Wed, 29 Feb 2012
By Olivia Chaiffin-Laird
This paper considers the issues that may arise once an agreement for construction work has been agreed and work commences particularly with regards the right to payment, variations and the impact any delay may have.
RIGHT TO PAYMENT
The contractor’s right to payment will of course depend upon the wording of the contract, subject to limited statutory intervention. Within the limits of legality parties may fundamentally agree what arrangements they please but broadly there are three broad heads under which the right can arise:
(i) A lump sum contract;
(ii) An express contract other than for a lump sum;
(iii) A claim for a reasonable sum, quantum meruit.
I Lump Sum Contracts
A lump sum contract is a contract to complete the entire works for a lump sum, i.e. build a house for £90,000. In the event the house is complete in every regard, complying with each detail required by the contract the contractor will be entitled to the £90,000. Of course in the event extra work, supplemental to that stipulated in the contract has been carried out the contractor may be entitled to further payment in that regard. This issue will be considered in further detail in due course.
If a contractor agrees to do an entire project according to a specification which consists of 40 items for a lump sum of £40,000 and fails to carry out 20 of the items, they will obviously not be entitled to recover the whole of the £40,000. The employer may consequently have an action against him for damages.
But is the contractor entitled to recover any of the £40,000? Can the employer simply refuse on the basis it was agreed the contractor would complete all 40 items and be paid upon completion thereof? The works remain incomplete and therefore the trigger for payment has not been reached.
Alternatively, can the employer rely on the same argument where only 2 out of the 40 items have been omitted? These problems which have greatly exercised the courts require discussion of entire contracts and substantial performance.
A Entire Contracts
An entire contract is one where entire performance by one party is a condition precedent to the liability of the other party. It is an indivisible contract. It follows the contractor’s right to payment depends on his entire performance.
Whether a contract is an entire one is a matter of construction. Clear words are needed to bring an entire contract into existence.
In Sumpter v Hedges  1QB 673 the builder contracted to construct buildings on the employers land for a lump sum. After completing part of the work it abandoned the contract and claimed a right to be paid in respect of the partially completed work on a quantum meruit basis. Its claim was rejected in the absence of any inference of a fresh contract to pay for it.
A contract which gives the contractor an enforceable right to instalments cannot be an entire contract because the contractor has the right to call for fulfillment of that part of the employer’s promise, i.e. part payment, before he entirely completes the works.
The right to instalments may arise expressly or by implication. The nature of the right under an express provision is of course a matter of construction.
(ii) Retention Money
The contract may provide for progress payments to be made as the work proceeds, but for retention money to be held until completion. Then entire performance is usually a condition precedent to payment of the retention money but not of course, to the progress payments. The contractor is entitled to payment, pro rata as the work proceeds, less a deduction for retention money. But he is not entitled to the retention money until the work is entirely finished, without defects or omissions.
This however again depends upon the words of the contract.
(iii) Value Added Tax
Whether a price for a construction contract is inclusive or exclusive of VAT must depend upon the terms of the particular contract. There is no implied term that prices generally are exclusive of VAT.
Where both parties to a contract operate within the construction industry it has been held that there is a custom that prices quoted are exclusive of VAT, Tony Cox (Dismantlers) v Jim 5 Ltd  13 Const.L.J.209.
By contrast, in a contract between a builder and a private individual, the prices were deemed to be inclusive of VAT,Franks & Collingwood v Gates  1 Con.L.R 21.
(iv) Recovery of Money PaidIf the employer pays money under a contract which the contractor fails to complete, the employer can recover that money if there has been a total failure of consideration arising out of the contractual duties in respect of which the payment is due.
If the employer has received any of the benefit bargained for from performance by the contractor, there has not been a total failure of consideration and any payment is not normally recoverable even though it was made in advance of performance. In such circumstances the employer can of course claim damages for breach of contract.
The combined effect of the rules relating to recovery of money paid and damages for breach of contract can operate somewhat capriciously to favour employer or contractor according to whether the contract price was high or low, and the value of the partial performance by the contractor in relation to the amount of money paid.
