delay

Contract Administration

The ‘notices’ provision

1 Comment

by Dennis Brand
Many of you will deal with industry-standard form contracts, while others will deal with company standard or even bespoke forms; whatever the form of contract, the notices provision contained in the conditions of contract is probably one of the least-read provisions. The notices provision does not attract the same degree of interest as, say, the variation or change order provisions, or provisions which deal with certificates of completion, suspension or even termination, but in each case a notice is required.

Let me be clear: a notice provision in a contract is not the same as where a contract includes the term ‘notify’; a requirement that one party must inform the other of a thing or matter. A notice provision is where the contract includes the term ‘shall give notice’ (or something similar), which usually requires a formal written notice to be issued by one party and delivered to the other.

For example, a ‘Notice to Proceed’ is a formal notice issued under many forms of industry-standard contracts. The issue of a ‘Notice to Proceed’ is the confirmation that the contractor or supplier of a service is to start work. To proceed on the basis of simply being notified, which could be a phonecall or even a text message, without a formal notice in writing, would be risky in the extreme for the contractor or supplier.

From the employer’s side, such a notice is equally important because, by issuing the formal ‘Notice to Proceed’, he knows that, regardless of what discussions or communications he may have had with the contractor or supplier, they will only start work, and thereby incur cost to his account, once the employer has issued the ‘Notice to Proceed’, and not before.

When one is involved in the preparation of a contract and the subject of the notices provision is to be addressed, there are really six points or matters to be considered:

1. How many days?

The first thing is that the period of notice should be expressed in days rather than weeks. Notice periods will differ depending upon the reason for the notice. When determining the number of days, the period should be reasonable, not too long and not too short, and must be workable. Many contracts contain provisions that, where a contractor seeks additional money or a variation, the contractor must give notice within a limited number of days following the event which resulted in the request. Some contracts go further and provide that, if the notice is not given within the specified time, the contractor loses his right to claim a variation. You may think this pretty harsh, and indeed it is not one that courts or arbitrators like to enforce, but if the period for the notice is reasonable, the contractor should not have any difficulty in complying with it.

2. In what form?

There is no standard form for a notice. The important thing to bear in mind is that it is a standalone document which advises the other party of something or requires the other party to do something. It should contain all the relevant information, including reference to the provision of the contract and relevant clause, so the recipient can be under no misapprehension as to the purpose of the notice and what is required. For example, FIDIC requires that, in the event of a dispute which is referred to the engineer for a decision, the notice must provide a description of the dispute and confirmation that a decision of the engineer under the relevant clause is required. Failure to give that information will likely mean that the notice is considered invalid.

3. Who should sign them?

Due to the importance of a contractual notice, it should only be signed by someone in authority. Rarely will the contract state who should sign the notice. Therefore it should be signed by the same person who signs all other contract correspondence, such as the contractor’s or employer’s nominated representative.

4. To whom should they be sent?

Due to the importance of such a notice, it is important it is brought to the attention of the senior management of the contractor or employer. However, for those large organisations where the head office might be in another country, a notice sent to the head office will not be acted upon at site level until it has been received and site management informed. In order to avoid attendant problems, it is not unusual to see a notice provision which requires the notice to be addressed to a named individual in the head office, with a copy sent to the project manager on-site. I have seen this put to good effect where the employer, who was not getting the required action from the site, issuing a notice, which required the original to be sent to the head office.

5. How should they be delivered?

Usually a notice provision provides for notices to be delivered by one of three methods: by hand, by mail or by fax. To deliver a notice by hand means exactly what is says; it also includes delivery by courier. To include a provision allowing the delivery of a notice by mail, consideration must be given to the delivery point, which could be another country. Often a number of days are added in case of delay, with an overall number of days agreed upon when delivery will be considered as having taken place. For delivery by fax, the sender’s fax report confirms the delivery.

6. Is an acknowledgement needed?

In my view never … that simply invites problems!

CW

Contract Administration

Contractor woes

by Jeffrey Badman

Hill International director Jeffrey Badman.The contractor has submitted his extension of time claim, some months have passed but no award or response has been forthcoming from the engineer – an all too familiar scenario experienced by most contractors at one time or another.

So what can the contractor do next? There are some initial practical avenues that can be taken in an attempt to secure an award: …

Contractor woesRead More »

Construction Law

Disputes in Dubai: more to come?

