Extension of Time (EOT) & Related Costs in Construction - Presentation Slides

Extension of Time (EOT) and Related Costs in Construction

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• Time is of Essence• Delays are inevitable on construction projects• The only project to have completed on time is a Mosque.

Divine intervention (or God’s help) was understood to be the force behind the timely completion of this Mosque.

• Time and Money go hand-in-hand. When projects get late, additional costs are incurred.

• This makes it imperative to take control of project delays; timely and effectively.


• Majority of construction projects worldwide are administered by the FIDIC forms of contract.

• FIDIC recognises delay and related costs and has provisions related thereto. For example;

Sub-Clauses 8.4 & 20.1 (FIDIC 1999 Edition) Clauses 44 & 53 (FIDIC 1987 Edition)

FIDIC

FIDIC

FIDIC

FIDIC

FIDIC


The FIDIC Provisions define the conditions where delay may be claimed as the basis for an Extension of Time (EOT). Some examples are;

Late provision of design or drawings

Unforeseeable Physical Conditions encountered on

Site

Inclement Weather

Variations instructed by the Engineer (Additional

Works etc.)


Meanwhile the principles of how delay and related costs should be calculated are not defined by FIDIC. This leads to issues; issues which are usually contentious due to various 'schools of thoughts' and varied interpretations existing worldwide.

Disputes are the usual outcome.


Contentious Issues in Delay Analysis

resulting in Disputes– Critical Path– Who owns the Float?– Concurrent (or Contractor) Delays and how these

effect Entitlement– EOT and its relation with Compensation for Delay– Which is the best Method of Delay Analysis?

» As-Planned Vs. As-Built Comparison» Impacted As-Planned» Collapsed As-Built / But-For» Time Slice / Sub-Networks / Time-Impact» Etc.


In order to eliminate disputes or facilitate settlement of disputes, there are now certain standards used worldwide. The leading standards are;

Society of Construction Law’s Delay and Disruption Protocol (SCL

Protocol)

AACE 29R-03 (Forensic Schedule Analysis)© www.asia-masters.com

The SCL Protocol was finalized in October

2002 after several years of deliberations and

considerable debate and agreement between

experts from different backgrounds


The objective of the SCL Protocol was to bring

reasonableness and fairness into the delay assessment process and to eliminate

widespread manipulation of complex delay issues


The SCL Protocol tried to standardize the issues such that disputes would be

reduced or eliminated


It is recommended that;

should be adopted as a Standard and should be,

where possible, incorporated in the

Construction Contracts© www.asia-masters.com

The SCL Protocol can be downloaded from:

www.eotprotocol.com


http://www.eotprotocol.com/

The remaining slides of this lecture will review and discuss the basic

Principles suggested and recommended by theSCL Protocol


Basic Principles suggested and

recommended bythe SCL Protocol


The Principles suggested by the SCL Protocol are simple.

Some of the key principles suggested by the Protocol are;


RULE NO. 1If there is an Employer’s delay, which is beyond the Contractor’s control, and if this delay impacts the

Completion Date of the Works, the Contractor should be entitled to receive an Extension of Time (EOT).

[This will effectively result in an extended Time for Completion and will relieve the Contractor from

having to pay penalties for delay (or Delay Damages under FIDIC)]


RULE NO. 2For the case of recovery of delay (or prolongation) costs

incurred due to the Employer delays, the Contractor must be able to prove that there has been no other delay, which

is in his own control, and which is equally (or partly) contributing for delaying the Time for Completion.

This category of delay is called a ‘Concurrent’

(or Contractor’s) Delay [In order to win a Delay Costs Claim, the Contractor

must be able to prove that he has not been responsible for Concurrent Delays to the Time for

Completion]


RULE NO. 3

Where Contractor’s Delay to Completion occurs concurrently with Employer’s

Delay to Completion, the Contractor’s concurrent delay should NOT reduce

anyExtension of Time (EOT), which is due.

[Result of Rule No. 1 will not change and is irrespective of the result of Rule No. 2]


The foregoing Rules proposed by the SCL Protocol are meant to bring fairness and

reasonableness into the delay assessment process.

