PROGRAMMING & EXTENSION OF TI0ME

Veenoy Dabee

3 FACTORS
It is often said that for a building or construction project, there are three objectives which the owner of the project is aiming. These are, in no order of priority or importance (A)money, (B)quality (C) time.
The question of time is an important one in construction contracts. There are provisions in construction contracts, for example, that the Contractor must complete the project, the design team must furnish the necessary drawings and information to the Contractor, and that the Employer must pay the Contractor, all before a certain date. All these carry with them their respective legal implications and consequences.

Extension of TIME
To delay events beyond the control of the contractor or of

the parties mean that flexibility in respect of the completion date is typically provided for in all standard forms of construction contracts. This flexibility takes the form of a right to grant and be granted an extension of time. In order to reflect the fundamental importance of time in the contract, to maintain the certainty of a definite completion date and to retain right to levy liquidated damages in the event of the contractors default in achieving such date, the employer should ensure that a proper mechanism for extension of time is included in the contract. Preventing the Time at Large situation from arising.

Revision.
Time for completion of the Works can be said to be, or made, at large in the following five situations: (a) no time for completion is fixed in the contract; (b) improper administration or misapplication of the extension of time provision in the contract; (c) waiver of time requirements; (d) the Employers interference in the certification process; (e) when the extension of time provision does not confer power on the Engineer/Architect/S.O. to extend the time for completion of the Works on the occurrence of event or events which fall(s) within the obligation of the Employer The significant consequence of time for completion being at large is that the liquidated damages clause in the contract becomes inoperative and the Employer cannot rely on this liquidated damages clause to impose liquidated damages onto the Contractor. The other significance when time for completion is at large is that the original completion date or the contractually certified extended completion date no longer binds the Contractor.

Meaning of Completion
The Meaning of Completion Completion of the Works comprised within a contract is important as not only it has a direct bearing on the question of whether the Employer can levy liquidated damages on the Contractor, but it also usually marks the transfer of certain risks or the crystallization of certain rights between the Contractor and the Employer inter-se. Further, and as an additional example to illustrate the importance of the meaning of completion, it may also be used to determine the extent of the right to payment in those contracts which provide for stage payments. In most standard contract forms, completion also marks the commencement of defects liability period and also the release of half of the retention monies. What is the legal meaning of Completion? Legal definition and Express in contracts. There have been a number of judicial decisions attempting a legal definition of the terms practical completion and substantial completion. J. Jarvis and Sons v. Westminster Corporation: practical completion as completion for the purpose of allowing Employer to take possession of the Works and used them as intended.

Express Terms: Under FIDIC 1987, Clause 48.1 refers to Completion is defined by tests and the completion of specified work.

FIDIC RED BOOK 87

The sharing of time-related risks is based on the liability for the delay.

If the delay is caused by an event for which the employer is liable, the risk is allocated to the employer. It is worth noting here that, if there is no express provision to extend the time for completion for a delay caused by an event which is not the fault of the employer, the contractor takes the risk of that delay. The relevant clauses of the Red Book which deal with the sharing of the time-related risks and their consequences are clauses 43, 44, 46, 47 and 48. Clause 43 of the Red Book establishes the time by which the works must be completed. It requires the contractor to complete the whole of the Works and, if applicable, any Section required to be completed within a particular time . . . in accordance with Clause 48, within the time stated in the Appendix to Tender . . . , or such extended time as may be allowed under Clause 44. Time for completion is a defined term under sub-clause 1.1(c)(ii) of the Red Book and is calculated from the commencement date which is the date of receipt of the notice to commence the works pursuant to clause 41.

GRANTING EXTENSION OF TIME

Failure to complete within the defined time limit is a breach of

contract, the remedy for which is provided in clause 47. Sub-clause 44.1 provides the following: In the event of (a) the amount or nature of extra or additional work, or (b) any cause of delay referred to in these Conditions, or (c) exceptionally adverse climatic conditions, or (d) any delay, impediment or prevention by the Employer, or (e) other special circumstances which may occur, other than through a default of or breach of contract by the Contractor or for which he is responsible, being such as fairly to entitle the Contractor to an extension of the Time for Completion of the Works, or any Section or part thereof, the Engineer shall, after due consultation with the Employer and the Contractor, determine the amount of such extension and shall notify the Contractor accordingly, with a copy to the Employer.

