FAIR AND REASONABLE ASSESSMENT IN GRANTING
EXTENSION OF TIME
NOR AZIZAN BINTI MUHAMED
A report project submitted in partial fulfillment of the
requirements for the award of the degree of
Master of Science in Construction Contract Management
Faculty of Built Environment
University Teknologi Malaysia
MAY, 2009
iii
DEDICATION
To my beloved mother and father, my siblings, my beloved friends
Beloved Husband
Mohd Fadhillah Bin Mohd Nor
“Thank you for your love and support”
My Children
My dear son, Muhamad Haziq, my dear daughters, Nurul Ilyana and Nurul Iman
“You all are the heart of my life’
iv
ACKNOWLEDGEMENT
First and foremost, I wish to express my deepest gratitude to Allah S.W.T. for
giving me the inspiration and physical strength to prepare this final project. I am also
profoundly indebted and grateful to all the special
people and
parties who
responded to the survey and offered their invaluable contributions to help bring this
project to fruition
In particular, I want to express my sincere appreciation to my main thesis
supervisor, Assoc. Prof. Dr. Maizon Hashim, for her encouragement, guidance,
constructive criticism and understanding. I would also like to extend special thanks
to Assoc. Prof. Dr. Rosli B. Abdul Rashid and the other lecturers of Master of
Science (Construction Contract Management) for their guidance, advice and
motivation. Without their continued support and interest, this thesis would not have
been the same as presented here.
Finally, I would like to express my deepest love and appreciation to my
family, especially to my husband for his support and understanding given to me
when I really need them. I could never adequately express my gratitude to all the
great people who had played a vital role in bringing this thesis to fruition. I do
sincerely hope that the success of this thesis will in some way be a tribute to them.
Thank you
v
ABSTRACT
In most contracts, the employers delegate the role of assessing the
contractor’s application for extension of time to the Contract Administrators or
Superintending Officers. In making any determination under a building contract,
Contract Administrators or Superintending Officers have the duty to act fairly and
reasonably on a rational basis. Any assessment they make must be based on reasons
that can stand up to scrutiny by the other parties to the contract. They should carry
out a detailed, logical and methodical analysis of the documents and other evidence
submitted in support of the application for an extension of time. Failure to act fairly
can lead to invalidation of their certificates. However, it is difficult to give the actual
definition of ‛fair and reasonable assessment’ in granting extension of time. A
dispute arises when there is an issue of determining whether the
Contract
Administrator or Superintending Officer acts correctly regarding the ‘fair and
reasonable assessment’ in granting extension of time. The objective of this study is to
identify how Superintending Officers or Contract Administrators approach their
duties in assessing Extension Of Time fairly and reasonably. The approach adopted
in this research is based on four case laws and five case studies in housing projects
located in various areas in Pahang, hoping that the findings will assist the
Superintending Officers or Contract Administrators to assess the Extension Of Time
to contractors fairly and reasonably. However, an analysis of past courts’ judgments
indicate no case law that clearly defines ‘fair’ and ‘reasonable’ assessment for
granting extension of time, although the English case of John Barker Construction
Ltd v London Portman Hotel Ltd (1996) 83 BLR 31, held that there was a guideline
for the Superintending Officers or Contractor Administrators to act in a fair and
reasonable way in assessing the contractor’s applications for extension of time.
vi
ABSTRAK
Kebiasaannya dalam sesuatu kontrak, tanggungjawab untuk membuat
penilaian untuk lanjutan masa telah diwakilkan oleh Pihak Klien kepada Pegawai
Kontrak atau Pegawai Penguasa. Pegawai Penguasa atau Pegawai Kontrak
mempunyai kewajipan tugas secara adil dan munasabah dalam membuat sebarang
penilaian dan keputusan. Sebarang penilaian yang dibuat mestilah bersandarkan
alasan yang kukuh oleh pihak yang berkontrak. Mereka hendaklah membuat
penilaian secara terperinci, logik dengan menganalisa segala dokumen serta buktibukti untuk membantu dalam membuat penilaian untuk lanjutan masa. Kegagalan
berbuat demikian boleh mengakibatkan sijil lanjutan masa yang dikeluarkan tidak
sah. Walaubagaimanapun, adalah sukar untuk memberi maksud sebenar penilaian
secara adil dan munasah. Masalah timbul apabila penilaian yang dibuat oleh Pegawai
Penguasa atau Pegawai Kontrak dipertikaikan. Kajian ini bertujuan untuk
mengenalpasti bagaimana pendekatan Pegawai Penguasaatau Pegawai Kontrak
berlaku adil dan munasah dalam membuat penilaian terhadap lanjutan masa.
Pendekatan yang digunakan dalam kajian ini adalah berdasarkan empat kes
mahkamah serta lima kajian kes dalam projek perumahan di Negeri Pahang. Melalui
analisis mahkamah, didapati tiada satu pun kes yang menerangkan secara jelas
maksud adil dan munasabah dalam membuat penilaian untuk lanjutan masa,
bagaimanapun melalui kes Mahkamah Inggeris, John Barker Construction Ltd v
London Portman Hotel Ltd (1996) 83 BLR 31 ada menjelaskan garis panduan untuk
berlaku adil dan munasabah dalam membuat penilaian lanjutan masa terhadap
kontraktor.
vii
TABLE OF CONTENTS
CHAPTER
TITLE
PAGE
DECLARATION
ii
DEDICATION
iii
ACKNOWLEDGEMENT
iv
ABSTRACT
v
ABSTRAK
vi
LIST OF CASES
xiii
LIST OF TABLES
xv
LIST OF FIGURES
xvi
LIST OF ABBREVIATIONS
xvii
LIST OF APPENDICES
xviii
CHAPTER 1
INTRODUCTION
1
1.1
Introduction
1
1.2
Problem Statement
3
1.3
Objective of the Study
5
viii
1.4
Scope of the Study
5
1.5
Research Methodology
6
1.5.1 Stage 1 : Identifying The Research Issue
7
1.5.2 Stage 2 : Literature Review
7
1.5.3 Stage 3: Data Collection
7
1.5.4 Stage 4: Research Analysis
8
1.5.5 Stage 5 : Conclusion And Recommendation
8
CHAPTER 2
CONSTRUCTION DELAYS
10
2.1
10
Introduction
2.1.1 Definition Of Delay
2.2
Types of delays
2.2.1 Excusable delay
11
12
13
2.2.1.1
Excusable delays/compensable delays
13
2.2.1.2
Excusable/non-compensable delays
14
2.2.2 Non –Excusable delays
14
2.3
Concurrent delays
15
2.4
Causes of Delay
15
2.4.1 Owner –Caused Delay
17
2.4.2 Designer –Caused Delay
17
2.4.3 Contractor –Caused Delay
18
2.4.4 Subcontractor –Caused Delay
18
2.4.5 Delay not caused by parties to the design
19
2.4.6 Prevention of Delay
19
2.4.6.1
Pre-Contract Stage
19
2.4.6.2
Post-Contract Stage
21
ix
2.5
Conclusion
21
CHAPTER 3
EXTENSION OF TIME
23
3.1
Introduction
23
3.2
Purpose of extension of time clause in building contract
24
3.3
The ground for extension of time
24
3.4
Neutral Events
25
3.5
Employer’s delays
26
3.6
Relevant event of extension of time under IEM Form Condition
of Contract
3.7
Procedure for claiming an extension of time under express
Contract provisions
3.8
26
36
The Procedure of claiming of extension of time under JKR 203A
form of contract
38
3.9
Timing of the Notification
42
3.10
Detailed Particulars Of the extension Of Time Claimed
43
CHAPTER 4
ASSESSMENT OF EXTENSION OF TIME
45
4.0
Introduction
45
4.1
Fair and Reasonable Extension Of Time
46
4.2
Basis of Assessment
48
4.3
The Assessment Process
49
x
4.4
Duties of the Engineer/Architect/S.O in Granting Extension of
Time
4.5
50
The Law Cases Relating to Fair And Reasonable Extension Of
Time
4.6
51
The Protocol Of The Society Of Construction Law – Granting
Extension Of Time
4.6.1 Programme and records
53
54
4.6.1.1
Core Principle
54
4.6.1.2
Guidance
54
4.6.1.3
Commentary
55
4.6.2 Extension Of Time
56
4.6.2.1
Core Principle
56
4.6.2.2
Guidance
57
4.6.2.3
Commentary
58
4.6.3 Float
59
4.6.3.1
Core Principles
59
4.6.3.2
Guidance
59
4.6.3.2
Commentary
61
4.6.4 Concurrent Delay
61
4.6.4.1
Core Principles
61
4.6.4.2
Guidance
62
4.6.4.3
Commentary
63
4.6.5 Retrospective delay analyses
64
4.6.5.1
Core Principle
64
4.6.5.2
Guidance
64
4.6.5.3
Commentary
64
4.6.6 Mitigation of delay and loss
65
4.6.6.1
Core Principle
65
4.6.6.2
Guidance
65
4.6.7 Monetary claims
66
xi
4.7
Conclusion
67
CHAPTER 5
DATA ANALYSIS AND RESULT
68
5.1
Introduction
68
5.2
Findings and discussions
76
5.3
Case Study No.1
78
5.4
Case Study No. 2
79
5.5
Case Study No. 3
80
5.6
Case Study No. 4
80
5.7
Case Study No. 5
81
5.8
Findings and discussions
82
5.9
Conclusion
86
CHAPTER 6
CONCLUSION AND RECOMMENDATIONS
87
6.1
Introduction
87
6.2
Summary of Research Findings
87
6.3
Problems Encountered When Conducting This Study
90
6.4
Recommendations
90
6.5
Further Studies
92
6.6
Conclusion
92
xii
REFERENCES
94
Appendix A
95
xiii
LIST OF CASES
CASE
PAGE
Balfaour Betty Building Ltd v Chestermount Properties (1993) 32 CON LR 139
75
Boskalis Westminster Construction Ltd v Liverpool City Council
(1983) 24 BLR 83
33
Henry Boot Construction (UK) Ltd v. Malmaison Hotel
(Manchester) Ltd (1999) 70 CLR 32
63,74,78, 89
Hounslaw London Borough Council v Twickenham Garden
Development Ltd [1971]Ch 233
48
John Barker Construction Ltd v London
Portman Hotel Ltd (1996) 83 BLR 31
v, vi, 47, 49, 51, 68,76,86,88,92
Lebaupin v. Crispin (1920) 2 KB 714
29
Liew Ter Kwang v Hurry General Contractor Pte Ltd
(2004) 3 SLR 59
51, 71,77,88
Lian Soon Construction Pte v Guan Qian Realty Pte Ltd (2000)
1 SLR 495
73,77,85,89
xiv
London Borough of Merton v Stanley Hugh Leach Lt 91985) 32
BLR 51
37
Matsoukis v Priestman [1915] 1 KB 681
29
Penang Development Corporation v Teoh Eng Huat [1992] 1
MLJ 749
29
Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd
[1970] BLR 111
24
Royal Brompton Hospital NHS Trust v Hammond & Ors (No 7)
[2001] 76 Con LR 148.
63
Sheffield District Railway Company v Great Central Railway
Company (1911) 27 TLR 451
47
Simplex Concrete Piles Ltd v St Pancras Borough Council
(1958) 14 BLR 80
32
Walter Lawrence And Sons Ltd v Commercial Union Properties
(UK) Ltd (1984) 4 CON LR 37
30
Westminster City Council v. Jarvis & Sons Ltd (1970) 7 BLR 64
34
xv
LIST OF TABLES
TABLE NO
TITLE
PAGE
Table 5.1 – Summary of causes of delay works and types of delay .......................... 84
Table 5.2 – Comparison of the numbers of days EOT applied by contractors and
approved by clients ................................................................................. 85
Table 6.1 – The cases law that explained ‘fair and reasonable’ in assessment for
granting extension of time ...................................................................... 89
xvi
LIST OF FIGURES
FIGURE NO
TITLE
PAGE
1.1
RESEARCH METHODOLOGY .................................................... 9
2.1
CAUSES OF DELAY ................................................................... 16
3.1
EXTENSION OF TIME: COMMON RELEVANT EVENTS ..... 36
3.2
FLOWCHART ON THE GENERAL PROCEDURE FOR
CLAIMING EXTENSION OF TIME – PART 1 .......................... 40
3.3
FLOWCHART ON THE GENERAL PROCEDURE FOR
CLAIMING EXTENSION OF TIME – PART 2 .......................... 41
xvii
LIST OF ABBREVIATIONS
S.O
- Superintending Officer
PWD 203 (10/83)
- Standard Form of Contract to be used where Bills of
Quantities Form Part of the Contract (Revised 10/83)
IEM.CE 1/89
- Standard Form of Contract to be used where Bills of
Quantities Form Part of the Contract of Civil Engineering
Construction
EOT
- Extension of time
BQ
- Bills of Quantities
CA
- Contract Administrator
M&E
- Mechanical and Electrical
TNB
- Tenaga Nasional Berhad
JBA
- Jabatan Bekalan Air
JKR
- Jabatan Kerja Raya
xviii
LIST OF APPENDICES
APPENDIX
A
TITLE
PAGE
IEM CONDITIONS OF CONTRACT FOR WORKS
MAINLY OF CIVIL ENGINEERING CONSTRUCTION
95
1
CHAPTER 1
INTRODUCTION
1.1
Introduction
A contractor is under strict duty to complete on time except to the extent that
he is prevented from doing so by the employer or is given relief by the express
provision of the contract. The effect of extending time is to maintain the contractor’s
obligation to complete within a defined time and failure by the contractor to do so
leaves him liable to damages, either liquidated damages or general, according to the
term of the contract.
In the absence of the extension provisions, time is put at large by prevention
and contractor’s obligation is to complete within a reasonable time. The contractor’s
liability can then only be for general damages but first must be proved that he has
failed to complete within a reasonable time. 1
1
Brian Eggleston , “Liquidated Damages and Extension Of Time In Construction Contract”, Second
Edition, (Blackwell Science,1992), pp.162
2
According Lim Chong Fong,2 the operation of clause 43 modifies the liability
of the Contractor to complete the Works by the Date for Completion specified in the
Appendix and to pay Liquidated and Ascertained Damages to the Government upon
the
failure of the Contractor to meet the deadline. It imposes a duty on the
Superintending Officer to grant a fair and reasonable extension of time for the
completion of Works in certain specified circumstances.
The period of work may be extended, subject to any extension of time
granted by the architect for delays that are not the fault of the main contractor under
the contract. When the contractor applies for an extension of time, it is often the case
that the architect will take some time to review before making a decision or withhold
the decision until the delay becomes apparent. In the absence of the instruction from
the architect, the contractor cannot recover the cost of acceleration of the work to
meet the completion date.
