-caused delays into it. The programme is then recalculated to establish the completion date. The approach does not require as-built information and can thus be used for both retrospective and prospective analysis. However, since actual progress is not considered, this approach may not demonstrate what actually caused delay to the project.
• Collapsed as-built: This method removes owner-caused delays from the as-built programme and, by doing so, determines the earliest date that the contractor could (in theory) have completed, had it not been for the delaying events. Good as-built records are required to enable a logic-linked, as-built programme to be established. As this approach considers what actually happened, as opposed to what might have happened, it is appropriate for retrospective delay analysis.
• Time impact analysis: This method provides a basis for determining the expected effect of an event on the completion date and is thus a forward-looking method of analysis. It updates the planned programme contemporaneously with actual progress up to the start of each delay event and then notes the expected completion date at that point in time. If the completion date is later extended, this is taken to be the critical effect of the delay event.
“Window analysis: The progress data available may not be sufficient to determine progress prior to the impact of each event and so derivatives of the time impact technique may be adopted such as “window analysis”. In this analysis, the construction process is seen as multiple windows or slices of time during the period of performance. The delaying event at the end of one window acts as the start of the next window.
Delay analysis: a “black art”?
Doubt has, however, been cast on the use of computer programming techniques recently. In the English case of Skanska Construction UK Limited v Egger (Barony) Limited [2004] EWCH 1748 (TCC), Skanska made claims relating to delays suffered by certain of its sub-contractors.
Egger's defence was that many of the delays related to the inefficiencies of Skanska and its sub-contractors. As such, much of the argument revolved around expert planning evidence and the apportionment of delays between those caused by late information and those caused by the inefficiencies of Skanska and its subcontractors.
Skanska's expert witness on delay matters had been closely involved in the project, but Egger's expert, on the other hand, had not. Consequently, he was reliant on information that had been provided to him by his client.
Handing down his decision, Judge David Wilcox doubted the evidence provided by Egger’s planning expert, complaining that he had relied on evidence prepared by his assistants; failed to adequately check out the facts presented to him; and relied on the evidence of Egger’s employees whose evidence had not been tested at trial.
Therefore, although critical path analysis (aided by the advent of sophisticated computer programming software packages) has brought about a perception that delays can be analysed scientifically so as to produce precise and reliable results, there is a tendency for parties to manipulate such techniques to meet their own ends. As such, they have come to be seen in the industry as something of a “black art” and planning experts must always be wary of falling into the ‘junk in, junk out’trap contemplated by Judge Wilcox if the credibility and reliability of the data produced is to hold water. That said, used correctly and in the right hands, they are invaluable tools.
Conclusion
The advantages and disadvantages of each method are varied and the method chosen depends largely on the stage of the construction process, the data available, the form of contract governing the project and the legal basis of the claim.
In most cases, a pure as-planned impacted analysis alone is not usually sufficient. Normally, arbitrators prefer a retrospective approach using as-built information. Parties (and delay experts) will often pick a method which best suits what they have to work with. One thing is certain, whichever method is used, as held in Skanska, the reliability of a computer-generated “sophisticated impact analysis is only as good as the data put in”!
* Adam Webster is a Dubai-based associate at the legal practice of Norton Rose (Middle East) LLP. Legal queries related to the construction sector can be addressed to Norton Rose through Gulf Construction at editor@gulfconstructionworldwide.com.
Norton Rose Group has had a presence in the Middle East for nearly 30 years and has advised developers, lenders, and contractors in relation to the legal aspects of a wide variety of construction and infrastructure projects in the region.
With a combined team located in both the Bahrain and Dubai offices, Norton Rose (Middle East) is able to provide both contentious and non-contentious support to financiers, developers, contractors and specialist contractors in the region.