[The emphasis of the SCL Protocol is that no one Party should benefit from default of the

other Party]


The Illustrations demonstrating the principles of the SCL Protocol are contained in the

following Figures A to G


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

Path 1 Float = 3.5 Weeks


Path 2

Figure A - Accepted Contract Programme

Weeks

Path 1

Contract Start Date

Contract Completion Date


1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22PRIOR TO EXCUSABLE DELAY (UPDATE WITH ACTUAL PROGRESS)



AFTER EXCUSABLE DELAY

Excusable Delay

Path 1 Float = 1.0 Week


(a) 2.0 Weeks (a) 5.5 Weeks(b) 1.0 Weeks (b) 0 Weeks(c) 0 Weeks (c) 1.0 Weeks(d) 5.5 Weeks (d) 2.0 Weeks

(a) 2.0 Weeks (a) 0.1% of Contract Price(b) 1.0 Weeks (b) Direct Costs of Excusable Delay(c) 0 Weeks (c) NIL(d) 5.5 Weeks (d) (a) plus (b)

<=Date of Excusable Delay

Figure B - Delay Impact 1

Weeks

Path 1

Contract Start Date


Path 2

(3) Compensation for Delay to Progress

(1) EOT Entitlement (2) Period of Prolongation Costs

(4) Other Compensation


Impact on Path 1 = 2.0 Weeks

Path 2

Path 1

Principles & Provisions of the SCL Protocol

relevant to Figure B

Core Principle No. 7 - Float as it relates to timeUnless there is express provision to the contrary in the contract, 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.

Guidance Section 1.12.1 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 that 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.






Excusable Delay

Float = -0.5 Week

(a) 0.5 Weeks (a) 5.5 Weeks(b) 3.5 Weeks (b) 0.5 Weeks(c) 0 Weeks (c) 3.5 Weeks(d) 5.5 Weeks (d) 0 Weeks

(a) 3.5 Weeks (a) 0.15% of Contract Price(b) 0.5 Weeks (b) Direct Costs of Excusable Delay(c) 0 Weeks (c) (a) plus (b)(d) 3.0 Weeks (d) NIL


Impact on Path 1 = 3.5 Weeks

Path 2

Path 1

Path 2





Figure C - Delay Impact 2

Weeks

Path 1

Contract Start Date


Core Principle No. 4 - Procedure for granting extension of timeThe EOT should be granted to the extent that the Employer Risk Event is reasonably predicted to prevent the works being completed by the then prevailing contract completion date…..The goal of the EOT procedure is the ascertainment of the appropriate contractual entitlement to an EOT; the procedure is not to be based on whether or not the Contractor needs an EOT in order not to be liable for liquidated damages.

Core Principle No. 5 – Effect of delayFor 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.


relevant to Figure C






Float = -0.5 Week

Excusable DelayImpact on Path 2 = 6.0 Weeks

(a) 0 Weeks (a) 5.5 Weeks(b) 6.0 Weeks (b) 0 Weeks(c) 0.5 Weeks (c) 6.0 Weeks(d) 5.5 Weeks (d) 0.5 Weeks

(a) 3.5 Weeks (a) (d) minus (c)(b) 0.5 Weeks (b) Direct Costs of Excusable DelayNIL(c) 6.0 Weeks (c) Direct Costs of Excusable Delay(d) 3.0 Weeks (d) 0.2% of Contract Price


Figure D - Delay Impact 3

Weeks

Path 1

Contract Start Date


Path 2

Path 1


Path 2




Core Principle No. 4 - Procedure for granting extension of timeThe EOT should be granted to the extent that the Employer Risk Event is reasonably predicted to prevent the works being completed by the then prevailing contract completion date…..The goal of the EOT procedure is the ascertainment of the appropriate contractual entitlement to an EOT; the procedure is not to be based on whether or not the Contractor needs an EOT in order not to be liable for liquidated damages.

Core Principle No. 5 – Effect of delayFor 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.


relevant to Figure D




Float = -1.5 Weeks



Excusable DelayImpact on Path 1 = 2.0 Weeks

Float = -3.5 Weeks

(a) 3.5 Weeks (a) 2.0 Weeks(b) 2.0 Weeks (b) 0 Weeks(c) 1.5 Weeks (c) 3.5 Weeks(d) 0 Weeks (d) 1.5 Weeks

(a) 3.5 Weeks (a) (c) plus (d)(b) 2.0 Weeks (b) Direct Costs of Excusable DelayNIL(c) 3.0 Weeks (c) Direct Costs of Excusable Delay(d) 0 Weeks (d) 0.1% of Contract Price

Figure E - Delay Impact 4

Weeks

Path 1

Contract Start Date


Path 2

Path 1

Path 2




Guidance Section 1.2.11 …an 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. This process requires consideration of the available float…

Guidance Section 1.4.12…Where there has been Employer Delay, this may prevent the Employer charging the Contractor with LDs for failure to achieve a contract completion date…


relevant to Figure E





Float = -1.5 Weeks



Impact on Path 1 = 2.0 Weeks Excusable Delay

Float = -3.5 Weeks

(a) 2.0 Weeks (a) 0 Weeks(b) 3.5 Weeks (b) 2.0 Weeks(c) 1.5 Weeks (c) 3.5 Weeks(d) 0 Weeks (d) 1.5 Weeks