CLAUSE 44.1
The extension that sub-clause 44.1 provides for is an extension of the time for completion of: (i) the works, or (ii) any section, or (iii) any part of any section There are three important points of note arising here: first, each time the engineer grants an extension of time pursuant to sub-clause 44.1, the contractual time for completion increases cumulatively. Secondly, the word fairly in the first line after paragraph (e) of the quoted text of sub-clause 44.1 above, is not intended to be an open invitation to be construed as entitling the contractor to an extension of time without the application of a wealth of supporting scientific and legal principles that should be applied before such an extension is granted, see section 17.6 below. This second point is of great importance if the word fairly is to be interpreted by arbitrators, since those who are not skilled in construction law and the principles referred to above might err and decide a dispute incorrectly.

CLAUSE 44.1 (e)

It can be said that sub-clause 44.1(e) is a catch-all provision which in effect places the risk of delays caused by the occurrence of any special circumstance, other than that caused by the contractor, firmly in the hands of the employer. Being somewhat of an ambiguous provision it has, in practice, caused problems in interpretation and application. It is worth noting here that, other than this catch all provision, the fourth edition of the Red Book makes express provision for extension of time only for a limited number of specific events, see Section 1.3 below. The following events are not expressly catered for, as they are in some other standard forms of construction contracts:
(i) (ii) (iii) (iv) (v) Discrepancies in or divergence between contract documents; Errors in drawings, technical specifications, items of reference for setting out of the works provided by the employer; Changes in law/legislation; Delays caused by other contractors employed by the employer, or nominated subcontractors/suppliers; Delays caused by public bodies/authorities

-PROGRAMMES
Programming involves introducing the parameter of time into the work activities and ultimately into the project itself. Two relevant piece of information can be extracted from a programme: firstly the (i) duration i.e. commencement and planned completion of each and every major activity which is reflected on the programme, (ii) the planned sequence of the Works, or strictly the planned sequence of each and every work item the completion of which constitute the construction contract.

PROGRAMMING (2)
The details which can be highlighted in a network programme are: (a) Independence of one activity from another requiring that neither the start nor the completion time of each is affected by the other. (b) Sequence of activities showing when one activity cannot start before the completion of another. (c) Burst describing restrictive activities which when completed allow two or more activities to start. (d) Merge describing an activity which cannot start unless and until two or more other activities have ended. (e) Combined burst and merge of activities describing the position when several activities cannot start until two or more immediately preceding activities have ended. (f) Timing of activities in a unit of time which usually depends on the duration of the whole project, and as a general rule expressed as one per cent to two per cent of the timescale of the whole project. This operation also includes an identification of the start and end of each activity.

PREPARING A PROGRAMME
A project network analysis should be carried out in at least eight phases, as described below, but each may be sub-divided and expanded to give a more detailed picture: (a) Planning phase where a network of all activities necessary for the completion of a project is planned and drawn up. An activity is an operation where time and resources are consumed and it is represented by an arrow. (b) Project timing where estimates of duration of activities are calculated to determine as accurately as possible the project duration and to identify the activities which may prove to be critical. Duration estimates should be calculated without bias. (c) Resource allocation where information is added to each activity duration to show the resources required to complete that activity within the projected duration. (d) Allocation of work to sub-contractors and a programme of appointment to be followed with a schedule for production and approval of subcontractors design, if any, and drawings. (e) Pricing of the various elements of the works. (f) Procurement of materials. (g) Commencement on site. (h) Project control where the actual progress on site is periodically measured against the network plan and where any corrective action can be identified and then taken. The network must then be updated in accordance with the actions taken, and a report can be periodically compiled to highlight the status of each activity at the particular time. The report may show: (i) delay in an activity and its effect on other activities and on the time for completion; (ii) new activities due to a variation and the effect on others and on the time for completion; (iii) resources which must be drafted to redress any new situation; (iv) any other change in the critical path network.