Therefore, contractors may take the risk of incurring liquidated damages for
the delay rather than spend extra money on acceleration. It should also be noted that
under no circumstances will the contractor be entitled to receive financial
compensation from the employer for the delay itself , as time can be extended
without increasing the overall cost of the contractor. The only entitlement for
monetary compensation from the employer is for the direct loss and /or expense
suffered by the main contractor as a direct consequence of the cause.3
According to Entrusty Group4, the evaluation to derive at the Extension of
time entitlement (EOT) can indeed be a complex subject especially when there is
more than one delaying events. Invariably, an evaluation of EOT will be made based
2
Lim Chong Fong , “The Malaysian PWD Form Of Construction Contract”, (Sweet & Maxwell Asia,
2004), pp.92
3
Teresa Cheng, Evia Wong, Gary Soo, “Construction Law And Practice In Hong Kong”, (Sweet &
Maxwell Asia, 2004),pp.344
4
Enstrusty Group,“ Is The Contractor Still Entitle To Extension Of Time Where Is Concurrent
Delay?”, First Quarter, (Master Builders Journal, 2006), pp.74-75
3
on programmes submitted by the contractor (Kevin, 2005)5. Besides the programmes,
the contractor is advised to provide relevant information related to delay such
variations and architect’s instruction for references, towards consideration for EOT
(Lim, 1998).6 Teresa Cheng 7 views that being fair and reasonable is the measure of
the extension of time to be granted to the contractor in relation to the causes(s) so
submitted.
1.2
Problem Statement
In construction contract, time may be stated either by reference to specified
date or by reference to a construction period.8 This practice has important
repercussions for parties to the contract, as a failure to complete by the date
stipulated may expose the contractor to claim for damages. Alternatively, where a
liquidated damage clause is inserted, delay will make the contractor liable for certain
liquidated amounts usually calculated at a daily or weekly rate in the contract itself.
It is important to all parties that the project be finalised by a specified date,
the standard forms of contract now provide details on the issues of delay in
completion and liquidated damages. The contract usually provides that the contractor
can apply for extension of time due to certain matters but not the fault of the
contractor, that the project is being delayed. The general procedure, for example, in
clause 43 I.E.M Condition of Contract For Works Mainly Of Civil Engineering
Construction’, the contractor shall use constantly his endeavours to prevent delay and
shall do all that may reasonably be required to the satisfaction of the Engineer to
5
Kevin,R.,“Analysing Extension of Time: What The Courts Have To Says”, First Quarter,
(Masterbuilders Journal.1, 2005), pp.74 -75
6
Lim P.K.,“ Evaluation Of The Contractor’s Claim For Extension Of Time”, (PAM Continuing
Professional Development Course, 25April 1998), pp. 1-21
7
Teresa Cheng, Evia Wong, Gary Soo, “Construction Law And Practice In Hong Kong”, (Sweet &
Maxwell Asia, 2004), pp.350
8
Martin, R.L.,“ Introduction Time Within Contracts”, (Bullet-Proof EOTs Conference, Kuala
Lumpur, July 2004), pp. 1-21
4
proceed the works. The certificate issued by the Engineer under this condition shall
be referred to as the “Certificate of Delay and Extension of Time”.
A grant of extension of time to the contractor will only be issued for the
period of time which is found to come within the extension of time entitlements. At
numerous stages through this process, disagreement can arise between the parties,
and the potential for financial liability to the contractor at the end of the day makes
the issue one on which parties are unhappy to compromise.
The issues can also become contentious because the decision as to whether or
not to grant extension of time is generally placed in the hands of the architect. A
contractor may be dissatisfied if there is a delay by the architect in dealing with his
application for an extension, or having dealt with the application, coming to a
decision which is unfavourable or not sufficiently favourable to the contractor.
The assessment of claims for extension of time is extremely complex. The
Superintending Officer or Contract Administrator acts as independent adjudicator,
and he must acts fairly, reasonably and impartially to both his employer and the
contractor.
The main issue lies in the actual definition of ‛fair and reasonable assessment’
in granting extension of time. A dispute arises between the employer and the
contractor when there is a reason to challenge the Contract Administrator’s or
Superintending Officer’s ‘fair and reasonable’ assessment of extension of time.
5
1.3
Objective of the Study
The objective of the study is to identify how Superintending Officers or
Contract Administrators approach their duty to assess Extension of Time fairly and
reasonably.
1.4
Scope of the Study
The approach adopted in this research is based on case laws and case studies.
The projects that will be investigated in this research are the housing projects i.e.
Perumahan Warga Felda (PWF) at Felda Schemes. There are two on going projects
which are located in Keratong 3 and Muadzam, Pahang and there were three
completed projects located in Mempaga, Bukit Goh and Lepar Hilir. The studies are
to identify how the Superintending Officers approach their duty to assess extension
of time fairly and reasonably. The detail of the five case studies as follows:
Case Study 1
Cadangan
Pembangunan
Perumahan
yang
Mengandungi 160 Unit Rumah Kos Rendah Satu
Tingkat, 45 Unit Rumah Kos Sederhan Rendah satu
Tingkat Dan Satu Unit Pencawang Elektrik Di Felda
Mempaga 2, Mukim Sabai, Daerah Bentong, Pahang
Darul Makmur.
Case Study 2
Membina Dan Menyiapkan Rumah Kos Rendah Dan
Kos Sederhana Rendah Satu Tingkat, Kedai Satu
Tingkat Dan Kerja-Kerja Infrastruktur Yang Berkaitan
Di Felda Bukit Goh, Kuantan, Pahang Darul Makmur.
6
Case Study 3
Cadangan Membina Dan Menyiapkan 192 Unit Rumah
Rumah Kos Rendah, 58 Unit Rumah Kos Sederhana
Rendah, 5 Unit Kedai, Bazaar, Pencawang Elektrik
Dan Kerja-Kerja Infrastruktur Yang Berkaitan Di
Felda Lepar Hilir Saujana, Kuantan, Pahang Darul
Makmur
Case Study 4
Membina Dan Menyiapkan Rumah Kos Rendah
Setingkat, Rumah Kos sederhana Rendah Setingkat,
Kedai Setingkat, Pencawang Elektrik Dan Kerja-Kerja
Infrastruktur Yang Berkaitan Di Felda Keratong 3,
Mukim Keratong, Daerah Rompin, Pahang Darul
Makmur
Case Study 5
Cadangan Membina Dan Menyiapkan 125 Unit Rumah
Kos Sederhana Di Atas Lot 2263-2268, 2173 di Bandar
Muadzam Shah, Mukim Bebar, Daerah Rompin,
Pahang Darul Makmur
1.5
Research Methodology
In order to achieve the objectives of this study, a systematic process of
conducting this study had been organized. Basically, this study process comprised
five major stages, which involved identifying the study issue, literature review, data
collection, data analysis, conclusion and suggestions.
7
1.5.1
Stage 1 : Identifying The Research Issue
The study issue arises from intensive reading of books, journals and articles
which can be attained from the UTM library, Building Construction Information
Centre (BCIC) and Resource Centre of Alam Bina (RC).Based on the study issue, the
objective of the study has been identified. In addition to that, this research is
executed to review the relevant court decisions with the intention of identifying how
Superintending Officers or Contract Administrators approach their duty to assess
Extension of Time fairly and reasonably.
1.5.2
Stage 2 : Literature Review
Collection of various documentation and literature regarding the study field is
of most important in achieving the research objectives. Besides, secondary data is
collected from reading materials in printed form like books, journals, research paper,
magazines, reports, proceedings, seminar paper as well as information from the
internet. It is important to identify trends and developments over time in construction
industry, as well as the general state of knowledge concerning the subject area of
delay such as background, definition, type, procedures, relevant events and etc.
1.5.3
Stage 3: Data Collection
In this stage, after identifying all the background and relevant issues through
literature review, legal cases based on written opinions of courts, which are related to
the study issue, will be collected from different sources such as All England Law
8
Reports, Malayan Law Journals, Singapore Law Report and etc. via UTM library
electronic database, namely Lexis-Nexis Legal Database. Data from the five case
studies had also been collected from Felda Engineering Services Sdn Bhd.
1.5.4
Stage 4: Research Analysis
Once the previous related court cases under Malayan Law Journal were
collected, reviewing and clarifying of all the facts of the cases will be conducted. The
data from the five cases also were also collected in housing projects procured by
Felda Engineering Services Sdn Bhd. The focus will be to identify how
Superintending Officers or Contract administrators approach their duty to assess
Extension of Time fairly and reasonably. After presenting the issues of each case
based on case studies, a thorough discussion and comparison will be done in order to
achieve the objectives of this study.
1.5.5
Stage 5 : Conclusion And Recommendation
In this stage, reviews on the whole process of the study will be made to
identify whether the study objective has been achieved. After presenting the study
findings, recommendations and limitations of the study and a topic for further
research emerge. Figure 1.1 shows a flowchart of the research methodology to
achieve the objectives of the study.
9
RESEARCH ISSUE
The issue is that a dispute arises when there is an issue of determining whether the
Contract Administrator or Superintending Officer acts correctly regarding the ‘fair
reasonable’ assessment of extension of time
RESEARCH OBJECTIVE
To identify how Superintending Officers or Contract Administrators approach their
duty to assess Extension of Time fairly and reasonably.
ƒ
LITERATURE REVIEW
Construction delay, types of delay, causes of delay, extension of time,
purpose of granting EOT, The ground for EOT, relevant events, procedure for
claiming EOT, Timing of the notification, detailed particulars of EOT,
assessment of EOT, duties of engineer in granting EOT, fair and reasonable
EOT, the law cases relating fair and reasonable and the Protocol Of The
Society Of Construction Law
ƒ
RESEARCH METHOD
Data collection:
Legal cases in relation to the fair and reasonable in assessing
extension of time
-
Access to UTM library electronic database(Lexis-Nexis Legal
Database)
-
Collect cases from All England Law Report, Malayan Law
Journal, Singapore Law Report, Current Law Journal and etc
-
Data from case studies.
DISCUSSIONS
CONCLUSION & RECOMMENDATIONS
Figure 1.1: Research Methodology
10
CHAPTER 2
CONSTRUCTION DELAYS
2.1
Introduction
The majority of construction contracts provide a time for completion9, and a
provision that failure to complete by that date will entitle the employer to liquidated
damages at a certain rate per day. However, delays may occur during the progress of
the works that may cause the employer damage but which do not delay the overall
completion. Such delays will generally not entitle the employer to claim damages
and so in attempt to prevent such delays occurring it is common for construction
contracts to include terms that define the manner in which the works are to be
progressed.
9
Martin, R.L.,“ Introduction Time Within Contracts”, (Bullet-Proof EOTs Conference,Kuala Lumpur,
July 27, 2004),pp.6
11
2.1.1
Definition Of Delay
Callahan10 defines that a delay in construction is the time during which part
of construction project has been extended or not performed due to unanticipated
circumstances. Delays that do not extend the project completion are called
“noncritical delays” whereas delays that result in extended project completion are
known as “critical delays”.
In construction claims, a delay can be described in two ways11. Firstly, it can
be the time during which some part of the construction project has been extended
beyond what was originally planned due to an unanticipated circumstance. Secondly,
a delay can also be the incident that affects the performance of particular activity,
without affecting project completion.
An incident of delay can originate from within the contractor’s organization
or from any of the other factors interacting upon the contracted project. Incidences of
delay from within the contractor’s organization are essentially those occurrences that
the contractor himself has caused. Incidences outside of the contractor’ organization
may be caused by the owner, the designer, other prime contractors, subcontractors,
suppliers, labor unions, natural forces, or any member of other organizations that
participate in the construction process.
Beyond a certain point, major or minor delays and other impact on the work
can interrupt normal construction activity and result in project delay. According to
10
Callahan, M.T.,Quackenbush,D.G.and Rowings, J.E., “Construction Project Schedulling”, Second
Edition, ( Mc Graw Hill Inc, New York, 1992)
11
Barry B. Bramble, Michael T.Callahan,“ Construction Delay Claims”, Second Edition, (1991),
pp.1-2
12
Barrie and Paulson12 this situation will cause an increase in cost
leading to
contractor ‘s claims and disputes.
Many things may occur in the construction project to increase the time of
performance of the overall project or affect any given activity. Most common causes
are:
(a) differing site condition
(b) changes in requirements or designs
(c) inclement weather,
(d) unavailability of labor, material or equipment
(e) defective plans and specifications, and
(f) owner interference.
These and other delays not only increase the time required to perform the
contract work but may also increase the costs of many parties involved. 13
2.2
Types of delays
Determining the legal consequences of the delay depends upon correctly
identifying the type of delay that has occurred. Construction delays fall into two
major categories:14
12
Barrie, D.S. and Paulson, G.A., “Construction Project Management”, Third Edition, ( Mc Graw
Hill Inc. New York, 1992)
13
Barry B. Bramble, Michael T.Callahan,“ Construction Delay Claims”, Second Edition,
(1991),pp.2-3
14
Smith, Currie & Hancock’s, “Common Sense Construction Law, A Practical Guide For The
Construction Professional”, Third Edition, (John Wiley & Sons, Inc, 2005), pp.239
13
(a) excusable
(b) non excusable
2.2.1
Excusable delay
An excusable delay provides a basis under the contract for an extension of
time. In order to be excusable, the delay must be on the critical path for completion
of the project. Non critical activities may be exempt from time extension claims up to
the time they become critical. Excusable delays are also either compensable or
noncompensable.
2.2.1.1 Excusable delays/compensable delays
Generally, a delay is deemed compensable to the contractor15 when its cause
is within the control of, is the fault of, or due to the negligence of the owner. A
compensable excusable delay permits the recovery of both time and money.
Examples of compensable delays are failure of the employer to furnish the
site to the contractor by the agreed date, faulty design, or incomplete drawings and
specifications. For this type of delay, the contractor is entitled to a time extension
and damages for extra costs associated with the delays.
15
Teresa Cheng, Evia Wong, Gary Soo, “Construction Law And Practice In Hong Kong”, (Sweet
&Maxwell Asia, 2004), pp.345
14
2.2.1.2 Excusable/non-compensable delays
A noncompensable excusable delay permits solely recovery time. The delays
occur when the contractor is delayed by occurrences that are not attributable to either
the contractor or owner. Under such circumstances, the contractor should receive a
time extension, but no additional compensation. Examples of excusable/ noncompensable delay would include an industry-wide strike, excessive bad weather,
floods, etc, or delays stemming from those designated as beyond the control of the
contractor in the delay clause- acts of Gods, and so on.16
2.2.2
Non –Excusable delays
In this category, the contractor’s own actions/inactions have caused the delay,
which could have been avoided if the contractor had taken proper action. These can
result from the fault of the contractor, his subcontractor, or suppliers. Examples of
non- excusable delays by the contractor are lack of manpower; use of improper
equipment; failure to order materials in a timely fashion or defective work that must
be removed and replaced.
The contractor is not entitled to either damages or extension of time from the
owner. In fact, the owner could conceivably recover damages from the contractor.
