THE MALAYSIAN SURVEYOR

| Vol.46 | No.2 | 2011

Students Corner

Explain the Causes and Contractual Effects of Construction Delays

1.0 Construction Delays
1.1 Construction delays refer to events arising during construction work which have the effect of disrupting the regular progress of the work, resulting in the breach of the Completion Date. Construction delays have attracted a lot of criticisms from our local construction industry both in the private and public sector. Construction delays are not only caused by the contracting parties but also by third parties. Hence, it is convenient to classify delays according to the parties causing the delays: a) Delays caused by the Employer b) Delays caused by the Contractor c) Delays caused by the Third Parties All references to Contract Clauses shall be based on the PAM Form 2006 Edition.

1.2

2.0 Delays Caused By Employer/Architect

2.1 The provisions of Clause 23.8 list the relevant events caused by the Employer and the Architect which affects or disrupts the regular progress of the construction work: 1) 2) 3) 4) The late issue of the AI for which the Contractor has applied in writing (Clause 23.8(e)). The delay in giving site possession (Clause 23.8(f)). The compliance with the AI regarding discrepancy, variation and suspension of works (Clause 23.8(g)). The delay by nominated-subcontractors (nsc) which the Contractor has taken all practical steps to avoid or reduce (Clause 23.8(i)). 5) The delay by the Employers direct Contractors (Clause 23.8(j)). 6) The delay or failure to supply materials which the Employer had agreed to supply (Clause 23.8(k)). 7) Opening up work for inspections and testing which are found to be in order (Clause 23.8(l)). 8) Any act of prevention or breach of contract by the Employer (Clause 23.8(m)). 9) The appointment of a replacement Architect, Engineers, QS and Specialist consultant (Clause 23.8(r)). 10)Compliance with the AI regarding disputes with neighbouring property owners (Clause 23.8(s)). 11)The delay caused by insufficient provision for provisional works (Clause 23.8(t)). 12)The delay in giving site access to and egress from the site (Clause 23.8(u)). 13)The suspension of work by the Contractor for non-payment or withdrawal of supervision by the Architect as required under the local building by-laws (Clause 23.8(v)). 2.2 Effects of Delays Caused By Employer/Architect Since the delays are caused by the defaults of the Employer: i) ii) iii) iv) The Contractor is entitled to a fair extension of time (EOT). The Contractor is entitled to be reimbursed for any loss and expense. The Employer forfeits his right to impose liquidated damages for the period so extended. If the delays are of a continuous nature and exceeds the period stated in the Appendix, the Contractor may determine his own employment. v) Further, if the delays involve a breach of contract by the Employer, the Contractor may be entitled to claim damages at common law; for the provisions of Clause 26.7 makes it very clear, that in the exercise of Clause 26.0, the Contractors other rights and remedies are not prejudiced.

3.0 Delays Caused By Contractor

3.1 Normally, Contractor caused delays to the work by failing to proceed regularly and diligently with the work upon the date of commencement. These can be summarised as follows:

46

The Professional Journal of The Institution of Surveyors, Malaysia

i) ii) iii) iv) v) vi)

The Contractor being incompetent. Lack of proper site management and co-ordination of the works. Insufficient labour force, materials and plant on site. Financially weak or failure to pay his sub-contractors and workers resulting in high turn-over rate. Failure to take practical steps to avoid or reduce delays caused by nsc and ns. Delay or failure to commence works upon given site possession.

Diligence, as implied in Clause 21.1, requires constant and earnest effort on the part of the Contractor to complete the works. Failure or negligence by the Contractor to rectify the above causes will result in the disruption of the regular progress of the works. 3.2 Effects of Delays Caused By Contractor Since the delays are caused by the defaults of the Contractor: i) ii) iii) iv) The Contractor is not entitled for an EOT. The Contractor is not entitled for reimbursement for loss and expense suffered. The Contractor is liable for liquidated damages. If the delays are serious and if the Contractor fails to take reasonable steps to rectify them, then the Employer may determine the Contractors employment.

Students Corner

4.0 Delays Caused By Third Parties

4.1 Delays caused by third parties are beyond the control of the Employer and the Contractor. The following are the relevant events: 1) 2) 3) 4) 5) 6) 7) 8) 9) 4.2 Force majeure (Clause 23.8(a)). Exceptional inclement weather (Clause 23.8(b)). Loss and damage caused by fire and other perils (Clause 23.8(c)). Civil commotion or strikes affecting the relevant trades (Clause 23.8(d)). Delay caused by nominated sub-contractors or nominated suppliers which the Contractor has taken all possible steps to avoid (Clause 23.8(h)). Outbreak of war (Clause 23.8(n)). Compliance with changes to by-laws of statutory bodies (Clause 23.8(p)). Delay or failure of statutory bodies to carry out their works (Clause 23.8(q)). Suspension of works by statutory bodies (Clause 23.8(w)).

