All too commonly in construction, the works are delayed for one reason or another; design not ready on time, adverse weather, obstructions encountered, unavailability of resources, scope creep, the list goes on. This is inevitable but what is important is to understand your entitlement to an extension of time (EOT) if your works are delayed by something which is not your risk under the contract. There are two reasons why you would seek an EOT in these circumstances: (1) to prevent the employer from charging you liquidated/delay damages and (2) to recover any additional time related costs resulting from your works being delayed.
Entitlement to an EOT
Firstly, it’s important to check that you have entitlement in the first place. Most standard forms of construction contract, unamended, will provide for an extension to the completion date when the contractor/subcontractor is delayed by their employer or by an event which they are not responsible for. These standard forms are usually amended though, so it is important to check the additions and amendments to identify whether your entitlement has been altered in any way.
For example, in a recent judgement (North Midland Building v Cyden Homes), an additional clause that excluded the contractor’s entitlement to an EOT in the event of concurrent delay was upheld. This existence of this clause means that when a delay to your works is simultaneously caused by more than one event, one of which is your responsibility and the other is your employer’s responsibility, you wouldn’t be able to claim for an EOT.
Reasons for delay
Make sure you identify the events for which you will be able to seek an EOT and those that you will not. The contractor/subcontractor will usually be expected to adopt a certain level of risk for delays. This will include events which he is responsible for (poor efficiency, incorrect methodology, mismanagement of suppliers) but can also include events which he has no control over (adverse weather, unforeseen ground conditions, uncharted services). Ideally, you should be aware of how these risks will be distributed prior to pricing the project to allow the inclusion of sufficient contingency. If not, then you will need to assess the level of risk allocated to you and decide if this is acceptable.
You will also need to check the contract requirements for notifying any delays. There may be a period within which the contractor must notify the employer of an anticipated delay e.g. in NEC3, this must be notified within 8 weeks of becoming aware of the event otherwise you lose your entitlement to an EOT and associated costs. The contract will also determine how such an occurrence is to be notified for it to be valid. Discussing the potential delay and having this included in the minutes may not be sufficient.
Consider whether the contract allows the employer to instruct you to accelerate your works. If so, you need to ensure that you will be entitled to recovery of additional costs relating to acceleration i.e. additional resources, overtime, alternative construction methods etc. You would also want the contract to provide you with the option to refuse acceleration if it is not considered practical.
Furthermore, ensure that the parameters for acceleration are clearly stated; access requirements, shift patterns, sequencing etc. It is likely your employer will seek to apply damages in the event the agreed acceleration date isn’t achieved. Protect yourself by identifying any assumptions you have made to maintain your entitlement to an extension in the event that the employer doesn’t provide something he ought to provide.
Mitigation of delay
Finally, there will sometimes be an obligation on you to mitigate the effects of any delay event on the completion date. How these obligations are determined will depend on the wording in the contract. It may state an obligation to use ‘reasonable endeavours’ or ‘best endeavours’. An obligation to use best endeavours to mitigate delay is more onerous as it may require you to seek multiple courses of preventative action. Some contracts even allow the employer to terminate the contract if the contractor ‘fails to proceed regular and diligently with the works’. You should always keep the employer informed about steps you are taking to prevent delays. Aim to get their acceptance for your proposed actions to prevent disagreements regarding whether more could have been done.
Have you ever been refused a claim for an EOT that you thought you were entitled to? What was the reason for this being rejected? Did you keep sufficient records to enable you to substantiate your claim?
Please comment with your thoughts and experiences.
In my next article I will discuss liquidated/delay damages and what you should look out for with regards to their inclusion in a contract or subcontract.
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