Such delays could be compensable to the owner in the form of liquidated or actual
damages paid by the contractor for the late completion, or could be the basis for the
contract termination by the owner.17
16
Smith, Currie & Hancock’s, “Common Sense Construction Law, A Practical Guide For The
Construction Professional ”, Third Edition, (John Wiley & Sons, Inc, 2005), pp.239-241
17
Teresa Cheng, Evia Wong, Gary Soo, “Construction Law And Practice In Hong Kong”, (Sweet &
Maxwell Asia, 2004), pp.345
15
2.3
Concurrent delays
Concurrent delay, in addition to excusable delay and nonexcusable delay, is
an analytical framework for identifying and evaluating construction delays.
Concurrent delays occur, at least to some degree, during the same period of time that
impact the critical path of a planned sequence of events18. The term ‘concurrent
delay’ is used to describe two or more independent delays that occur during the same
period, either of which had it occurred alone, would have affected the ultimate
completion date. If the concurrent delays consist of delays attributable to both the
owner and the contractor, neither can recover damages from each other.19
2.4
Causes of Delay
There are many ways that a construction project can be delayed. Although it
is extremely difficult to generalize the cause of delay, in most cases delay results
from a failure to plan and to assess possible occurrences and consequences.20
This section will explain the causes of delay by looking at the responsibility
of the major parties to design and construction process for instance the owner,
designer, contractor, sub-contractors and suppliers. In assessing responsibility of the
various parties for delay, one must start with a factual analysis of who did or failed to
do what. This requires a further examination of the contractual responsibilities and
duties implied by law. Generally, the main causes are:
18
Smith, Currie & Hancock’s, “Common Sense Construction Law, A Practical Guide For The
Construction Professional ”, Third Edition, (John Wiley & Sons, Inc, 2005), pp.239-241
19
Teresa Cheng, Evia Wong, Gary Soo, “Construction Law And Practice In Hong Kong”, (Sweet &
Maxwell Asia, 2004), pp.346
20
Nicholas J.Carnell,“Causation and Delay in Construction”, Second Edition, ( Blackwell Publishing
Ltd.,UK, 2005), pp.183
16
(a.) Owner –caused delay
(b.) Contractor –caused delay
(c.) Not caused by parties to the design
The causes of delay are summarized in Figure 2.1 as follows:
Causes of Delay
Owner-Caused Delay
–
–
–
–
The project site
Approvals
Owner’s financial obligation
Owner Contract Administration
Responsibilities
– Changes in the works
– Owner interference
– Failure to coordinate separate
prime contractors
– Failure to evaluate
– Contractor management
problems
– Inadequate Resources
– Construction defects
Designer-Caused Delay
–
–
–
–
Delay-Not
Caused by
Parties
Contractor-Caused Delay
Design defects
Slow correction
Tardy Shop drawing review
Delay due to tests and inspection
Figure 2.1: CAUSES OF DELAY
Adopted : Md. Asrul Nasid
– Weather
– Acts of God
– Strikes and labor disputes
Subcontractor
17
2.4.1
Owner –Caused Delay
According to Nee, C.S21, owner – caused delay can be classified into four
main categories:
(a) delay resulting from the owner’s failure to fulfil its contractual
responsibilities;
(b) delay caused by making changes in the work required under the
construction contract
(c) delay caused by interfering with responsibilities of the contractors; and
(d) failure to coordinate activities of any separate contractors
Although specific duties depend upon the individual contract, the owner’s
contractual responsibilities generally are to provide the project site, approvals,
finances, design, and contract administration.22
2.4.2
Designer –Caused Delay
With reference to Rahman et. al’s23 study, delay caused by designers
generally results from four common deficiencies (1) defects in design; (2) slow
correction of design problems; (3) tardy review of shop drawings; and (4) delay in
tests and inspections.
21
Nee, C.S, Extension of Time, “The Issue of Delay Notification”, Faculty Of Built Environment,
UTM. Msc. Thesis, (2005)
22
Barry B. Bramble, Michael T. Callahan, “Construction Delay Claims”, Second Edition (1991),
pp.84
23
H.A. Rahman , I.A. Abbas & M.A. Berawi,“ Experiences In Handling Project Delays In
Construction”, Conference Paper of National Conference Of Construction Industry Development,
Johor Bahru
18
The designer is held to a professional standard in malpractice actions. Not all
design errors are actionable. To be actionable, the deficient performance by the
engineer must constitute professional negligence by falling below standard of
performance of the design industry. Even in contract actions, the court may tend to
evaluate the contractually required design performance in terms of the negligence
standard for the performance required by the design industry.24
2.4.3
Contractor –Caused Delay
Delay attributable to the contractor most often stem from five major causes
(1) failure to evaluate the site or design;(2) contractor management problem;(3)
inadequate resources, such as cash, material, or labor, (4) poor workmanship; and (5)
subcontractor failures.25
2.4.4
Subcontractor –Caused Delay
In general, the contractor is responsible to the owner for the nonexcusable
delays caused by its subcontractors. However, if the delay is caused by second –tier
subcontractor, and the general contractor and first-tier contractor, the general
contractor may be excused for the delay. Because the second-tier subcontractor’s
action may be beyond the control of the contractor and may not be due to the
24
Barry B. Bramble, Michael T. Callahan, “Construction Delay Claims”, Second Edition (1991),
pp.99
25
Kumurasamy, M.M & Chan, D.W.M, “Contributors o Construction Delays, Construction
Management and Economics”, (The University of Hong Kong, 1996),pp.16,17 -29
19
contractor’s fault or negligence, the contractor may not be liable for liquidated
damages nor be compensated for such delay.26
2.4.5
Delay not caused by parties to the design
The delays that are beyond the control of any parties, some of which are dealt
with specifically in contract documents, are adverse weather, acts of God, Acts and
labor problems.27
2.4.6
Prevention of Delay
There are two stages during which preventive measures can be adopted during Pre-Contract Stage and Post Contract Stage.28
2.4.6.1 Pre-Contract Stage
The preventive measures to avoid any delay during pre-contract stage are as
follows29:
26
Chappel, D.Smith, V.P, Sims,J.,“Building Contract Claims”, Fourth Edition, (Blackwell Publishing
Ltd, UK,2005)
27
A.M. Odeh & H.T. Battaineh,“ Causes of Construction Delay, Traditional Contracts, International
Journal of Project Management”, (2002), pp.20, 67-73
28
Ir Harban Singh K.S., “Engineering and Construction Contracts Management, Commencement and
Administration, Lexis Nexis-Conference”
20
a) Adequate site and soil investigation must be carried out to obtain up-to-date
and accurate data to enable the design to be proceeded with
b) Adequate time must be accorded to design, tendering and contract formation
c) Requirements of the Employer must be fully evaluated, established and
confirmed
d) Requirements of the Statutory Authority and utilities providers must be fully
investigated and clearly established
e) Works and interfaces in connection with the M & E Services must be clearly
established and incorporated into the design
f) The design and tender documentation must be closely coordinated at all
stage.
g) Drawings, specification and other documents used must fully describe the
requirements of the designers
h) All drawings and other tender documents must be checked for discrepancies
prior to tendering
i) P.C. and Provisional Sums must not be reduced to the minimum. These sums
must not be used as ‘couriers’ for the deferment of design decisions to the
construction stage
29
Ir Harban Singh K.S,“Practical Course On Effective Construction/Engineering Contract
Management, Module III:Post Contract Practice”, (HNH Contract Management Services,2002),
pp.25-27
21
2.4.6.2 Post-Contract Stage
According to Ir Harban Singh, the preventive measures or actions that can be
taken to avoid any delay during post- contract stage are as follows:
a) All necessary drawings, specifications, Bill of quantities and other details
must be furnished to the Contractor by the date of possession site.
b) All construction details and other information, clarification, decisions,
approvals for samples of materials, etc sought by the Contractor must be
promptly given to him
c) Every effort must be made to meet the Contractor’s approved work
programme in the issue of information/details to him, in the award of P.C.
works, etc.
d) Payment to the contractor must be prompt and in accordance with the
contract
e) No variation works must be indiscriminately ordered unless it is absolutely
essential
2.5
Conclusion
A date for possession and date for completion are normally stipulated in the
contract. The practical result is that the contractor is allowed to commence work
immediately after the date of possession and that he must complete it by the agreed
date. Failure by the contractor to comply with this obligation is a breach of contract.
22
Delay is one of the most common causes of dispute, and of subsequent claims
between the contracting parties in construction projects. All in all, this chapter
discusses the definition of delays, types of delays, causes of delays and prevention of
delays.
23
CHAPTER 3
EXTENSION OF TIME
3.1
Introduction
Murdoch and Hughes30 stated that most building contracts contain express
provisions under which the period allowed for the contractor to undertake and
complete the works can be extended. These provisions cater for delay that is neither
the fault nor responsibility of the contractor. Such provisions obviously benefit the
contractor, who will not be liable to pay damages for delay during the period for
which time is validly extended.
Acccording to Hashim Sikam31, a delay possibly is interpreted as a loss of
time and ‘time’ in a construction project is the ‘construction period’ or in contract
administration ‘contract period’. A loss of time in contract period does not only
affect the client but also the contractor. However if the delay is not due to the
30
John Murdoch and Will Hughes, “Construction Contract, Law And Management”, Third Edition,
(Spon Press, 2000), pp.186
31
Hashim Sikan, Salient Points On Contract Administration Of Building And Civil Engineering
Works, pp.60
24
contractor’s fault, the contractor shall not be blamed. He has already lost time in the
contract period. Instead he should be compensated with time that has been lost. This
compensation is what is termed as extension of time’ (EOT) in contract
administration. It is therefore not appropriate to regard EOT as means to help the
contractor. As a matter of fact, it is the contractor’ right to be given EOT.
3.2
Purpose of extension of time clause in building contract
Brian Eggleston stated32 that there are several purposes of extending the
completion period of project, which are as follows:
i.
To retain a defined time for completion
ii.
To preserve the employer’s right to liquidated damages against act of
prevention
iii.
To relieve the contractor of his strict duty to complete on time in respect of
delays caused by designated neutral event and by the employer
3.3
The ground for extension of time
A fundamental point is that the time for completion can only be extended
where the contract permits, and is strictly in accordance with the contract provision.33
This was clearly stated in the case of Peak Construction (Liverpool) Ltd v McKinney
32
Brian Eggleston , “Liquidated Damages and Extension Of Time In Construction Contract”, Second
Edition, (Blackwell Science,1992), pp.162
33
John Murdoch and Will Hughes, “Construction Contract, Law And Management”, Third Edition,
(Spon Press, 2000), pp.186
25
Foundations Ltd [1970] 1 BLR 111. It was held that, as delays on the part of the
City Council in approving remedial works to the piling were not catered for in
extension of time provisions, the right to liquidated and ascertained damages was lost
and time is of the essence. The corporation was left with an entitlement to claim such
damages under common law after it was able to prove the Contractor’s failure to
complete within a reasonable time.34
Gillian Birkby and Paul Brough (1993)35 have categorized the circumstances
for which the extension of time may be granted into two categories:
3.4
i.
Neutral events
ii.
Employer’s delay
Neutral Events
Neutral events which are not the fault of either party do not call for additional
payment by the employer under the express terms of the contract or otherwise. They
merely entitle the contractor to an extension of time36. Examples of the neutral
events are force majeure, fire, storm and exceptionally inclement weather and also
work by statutory undertakers.
34
Rodney L.Martin,“ Introduction Time Within Contracts”, (Bullet -Proof Eots Conference, 2004),
Lecture 1-pp.28
35
Gillian Birkby And Paul Brough , “Extension Of Time Explained ”, (1993)
36
Sundra Rajoo, “The Malaysia Standard Form Of Building Contract (The PAM 1998 Form)”,
Second Edition, (Malayan Law Journal Sdn Bhd, 1999), pp.215
26
3.5
Employer’s delays
This covers a variety of delay events caused by the employers such as the
failure to give possession of site, actions of the employer or his nominated
contractor, variation orders, discrepancies between the contract drawings, late
issuance of information and events as stated in Clause 43 IEM/CE Condition of
Contract, the lists of which are 43(c), (f), (g) or (i).
contractor qualifies for extension of time.
3.6
Under such delays , the
37
Relevant event of extension of time under IEM Form Condition of
Contract
For the purpose of this study, the IEM Condition of Contract Form will be
used. The reasons for EOT38 in the IEM Form are similar to those in PWD Form 203.
This is spelled out in clause 43 as follows:-
a.) by force majeure, or
b.) by reasons of any exceptionally inclement weather, or
c.) by reason of directions given by the Engineer consequential upon disputes
with neighbouring owners provided the same is not due to any act, negligence
or default of the contractor or any sub-contractor, nominated or otherwise, or
37
Lim Chong Fong , “The Malaysian PWD Form Of Construction Contract”, (Sweet & Maxwell
Asia, 2004), pp.97-98
38
Hashim Sikan, Salient Points On Contract Administration Of Building And Civil Engineering
Works, pp.62-63
27
d.) by reason or loss or damage occasioned by any one or more of the
contingencies referred to clause 34 hereof (provided and to the extent that the
same is not due to any act, negligence, default or breach of contract or any
sub-contractor, nominated or otherwise, whether in failing to take reasonable
steps to protect the Works or otherwise),
e.) by reason of Engineer’s instruction issued under clause 5 hereof, provided
that such instruction areas not issued due to any default or breach of contract
by the Contractor or any subcontractor nominated or otherwise, or
f.) by reason of the contractor not having received in due time from the Engineer
necessary instruction, drawings, levels or instruction in regard to the
nomination of sub-contractors and/supplier provided in this contract
for
which he shall have specifically applied in writing on a date which having
regard to the Date for Completion stated in the appendix to these Conditions
or to any extension of time then fixed under these Conditions, was either
unreasonably close to the date on which it was necessary for him to receive
the same, or
g.) by reason of delay in giving site possession of the Site as provided under
Clause 33(b) (i) hereof, or
h.) by reason of any action due to local combination of workmen, strike or
lockout affecting any the trades employed upon the works, provided the same
are not due to any sub-contractor, nominated or otherwise, or
i.) by delay on the part of artisans, tradesmen or others engaged by the Employer
in executing work not forming part of this contract, or
j.) by the contractor’s inability for reason beyond his control and which he could
not reasonably have foreseen at the date of closing at the date of closing of
tender of this contract to secure such goods and/or materials as are essentials
to the proper carrying out of the works, or
28
k.) by delay on the part of Nominated Sub contractor and/or Nominated Supplier
of their works, and such delay shall be caused by the same reasons affecting
their works as stated above in sub –clauses (a) to (j) inclusive (provided that
the same not due to any act, negligence, default or breach of contract by the
Nominated Sub Contractor and/or Nominated Supplier and/or the contractor,
or any of the servants or agents of such Nominated Sub-contractor or
Nominated Supplier or the Contractor).”
