Examine the role of Extension of time
in quality control environment;
Evidence from construction projects
Student Details
Student Name
Registration No.
Session
Faculty
Hamza Hussnain
Haris Khan
L1S21MSAF0006
L1S21MSAF0011
1st Semester
MSAF
Supervisor Name: ___Dr. Shabana Naveed
Supervisor Signature: ____________________________________________________
Abstract
Almost all construction projects face delays resulting in extension of time (EOT) or liquidated
damages, depending upon which of the two parties absorbs the responsibility as per terms of the
contract. A number of factors influence the realistic assessment of EOT claims, along with the
level of awareness and technical support. The construction industry of Pakistan, which operates
in a rather traditional and outdated style, has never been assessed on such critical contract
management aspects. It has resulted into various disputes, court cases, and bad blood between
stakeholders. To help facilitate the local practitioners, this study analyzed 29 EOT-influencing
factors. Prevalent practices
in the construction industry also were investigated. On the basis of an extensive survey, it was
found that delayed payment to the contractor was the primary cause of EOT claims. Conclusions
were drawn and reommendations are proposed to resolve EOT issues, float ownership, and
prolongation cost. Almost all construction projects face delays resulting in extension of time
(EOT) or liquidated damages, depending upon which of the two parties absorbs the
responsibility as per terms of the contract. A number of factors influence the realistic assessment
of EOT claims, along with the level of awareness and technical support. The construction
industry of Pakistan, which operates in a rather traditional and
outdated style, has never been assessed on such critical contract management aspects. It has
resulted into various disputes, court cases, and bad blood between stakeholders. To help facilitate
the local practitioners, this study analyzed 29 EOT-influencing factors. Prevalent practices in the
construction industry also were investigated. On the basis of an extensive survey, it was found
that delayed payment to the contractor
was the primary cause of EOT claims. Conclusions were drawn and recommendations are
proposed to resolve EOT issues, float ownership, and prolongation cost.
Almost all construction projects face delays resulting in extension of time (EOT), depending
upon which of the two parties absorbs the responsibility as per terms of the contract. A number
of factors influence the realistic assessment of EOT claims, along with the level of awareness
and technical support. The construction industry, which operates in a rather traditional and out
dated style, has never been assessed on such critical contract management aspects. It has resulted
into various disputes, court cases, and bad blood between stakeholders. To help facilitate the
local practitioners, this study analyzed 29 EOT-influencing factors. Prevalent practices in the
construction industry also was investigated. On the basis of an extensive survey, it was found
that delayed payment to the contractor was the primary cause of EOT claims. Conclusions were
drawn and recommendations are proposed to resolve EOT issues, float ownership, and
prolongation cost.
Key words: Extension of time, Quality control environment, Construction projects.
• Introduction
1.1 Background of Research
Project success has many dimensions, one of which is timely completion (Fawzy and EL-adaway
2013). It has been argued that it is the most important matric to measure project success (Ullah et
al. 2016). It is reported that 70% of projects, on average, face delays that extend their duration by
10–30% (Assaf and Al-Hejji 2006). Similarly, Aibinu and Jagboro (2002) reported that
construction delays are responsible for 36–64% of cost overruns. Some delay causes can be
attributed to the contract, whereas some are beyond the control of stakeholders, such as force
majeure. In this regard, Aibinu (2009) suggested the use of precontract negotiation to avoid and
mitigate delay claims. However, concerted efforts are exercised to avoid it; once occurred, the
delay may result in either liquidated damages to the contractor, an extension to stipulated time of
completion, or monetary compensation to the contractor (Hanna et al. 2016). The decision for
one of these measures depends on the responsibility of delay, established with the help of proper
investigation and analysis (Muhamad et al. 2016). Construction delays are caused by several
factors, including internal and external process time, errors in documentation, unrealistic contract
period, improper resource, and risk allocation (Hanna et al. 2016; Larsen et al. 2015). As a result
of delays caused by the client, an extension of time (EOT) is granted to the contractor. However,
EOT claims are not always resolved so amicably owing to confrontational approaches adopted
by various parties. Literature suggests that, globally, EOT claims are on rise. According to Odeh
and Battaineh (2002), the average ratio of actual completion time to the planned contract
duration is 160.5% for road projects and 120.3% for building projects because of the delays and
EOT claims.. To avoid any conflicts and reach a mutually beneficial solution, a number of
analytical methods are available, such as window analysis and time impact analysis. (Muhamad
et al. 2016). These methods take into consideration various factors identified through literature
review and interviews that directly or indirectly affect the realistic determination of EOT
(Muhamad et al. 2016; Birgonul et al. 2014).