PROGRAMMING (2)
The network is divided into events which represent the

end of all preceding activities and the start of a succeeding activity.

NETWORK ANALYSIS
The right half of the circle is divided into quadrants; the upper quadrant carries the number of units of time representing the earliest event time the lower quadrant carries the latest event time. These figures are calculated through a process called time analysis. (a)Earliest event time. These figures are calculated by adding from left to right through the network the durations of activities leading to each event. This will give the earliest possible time within which each event can be achieved. Where there is more than one path leading to an event, then the longest path in terms of time the figure for the top right-hand quadrant of the event circle. (b) The second set of calculations is carried out in a reverse order from the end of the project back towards the start. By deducting the duration of events from the earliest time of the last event, one can obtain the latest possible time for each event to be completed an event, then once again the longest path in terms of time duration is used. A critical event is identified by the fact that its earliest and latest time are the same. A critical activity is identified when it joins two critical events and has a duration equal to the difference between the times of the critical events it joins. A noncritical activity has float, which is the time available for an activity in addition to its duration.

CONCURRENT DELAY
Two or more delay events occurring within the same time period, each independently affecting the Completion Date. In simple terms, concurrent delays arise where the contractor is delayed by two critical events which occur contemporaneously or overlap, one for which he would be entitled to an extension of time under one of the headings listed in sub-clause 44.1 (a clause 44 event), the other one being his own responsibility.

Concurrent delay: Scenario 1

In the first scenario, the two events, one a clause 44 event and the other an event for which the contractor is liable, occur before either has had an effect on progress and either of which, had it happened on its own, would have caused delay. In such case, the contractor is entitled to an extension of time for the period of delay caused by the clause 44 event notwithstanding that the other event has a concurrent effect, as per the reasoning in part of the decision of Henry Boot Construction (UK) Ltd v. Malmaison Hotel (Manchester) Ltd17.29 and confirmed in Royal Brompton Hospital NHS Trust v. Frederick A. Hammond and Others. 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 that week is likely to delay the works beyond the completion date by one week, then if it considers it fair and reasonable to do so, the architect is required to grant an extension of time of one week. 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.

Concurrent delay: Scenario 2

In the second scenario, the event which is at the

contractors risk occurs first and has already caused delay when the clause 44 event occurs. The clause 44 event would have caused the contractor to be delayed, but in fact, because of the existing delay, it makes no difference. Therefore, there is no entitlement to an extension of time as per the reasoning in another part of the decision of Henry Boot Construction and also confirmed in the Royal Brompton Hospital case.

Concurrent delay: Scenario 3

In the third scenario, the event which is at the contractors risk

occurs first and has already caused delay when the clause 44 event occurs, similar to the second scenario above. However, in this third scenario, the effect of the first event finishes before that of the clause 44 event so that the clause 44 event does make a difference and further delay occurs. This scenario was considered in Balfour Beatty Building Ltd v. Chestermount Properties Ltd. It was held that the objective in assessing an extension of time was to assess whether the relevant event (equivalent to the clause 44 event) had caused further delay to the progress of the works, and if so how much. If there was in fact further delay to the overall completion date, the contractor was then entitled to an extension of time equal to the amount of such further delay.

Claims for both extension of time and money

Thus, in general terms, a contractor may have a claim for:
a) time alone (b) for money alone, or (c) for both time and money.
(

There are three types of claim which may be made under the Red Book linking delay and money. (1) The first type is associated with any critical delay which may occur in the completion of the works beyond the time for completion, and this is often referred to as a claim for prolongation. (2) The second type of claim is associated with a non-critical delay of an activity that has a positive float. There can be no claim for an extension of time for the time for completion, but there could be a claim for monetary compensation in this case, which will be limited to the effect of delay, if any, on the completion of that activity. For want of a better term, it is sometimes referred to as a claim for elongation. (3)The third type of claim is associated with the possible effect of a claim event on the efficiency of the execution of some part or parts of the works. This type of claim is referred to as a claim for disruption, which includes any reduction in the efficiency of the disrupted partys resources.