Lim Chong Fong (2004) and Ir Harbans Singh K.S provide detailed
explanations on the relevant event for claiming of extension of time as follows:
(a)
Force majeure
‘Force majeure’
39
is seldom defined in the various standard forms of
contracts; the IEM. ME 1/9440 is one of the rare exceptions, which in clause 35.1
stipulates:
Force majeure means any circumstances beyond the control of the parties,
including but not limited to:-
(a) war and other hostilities, (whether war be declared or not), invasion, act
of foreign enemies, mobilization, requisition or embargo;
(b) ionizing radiation or contamination by radio-activity from any nuclear
fuel or from any nuclear waste from the combustion of nuclear fuel,
39
Ir Harban Singh K.S., “Engineering And Construction Contracts Management, Commencement
And Administration”, (Lexis Nexis, 2002), pp.369
40
For Mechanical and Electrical Work, See also the Putrajaya Conditions of Main Contract And
Nominated Sub-Contract
29
radio- active toxic explosive, or other hazardous properties of any
explosive nuclear assembly or nuclear component thereof;
(c) rebellion, revolution, insurrection, military or usurped power and civil
war; and
(d) riot, commotion or disorder, except where solely restricted to employees
of the Contractor
A French law term is used with reference to all circumstances independent of
the will of man and which are not in his power to control (see Lebeaupin v Crispin
[1920] 2 KB 714]. The term must be interpreted in the light of the nature and general
terms of a specific contract and in this Contract force majeure has a restricted
meaning because such events as earthquakes and exceptionally inclement weather
are dealt with expressly elsewhere. In Matsoukis v Priestman [1915] 1 KB 681, it
was held that force majeure has more extensive meaning and is not confined to an act
of God.
In Penang Development Corporation v Teoh Eng Huat [1992] 1 MLJ 749, it
was held that government policy in support of Bumiputera contractors which had
delayed the completion of housing project did not constitute force majeure. On the
other hand, the encountering of exceptional adverse physical obstruction might so
qualify.41
41
Lim Chong Fong, “The Malaysian PWD Form Of Construction Contract”, (Sweet & Maxwell
Asia,2004), pp.97-98
30
(b)
Exceptionally Inclement Weather
The emphasis is on the exceptional nature of the inclement weather and the
meaning has to be applied considering two factors. The first factor is the kind of
weather that may be expected at the Site at the particular time when the delay occurs,
and the second factor is the stage in which the Works have reached, for example
whether the Contractor is carrying out earthworks exposed or internal finishing
sheltered. An example of the such a weather condition might include possibly a
typhoon; a fair illustration being ‛Typhoon Greg’ which struck Sabah a few years
ago.
Therefore it is no simple task to establish the ‛exceptional’ status as adverted
to above. To prove that the weather encountered was exceptional, it may be
necessary to provide meteorological records for a reasonably lengthy period of about
10 to 20 years for the area and time on which the claim is premised. Sundra Rajoo
suggests that ‛a complaint of exceptionally inclement weather is valid in a relevant
period if it substantially exceeds the Malaysian Meteorological Department’ 20 –year
averages for that period and area’.
The issues of causation and delay have to be addressed and not merely the
establishment of the occurrence of ‛exceptionally inclement weather’. This was
neatly summed up by Judge Hawser in Walter Lawrence And Sons Ltd v Commercial
Union Properties (UK) Ltd (1984) 4 CON LR 37
‘… When considering an extension on time under clause 23(b) of JCT 63, on
the ground of ‛exceptionally inclement weather’ the correct test for the
architect to apply is whether the weather itself was ‛exceptionally inclement’
so as to give rise to delay and not whether the amount of time lost by the
inclemental weather was exceptional…’
31
(c)
Disputes with neighbouring owners
The delay must have arisen as a result of the direction given by
Superintending Officer consequential to a dispute by the Government, or possibly the
Contractor, and the neighbouring owner, though not necessarily of the adjacent site.
The commonest dispute here is over the boundary of the site. As a result of the
dispute, the delay could be occasioned by the reconstruction or suspension of the
work or by a restricted method of working as directed by the Superintending Officer.
There is however the proviso that the dispute must not be due to any act, negligence
or default of the Contractor or for those whom he is responsible, the commonest
being erroneous setting out resulting in boundary encroachment.
(d)
Insurance Contingencies (by reason of loss and damage occasionedreferred to in Clause 34
This ‛relevant event’ deals with insurance contingencies or insurable risks,
i.e. loss or damage occasioned by the contingencies of fire, lighting, explosion,
storm, tempest, flood, ground subsidence, bursting or overflowing of water tanks,
apparatus, or pipes, aircraft and other aerial devices or articles dropped there from or,
riot and civil commotion.
There is nevertheless the proviso that the Contractor would not be entitled to
an extension of time if he or those for whom he is responsible caused the same by
their act, negligence, default or breach of contract, such as failing to take reasonable
steps to protect the Works.
32
If they have contributed partly by their act, negligence, default or breach, then
the entitlement to extension of time would correspondingly be reduced to such extent
of the contribution.42
(e)
By Reason Of Superintending Officer’s/ Engineer’s Instruction
The instruction referred to is summarized in clause 5(a). The Contractor’s
entitlement to an extension of time is subject to the proviso that the instruction is not
issued due to any default or breach of contract by Contractor or by those for whom
he is responsible. The reason for the proviso is to negative the possible consequences
of the criticized decision of Simplex Concrete Piles Ltd v St Pancras Borough
Council (1958) 14 BLR 80, where the Contractor was held to be entitled to a
compensable variation notwithstanding that it resulted from the breach on the part of
the Contractor.
(f )
Late instruction, drawings or levels
This ground is basically premised on late constructional information
furnished by the Superintending Office/Engineer to the Contractor for the execution
of work. The S.O/Engineer is obliged to provide the Contractor with further
reasonably necessary information to amplify the Drawings or Bill Of quantities as
and when necessary. The failure of the Superintending Officer to do so in good time
puts the Government in breach of contract.
42
Lim Chong Fong, “The Malaysian PWD Form Of Construction Contract”, (Sweet & Maxwell
Asia,2004), pp.98
33
(g)
Delay in giving possession of the site
According to IEM CE, clause 38(b) stipulated that:
“…If the contractor suffers delay or incurs expenses from failure on the part
of the employer to give possession in accordance with the terms of this
Clause the Engineer shall grant an extension of time for the completion of the
Works and certify such sum as in his opinion shall be fair to cover the
expense incurred which sum shall be paid by the Employer.43
h)
Local Combination of workmen, strike, or lockout
The events are limited to only local combination of workers, strikes or
lockout affecting the trade employed upon the Works. Local combination of workers
probably covers obstructive industrial activities short of a strike.
It was held in Boskalis Westminster Construction Ltd v Liverpool City
Council (1983) 24 BLR 83 that a strike by workers employed by a statutory public
water authority which directly contracted with the employer to execute work not
forming part of the contract was not covered by an equivalent clause in the English
standard form.
43
Clause 38(b)-IEM Conditions Of Contract For Works Mainly Of Civil Engineering Construction,
“Possession Of Site And Wayleaves”, pp.17
34
It should be noted that the Contractor must not have caused the local
combination, strike or lock out, such as through a failure to pay the workmen’s
wages.
(i)
Artists, tradesmen and others
Clause 31 IEM.CE. stated that the Contractor shall permit the execution of
work not forming part of this Contract by artisans or tradesmen or others who may be
engaged by the Employer.44 The Engineer accepts responsibility for delay on the
part of such people. This is however restricted to delay in the execution of their
works and does not extend to delay caused by their returning to carry out remedial
work after purported completion (see Westminster City Council v J Jarvis & Sons Ltd
[1970] 1 All ER 943)
(j)
Inability to obtain materials or goods
This applies only if the securing of the goods or materials is beyond the
Contractor’s control, but the shortage must have been one that could not have
reasonably foreseen at the date of the closing of the tender. It should be noted that
this clause is not applicable for the shortage of labor even though it is essential for
the execution of the Works.
44
Clause 31- IEM Conditions Of Contract For Works Mainly Of Civil Engineering Construction,
“Artisan And Tradesmen”, pp.12
35
(k)
Delay on the part of nominees
Any delay by the sub-contractors, either domestic or nominated is a common
occurrence. It will benefit the Contractor if there is a provision entitling the
Contractor to an extension of time for such a delay. Otherwise the Contractor would
have to assume the delay as a part of his risks in undertaking the Contract and pursue
any loss suffered from the sub-contractor directly. This ground though attractive at
first sight, is of little additional usefulness to the Contractor since the delay on the
part of the nominated sub-contractors or suppliers must similarly have been caused
by the reasons as set out in paragraphs (a) to (j) above. Clause 43(k) IEM. CE 1/89
Form Provides:
By delay on the part of Nominated Sub-contractor’s and/or Nominated
Suppliers of their works and such delay shall be caused by the same reasons
affecting their works as stated above in sub clauses (a) to (j) inclusive
(provided the same are not due to any act, negligence or breach of contract by
the Nominated Sub-contractor and /or Nominated Supplier and/or the
Contractor, or any of the servants .or agents of such Nominated Subcontractor or nominated Supplier Or the Contractor). Figure 3.1 on extension
of time : Common Relevant Events, adopted from Ir. Harban Singh K.S.
(2002), Engineering and Construction Management.
36
FORCE MAJEURE
EXECEPTIONALLY INCLEMENT WEATHER
CIVIL COMMOTION, STRIKES, LOCK-OUT etc
LOSS OR DAMAGE TO THE WORKS ACCASIONED BY SPECIFIC PERILS
CONTRACTOR’S INABILITY TO SECURE LABOUR, GOODS, MATERIAL etc.
CARRYING OUT OF WORK BY STATUTORY UNDERTAKERS
EXERCISE BY GOVERNMENT OF ANY POWER WHICH DIRECTLY AFFECTS THE WORKS
EXTENSION OF TIME: COMMON
RELEVANT EVENTS
FAILURE OF EMPLOYER TO GIVE POSSESION/ ACCESS IN TIME
DELAY IN SUPPLY OF INFORMATION/
VARIATIONS AND EXTRA WORKS
COMPLIANCE WITH CONTRACT ADMINISTRATOR’S INSTRUCTION
DELAY ON PART OF NOMINATED SUB-CONTRACTOR/ SUPPLIERS
EXECUTION OF WORK NOT FORMING PART OF THE CONTRACT
LATE SUPPLY OF MATERIALS BY THE EMPLOYER
OTHER SPECIAL CIRCUMTANCES
Figure 3.1- EXTENSION OF TIME: COMMON RELEVANT EVENTS
Source: Adopted From I.R. Harban Singh K.S (2002)
3.7
Procedure for claiming an extension of time under express Contract
provisions
All the standard forms of contracts have included appropriately drafted
clauses to cover the said matter. Though varying appreciably in wording, form and
content, these clauses lay down expressly for the particular application the governing
procedures for extension of time which the contractor must observe to procure a
successful grant. Notable examples for IEM.ME 1/94 Form:
37
Clause 31.2 states45
…The contractor shall give to the engineer notice of his intention to make a
claim for an extension of time within 14 days of the circumstances of such a claim
becoming known to the contractor. The notices shall be followed as soon as possible
by the claim with full supporting details.
Lim Chong Fong (2004) said 46that the operative wording of clause 43 similar
to that in the PAM (1969) form of contract which has been interpreted in the English
case of London Borough of Merton v Stanley Hugh Leach Lt (1985) 32 BLR 51
which was concerned with a contract identical with PAM form of contract. The main
principles laid down as alluded to by Professor Powell Smith in the PAM
commentary are as follows:
(i.)
The giving of notice by the Contractor is not a condition precedent to the
performance by the architect of his duties under the clause.
(ii)
If the architect is of the opinion that the progress of the Works is being or
likely to be delayed beyond the completion date because of one or more of
the specific events, he must estimate the delay and grant an appropriate
extension. He owes this duty both to the employer and to the Contractor.
(iii)
The failure of the Contractor to notify the architect when it becomes
reasonably apparent to him that the progress of the Works is delayed is a
breach of contract. It is not fatal to the Contractor’s entitlement to an
extension of time but the architect can take the Contractor’s breach into
account in assessing the extension of time. In this respect, the Contractor
cannot benefit from his breach by receiving a greater extension than he would
45
IEM, ME. 1/94 Form, Condition Of Contract For Mechanical And Electrical Works, “ Entitled
Extension Of Time for Completion”
46
Lim Chong Fong, “The Malaysian PWD Form Of Construction Contract”, (Sweet & Maxwell Asia,
2004), pp.98
38
otherwise have received had the architect on notice at the proper time been
able to avoid or reduce the delay by some instruction.
(iv)
A document can be a valid notice even if it does not specify a cause of delay
with sufficient detail for the architect to decide whether the event falls within
the specified grounds because different criteria apply to the notice and the
architect’s opinion under the clause. The intention behind the contractor’s
notification is to warn the architect of the current situation regarding progress
and it is then up the architect to monitor the position in order to form his own
opinion and if necessary to seek further information from the contractor.
(v)
The Contractor’s duty is to give the architect as much information as he can
about the cause of the delay and to assist the architect in performing his duty.
The Contractor’s failure to provide information if requested is also a factor
the architect can take into account in assessing the extension of time.
3.8
The Procedure of claiming of extension of time under JKR 203A form of
contract
The abovementioned principles apply to clause 43 PWD Form and are similar
to those in IEM Form. In the usual course of events, the initiatives for taking action
under this clause will come from the Contractor when he realizes that the progress of
the Woks is delayed. The contractor’s is not required to give notice of delay which
will be caused by some expected future event, however probable its occurrence may
be. He has only to give notice when it becomes apparent to him that the progress of
the Works is delayed; it seems clear that the Contractor is bound to notify the
Superintending Officer/Engineer of all delays to the progress and not merely those
caused by events listed in the clause.
39
On the receipt of the Contractor’s notice or more usually the Contractor’s
application of extension of time incorporating various consolidated and retrospective
notification of delay, the S.O. (must convey to the Named Officer and the named
Officer) must decide whether the causes of delay specified by the Contractor falls
within (a) to (k) of the Clause 43, if the S.O. (Named Officer) takes the view that
they do not so fall, then subject to the right of the Contractor to seek recourse, no
extension of time arises.
If the S.O. concludes that the cause(s) of delay is covered by item (a) to (k),
he must decide whether completion of the Works is likely to be or has been delayed
beyond the current completion date. In forming his opinion, the S.O. is entitled to
have regard to the proviso to the clause, namely the Contractor must have used
constantly his best endeavours to prevent delay.
If the S.O. decides that the completion date will not be affected, he should
notify the contractor of his decision, although this is not expressly stated. If the
contractor wishes to challenge that decision he must seek recourse under 54. 47
If the S.O. decides that the delaying cause(s) either delayed completion or is
likely to result in the failure to complete on time he must then make in writing a fair
and reasonable extension of time for the completion of the Works. It is noted that
clause 43 states “a fair reasonable extension of time” but this is no different from “a
fair and reasonable extension of time”. The clause also says that the S.O. must do
this as soon as he is able to estimate the length of the delay and no time limit is
specified. Figures 3.2 and 3.3 on general procedure for claiming extension of time,
adopted from I.R. Harban Singh K.S (2002), Engineering and Construction Contract
Management.