1.2 Research Gap
Extension of time is the compensation granted to the contractor in the case of delays for which
he is not responsible to prevent incurrence of undue liquidated damages (Eladaway et al. 2016).
According to Anuar Othman et al. (2006), EOT is a result of an excusable delay that occurs
when a contractor is behind schedule because of events beyond his control. The Society of
Construction Law’s (SCL) (2002) Delay and Disruption Protocol states that a major benefit of
EOT to the contractor is the relief from the liability of liquidated damages, whereas the client
may benefit from avoiding the situation of time-at-large. Construction delays may be categorized
into four groups:
critical versus noncritical delays, excusable versus no excusable delays, compensable versus no
compensable delays, and concurrent delays. According to Mubarak (2015), resolving delay
claims is one of the core objectives of scheduling a project. Construction schedules have been
used widely for resolving delay claims (Babar et al. 2016;Perera et al. 2016). According to
Nguyen and Ibbs (2008), the five most commonly used methodologies for delay analysis are: (1)
as-planned versus as-built (total time) method, (2) impacted as-planned (what-if) method, (3)
collapsed as-built (but-for) method, (4) windows analysis method, and (5) time impact analysis
(modified as-built) method.
Compensation for prolongation cost is also an important issue when dealing with delay claims.
Standard contract forms, especially that of the International Federation of Consulting Engineers
(FIDIC), entitle the contractor to recover prolongation compensation for time-related resources
and site overheads. As per the core principle proposed by the protocol, the objective is to put the
contractor in the same financial position he would have been in if the employer risk event had
not occurred.
• Significance of Research
In recent decades, projects have tended to become more time-constrained and ability to deliver a
project on-time has becoming an increasingly important element in winning a bid. There is an
increasing emphasis on tight contracts by using prime contractor ship to pass time-risk onto the
contractor, frequently with heavy liquidated damages (LADs) for lateness. Delays are a major
source of claims and disputes in construction projects and have even been cited as the most
common and costly causes of problems.
Furthermore, local practice is doubtful in the process of claiming and assessing the extension of
time. There is no standardized procedure or protocol for both contractors and clients. Therefore,
it is essential to reveal the local practice on EOT before any recommendation of methods to
reduce EOT claim.
1.4 Research Questions
This study has following research questions:
•
How the organizations will apply for extension of time in quality control
environments?
•
How do project team members evaluate the techniques for EOT?
•
How the project team members can be avoided from the liquidated damages in
regards to EOT.
• Definition of key constructsws
This writer has seen quite a number of in-house drafted contracts which do not provide for an
extension of time (hereinafter referred to as “EoT”) clause for the declared reason that, in the
absence of such a provision, the Contractor would not be able to claim for extension of time and
hence, on that pretext, no claim for “loss and expense” can be entertained. Almost always, those
contracts also contain a provision for the imposition of liquidated damages (hereinafter referred
to as “LD”) for delay to completion. Further, there are also a considerable contract which this
writer has seen which attempt to limit as much as possible the grounds on which the
Engineer/Architect/S.O. can grant EoT. With respect, such over-zealousness in protecting one
party may be counter-productive and glaringly displays an ignorance of the purpose, and legal
implications, of EoT clause in construction contracts. To properly understand this, an
understanding of the concept of what is called the “prevention principle” is necessary.
•
Theoretical Framework
•
Base theories
Time of the Essence
The possible legal consequences that can flow from the Contractor’s failure to complete the
Works within the contractual time can be inferred from the provisions of section 56 Contracts
Act 1950.
In Tan Ah Kian v. Haji Hasnan,8 Gill CJ identifies the following three situations when time
would be of the essence:
(a) the parties expressly state in the contract that it shall be so;
(b) where it was not originally stated to be of the essence but it was subsequently made so by one
party giving reasonable notice to the other who has failed to perform the contract with sufficient
promptitude; or
(c) where from the nature of the contract or of its subject matter time must be taken to be of the
essence.
Time at Large
Time for completion of the Works is said to be “at large” when the Contractor’s obligation to
complete the Works within the specified time or certified extended time is lost. That is to say, the
Contractor is no longer bound by the contract provision that he has to complete the Works by a
certain date or extended date. The obligation of the Contractor is then to complete the Works
within what is called “reasonable time”.
Reasonable Time
The question of what duration of time is reasonable is one of fact, not law. It is a question of fact
taking into consideration all relevant factors and circumstances, objectively assessed.