PROLONGATION
Prolongation may be defined as a critical delay which results when the

time necessary to complete a critical activity is prolonged, as defined above, thus extending the time for completion of the whole of the works. A prolongation claim is, therefore, a claim that a contractor would make when the time necessary to complete a critical activity becomes longer than that originally planned owing to the event giving rise to the critical delay. Delays in completion of the works might result in a number of added costs to the contractor for the additional time during which he remains on the site and also in respect of certain direct and indirect costs that he may have suffered. If such delay is determined by the engineer to be the responsibility of the employer, then the contractor would be entitled to an extension of time and a number of heads of claim for financial compensation can be pursued by the contractor.

LIQUIDATED DAMAGE
Clause 47 of the Fourth Edition of the Red Book regulates the

relationship between the employer and the contractor should there be a failure by the contractor to comply with the requirement to complete in accordance with clause 48 within the time for completion as specified in clause 43 and, if applicable, any extended time in accordance with clause 44. Liquidated damages may be defined as the genuine pre-estimate of all the losses which are likely to be incurred by the employer as a result of late completion of the works, calculated at the time of making the contract. The purpose of providing for a monetary payment in the event of late completion is essentially to compensate the employer for the damages incurred by the contractors breach of contract in not completing the works on the specified date.

LIQUIDATED DAMAGE (2)

The advantage of having a liquidated damages provision can be

said to be that the damages payable by the contractor in culpable delay are limited and the employer who receives late completion does not have to prove his losses due to such delay. Additionally, the liquidated damages provision acts as an exhaustive remedy for damages for late completion. Therefore, the provision provides certainty for both parties, enabling them to assess and price the risk. The employers ability to rely on the liquidated damages provision is lost if the employer prevents the contractor from completing by the completion date without any effective mechanism for extending time for completion. In such a case time is said to be at large, which was discussed earlier

LIQUIDATED DAMAGE (3)

Why Liquidated Damages?

Money may not be the answer to all programs which run late, as delivery on time may be the only priority. All clients want projects to specification and financial remedy is not as satisfying as a perfect project. When things do go wrong or when something is not operating properly, or is delayed, a solution is what clients want. In spite of this, general damages (or unliquidated damages) are one of the most important remedies for a breach of contract, but requires that firstly, the non-defaulting party proves that it has incurred actual loss as a result of the breach and secondly that the loss must not be too remote Hadley v Baxendale [1854]. A liquidated damages clause (LAD) avoids these two legal requirements. The Employer only needs to prove that a breach has occurred and the calculation based on an estimate of the costs resulting from the non performance.

LIQUIDATED DAMAGE (4)

However for a liquidated damage clause to successfully apply it must be a genuine preestimate of the employers anticipated loss in the event of delay to the project. The onus is therefore on the employer to predict and genuinely estimate what the loss would be to his business, in the event that the contractor fails to complete the Works or a Section of the Works by the completion date. If things go wrong the contract mechanism provides a formula to assess the loss to the client without the bother of adding up its actual losses. This is much neater, but of course subject to challenge if not done properly. However, a client cannot rely on LADs where the client hinders or prevents the contractors progress Peek Construction (Liverpool) Ltd v McKinney Foundations Lrd CA [1970]. ARGUMENTS: Commercial tension is created for performance and/or timely delivery The contracting parties have the certainty of knowing in advance what the financial cost of delay is and how that risk is allocated. The non-defaulting party benefits from making a recovery of damages without the difficulty and expense of proving actual loss (usually to the clients benefit) Legal costs are reduced with recovery of compensation made under the contract Contractual obligations are reinforced to deter breach The contractor can appreciate the financial implications of completing, plan to complete on time or price the risk of delay (at least in theory).