47
Lim Chong Fong, “The Malaysian PWD Form Of Construction Contract”, (Sweet & Maxwell
Asia, 2004), pp.94
40
START
Is progress delayed
or is likely to be
delayed?
No
Yes
Does the delaying event
constitute one of the
‘relevant event’/ grounds
under the provision of the
contract?
No
Yes
Initiate notification
of the delay
procedure
Is the notice
given in writing?
No
Yes
Is the notice
given within the
period expressly
stipulated?
No
Is the notice
a condition
precedent?
Yes
No
Yes
Proceed with the
application of the
extension of time
process
Yes
Has an extension
been granted by
the contract
administrator?
A
No
B
Figure 3.2 - FLOWCHART ON THE GENERAL PROCEDURE FOR
CLAIMING EXTENSION OF TIME – PART 1
Source: Adopted From I.R. Harban Singh K.S (2002)
41
A
B
Is the application
given in writing?
No
Yes
Is the application made
within the period
expressly stipulated?
No
Is the application a
condition precedent?
No
Yes
Contract Administrator to
check application made
Yes
Yes
Has an extension been
granted by the contract
administrator?
No
Is the requirement as
to sufficiency etc a
condition precedent?
Yes
No
Is the application
complete/ sufficient
and accurate?
No
No
Yes
Establish whether
contractor has done
all that is reasonable
required of him
Has the contract
administrator
requested for
information details etc?
No
Yes
Has the contractor used
his best Endeavour's to
minimize the delay?
Yes
No
Yes
Contract Administrator to
proceed with further assessment
for the possible grant of
extension of time
Prima facie no
extension of time can
be granted
Return to contractor
for resubmission or
reject application as
appropriate
STOP
Figure 3.3 - FLOWCHART ON THE GENERAL PROCEDURE FOR
CLAIMING EXTENSION OF TIME – PART 2
Source: Adopted From I.R. Harban Singh K.S (2002)
42
3.9
Timing of the Notification
Different formulae are employed in defining the precise timing for the
contractor to notify the contract administrator of the delay and of his intention to
clarify the extension of time. These include, inter-alia, the following:48
a) use of the phrases such as ‘the contractor shall forthwith given written notice’
or ‘the contractor shall forthwith of the occurrence of such event notify the
architect in writing
b) employment of specific time periods, e.g. ‘he shall forthwith notify the
Superintending Officer of such event within 30 days of the occurrence of
such event or ‘give to the engineer notice of his intention to make a
claim…within 14 days of the circumstances of such claim becoming known...
The legal effects of such provisions are important; the main concerns being:
a) whether the contractor’s notification or application being the condition
precedent for the granting of an extension of time; and
b) if in the affirmative, the effects of the breach of the said condition precedent.
48
Ir Harban Singh K.S., “Engineering and Construction Contracts Management, Commencement and
Administration”, (Lexis Nexis, 2002), pp.440
43
3.10
Detailed Particulars Of the extension Of Time Claimed
Some standard forms of contract require the contractor to submit detailed
particulars of the extension of time claimed49, within a specified time limit. However,
it is not common (although not unheard of) for such particulars to be a condition
precedent to the grant of an extension of time.
Examples of contracts where there is no such requirements: PWD Form/B/T
(clause 45), PW 203A (clause 43), PAM69 (clause 23) and IEM (clause 43) contain
no provisions requiring the Contractor to submit particulars. Examples of contracts
where there are requirements to submit particulars are:
(a) PAM98 (clause 23) requires the Contractor to “… Notify the Architect in
writing identifying the relevant causing the delay, giving particulars of the
expected effect an estimate of the extension of time required. The notice shall
contain sufficient information and reason why delay to completion will
result”.
(b) CIDB (clause 24.2) requires the following to be provided;
(i.) the appropriate contract references (if applicable) to such event of
delay;
(ii.) the estimated length of the delay and of the extension of time
require; and
(iii.) details of the effect of the event of delay on the works programme
accepted under clause 5
49
Rodney L.Martin, “ Introduction Time Within Contracts”, (Bullet-Proof Eots Conference, 2004) Lecture 1-p.27
44
If the details submitted are insufficient to enable the Superintending Officer
to decide on an extension of time, the Superintending Officer may require the
Contractor to provide further information which may reasonably be required.
45
CHAPTER 4
ASSESSMENT OF EXTENSION OF TIME
4.0
Introduction
IR Harban Singh stated that50 the role of assessing the contractor’s
application for extension of time is usually delegated by the employer to the contract
administrator in most contracts. Hence, although employed by the employer, he must
act fairly, reasonably and impartially to both his employer and contractor.
The IEM conditions of contract include similar list of relevant events to that
of PAM 98, PWD 203A and CIDB. Almost all the Conditions Of Contract stated the
Architect/Engineer/ S.O must grant a fair, reasonable and necessary extension of
time to the contractor.
50 50
Ir Harban Singh K.S., “Engineering and Construction Contracts Management, Commencement
and Administration”, (Lexis Nexis, 2002),pp.463
46
4.1
Fair and Reasonable Extension Of Time
According to Sundra Rajoo51, in the law, the word ‘reasonable’ implies an
objective and careful decision by the architect. It does not sanction a rough and ready
approach although a purely scientific analysis of delays is not required. Even though
the contractor is already in culpable delay, the architect has still to assess the effect
of other delays on completion at the time when the works are actually being carried
out. In practice, it is not easy to do so because a large number of events may have
caused the delay, some of which are the contractor’s own responsibility while the
others are that of the employer, architect, consultants or his agents.
Sundra Rajoo
52
also stated that the architect must then give a ‘fair and
reasonable’ extension of time subject to Clauses 23.3, 23.4 and 23.7 and fix a new
Date for Completion. However, if the architect views that it is not appropriate to
grant an extension of time, he has the prerogative to reject it. In this case, it is up to
the contractor to challenge his view in arbitration.
In making any determination under a building contract, Contract
Administrator has a duty to act fairly and on a rational basis. Any assessment he
makes must be based on reasons that can stand up to scrutiny by other parties to the
contract. The engineer should carry out a detailed, logical and methodical analysis of
the documents and other evidence submitted in support of the application for an
extension of time. 53Such an analysis would enable him to correctly assess how much
time should be given to the contractor.
51
S Sundra Rajoo, “The Malaysia Standard Form Of Building Contract (The PAM 1998 Form)”,
Second edition, (Malayan Law Journal Sdn Bhd,1999),pp.208
52
Sundra Rajoo, “The Malaysia Standard Form Of Building Contract (The PAM 1998 Form)”,
Second edition, (Malayan Law Journal Sdn Bhd,1999),pp.208
53
Ir Harban Singh K.S., “Engineering and Construction Contracts Management, Commencement and
Administration”, (Lexis Nexis, 2002),pp.464
47
The contractor is entitled to ‘a fair and reasonable extension of time’ under
Clause 43 IEM Condition Of Contract as stated below:
…than the Engineer shall so soon as he is able to estimate the length of the
delay beyond the date or time aforesaid make in writing a fair and reasonable
extension of time for completion of the Works…
According to Lim Chong Fong54, in the assessment of a fair and reasonable
extension of time, it has been held in English case of John Barker Construction Ltd v
London Portman Hotel Ltd (1996) 83 BLR 31 that it has to be a logical analysis in
methodical way of the impact which the relevant matters had or are likely to have on
the Contractor’s planned programme. The extension is flawed if the architect makes
an impressionistic rather than a calculated assessment bearing no logical or
reasonable relation to the delayed caused.
Lim Chong Fong also stated that the Contractor’s entitlement to a fair and
reasonable extension of time is subject to the dual proviso, that is the Contractor
must have constantly used his best endeavours to prevent delay and to do all may
reasonably be required to the satisfaction of the Superintending Officer to proceed
with the Works. The first part of proviso is akin to taking mitigating steps and better
view is that it does not require the Contractor to expand substantial sums of money
(see Sheffield District Railway Company v Great Central Railway Company (1911)
27 TLR 451).
It is dependent upon what is reasonable in the circumstances and it would
normally entail the Contractor reprogramming the works, particularly utilising the
appropriate and available float. As for the other part of the proviso, it is suggested
that that it does not entail more than general obligation to show willingness to do
54
Lim Chong Fong, “The Malaysian PWD Form Of Construction Contract”, (Sweet & Maxwell Asia,
2004), pp.95-97
48
what the Contract requires, and does not empower the Superintending Officer to
order acceleration of the progress of the Works or instruct the Contractor to deploy
extra resources.
4.2
Basis of Assessment
In assessing the entitlement for extension of time, the prevailing principles55
that must be taken into consideration, include but not limited to the following:(a.) an extension of time can only be validly granted if the procedures which the
contracts lay down are strictly followed;
(b.) an extension of time can only be granted in respect of an event that is
expressly included in the contract
as a ‘relevant event’ and which has
delayed or likely to delay completion Hounslaw London Borough Council v
Twickenham Garden Development Ltd [1971]Ch 233
(c.) the delay must be one affecting an activity or activities that are on the critical
path, i.e. one that having ‘little or no float’ that cannot be delayed without
affecting the others
(d.) the ‘net effective’ delay must be assessed based on the contractor’s approved
work programme and interdependence of the operations of the works in
relation to the whole works. Consequential delay must also be considered.
(e.) in the assessment, a logical analysis and not mere impressionistic assessment
must be undertaken in a methodical way of the impact which the relevant
matters had or were likely to have on the contractor’s planned programme:
55
Ir Harban Singh K.S., “Engineering and Construction Contracts Management, Commencement and
Administration”, (Lexis Nexis, 2002), pp.463
49
John Barker Construction Ltd v London Portman Hotel Ltd [1996]CILL
1152
(f.) the overriding requirement is the satisfaction of the ‛Fairness and
Reasonableness Test’ on the part of assessor
4.3
The Assessment Process
In the assessment process, the contract administrator may utilize all the
relevant records, documents, etc either at his disposal or made available to him by
the contractor as part of the application as sources of information. These should
include, but not limited to the following:56
(a.) personal record maintained by the contract administrator and/or his
representative
(b.) official work records of the contractor
(c.) official progress
(d.) site diaries
(e.) relevant correspondence, e.g. letter, instructions,etc
(f.) drawings, diagrams, etc
(g.) official records of meetings, discussions, etc
(h.) work programme
(i.) records, information, report, etc from third parties and/or independent
bodies; and
(j.) other relevant records, documents
56
Ir Harban Singh K.S., “Engineering and Construction Contracts Management, Commencement and
Administration”, (Lexis Nexis, 2002), pp.463
50
The Contract Administrator should use the above information to cross-check
and verify the contractor’s various representations contained in his application and/or
use these as the basis of his own analysis for the entitlement.
Such an exercise is necessary for the Contract Administrator to arrive at the
final entitlement which should be methodical, logical, reasonable and fair and
according to the governing stipulations of the contract. The final entitlement should
be broken down or particularized on an event-by event basis, cross referenced to the
applicable contract provision and with the reasons in support, to enable an
explanation to be afforded in the event of a challenge or a dispute. All attempts must
be made to obviate an extension on a ‘global’ basis except where the circumstances
are extraneous and/or so closely interlinked that it is impossible within reasonable
limits to go on any other basis.
In any event at the end of the assessment process the Contract Administrator
has to arrive at either of the two conclusions, i.e.:
a. that the contractor is entitled to an extension of time; or
b. that the completion date will not be affected in any material way
4.4
Duties of the Engineer/Architect/S.O in Granting Extension of Time
There is a general duty on the architect/engineer to determine a fair and
reasonable extension of time. 57
57
Rodney L.Martin,‘Introduction Time Within Contracts’, Bullet –Proof Eots Conference (2004),
Lectural, pp.32
51
This is expressly stated in the various clauses as follows:
(a)
PWD Form DB/T clause 45.1, PWD Form 203A Clause 43 and IEM clause 43
require P.D./Superintending Officer/Engineer to make “ a fair and reasonable
extension of time”
(b)
PAM69 and PAM98 condition clause 23 require Architect to make/give “a fair
and reasonable extension of time”
CIDB condition Clause 24 provides that the Superintending Officer may
extend the Time for Completion of the Works by such further period or periods of
time “as may reasonably reflect delay in completion of the works” (due to one or
more of the relevant events). It follows that the Contract Administrator cannot
merely take a passive role in the extension process; he must consider his duty to the
employer. 58He must act fairly, reasonably and impartially to both his employer and
the contractor. Failure to act fairly can lead to invalidation of his certificates.59
4.5
The Law Cases Relating to Fair And Reasonable Extension Of Time
As stated earlier, the relevant case relating to fair and reasonable extension
of time, has been held in the English case of John Barker Construction Ltd v London
Portman Hotel Ltd (1996) 83 BLR 31. The High Court in the Singapore case of Liew
Ter Kwang v Hurry General Contractor Pte Ltd [2004] 3 SLR 59 followed the
English case of John Barker Construction Ltd v London Portman Hotel Ltd (1996)
83 BLR 31 in holding that an architect had an implied duty to act fairly and on a
58
Brian Eggleston (1992), Liquidated Damages and Extension Of Time In Construction Contract,
Second Edition, (Blackwell Science,1992), pp.164-165
59
Ir Harban Singh K.S., “Engineering and Construction Contracts Management, Commencement and
Administration”, (Lexis Nexis, 2002), pp.458
52
rational basis in making a fair and reasonable assessment of the extension of time to
be granted. In particular, the architect must:
(a.) carry out a logical analysis in a methodical way of the impact that the
relevant matters which the contractor put forward had on the delay to the
project
(b.) make a calculated assessment of time which he thought was reasonable for
the various items individually and overall, rather than an impressionistic
assessment;
(c.) apply the contract provisions correctly; and
(d.) in allowing time based on the grounds listed in the contract provisions,
ensure that the allowance made bears a logical and reasonable relation to the
delay caused.
According to Lim Chong Fong (2004),60 it is apparent from the above cases
that the assessment of fair and reasonable extension of time is not a straightforward
exercise. As a guide, the Superintending Officer (named Officer) is encouraged to
consult published Delay and Disruption Protocol published by The Society Of The
Construction Law UK which is an excellent document setting out the relevant
principles.
60
Lim Chong Fong , The Malaysian PWD Form Of Construction Contract (2004) , P.97
53
4.6
The Protocol Of The Society Of Construction Law – Granting Extension
Of Time
The United Kingdom Society Of Construction Law (the Society) published
the Delay and Disruption Protocol in October 2002 (reprinted in March 2003) (the
Protocol) to provide useful guidance on common issues that arise in relation to
construction contracts61. The Protocol aims to “provide a means by which the parties
can resolve these matters and avoid unnecessary disputes”. The objective is to
answer some of the common issues that arise on construction contracts where one
party wishes to recover from the other an extension of time and or compensation for
additional time spent and resources used to complete the project.
