by Chris Larkin
Delay analysis has for some time been a hot topic in construction law around the world.
Delay analysis is supposed to identify who is responsible when a project is delayed. The subject itself, however, is a contentious one. There are several delay analysis methods; each has its benefits and drawbacks. In addition to the different methods that can be used, there are other issues that affect how they are applied. One such long-debated issue is which party owns the ‘float’ in the programme.
Float is the time available for an activity or path in addition to its duration. The critical path is the series of activities with least float.
There are several types of float. There is an activity float, often called free float, which is the time available to an individual activity without it affecting its succeeding activity. Another is project float, which is the time available to the critical path where it ends before the contractual date for completion.
The issue that causes the problem when analysing delays is who is entitled to use up the float. To illustrate the problem, I will give you a simple scenario: imagine a project that the contractor has programmed to carry out in three phases; each has a one-month duration. The contractual time for completion is four months and so the programme has project float of one month.
After just one week, the work is delayed by the employer. The period of delay is one month and so the employer uses all of the float. The contractor submits the required notice and claims an extension of time. In response, the employer says that there is no entitlement since the works will still be completed within the time for completion.
Under several forms of contract the employer would be correct and the contractor at this stage would not be entitled to an extension of time. By way of example, 1999 versions of FIDIC’s Red, Yellow and Silver books state: “The contractor shall be entitled … an extension of the time for completion if and to the extent that completion is or will be delayed…”
Now, let’s say the second activity in the programme proceeds as planned. When undertaking the final activity, however, a piece of plant breaks down and the contractor takes two weeks longer than it had planned. The result is that the works are completed two weeks after the contractual date for completion. The contractor cannot submit a claim for the two weeks of plant breakdown, as that is its own responsibility.
Ask yourself this question: which party’s delay caused the works to be completed late? The answer is both parties’ delays, since any one on its own would not have led to the works being finished late. In my scenario, the contractor might not receive an extension of time and would be liable to pay two weeks’ delay damages simply because the employer’s delay occurred first, so it used the float. Do you think this is fair?
There are three different views as to who is entitled to use the float. Contractors argue that only they are entitled to use the float as it is their programme and they are entitled to plan and carry out the works as they think fit. Employers claim that since they are paying the contractor the price of carrying out the works to the contractor’s preference then only the employer should be entitled to use the float. The third view is that neither party exclusively owns the float and that it is available to whoever uses it first.
In my view, the contractor should own the float for the following reasons: first, most standard forms of contract contain just two requirements in respect of the time and progress, namely that the contractor shall proceed with “due expedition and without delay” [or similar such phrase] and shall complete the works within the time for completion. While the time for completion sets out the period within which the works must be completed, it also defines the time that the employer makes available to the contractor to carry out the works. It would be unfair to the contractor to allow the employer to reduce the time available to execute the works and recover delay damages. This could occur in situations like the one in my example if the employer is permitted to use the float.
Second, float in the programme is a result of how the contractor chooses to execute the works. It is the contractor who decides the methods of construction, sequence of activities, deployment of resources and allowances for risks such as weather, all of which determine the contractor’s programme. The programme is an estimate of how the works might proceed based on the contractor’s chosen methods. The contractor alone takes the risk that it has underestimated the time needed and should alone benefit from any contingencies that have been built in as float.
The ownership of float affects the administration of the contract, not just the analysis of delays. Contractors frequently seek to protect the float if the law is unclear on this issue by eliminating or minimising the float in their programmes. Sometimes contractors maintain two versions of their programmes: one that is presented to the employer, which disguises any float, and another that is used to plan and control the works, but which is not disclosed to the employer. This approach can cause difficulties with the administration of the contract, leading to disagreements as to the reasonableness of the submitted programme, reporting of progress and impact of delays.
A lot of these difficulties and disagreements as to who owns the float could be resolved by an express provision in the contract. Whilst in other countries such as the US, contracts contain such provisions, many of the FIDIC-based contracts that are used in the UAE have yet to follow suit.
Leave a Comment | 8,275 views