Dubai has recently seen record numbers of construction-related court cases and arbitrations and its arbitral institutions should now prepare for a second wave before the year-end, writes HENRY QUINLAN*.
DUBAI has not escaped the widespread effects of the global economic downturn, which has had a wide impact on the construction sector, largely due to the enormous number and scope of projects in the emirate.
Liquidity has been one of the main casualties of the downturn which, together with falling property values, has put both developers and contractors under significant financial pressure. …

Disputes in Dubai: more to come?Read More »

Contract Administration

Factors to consider when preparing a disruption claim

by David Merritt

Disruption claims are routinely made during the course of a construction project yet they remain notoriously difficult to prove. One of the main reasons for this is that productivity losses are often extremely difficult to distinguish, as opposed to other money claims which are more directly concerned with the occurrence of a distinct and compensable event, such as an instruction for a variation during the progress of work or a properly notified compensation event.
Most claims for disruption are dealt with retrospectively and the claimant is forced to rely on contemporary records to try and establish a causal nexus for identified losses (cause & effect), which are inadequate for evidencing a loss of productivity claim.
When this happens the claimant is often forced into the situation where it advances a weak global or total cost claim to try and recover its losses. The claimant must first establish that the factor causing the disruption is compensable risk under the contract.
To do this, the contract needs to be reviewed to understand the basis of the agreement as certain productivity issues may have been foreseeable and therefore accounted for within the claimant’s productivity allowances. The contract may also identify if a party expressly accepted certain productivity risks. Common causes of disruption on projects that may lead to a loss of production include site access restrictions, unforeseen site conditions, late or incorrect design, changes in the work, labour availability, remedial/corrective work, testing/inspections, client and third party interference, changes in construction methods and adverse weather.
The primary challenges the claiming party faces in preparing a disruption claim are to identify the root cause of the loss of productivity and quantifying the associated labour and equipment productivity losses. Many methods exist to quantify a disruption claim such as the measured mile; the modified total cost approach; a time and motion study or a comparative work study.
Alternatively research data published by the Mechanical Contractor Association or the National Electrical Contractors Association on the effects of disrupted working may be utilised but care must be exercised because no one size fits all.
Productivity is normally measured as production per unit of effect or output divided by input (ie units/hr) or it may be expressed as input divided by output (ie hrs/unit). A loss of productivity occurs when it takes more labour and equipment to do the same amount of work, thereby increasing project costs. A common error made by a claiming party when preparing a disruption claim is to confuse productivity with efficiency.
Efficiency is a measure of productivity as a ratio or percentage during the affected periods. If target production is 50 units per day and actual production is 25 units per day then given the same input the efficiency of the operation would be 50%. If actual production was equal to the target production efficiency would be 100%. The efficiency formula must take into account the variable input (resources) as well as variable output (production).
For instance it is possible to increase productivity but reduce efficiency. A decrease in efficiency is often associated with one or more secondary factors unrelated to the original excusable event but which are implemented to negate or mitigate the effects of the root cause. These secondary factors include out of sequence working, multiple work fronts, new learning and unlearning curves, fatigue (overtime/shift working), dilution of supervision and stacking of trades in confined spaces.
So when preparing a disruption claim for a loss of productivity it is very important to consider not just immediate effects on the rate of production but also the inefficiencies of some of the secondary factors.

Disruption claims are routinely made during the course of a construction project yet they remain notoriously difficult to prove. One of the main reasons for this is that productivity losses are often extremely difficult to distinguish, as opposed to other money claims which are more directly concerned with the occurrence of a distinct and compensable event, such as an instruction for a variation during the progress of work or a properly notified compensation event.

Most claims for disruption are dealt with retrospectively and the claimant is forced to rely on contemporary records to try and establish a causal nexus for identified losses (cause & effect), which are inadequate for evidencing a loss of productivity claim.

When this happens the claimant is often forced into the situation where it advances a weak global or total cost claim to try and recover its losses. The claimant must first establish that the factor causing the disruption is compensable risk under the contract. …

Factors to consider when preparing a disruption claimRead More »