The Protocol contains core principles relating to delay and compensation, and
guidance notes in four sections, in relation to:
(a) the Protocol’s position on core principles and on other matters relating
to delay and compensation;
(b) preparing and maintaining programmes and records
(c) extensions of time during the course of the project; and
(d) dealing with disputed extension of time issues after completion of the
project –retrospective delay analysis.
The Protocol provides a suggested approach to deal with a contractor’s claims
for extension of time (EOTs) and compensation of delay. Matters covered by the
61
Aliens Arthur Robinson, The Society of Construction Law , Delay and Disruption Protocol
54
protocol are: programme; entitlements to extensions of time, Floats, Concurrent
delays, Retrospective delay analyses, Mitigation and Monetary claims.
4.6.1
Programme and records:
4.6.1.1 Core Principle
The contractor should prepare a programme showing the manner and
sequence of the works (which programme should accepted by the Contract
Administrator (CA) and keep the programme up to date to record progress and
EOTs.
4.6.1.2 Guidance
The protocol suggests that its recommendations, that a contractor should
submit a programme as early as possible in the project of the manner and sequence in
which the works are to be performed, should apply equally to smaller projects. The
Protocol recommends that the parties reach an agreement on the programme, in
particular to:
-
the form of programme
-
the interaction with the method statement (which describes how
the Contractor intends to construct the works);
55
-
the time within which the contractor should submit a draft
programme for acceptance
-
a mechanism for obtaining the acceptance of the CA of the draft
programme
-
the requirements for updating and saving of the accepted
programme.
The parties should also agree on the software to be used to produce the
programme. The Protocol also recommends that the parties reach an agreement on
the records to be kept to allow for delay analysis.
4.6.1.3 Commentary
Although it is generally considered good practice management to maintain up
to date programmes and records, it may be time intensive to do so, and accordingly,
this cost should considered at the time the contract sum is priced. In relation to
smaller projects, to which the Protocol recommends these practices apply equally,
additional time spent on programming may not be required or be viable. The use of
the same software may be difficult due to issues with intellectual property rights, or
licensing arrangements, and the ability for the parties to make changes to the
programme should be considered at the outset.
56
4.6.2
Extension Of Time
4.6.2.1 Core Principle
(a)
Purpose
An EOT relieves the contractor for liability for delay damages (such
as Liquidated Damages (LDs)) for any period prior to the extended contract
completion date.
(b)
Entitlement to extension of time
The contractor will potentially only be entitled to an EOT for those
events in respect of which employer has assumed risk and responsibility
(Employer Risk Events)
(c)
Procedure for granting extension of time
The EOT should be granted to the extent that the Employer Risk event
is predicted to prevent the works being completed by the then prevailing
contract completion date.
The entitlement to an EOT should be based on the contract not on the
question of whether or not the contractor needs an EOT in order not to be
liable for liquidated damages.
(d)
Effect of delay
For an EOT to be granted, it is not necessary for the Employer
Risk Event already to have begun to affect the contractor’s progress with the
works, or for the effect of the Employer Risk Event to have ended.
57
(e)
Incremental review of extension of time
Where full effect of an Employer Risk Event cannot be predicted with
certainty at the time of initial assessment by the CA, the CA should grant an
EOT for the then predictable effect.
The EOT should be considered by the CA at intervals as the actual
impact of the Employer Risk Event unfolds and the EOT increased (but not
decreased, unless there are express contract terms permitting this) if
appropriate.
4.6.2.2 Guidance
The protocol identifies that the main effect of an EOT is to relieve a
contractor of its liability for liquidated damages during the period of the
extension, not as often incorrectly believed, give rise to an automatic
entitlement to compensation for prolongation cost. Some standard form
contracts provide that specific delay events, at the employer’s risk, will not
entitle the contractor to prolongation costs, such as delay resulting from
adverse weather conditions.
The protocol suggest that although not all contracts require the
contractor to give notice of the occurrence of an employer Risk Event
irrespective of weather it is likely to affect the contract completion date,
notice should be given by the contractor to the CA of an Employer delay as
early as it is aware of any. The impact of such an event should be dealt with
co-operatively by the parties.
58
Assessment of the EOT application should be undertaken within one
month of its receipt. The CA should not wait until the effect of the Employer
Risk event is known before assessing the application for an EOT. The EOT
should be granted on the most predictable effect, and increased at a later stage
if appropriate.
A Contract should allow a CA to determine that an EOT is due on his
or her own initiative, whether or not the contractor has applied for one or
provided sufficient information. The clause should also entitle the contractor
to an EOT for an act of prevention or breach by the employer. Consideration
by the CA of an EOT should also take into account the available float and
concurrency.
4.6.2.3 Commentary
The procedure and time limits for application for an EOT is generally
governed by the contract, as it is contained in most standard form contracts.
The one month period for assessing the Contractor’s entitlement to an EOT is
consistent with the Australian Standard Contracts such as AS2124-1992
(clause 35) and AS4000-1997 (clause 34.5)
59
4.6.3
Float
4.6.3.1 Core Principles
(a)
as it relates to time
Where there is remaining float in the programme at the time of an
employer Risk event, an EOT should only be granted to the extent that the
Employer Delay is predicted to reduce to below zero the total float on the
activity paths affected by the Employer Delay.
(b)
as it relates to compensation
If as a result of an Employer Delay, the contractor is prevented from
completing the works by the contractor’s planned completion date (being a
date earlier than the contract completion date), the contractor should in
principle be entitled to be paid the costs directly caused by the Employer
Delay, notwithstanding that there is no delay to the contract
completion date ( and therefore no entitlement to an EOT), provided also at
the time they enter into the contract, the employer is aware of the contractor’s
intention to complete the works prior to the contract completion date, and that
intention is realistic and achievable.
4.6.3.2 Guidance
The Protocol describes float as “the amount of time by which an
activity or group of activities may be shifted in time without causing delay to
60
contract completion date”. It strongly recommends the ownership of the float,
which may ultimately determine entitlement to an EOT as a consequence of
Employer Delay, should be adequately addressed in the contract.
A contractor should not be automatically entitled to an EOT merely
because an Employer Delay to Progress takes away the contractor’s float for
a particular activity. The Protocol’s position is that an Employer Delay
should only result in an EOT if it is predicted to reduce the total float on the
activity paths affected by the delay to below zero i.e.: The Project/Principal
owns the float.
The Protocol again urges the importance of programming and the
updating of programmes to enable accurate identification of the float and the
consequences of Employer Delay (for Concurrent Delay) on the float.
The Protocol also recognizes that there may be an entitlement to
compensation for Employer Delay notwithstanding that an EOT has not been
granted because of the availability of the float. This may be the case because
the parties have recognized, contractually, that the loss of float may have cost
consequences for the Contractor alternatively because at the time the Contract
is entered into the Employer is aware of the Contractor’s intention to
complete works on a date prior to the Contract Completion Date.
The Protocol recommends that the contracting parties address both the
issues of the relationship between float and an entitlement to an EOT and
entitlement to compensation for loss of float even where there is no
entitlement to an EOT to avoid uncertainty in such circumstances.
61
4.6.3.2 Commentary
Float is not usually dealt with in standard form contracts, and the use
of the Protocol sensibly to overcome this. It has been suggested that this
recommendations could lead to avoidance of dispute in circumstances where
a principle uses the whole of the float and the contractor becomes liable for
liquidated damages at the end of the project. However, given that this
recommendation is in some respects inconsistent with a leading UK decision,
it remains to be seen whether the courts will accept this approach.
4.6.4
Concurrent Delay
4.6.4.1 Core Principles
(a)
Its effect on entitlement to extension of time
Where Contractor Delay to completion occurs or effects concurrently
with Employer Delay to completion, the Contractor’s concurrent
delay should not reduce any EOT due.
(b)
its effect on entitlement to compensation for prolongation
If the contractor incurs additional costs that are caused both by
Employer Delay and concurrent Contractor Delay, then the Contractor
should only recover compensation to the extent it is able it is able
separately identify additional costs caused by the Employer Delay
from those caused by the Contractor Delay.
62
However, if the additional cost incurred in any events as a result of
the Contractor Delays, the Contractor will not be entitled to recover
these additional costs.
(c)
Identification of float and concurrency
Accurate identification of float and concurrency is only possible with
benefit of a proper programme, properly updated.
4.6.4.2 Guidance
The Protocol aims to provide an agreed manner in which issues of
concurrency can be resolved. Where an event of employer Risk and
Contractor risk occur at the same time, the contractor should nevertheless be
entitled to an EOT for the delay to completion. Risks events which occur
sequentially, but whose effects are concurrent, should also not reduce the
amount of an EOT due to the Contractor as result of Employer delay. To
accurately identify concurrency, an up to date programme is required.
The Protocol’s position on concurrency prevents an employer or CA
from taking advantage of the contractor’s delay after the contract completion
date by issuing instructions and making changes without giving an EOT. This
means that if the Employer’s new instructions further extend the period of the
works and the Contract Completion Date, that delay will be concurrent.
63
4.6.4.3 Commentary
The “dominant” cause approach, which is frequently adopted to
determine whether a contractor should be entitled to an EOT in circumstances
of concurrent events of delay, has not been applied by the Protocol. Given
that disputes often arise due to conflicting arguments over cause of or
contribution to delay the Protocol attempts to move away from the
apportionment of blame for the delay and reduction of the EOT.
The protocol is in one sense contractor friendly in adopting the
position that the contractor gets EOT notwithstanding concurrent delay. This
is a position which has been adopted in the UK in two recent cases Henry
Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70
Con LR32 and in Royal Brompton Hospital NHS Trust v Hammond & Ors
(No 7) [2001] 76 Con LR 148. It appears that the Protocol approach is
becoming the preferred approach in the UK.
There is some balance in that the contractor must still prove that he
has incurred additional costs as a consequence of the employer delay beyond
costs due to the contractor’s concurrent cause of delay, before the contractor
is entitled to compensation, notwithstanding the possibility of an entitlement
to an extension of time.
64
4.6.5
Retrospective delay analyses
4.6.5.1 Core Principle
The adjudicator, judge or arbitrator should so far as practicable, put
him/herself in the position of the CA at the time the Employer risk event
occurred.
4.6.5.2 Guidance
The person assessing whether the contractor is entitled to an EOT
should use an updated programme to establish the status of the works for the
period over which an EOT is claimed, to determine whether the entitlement
should have been recognized by the CA at that time.
4.6.5.3 Commentary
The protocol’s view is correct in principle but in practical terms it is
nevertheless difficult to assess the amount of information that a CA would
have had at the time he or she assessed the claim.
65
4.6.6
Mitigation of delay and loss
4.6.6.1 Core Principle
(i)
Subject to the Contract, the duty to mitigate loss does not extend to
requiring the contractor to add extra resources or to work outside its planned
working hours.
(ii)
The contractor must not take unreasonable steps that increase its loss.
4.6.6.2 Guidance
The protocol considers that the contractor’s duty to mitigate its loss has
two limbs:
(a) the contractor must take reasonable steps to minimize its loss; and
(b) the contractor must not take unreasonable steps that increase its loss
The contractor is usually required in construction contracts to do all it can
to avoid, overcome or reduce delay. This duty does not extend to carrying out
any change in scope any more efficiently than the original scope, spend more
money in order to negate the effect an employer Risk Event, for example
adding extra resources by working outside its planned working hours or
otherwise. The employer should pay the contractor the costs of taking such
measures to mitigate the loss if it requires the contractor to do so. The
66
method, speed and timing of the activities under the contract are generally at
the contractor’s discretion subject to any agreed programme or method.
4.6.7
Monetary claims
Prolongation costs, the protocol advises, should be based on costs incurred.
Whether or not the cause of prolongation compensation is governed by a provision in
the contract or arises from a breach of contract, it is up to the contractor to
demonstrate that he has actually suffered loss and/or expense before becoming
entitled to compensation, unless the contract or indeed the applicable law provides
otherwise.
The tender allowance, on the other hand, has limited relevance to the
evaluation of prolongation and disruption caused by a breach of contract or any other
cause that requires the evaluation of additional costs.
The protocol expresses views on such matters as claims for the recovery of
head office costs using Hudson’s Formula and its rival Emden’s formula, together
with interest and finance charges, profit, acceleration and claims for the recovery of
costs incurred in preparing claims.
67
4.7
Conclusion
In construction, time is extremely important. The construction phase can be
divided into three basic time-related stages, namely commencement, progress and
completion. A delay in any of the stages, especially the first stage, will have a huge
impact on the other stages and this can result in a significant increase in the
construction cost and wastage of human hours. Therefore, it is imperative for all
relevant parties to organize, co-ordinate and plan properly in order to execute the
construction efficiently from commencement until completion within the time and
budget provided.
However, timely completion of projects is not always the case. Consequently
contractors and employers need to have recourse to claiming EOTs and liquidated
damages respectively. The grounds for granting extension of time, procedure for
claiming and also the basis of assessing EOT have been discussed in this chapter.
68
CHAPTER 5
DATA ANALYSIS AND RESULT
5.1
Introduction
This chapter will look into case laws and projects that involve works which
have experienced delays. Five (5) case studies have been selected in order to have an
understanding of delayed projects, causes of delay and the grounds for the issuance
of extension of time. The case laws that explain ‘fair and reasonable’ assessment in
granting extension of time are as follows:
Case No. 1: John Barker Construction Ltd v London Portman Hotel Ltd (1996)
83 BLR 31
Under this case, on 1 December 2004, Barker applied an extension of time for
the full period of delay which was six weeks. An extension of time was awarded by
69
the architect, but not for the full period of delay. The dispute was referred to the
Official referee’s court, and was heard before Mr Justice Toulmin.
The judge was not persuaded that the architect’s assessment of a fair and
reasonable extension of time was methodical and logical. His conclusion was that the
architect’s assessment was irrational, illogical and fundamentally flawed and he
mentioned in his judgment that the architect did not carry out a logical analysis in a
methodical way of the impact which the relevant matters had or were likely to have
on the planned programme. He made an impressionistic, rather than a calculated,
assessment of the time which he thought was reasonable for various items
individually and overall.
There are two important observations in this case as follows:
(i)
Mr Recorder Toulson QC held that a fair extension of time
called for a logical analysis of the impact of relevant
matters in a methodical way.
(ii)
An analysis using CPM techniques was held to be fair way
of assessing a reasonable extension of time, However, it
was not suggested that such techniques were the only ways
of assessment.
