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Construction contracts have long embraced the need for ensuring certainty, predictability, quality and efficiency. Incomplete design, labour shortage, issues with supply chain, working through strict schedules, incidents and unforeseen conditions have put significant pressure on productivity and timed completion. Whilst project delays are seldom avoidable, some are self-inflicted. For example, prolongation of schedules in Canada remains lower compared to other jurisdictions, such as the United States, and most notably the Middle East and Africa.
Managing Delay
There are several ways to avoid and manage events of delay during a project’s lifecycle:
- Prior to submitting a tender, start by identifying and analysing the 'chips' and 'red lines' of a contract. In the event where a relatively short completion date is a red line for the developer, a contractor could still commit to a strict schedule upon identifying the chips, representing the issues (in financial or other value) a developer may be willing to compromise or concede in exchange for its red lines. These chips often carry risk items that can be allocated or de-scoped to other subcontractors, specifically in EPC Contracts.
- A clear and achievable design is decisive in completing the works on time. Works on large P3 infrastructure projects often commence before the design is detailed, coordinated and sufficiently complete, leading to piecemeal, uncoordinated and fragmented instructions issued on the design and variations causing delay and disruption to the performance of the works. It is important to ensure that the final design is as detailed and complete as soon as possible, and has been agreed upon by all stakeholders, including local authorities.
- Although a strict schedule could lay down the foundations for any potential delay, a contractor can still perform the works by the completion date if it commits to a detailed and realistic schedule with sufficient contingency planning. The higher the level of details within a schedule, the greater the clarity in terms of duration of activities and the more reflective the logical relationships are between those activities. It is essential for schedules to include sufficient periods of float. It is a generally accepted principal that float belongs to the project (see Glenlion Construction Limited v The Guinness Trust (1987) 39 BLR 89). The first party who needs it can use the float. Courts have held that, in the event of an owner-caused delay which consumes the float, but which does not delay the date of completion, the contractor will not be entitled to damages on that account. If, on the other hand, the owner-caused delay consumes the float, and thereafter there is a contractor-caused delay which delays the date of completion, the contractor may be entitled to an extension of time equal to the duration of the float. On the other hand, one cannot hoard, squander or waste float. A contract may state unequivocally that float is owned jointly or belongs to one party or the other. In that case, the contract provisions prevail.
- Modern tools such as 3D and 4D Building Information Modelling (BIM) bring an extra dimension to scheduling by allowing teams to visualize not only the project’s design but also its construction sequence. Such tools enable better coordination, clash detection, and enhanced efficiency in performing the works.
- A significant tool for managing tight projects is adopting construction management as a procurement model for major projects. Having a construction manager is beyond a contractor's control but is nevertheless witnessed in modern projects by direct contracting by developers with specialist trade contractors. The concept of construction management includes the use of risk registers and proactive project management software such as Last Planner System (LPS) and Program Evaluation and Review Technique (PERT) to identify potential challenges, dependencies, and resource constraints upfront, allowing for proactive problem-solving. The benefits of having a construction manager are crucial, especially when the contractor is dealing with developers that are inexperienced with certain types of projects.
- If, or rather when, faced with delay, identify and investigate the events causing the delay. Are those events excusable and compensable or non-compensable, non-critical or non-excusable? Excusable and culpable events causing delay may run in parallel, creating a situation of concurrency. Courts have typically looked at the contract to determine allocation of liability for any concurrent delay. Such provisions are likely to exist in P3 contracts. In the absence of contractual provisions, Courts may apportion the various causes of delay between the parties (see Schindler Elevator Corporation v Walsh Construction Company of Canada, 2021 ONSC 283). Irrespective of the delay event, a contractor should remain mindful that delay claims are essentially factual and require contemporaneous records to evidence cause, including progress reports, change orders and correspondence. Schedules must have a critical path from the start date through completion. The longest path is the critical path. Any delay on this path would impact project completion. Upon the occurrence of a delay, the contractor must impact the schedule by inserting such event without changing the logic.
- Typical contractual language provides for the “initiation of claims within x days after occurrence of the event giving rise to such claim or within x days after a party first recognizes the condition giving rise to the claim, whichever is later”. It is therefore important to issue notices of delay within the prescribed time period. Notices must connect cause to the delay, accurately documenting the start and end date of the delay. Conduct delay analysis by using a reliable method of delay. The use of a prospective or retrospective method of delay analysis depends on the progress of work.
- When delay occurs, a party is required to mitigate cost overruns, including overheads, prolongation and potential loss of profit. The calculation of such costs is usually contentious.
The parties are advised to apply the contractual rates and best practices.
Pacing Delay may occur for a variety of reasons, including in the event of default by either party. In contrast to the situation where delays are non-intentional and occur outside the control of the parties, the default of a party under the contract, e.g. of payment obligations, may trigger another party to suspend the works. Thus, creating a situation of intentional delay. Suspension of the works, even when forecasted in the contract, is usually better threatened with than applied. An alternative to suspension is pacing the works in the event of an employer's default.
Pacing allows the contractor to delay its progress and not to proceed in line with its schedule of works, albeit without causing further critical delay arising from the situation of default. Pacing measures are often prescribed in construction contracts and can be demonstrated by developing and implementing a risk management and control plan covering risk management activities during the affected period. The purpose of the risk management plan is usually to identify risks related to the project with the aim of developing a risk mitigation strategy which includes adequate corrective actions. Pacing measures can also be demonstrated in the contractor's monthly reports. Crucially, the contractor should be able to demonstrate an intention to pace in reaction to the employer's delay event and the actual effect of its pacing measures.
Below are some further key points about pacing delay in construction:
- Responsibility: Determining responsibility for pacing delay can be complex and often requires careful analysis of the contractual terms, project documentation, and the sequence of events leading to the delay. It may involve assessing whether the actions or inactions of one party were justified or constituted a breach of contract.
- Documentation: Proper documentation is crucial in addressing pacing delay claims. Parties should again keep detailed records of project communications, delays, disruptions, and any additional costs incurred as a result. This documentation can help support claims and provide evidence in case of disputes.
Conclusion
These and other measures are at the disposal of the parties to avoid and manage delays. The contract offers an opportunity to agree on a realistic approach to project’s performance and completion. Overly optimistic schedules should be avoided. In the event of delay, prompt mitigation often spears the parties significant time and costs. If suspension is an option, it is advised to exploring pacing as an alternative to avoid further delays on the project.