Regrettably as it is, this is one of the elastic concepts for which there will be no fixed answer.
The Meaning of Completion
There have been many shades of opinion as to what constitute “completion” and the use of some
phrases in certain standard forms of building and construction contracts such as “practical
completion”, “substantial completion” and others certain do not help. Further, the standard forms
of building and construction contracts also do not define the meanings of such phrases. In most
standard contract forms, “completion” also marks the commencement of defects liability period
and also the release of half of the retention monies. There have been a number of judicial
decisions attempting a legal definition of the terms “practical completion” and “substantial
completion”.
•
Relationships of constructs
The objective of this study is to identify the major reasons of EOT in construction project, to
review and identify the most preferred technique used to substantiate and evaluate the EOT, and
to identify the alternatives solution beside granted EOT.
This study has following research questions:
•
How the organizations will apply for extension of time in quality control
environments?
•
How do project team members evaluate the techniques for EOT?
•
How the project team members can be avoided from the liquidated damages.
•
Development of Hypothesis or Research Questions
These hypotheses will test in this study.
H1= Owner caused delays has significant impact on Extension of time
H2= Contractor caused delay has significant impact on Extension of time
H3= Third-party caused delay has significant impact on Extension of time
H4= Concurrent (dependent) delays has significant impact on Extension of time
H5= Non-concurrent delays have significant impact on Extension of time
H6= Excusable delay with compensation has significant impact on Extension of time
H7= Excusable delay with no compensation has significant impact on Extension of
time
H8= Non- Excusable delays has significant impact on Extension of time.
• Methodology
•
Research Paradigm
•
Philosophical Assumptions
For this research, a questionnaire survey approach was adopted to identify and analyze different
factors affecting realistic assessment of EOT. Twenty-nine factors involved in EOT assessment
were identified after extensive literature review, interviews from experts in the field, and
personal experience of the authors in the capacity of contracts and planning engineers. For each
of the 29 factors, both yes/no type and Likert scale-based questions were designed so that not
only the respondents’ importance rankings were analyzed, but some data over prevalent practices
regarding those factors also were
studied. The questionnaire consisted of three major parts: (1) respondents’ information was
collected, (2) general questions regarding prevalent practices were asked, and (3) questions
regarding the factors involved in EOT assessment were asked. These factors were related to
schedule, delay analysis, ownership of float, and prolongation cost.
•
Research Approach
•Induction/Deduction
•
Research Method
•
Qualitative/ Quantitative/ Mixed
The quantitative / mixed will be used.
•
Research Design (Population, Sample Size, Sampling Technique, Data Collection
Instrument, Data Collection Technique, Data Analysis, Ethical Considerations,
Delimitations and Limitations of the study)
The sample that was chosen for this research was randomly selected from civil engineers
working with various construction companies. The sample contained all three types of
contractual stakeholders: clients, consultants, and contractors with a minimum experience of
three years. The questionnaire was distributed for online filling and submission, and was in hard
form when visiting the potential respondents. Out of 130 invited respondents, 105 total responses
were received and after screening, a sample of 97 valid responses was used. Hence, a 74.6%
valid response rate was achieved. Setting the confidence level at 95%, and using Shash and
Abdul-Hadi (1993) and Dillman (2000), the sample size was 96, with a sampling error of _10%.
Analysis of the collected data by Statistical Package for Social Sciences (SPSS), gave a
maximum sampling error of _9.8%. Hence, a sample comprised of 97 respondents was quite
reliable for further analysis.
• Conclusion
Realistic durations and schedules are extremely important for proper delay analysis and progress
tracking in construction projects. Assessment of available resources for projects is important for
preparation of realistic schedules. In this study, it is found that construction schedules are usually
not realistic and contract completion time is assigned tentatively. Extension of time claims rose
because of these unrealistic schedules. Performing delay analysis and considering the effect of
concurrency of delays was important for realistic assessment of EOT and identification of critical
or most damaging delays. Delay analysis techniques were not used widely in assessing EOT
claims, which resulted in unrealistic assessments. Of the delay events that resulted in EOT
claims, payment to contractors had the highest contribution. Float ownerships and prolongation
costs were other key issues leading to increased EOT claims. Contract duration was assigned
tentatively and delay analysis was not performed.
To prepare a realistic schedule, assessment of available resources should be made. Contractors
are recommended to keep a well-maintained record of events at the site to substantiate their EOT
and prolongation cost claims. Clients are recommended to ensure timely payments of
contractor’s bills to avoid disruption of work. Consultants are recommended to use efficient
delay analysis techniques for making realistic assessment of EOT.
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