Effects of Delays Caused By Third Parties The contractual effects are as follows: i) The Contractor is entitled to claim for a fair EOT only. ii) The Contractor is not entitled to claim for loss and expense incurred. iii) The Employer forfeits his right to impose liquidated damages. The underlying rationale is that both parties shall carry and share the burdens arising from the delays, since they are beyond their control. If the delays are caused by nsc, the Employer has no recourse to the nsc because there is no privity of contract between them, although the Contractor is entitled to an EOT.

5.0 Granting of Extension of Time

5.1 The Architect shall consider the following factors before granting an EOT: i) The claim must be in writing, stating the causes of the delay with sufficient supporting particulars. Clause 23.1(a) makes it clear that a written notice is a condition precedent to initiate a claim. ii) The causes of delay must fall within the provisions of Clause 23.8. iii) The Contractor has taken all practical steps to avoid or mitigate the cause of delay. iv) The effect or extent of any work omitted. v) Any other relevant events which will have an effect on the Contractors entitlement to an EOT. vi) The causes of delay must not be due to the negligence or default by the Contractor or nsc. vii) Finally, the causes of delay must have materially affected the regular progress of the works, resulting in the completion date being overrun.

47

THE MALAYSIAN SURVEYOR

| Vol.46 | No.2 | 2011

5.2

a) If the above conditions are satisfied, the Architect shall grant a fair EOT. If not, the Architect shall inform the Contractor accordingly and he shall then issue the Certificate of Non-Completion (CNC). Clause 23.9 expressly allows the Architect to issue an EOT after the issue of CNC and if read together with Clause 22.3, will have the effect of revoking the CNC by the subsequent EOT by the Architect. b) Clause 23.10 expressly allows the Architect to review any EOT granted within 12 weeks after the date of CPC and fixed a later completion date. If the Architect decides not to review the EOT after the CPC, he shall confirm this to the Contractor. The merit of Clause 23.10 is that it allows the Architect to review the EOT after the CPC, to correct any factual errors, remove any overlapping of events and to correct any element of bias or unreasonableness, before it goes to Arbitration. c) The Architect cannot grant EOT for variation when the Contractor is in culpable delays. However, there is a caveat - EOT can be granted if the Employer is in breach of payment terms. If the Contractor chooses not to apply for EOT on this ground, he puts the Employer in a position of breach. The Architect can still issue an EOT under Clause 23.9 to revoke the CNC under Clause 22.3 to prevent the Employer from being in breach.

6.0 Reimbursement For Loss & Expense Claim

6.1 The Architect needs to consider the following factors before granting reimbursement: i) The regular progress of the works or any part of the works had been materially affected by matters referred to in Clause 24.3. ii) The Contractor has actually suffered loss and damage directly arising from the matters referred to in Clause 24.3. Notice that a written notice of intention to claim for reimbursement is a condition precedent to any entitlement. If the Contractor fails to submit full particulars of claim within 28 days, it shall be deemed that he has waived his rights for reimbursement. 6.2 The right to recover loss and/or expense are quite separate from entitlement to EOT. Merely because the contract period is extended, no right to money is conferred. Conversely, there can be a money claim under Clause 24.0 where the contract period is not extended at all. The Contractors right to reimbursement will arise from whether, and the extent to which, his work is in fact materially delayed, whereas Extensions of time are essentially estimates of delay.

7.0 Conclusion
7.1 It is very seldom that you come across projects without delays, mainly because construction has now become very complex with its multitude of trades and parties involved. The most important task of the Contract administration is to nip the delay right away; all parties should hanker down and try their best to avoid, reduce and mitigate the causes of delays. And if the Architect is of the opinion that an EOT is justifiable, he should grant a fair extension, so that the construction programme can be re-calibrated and the work accelerated. This will free the Contractor from worrying over liquidated damages as nobody stands to gain if projects are delayed. Finally, I would like to come back to the phrase loss and/or expense; it is a much maligned phrase and those who have to exercise this Clause have often expressed their frustrations, often in expletive and pejorative terms. The dictionary defined the word loss as damage or deprivation caused by the default of the opposite party and expense, in its legal sense, as money claimed by, or ordered paid to a person to compensate for injury or loss caused by the default of the opposite party. As I see it, they both point towards the same thing, namely additional expenses By conjoining the words loss and expense together with the controversial conjunction - and/or makes its meaning more confusing and perplexing. I wonder why the PAM Form 2006 did not attempt to clarify the issue in Clause 24.0 as it did in Clause 11.7 for variation. In fact, the phrase loss and/or expense is a carry-over from the British RIBA and the JTC Forms. Does the word loss include loss of profit and loss of anticipated profit? The test of loss of profits should be objective and not subjective for it to be compelling and sustainable.

7.2

References
PAM Form 2006 Professional Practice (The Aqua Group).

48