In this case, the judge held that the effect of the architect making
impressionistic assessment instead of a logical analysis of delay rendered his
extension of time fundamentally flawed. The judge said:
‘‘ I accept that [the architect] believed, and believes, that he made a fair
assessment of the extension of time due to the Plaintiffs. It is fairly apparent that the
70
Defendants were concerned by the overrun of the contract in time and costs, and I
have no doubt that[the architect] was conscious of this, but I believe also that he
endeavoured to exercise his judgment independently. However, in my judgment his
assessment of extension of time due to the Plaintiffs was fundamentally flawed in a
number of respects, namely:-
(a)
[The architect] carry out a logical analysis in a methodical way of
the impact that the relevant matters which the contractor put forward
had on the delay to the project
(b)
He made an impressionistic, rather than a calculated, assessment of
the time which he thought was reasonable for the various items
individually and overall. (The Defendants themselves were aware of
the nature of [the architect’s ]assessment, but decided against seeking
to have any more detailed analysis of the Plaintiffs’ claim carried out
unless and until there was litigation)
(c)
[The architect] misapplied the contractual provisions, as more
particularly set out above. Because of unfamiliarity with SMM7 he
did not pay sufficient attention to the content of the bills, which was
vital in the case of JCT contract with quantities
(d)
Where [the architect] allowed time for relevant events, the allowance
which he made in important instances (such as the items relating to
walls or he cutting of pockets in bathrooms screeds) bore no logical or
reasonable relation to the delay caused.
This case provides a clear warning to everyone whose duty it is to assess and
certify extensions of time that anything less than a thorough delay analysis may
invalidate the certificate. The consequences of that could well be that the certifier
could find himself in breach of his professional contract and liable to the employer
for breach of duty.
71
Case No. 2: Liew Ter Kwang v Hurry General Contractor Pte Ltd [2004] 3 SLR
59
In this case Mr Liew Ter Kwang is the owner of semi-detached house in
Mayflower Rise, Singapore. He had applied for leave to appeal on three questions of
law. In the originating motion, these questions were formulated as follows:
(a) Whether the arbitrator erred in agreeing that extension of time could
be granted on grounds not provided for in cl 23 of the Conditions
(b) whether the arbitrator erred in law in agreeing that an architect can
properly assess an extension of time without carrying out a detailed or
logical or methodical analysis of the extension of time granted based
on supporting documents, but by simply making an empirical
assessment or estimate
(c) whether the arbitrator has power under cl 37(3) of the Conditions to
review the architect’s or consultants’ decisions and/or certificates only
if there is clear evidence of the architect or consultant not acting
professionally, independently or fairly, or whether the arbitrator may
do so on other grounds.
In the first question, the arbitrator found that the architect’s granting of the
Extension of time of six weeks to be in order because he thought the architect had
considered that the delay arising from the late supply of the roof tiles was not solely
caused by the contractor. Counsel for Mr. Liew challenged that the finding on the
basis of that reason did not fall within cl 23(1) of the Conditions
For the second question, according to the judgment, in making any
determination under a building contract, an architect has Duty to act fairly and on a
72
rational basis, any assessment he makes must be based on reasons that can stand up
to scrutiny. It has been held that in order for an architect to make a fair and
reasonable assessment of the time extension to be granted, he must:
(a) carry out a logical analysis in a methodical way of the impact that the
relevant matters which the contractor put forward had on the delay to the
project
(b) make a calculated assessment of time which he thought was reasonable for
the various items individually and overall, rather than an impressionistic
assessment;
(c) apply the contract provisions correctly; and
(d) in allowing time based on the grounds listed in the contract provisions, ensure
that the allowance made bears a logical and reasonable relation to the delay
caused.
For the third question, the arbitrator did not appear to have carried out a
proper evaluation or review of the architect’s decision. Instead, there was a
presumption that the architect was right unless it could be proven that he did not act
professionally, independently and fairly. He further upheld the architect’s decision to
extend time
beyond the time initially allowed by the contract to complete on the
ground that there was no evidence to show that the architect and engineers had acted
unprofessionally or unfairly.
73
Case No. 3: Lian Soon Construction Pte v Guan Qian Realty Pte Ltd [2000] 1
SLR 495
In this case, the main Contractor entered into a SIA contract (4th. Edition)
with the Employer for the construction of a 10 storey block of residential apartments.
The Contractor granted an extension of time of 52 days. The Employer relied on
these purported certifications and computations as set-offs in the summary judgment
proceedings.
In this case, the processing of the extension of time application reached an
impasse regarding the submission of a critical programme. Although the Architect
had intimated that in the absence of such a programme, he would assume that the
events relied on did not fall within the critical path and he would ‘evaluate
accordingly’, he left the matter in limbo.
For a whole year, he did not indicate one way or the other his position in
regard to this matter, leaving it quite ambiguous and uncertain. What was involved in
a time extension exercise was, basically, to assess how much more time the main
contractor should fairly and reasonably be entitled to have beyond the time initially
allowed by the contract to complete the works as a result of the delay events which
had occurred.
The Architect was required to make a fair estimate and assessment, and not to
give a precise arithmetic calculation. There was no requirement in Clause 23 for a
critical path programme. Even in the current, revised, version of the clause, all that
was required was the submission of a ‘sufficient explanation’ of the reasons why the
delay to completion will result.
74
The assessment of extension was within the competence and expertise of the
architect. He had to do his best with the submission of the material required by the
clause to be submitted, and should not shift the responsibility to the main Contractor.
An analysis of the inter-relationship between all these events and consequent impact
on the overall completion date was within the Architect’s own responsibility and
competence, rather than the Contractor’s.
The court summed up by holding that the architect failed to act upon the main
Contractor’s application for time extension; he failed to make a decision or to make
it in time, and he seemed to have taken one position at the time of receipt of the
application (that he would not or could not grant any extension) and a another a year
later (that the plaintiffs were entitled to 52 day extension). The architect did not
properly exercise his power in respect of the matter of extension of time and delay
certificate. The court therefore found that the purported decision on the extension and
the delay certificate was a nullity for the purpose of the summary proceedings.
Case No. 4 : Henry Boot Construction (UK) Limited v Malmaison Hotel
(Manchester) Ltd (1999) 70 Con LR 32
In the arbitration, the contractor was claiming an extension of time on the
basis of various events. The Employer wished to challenge this claim by advancing
both a negative and a positive case. The negative case was that the events relied on
by the Contractor had not caused the alleged or any delay. The positive case was that
delay had in fact been caused by other events. The Contractor argued that it was not
within the jurisdiction of the Arbitrator to consider this positive case and that he was
only entitled to consider events puts before him by the Contractor. This proposition
was rejected both by the Arbitrator and the Court.
75
The basic principle is encapsulated in para 12 of Dyson J’s judgment in Henry Boot :
“ First it is agreed that the analysis of Colman J in Balfaour Betty Building
Ltd v Chestermount Properties (1993) 32 Con LR 139 should be applied. In his
valuable interpretation of cl 25 of this form of the contract, Colman J said, inter alia,
that the purpose of the power to grant extension of time under cl.25.3 was to fix the
period of time by which the period of time available for completion ought to be
extended having regard to the incidence of the relevant events measured by the
standard of what is fair and reasonable. The completion date as adjusted was not the
date by which the contractor ought to have achieved practical completion, but the
end of the total number of working days starting with the date of possession within
which the contractor ought fairly and reasonably to have completed the works.
In Henry Boot, Dyson J dealt with the questions of concurrent delays and
whether it is permissible to consider other events. In relation to the first question
Dyson J said, at para 13 of his judgment:
‘Second, it is agreed that if there are two concurrent causes of delay, one
which is a relevant cause and the other is not, then the contractor is entitled to an
extension of time for the period of delay caused by relevant event notwithstanding
the concurrent effect of the other event. To take a simple example : if no work is
possible on a site for a week not only because of exceptionally inclement weather ( a
relevant event) but also because the contractor has a shortage of labour (not a
relevant event) and if the failure to work during it that week is likely to delay the
works beyond completion date by one week, then it is considered fair and reasonable
that the architect be required to grant an extension of time of one week, and he
cannot refuse to do so on the grounds that the delay would have occurred in any
event by reason of the shortage of labour.’
76
In relation to the second question, Dyson J held that an architect is not
precluded from considering the effect of other events when determining whether a
relevant event is likely to cause delay to the works beyond completion. It seems to
follow that where there is true concurrency as identified the Contractor gets an
extension of time for the relevant period and the employer’s claim to liquidated
damages fails. That seems a fair outcome.
5.2
Findings and Discussions
Based on my findings, there appears to be no case law which gives a clear
definition of ‘fairly’ and ‘reasonably’ in the assessment for granting extension of
time. In Case No.1: John Barker Construction Ltd v London Portman Hotel Ltd
(1996) 83 BLR 31, the judgement was that the architect’s assessment of extension
of time due to the Plaintiffs was fundamentally flawed. He did not carry out a logical
analysis in a methodical way to assess the impact the relevant matters had or were
likely to have on the construction plan. Instead of making a calculated assessment
of the time due to the contractor, he made an impressionistic assessment, which he
thought was reasonable, for various items individually and overall.
The court held that there were two important observations to be noted in this
case for a fair determination in assessing extension of time . They are as follows:
(a) a fair extension of time called for a logical analysis of the impact of
relevant matters in a methodical way.
(b) an analysis using CPM techniques was held to be a fair way of
assessing a reasonable extension of time, However, it was not
suggested that such techniques were the only ways of assessment.
77
In the Case No 2 : Liew Ter Kwang v Hurry General Contractor Pte [2004]3
SLR 59, the arbitrator approved the architect’s act of assessing the application for
extension of time by simply making an empirical estimate. It was held that there was
no evidence to show that the architect and engineer had acted unprofessionally or
unfairly. According to the judgment, in making any determination under a building
contract, an architect has a duty to act fairly and on rational basis, any assessment he
makes must be based on reasons that can stand up to scrutiny. In order for an
architect to make a fair and reasonable assessment of the time extension to be
granted, he must:
(a) carry out a logical analysis in a methodical way of the impact that the
relevant matters which the contractor put forward had on the delay to the
project
(b) make a calculated assessment of time which he thought was reasonable for
the various items individually and overall, rather than an impressionistic
assessment;
(c) apply the contract provisions correctly; and
(d) in allowing time based on the grounds listed in the contract provisions, ensure
that the allowance made bears a logical and reasonable relation to the delay
caused.
In Case No.3: Lian Soon Construction Pte v Guan Qian Realty Pte Ltd
[2000] 1 SLR 495, the architect did not properly exercise his power in respect of the
matter of extension of time and delay certificate. Under his duty, the architect was
required to make a fair estimate and assessment, and not to give a precise arithmetic
calculation. The assessment of extension was within the competence and expertise of
the architect. He had to do his best with the submission of the material required by
the clause to be submitted, and should not shift the responsibility to the main
Contractor.
78
In the Case No.4 : Henry Boot Construction (UK) Limited v Malmaison Hotel
(Manchester) Ltd (1999) 70 Con LR 32, there seems a fair outcome when the
architect is not precluded from considering the effect of other events when
determining whether a relevant event is likely to cause delay to the works beyond
completion. It seems to follow that where there is true concurrency as identified the
Contractor gets an extension of time for the relevant period and the employer’s claim
to liquidated damages fails. The next step was the assessment of extension of time in
housing projects procured by Felda Engineering Services Sdn Bhd.
Below are the five case studies that the Engineer had granted extension of
time in Felda Engineering Services Sdn Bhd.
5.3
Case Study No.1
Project Name :
Cadangan
Pembangunan
Perumahan
yang
Mengandungi 160 Unit Rumah Kos Rendah Satu
Tingkat, 45 Unit Rumah Kos Sederhana Rendah Satu
Tingkat Dan Satu Unit Pencawang Elektrik Di Felda
Mempaga 2, Mukim Sabai, Daerah Bentong, Pahang
Darul Makmur.
Contract Number:
59/09/03/B
Contractor
:
Jentayu Padu Sdn Bhd
Client
:
Felda Properties Sdn Bhd
Architect
:
Jazlan Azmi Architects Sdn Bhd
Project Manager :
Felda Engineering Services Sdn Bhd
Quantity Surveyor :
Felda Engineering Services Sdn Bhd
M&E
Allied Engineering Services Sdn Bhd
:
Original Contract Sum :
RM 8,576,316.00
New Contract Sum
RM 9,011,305.43
:
79
LAD
:
Start Work
:
RM 5,000.00 per day
1.04.2004
Original Completion Date:
01.07.2005
Actual Completion Date:
28.10.2005
EOT 1
:
02.07.2005 - 10.09.2005 (71 days)
EOT 2
:
11.09.2005 - 28.10.2005 (41 days)
5.4
Case Study No. 2
Project Name :
Membina Dan Menyiapkan Rumah Kos Rendah Dan
Kos Sederhana Rendah Satu Tingkat, Kedai Satu
Tingkat Dan Kerja-Kerja Infrastruktur Yang Berkaitan
Di Felda Bukit Goh, Kuantan, Pahang.