(a) 3.5 Weeks (a) (c) plus (d)(b) 2.0 Weeks (b) Direct Costs of Excusable DelayNIL(c) 3.0 Weeks (c) Direct Costs of Excusable Delay(d) 0 Weeks (d) 0.1% of Contract Price

Figure F - Delay Impact 5

Weeks

Path 1

Contract Start Date

Path 2

Path 1

Path 2




Guidance Section 1.4.8Where an Employer Risk Event occurs after the contract completion date, in a situation where failure to complete by the contract completion date has been caused by Contractor Delays, the principle set out in Section 1.4.7 above should apply, except where the Employer Risk Event is a non-compensable Employer Risk Event. In such an event, no EOT (or compensation) should be due. Where an EOT is due after the contract completion date, the Employer Risk Event does not exonerate the Contractor for all its delays prior to the Employer Risk Event occurring. The effect of the Employer Risk Event should be assessed as described above and any EOT found due should simply be added to the contract completion date.


relevant to Figure F





Float = -1.5 Weeks




Float = -1.5 Weeks

Excusable Delay = 3.5 Weeks

(a) 2.5 Weeks (a) 0 Weeks(b) 3.5 Weeks (b) 2.5 Weeks(c) 1.0 Weeks (c) 3.5 Weeks(d) 1.5 Weeks (d) 1.5 Weeks

(a) 0 Weeks (a) (b) plus (d)(b) 2.0 Weeks (b) Direct Costs of Excusable Delay(c) 3.0 Weeks (c) NIL(d) 3.5 Weeks (d) 0.2% of Contract Price

Path 1

Path 2




Figure G - Delay Impact 6

Weeks

Path 1

Contract Start Date

Path 2

Guidance Section 1.4.1Where Contractor Delay to Completion occurs concurrently with Employer Delay to Completion, the Contractor’s concurrent delay should not reduce any EOT due.

Guidance Section 1.4.7Where Employer Risk Events and Contractor Risk Events occur sequentially but have concurrent effects, here again any Contractor Delay should not reduce the amount of EOT due to the Contractor as a result of the Employer Delay.

Concurrency (Appendix A – Definations and Glossary)True concurrent delay is the occurrence of two or more delay events at the same time, one an Employer Risk Event, the other a Contractor Risk Event and the effects of which are felt at the same time. The term ‘concurrent delay’ is often used to describe the situation where two or more delay events arise at different times, but the effects of them are felt (in whole or in part) at the same time. To avoid confusion, this is more correctly termed the ‘concurrent effect’ of sequential delay events.


relevant to Figure G – Slide 1/2


Core Principle No. 9 - Concurrent delay – its effect on entitlement to extension of timeWhere Contractor Delay to Completion occurs or has effect concurrently with Employer Delay to Completion, the Contractor’s concurrent delay should not reduce any EOT due.

Core Principle No. 14 - Link between extension of time and compensationEntitlement to an EOT does not automatically lead to entitlement to compensation (and vice versa).

Core Principle No. 10 - Concurrent delay – its effect on entitlement to compensation for prolongationIf 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 to separately identify the additional costs caused by the Employer Delay from those caused by the Contractor Delay. If it would have incurred the additional costs in any event as a result of Contractor Delays, the Contractor will not be entitled to recover those additional costs.


relevant to Figure G – Slide 2/2


Guidance Section 3.2.13Although the programme should be the primary tool for guiding the CA in his determination of EOT, it should be used in conjunction with the contemporary evidence to ensure that the resulting EOT is fair and reasonable. It will also be necessary for the parties to apply common sense and experience to the process to ensure that all relevant factors are taken into account, and that any anomalous results generated by the programme analysis are managed properly.

Key Guideline, Suggestion and Advice of the SCL Protocol


Figure No. Question 1 Question 2 Question 3 Question 4B (c) (b) (a) (b)C (a) (b) (d) (b)D (c) (d) (d) (c)E (b) (a) (d) (c)F (a) (b) (d) (c)G (c) (a) (a) (b)

Correct Responses for Figures B to G


Congratulations we have come to the

end of the Lecture.You are now a Qualified and

Certified Delay Claims Analyst and

Expert.


FIDIC and Construction Solutionsthank you for your attendance and

contribution.

We wish you all Good Luck.


THANK YOU!


Extension of Time (EOT) & Related Costs in Construction - Presentation Slides

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