Construction Law

The TIA route to resolving disputes

The TIA route to resolving disputes
Time impact analysis is becoming an increasingly popular method of resolving construction disputes without litigation. MICHAEL HARDY* details the steps to be considered and the benefits of using the method
FUNDS for a large number of construction projects in the region are drying up. This, coupled with a substantial reduction in the cost of labour and materials, has meant that some developers are reconsidering their current projects with a view to renegotiating more favourable terms or seeking to alter the original scope.
Should a developer fail to persuade its contractor to agree to a re-scoping exercise, the developer may then be faced with a claim for delay caused by what, in effect, amounts to a contract variation.
Given the financial pressure developers are currently facing, there may also be increasingly valid grounds for contractors to make extension-of-time claims in respect of delays caused by, for example, non-payment or the late provision of information.
Whatever the cause, the contract administrator (often an engineer) must apply a methodology to determine whether and to what extent an extension of time should be awarded.
There are a number of different ways to determine an extension of time and it is not uncommon for parties to disagree upon the methodology used. If the contract follows a particular industry form, there may already be a specific methodology applicable. However, most standard form contracts fail to address the issue adequately.
For example, the Fidic Conditions of Contract are commonly used in the Gulf yet fail to promote a specific approach to extensions of time. Fidic’s Red Book uses the words: “If and to the extent that completion … is or will be delayed” but fails to consider the appropriate methodology to decide such delay.
Time impact analysis (TIA) is a method typically used to resolve complex disputes. In order to undertake a time impact analysis, the six sequential steps below must be considered:
1. Has a cause entitling the contractor to an extension of time arisen (an “Event of Delay”)?
2. Identify the programme against which any delay is to be assessed. By way of example, in the case of the Fidic Red Book, the contractor is obliged to submit a programme and to revise it “whenever the previous programme is inconsistent with actual progress or with the contractor’s obligations”. Consequently, the last such accepted (or deemed accepted) programme which most recently pre-dates the ‘event of delay’ identified should be used.
3. Without taking into account the event of delay itself, revise the programme identified in Step Two, so that it reflects:
(i) The reality that pertains at the time immediately before the occurrence of the ‘event of delay’; and;
(ii) A plan for the remaining works which complies with the contractor’s duties as to programming and progressing of the works.
4. Identify planned time for completion on the revised programme developed in Step Three.
5. Identify the activities on the revised programme that will be affected by the ‘event of delay’, and then assess the effect of it on each of those activities. Finally, impact the ‘event of delay’ on those activities, in order that the revised programme takes account of the ‘event of delay’.
6. Finally, consider whether the planned time for completion has changed following the impact of the ‘event of delay’ determined at Step Five.
As to Step Three, contractors are often tempted to use an unamended version of the accepted programme to assess events of delay, irrespective of how out of date it may be. Whilst there is no reported case law in England on this point, for the contractor not to revise the programme to reflect the position immediately prior to the event of delay, is often self-serving.
Consider a project where the programme is severely out of date and the contractor is in culpable delay. If the contractor were to be entitled to assess an extension of time against the out-of-date programme, the culpable delay in the period after that programme but before the event of delay occurred would be completely ignored, thereby reflecting reality from a frozen point in time in the past and failing to accurately demonstrate the cause and effect of the delay.
This would permit the contractor to evade liability for culpable delay and effectively provide him an incentive to stop issuing programmes for acceptance in the future, in order to avoid future liability for culpable delay. The contractor could take advantage of its own wrongdoing by benefiting from a breach of contract (be it the culpable delay or the failure to submit revised programmes).
That being said, Article 246(1) of the UAE Civil Code introduces an implied term to carry out obligations in good faith, which would seem contrary to this approach.
Conversely, employers are sometimes tempted to take hindsight into account and to use a programme that post-dates the event of delay. This is similarly not permitted. Time impact analysis does not permit events to be taken into account if they post-date the event of delay in question. In other words, a retrospective approach, which allows the benefit of hindsight, is not permitted.
In relation to Step Five above, another argument known to surface is whether the assessment or “snapshot” date should be the date at which the assessment is made (or ought to have been made) or the date of the occurrence of the event of delay itself. This is probably an arguable point and depends on contractual drafting.
However, reliance on the date of assessment (as opposed to the date of the event of delay itself) would result in differing degrees of hindsight, depending on when the assessment occurred.
For example, the Fidic Red Book allows the engineer to make its determination within either 42 days after receiving the contractor’s particulars of claim, an alternative period mutually agreed or, alternatively, seek further particulars. This leaves the position open to manipulation. Aside from anything else, carrying out the assessment as at the date of the event of delay would ensure consistency irrespective of how quickly the assessment is made afterwards and would also be truer to the concept of a time impact study (as supported by the Society of Construction Law Protocol on Delay and Disruption).
The downside of the time impact methodology is that it places considerable importance on the programme and on the contractor continually updating the programme so as to reflect reality.
However, the benefits of time impact analysis in terms of prudent project management and progress tracking are to a large degree self-evident.
The parties know where they stand as the works progress as regards contractual entitlements flowing from events at the employer’s risk. This works to all parties’ mutual benefit and should help to avoid large scale after-the-event disputes on projects that encounter difficulties.
However, if the actual process of time impact assessment does not take place within a short period after the event occurring, it can be very burdensome and expensive to revisit. Clearly, it is in both parties’ best interests not to adopt a “wait-and-see” approach, but immediate action is something which is sadly more honoured in the breach than the observance.
Developers, contractors and engineers need to be prepared for these issues and to deal with them effectively, so as to protect their contractual rights (both in existing and future contracts) in what are trying economic conditions

Time impact analysis is becoming an increasingly popular method of resolving construction disputes without litigation. MICHAEL HARDY* details the steps to be considered and the benefits of using the method

FUNDS for a large number of construction projects in the region are drying up. This, coupled with a substantial reduction in the cost of labour and materials, has meant that some developers are reconsidering their current projects with a view to renegotiating more favourable terms or seeking to alter the original scope. …

The TIA route to resolving disputesRead More »

Contract Administration

Problems with using critical path analysis for proving delay claims

By Robert Palles-Clark

In my previous article for the Legal Review, I argued that, in the case of a claim for delay on a construction project, the courts are directing us towards the need for some sort of critical path analysis to be provided as part of the evidential material required to prove the claim. There are plenty of planners out there that will tell you that the use of critical path analysis for this purpose is essential. It is certainly the norm ultimately for both parties to an arbitration or litigation concerning delays to appoint planning experts and for those experts to present their critical path model and analysis of the delays contended for. In this article I thought that it would be interesting to examine some of the many problems associated with the requirement and use of such techniques. …

Problems with using critical path analysis for proving delay claimsRead More »

Scroll to Top