Contract Number:
29/06/04/B
Contractor
:
MMN Bina Sdn Bhd
Client
:
Felda Properties Sdn Bhd
Architect
:
Jazlan Azmi Architects Sdn Bhd
Project Manager :
Felda Enngineering Services Sdn Bhd
Quantity Surveyor :
Felda Engineering Services Sdn Bhd
M&E
Allied Engineering Services Sdn Bhd
:
Original Contract Sum :
RM 15,050,000.00
New Contract Sum
:
RM 16,005,756.32
LAD
:
RM 5,000.00 per day
Start Work
:
01.09.2004
Original Completion Date:
01.09.2005
EOT 1
:
02.09.05 - 30.11.2005 (90 days)
EOT 2
:
31.11.2005 - 31.01.2006 (62 days)
EOT 3
:
01.02.2006 – 30.04 .2006 (89 days)
EOT 4
:
01.05.2006 -30.11.2006 (214 days)
80
5.5
Case Study No. 3
Project Name :
Cadangan Membina Dan Menyiapkan 192 Unit Rumah
Rumah Kos Rendah, 58 Unit Rumah Kos Sederhana
Rendah, 5 Unit Kedai, Bazaar, Pencawang Elektrik
Dan Kerja-Kerja Infrastruktur Yang Berkaitan Di
Felda Lepar Hilir Saujana, Kuantan, Pahang
Darul
Makmur
Contract Number:
18/03/04/B
Contractor
:
Kejuruteraan Seberkas Sdn Bhd
Client
:
Felda Properties Sdn Bhd
Architect
:
Jazlan Azmi Architect
Project Manager :
Felda Enngineering Services Sdn Bhd
Quantity Surveyor :
Felda Engineering Services Sdn Bhd
M&E
Allied Engineering Services Sdn Bhd
:
Original Contract Sum :
RM 11,387,000.00
New Contract Sum
RM 10,833,391.56
Start Work
:
:
11.10.2004
Original Completion Date:
11.01.2006
LAD
RM5,000.00 per day
:
EOT 1
:
12.01.06 -12.03.06 (60 days)
EOT 2
:
13.03.06 – 13.06.06 (93 days)
EOT 3
:
14.06.06 -30.09.06 (109 days)
EOT 4
:
1.10.06 – 31.03.2007 (182 days)
5.6
Case Study No. 4
Project Name :
Membina Dan Menyiapkan Rumah Kos Rendah
Setingkat, Rumah Kos sederhana Rendah Setingkat,
81
Kedai Setingkat, Pencawang Elektrik Dan Kerja-Kerja
Infrastruktur Yang Berkaitan Di Felda Keratong 3,
Mukim Keratong, Daerah Rompin, Pahang Darul
Makmur
Contract Number:
27/06/04/B
Contractor
:
MMN Bina Sdn Bhd
Client
:
Felda Properties Sdn Bhd
Architect
:
Jazlan Azmi Architect
Project Manager :
Felda Enngineering Services Sdn Bhd
Quantity Surveyor :
Felda Engineering Services Sdn Bhd
M&E
Allied Engineering Services Sdn Bhd
:
Original Contract Sum :
RM 19,750,000.00
New Contract Sum
RM21,119,809.57
Start Work
:
:
22.11.2004
Original Completion Date:
22.05.2006
EOT 1
:
23.05.06 -31.08.2006 (101 days)
EOT 2
:
01.09.2006 - 28.02.2007 (181 days)
EOT 3
:
01.03..2007 – 14.04.2007 (45 days)
5.7
Case Study No. 5
Project Name :
Cadangan Membina Dan Menyiapkan 125 Unit Rumah
Kos Sederhana Di Atas Lot 2263-2268, 2173 di Bandar
Muadzam Shah, Mukim Bebar, Daerah Rompin,
Pahang Makmur
Contract Number:
02/01/06/B
Contractor
:
Jentayu Padu Sdn Bhd
Client
:
Felda Properties Sdn Bhd
Architect
:
Arkitek Ehwan Sdn Bhd
Project Manager :
Felda Engineering Services Sdn Bhd
82
Quantity Surveyor :
Felda Engineering Services Sdn Bhd
M&E
Allied Engineering Services Sdn Bhd
:
Original Contract Sum :
RM 9,430,000.00
LAD
:
RM5,000.00 Per day
New Contract Sum
:
RM10,664,830.00
Start Work
:
03.07.2006
Original Completion Date:
03.10.2007
EOT 1
:
04.10.2007 -31.05.2008 (240 days)
EOT 2
:
01.06.2008 - 28.09.2008 (120 days)
EOT 3
:
29.09.2008 - 31.01.2009 (125 days)
EOT 4
:
01.02.2009 - 21.04.2009 (80 days)
5.8
Findings and discussions
The summary of the causes of delay and the granting of extension of time to
the contractors are summarized as below:
ITEM
CAUSES OF DELAY
A
By force majeure
B
By
reasons
of
any
exceptionally inclement
weather
C
By reason of direction
given by the Engineer
consequential
upon
disputes
with
neighbouring owners
D
By reason of loss or
CASE
CASE
CASE
CASE
CASE
STUDY
STUDY
STUDY
STUDY
STUDY
1
2
3
4
5
83
ITEM
CAUSES OF DELAY
CASE
CASE
CASE
CASE
CASE
STUDY
STUDY
STUDY
STUDY
STUDY
1
2
3
4
5
9
9
9
9
9
damage occasioned by
any one or more of the
contingencies referred to
in Clause 34
E
By reason of Engineer’s
instruction issued under
Clause 5
F
By
reason
of
the
Contractor not havingreceived in due time
from
the
Engineer
necessary
instructions,
drawings,
levels
or
instructions in regard to
the nomination of subcontractors
and/or
suppliers
G
9
By reason of delay in
giving possession of the
Site as provided under
Clause 38 (b) (i) hereof
H
By reason of any action
due to local combination
of workmen, strike, or
lockout
affecting
any
trades employed upon
the Works
I
By delay on the part of
artisans, tradesmen or
others engaged by the
9
84
ITEM
CAUSES OF DELAY
CASE
CASE
CASE
CASE
CASE
STUDY
STUDY
STUDY
STUDY
STUDY
1
2
3
4
5
employer in executing
work not forming part of
this Contract
J
By
the
contractor’s
inability
for
reason
beyond his control and
which
he
could
reasonably
foreseen
not
have
at
the
date
closing of tender of this
contract to secure such
goods and/or materials
K
By delay on the part of
nominated
contractors
suband
or
nominated suppliers of
their works, and such
delay shall be caused by
the
same
reasons
affecting their work as
stated
above in sub
clauses (a) to (j)
Table 5.1 - Summary of causes of delay works and types of delay
Based on table 5.1 above, most causes of delay for the five case studies were
due to Clause 43(e) IEM Condition Of Contract by reason of Engineer’s instruction
issued under Clause 5, which included the variations, additional works because of
changing design, sizes, new works, requirements by Authorities such as TNB and
JBA and for electrical works and water supply or piping works. The other reasons
were delay in giving possession of the site due to presence of squatters and shortage
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of labour. The table for the entitlement extension of time by the Contractor for the
five case studies are summarized as follows:
CASE
NO OF DAYS
NO OF DAYS CLENT
NO. OF
STUDIES
CONTRACTOR
APPROVED
DIFFERENCE
APPLY EXTENSION
EXTENSION OF
(DAYS)
OF TIME
TIME
1
112
112
0
2
939
455
484
3
815
476
339
4
524
327
197
5
749
565
184
Table 5.2 – Comparison of the numbers of days EOT applied by
contractors and approved by clients
Referring to table 5.2, among the five case studies above, only one case study
shows that the extension of time given was similar to that the contractor had applied
for. In the other four case studies, the number of days applied by the Contractor did
not match with the number of days approved by the Engineer. Even though the
number of days for extension of time granted did not match perfectly with the
number the contractor applied for, there was no evidence o show that the engineer
had acted unprofessionally or unfairly. It was held in
Case No.3
Lian Soon
Construction Pte v Guan Qian Realty Pte Ltd [2000] 1 SLR 49, that the assessment
of extension was within the competence and expertise of the architect who had to do
his best with the submission of the material required by the clause and should not
shift the responsibility to the main Contractor.
In determining a fair and reasonable assessment of Extension of Time, the
Engineer or Contract Administrator must apply the principle that is set out in the case
86
of John Barker Construction Ltd v London Portman Hotel Ltd (1996) 83 BLR 31 and
Liew Ter Kwang v Hurry General Contractor Pte Ltd [2004] 3 SLR 59.
During the two-day course entitled ‘Contract Administration For Contracts
Based On IEM Conditions Of Contract’ which was conducted on 13-14 April 2009,
Ir. Harban Singh K.S. held that for Felda , it is the normal practice for the Engineer
to calculate the extension of time as follows:
Estimate length of delay (Excusable delay)
= A days
No. of days saved through mitigation
= B days
Estimate for extension of time
= A days – B days
5.9
Conclusion
It is apparent from the above cases law that the assessment of a fair and
reasonable extension of time is not a straightforward exercise. It also appears that
there is neither a fixed nor a single way of assessing a fair and reasonable extension
of time. This is further corroborated when it has been held in the English case of
John Barker Construction Ltd v London Portman Hotel Ltd (1996) 83 BLR 31 that it
has to be a logical analysis in a methodical way considering the impact which the
relevant matters had or are likely to have on the contractor’s planned programme.
Also, in the five case studies above, although the period of extension of time did not
match with the period applied for by the Contractor, the engineer’s decision in
assessing the application for extension of time is not a violation of the law on the
ground that there was no evidence to show that the engineers had acted
unprofessionally or unfairly. There has been no case law that clearly states the
meanings of ‘fairly’ and ‘reasonably’ in assessment for granting extension of time.
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CHAPTER 6
CONCLUSION AND RECOMMENDATIONS
6.1
Introduction
This final chapter concludes the study by listing and summarizing the result
of the analysis in accordance with the research objective based on literature reviews,
interviews and the case studies and result analysis.
6.2
Summary of Research Findings
In general, the objective of this research has been achieved through the
analysis of the cases law and case studies for housing project procured by Felda
Engineering Services Sdn Bhd. The objective was to identify how Superintending
88
Officers or Contract Administrators approach their duty in assessing Extension Of
Time fairly and reasonably. A summary of the above case laws is appended below:
No
Cases
Explanation of ‘Fair and Reasonable’
assessment in granting extension of time
1
John Barker Construction Ltd The assessment of a fair and reasonable
v London Portman Hotel Ltd extension of time involves an exercise of
(1996)
judgment, but the judgment must be fairly
and rationally based. Although there was
no bad faith or excess of jurisdiction on the
part of the architect, his determination of
the extension of time due to plaintiffs was
not a fair determination, nor was it based
on a proper application of the provisions of
the contract and it was accordingly invalid.
2
Liew Ter Kwang v Hurry The arbitrator approved the architect’s act
General Contractor Pte Ltd of assessing the application for extension of
[2004] SGHC97[2004]3 SLR time by simply making an empirical
59
estimate. He further upheld the architect’s
decision to extend time on the ground that
there was no evidence to show that the
architect
and
engineers
unprofessionally or unfairly.
had
acted
89
3
Lian Soon Construction Pte v The Architect was required to make a fair
Guan Qian Realty Pte Ltd estimate and assessment, and not to give a
[2000] 1 SLR 495
precise arithmetic calculation. There was
no requirement in Clause 23 for a critical
path programme. Even in the current,
revised, version of the clause, all that was
required was the submission of a ‘sufficient
explanation’ of the reasons why the delay
to completion will result. The assessment
of extension was within the competence
and expertise of the architect.
4
Henry
Boot
Construction ‘… it is agreed if there are two concurrent
(UK) Limited v Malmaison causes of delay,…take for example, if no
Hotel 70 Con LR 32
work is possible on our site for a week not
only because of exceptionally inclement
weather (a relevant event), but also because
the Contractor has a shortage of labour) not
a relevant event , and if the failure to work
during that week is likely to
delay the
works beyond the Completion Date by one
week, then it is considered fair and
reasonable that the Architect be required to
grant an extension of time of one week…”
Table 6.1: The cases law that explained ‘fair and reasonable’ in
assessment for granting extension of time
The above table 6.1, summarises all the cases discussed above and give a
view of the explanation of ‘fair and reasonable’ assessment in extension of time for
each case. Failure by a certifier to act fairly can lead to invalidation of his
certificates. But even where the certifier acts fairly, that will not be enough to sustain
his decisions if it can be shown that he has failed to apply the machinery of the
contract to his decision making process.
90
According to the five case studies above, even though the period of extension
of time did not match with the period applied by the Contractor, the engineer’s
decision in assessing the application for extension of time is not a violation of the
law on the ground that there was no evidence to show that the engineers had acted
unprofessionally or unfairly. There has been no case law that clearly states the
meanings of ‘fairly’ and ‘reasonably’ in assessment for granting extension of time.
6.3
Problems Encountered When Conducting This Study
There some constraints in conducting this study. The cases relating to this
study are also limited. This limitation led to fewer cases being found to support the
findings, especially those decided in Malaysia Court.
6.4
Recommendations
Some guidelines are recommended for Superintending Officer or Contract
Administrator to act fairly and reasonably when considering applications for
extension of time:
(a) The contractor must appreciate the application procedures which are
inclusive of express contract provision, timing of the notification, form of
notice, content of notice, timing of the application and contents of the
application. The Contract administrator must appraise these procedures
91
assiduously in order to ensure that a fair and reasonable decision is made
to the applications.
(b) The Contractor has to submit as much information as he can about the
causes of the delay to assist the architect in performing his duty. The
Contractor’s failure to provide accurate information if requested is also a
factor the architect can take into account in assessing the extension of
time.
(c) Extension of time should not been given randomly and without serious
consideration of the events that cause the delay The assessment of
extension of time must be granted on a fair and reasonable and rational
basis according to the contract. The basis of assessment must be
consistent and similar to all the projects. In the assessment of fair and
reasonable granting of extension of time, the Superintending Officer ,is
encouraged , as a guide, to consult the recently published delay and
Disruption Protocol published by the Society of Construction Law UK,
which is an excellent document setting out the relevant principles.
(d) There is no exact formula stated in the contract on how to assess
extension of time.
For a fair and reasonable assessment in granting
extension of time, there must be a clear basis and the clear meaning of
‘fair and reasonable’. So the Contract Administrator and the Contractor
must set out the procedure on how to assess the extension of time during
the award of the Contract to the Contractor.
It is hoped that the body of this work and recommendations will contribute to
a better understanding of the problems involved in the construction industry
and will help to stimulate an implementation of a more systematic and
professional approach in the granting of extension of time and pave the way
for a further research in this contentious issue.
92
6.5
Further Studies
A future research on a related topic ‘The entitlement of extension of
time due to concurrent delay’ will be a beneficial consideration. The
objective of this research will be to determine the circumstances surrounding
concurrent delays in construction and the entitlement of extension of time to
the Main Contractor.
6.6
Conclusion
The main finding of this research is that there is no case law with a clear
definition of ‘fair and reasonable’ assessment for granting extension of time. In the
five case studies above, owing to relevant events, the contractor was granted
Extension Of Time by the client. Even though the period of extension approved by
Superintending Officer/Engineer did not match the number of days the contractors
had applied for, there was no evidence to show that the engineer had acted
unprofessionally or unfairly because there is no case law which clearly described the
meaning of ‘fair’ and ‘reasonable’ in assessment for granting extension of time.
This point comes out very strongly in the recent case of John Barker
Construction Ltd v London Portman Hotel Ltd (1996) 83 BLR 31 where the judge
held that the effect of the architect making impressionistic assessment instead of a
logical analysis of delay rendered his extension of time fundamentally flawed. This
case provides a clear warning to everyone whose duty it is to assess and certify
extensions of time that anything less than a thorough delay analysis may invalidate
the certificate. The consequences of that could well be that the certifier could find
himself in breach of his professional contract and liable to the employer for breach of
duty.
93
One of the roles of the Contract Administrator is the assessment of claims for
extension of time. Accordingly, though the Contract Administrator is usually
appointed by and paid by the Proprietor (and may sometimes be the Proprietor’s
original design consultant), the Contract Administrator’s role is principally to decide
major issues of potential dispute under the contract between the Proprietor and the
Contractor.
In such contracts there is (at least) an implied term that the Superintendent
will act fairly. There is a strong contractual agreement that if the Superintendent.
does not act fairly towards the Contractor, this constitutes a breach of contract by the
Proprietor.
It should be noted that the Contract Administrator’s ultimate decision as to
the granting of any extension of time is subject to two important exception that are
highlighted in the standard forms of contract. These are namely:
(a) the contractor is not entitled to any extension of time where the
instructions or acts of the employer and/or the Contract Administrator are
necessitated by or intended to cure any default or breach of contract by
the Contractor and
(b) the contractor shall have constantly used his ‛best endeavours’ to prevent
delay and has done all that may reasonably be required of him to the
satisfaction of the Contract Administrator to prevent delay or further
delay in the completion of works.
All in all, the Contract Administrator or Superintending Officer plays a
pivotal role in the successful management of a contract and an appropriate and
responsible assessment of delays and granting of Extension of Time will not only
keep any possible disputes at bay but also smoothen the completion of the project.
94
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Hashim Sikan, (2003), “Extension Of Time” The Malaysian Surveyor (3rd Quarter,
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K.S.,(2002),
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95
APPENDIX A
IEM CONDITIONS OF CONTRACT FOR WORKS MAINLY OF CIVIL
ENGINEERING CONSTRUCTION