B Substantial Performance
In the ordinary lump-sum contract the employer cannot refuse to pay the contractor merely because there are a few defects or omissions. If there is substantial completion it must pay the contract price (subject to any unfulfilled condition precedent imposed by the contract such as an architect’s certificate) subject to a deduction by way of set-off or counterclaim for defects.
In Hoenig v Isaacs  2 ALL ER 176 CA the claimant was employed to decorate a one-room flat and provide it with certain furniture for £750, the terms of payment being “net cash, as the work proceeds, and balance on completion.” The claimant claimed it had carried out the work under the contract and requested payment for the outstanding balance of £350 of the contract price. The defendant entered into occupation of the flat and used the furniture but refused to pay, complaining of faulty design and poor workmanship. The Official Referee found that the door of a wardrobe required replacing, and that a bookshelf, which was too short, would have to be remade, which would require alterations being made to a bookcase. He held that there had been substantial compliance with the contract and awarded £294, being the £350 claimed less £56, the cost of remedying the defects. This finding was upheld by the Court of Appeal which rejected the defendant’s contention that there had been non-performance of an entire contract, and that therefore the claimant was not entitled to any further payment under the contract, but could only claim on a quantum meruit.
When a contract provides for a specific sum to be paid upon completion of specified work, the courts tend to steer clear of a finding that would deprive the contractor of any payment at all simply because there are some defects or omissions. In order for the Court to find otherwise the contract will require words at least as strong as “complete in every particular” or similar.
What is Substantial Completion?
One test to be applied is whether the work is “finished” or “done” in the ordinary sense even though part of it is defective. In so deciding consideration will be required of both the nature of the defects and the proportion between the cost of rectifying them and the contract price.
It is not therefore sufficient to consider the cost of rectification alone:
Kiely & Sons v Medcraft  109 S.J.829 CA
The contract price was £520 and the cost of remedying the defects was £200, the Court of Appeal upheld a finding that there had been substantial completion.
Bolton v Mahadeva  1 WLR 1009,CA
Where the cost of remedying defects was £174 against a contract price of £560 the Court of Appeal allowed an appeal against a finding that there had been substantial completion. The contract was to provide central heating and the defects were such that the system did not heat the house adequately and fumes were given out so as to make living rooms uncomfortable. The works was ineffective for its primary purpose.
This may occur for all manner of reason: by express or implied agreement, because the employer prevents completion, because the contractor in breach of contract fails to complete or because the contract is frustrated.
When entire completion is a condition precedent to payment, the contractor cannot recover anything either under the contract or on a quantum meruit if it has failed to complete in every detail. For an ordinary lump-sum contract, the contractor cannot recover anything either under the contract or on a quantum meruit unless it shows substantial completion.
The rule that a contractor who has not substantially completed cannot recover payment has been said to cause hardship to a contractor. However he has only to remedy the defects before seeking to resort to litigation to recover the lump sum.
(i) Express Agreement
If there is an express agreement, its terms will govern the contractor’s right to payment. Where the position is unclear, the court may nevertheless spell out an agreement by conduct. Furthermore an implied promise to pay a reasonable sum for the work done can arise from acceptance or waiver.
If a contractor can prove a fresh contract to pay for the work done he can recover on that contract. Such a contract may be inferred from the acceptance by the employer of the work done with the full knowledge of the failure to complete, but it is difficult to prove acceptance from mere occupation and use of the works.
It is always open to a party to waive a condition which is inserted for his benefit. Even if entire performance is condition precedent, in Hoenig it was held the employer by entering into occupation and using the furniture had waived the condition and could no longer rely on it.
(iv) Unpaid Instalments
The cancellation or rescission of a contract in consequence of repudiation does not affect accrued rights to payment of instalments of the contract price, unless the contract so provides.
(v) Impossibility or frustration
If the failure to complete is due to impossibility of performance or frustration and the employer has obtained a valuable benefit from the work done, the contractor can recover from the employer such sum as the court considers just.
II Express Contracts
The manner of payment can be arranged in a variety of ways and it is impossible therefore to attempt any exhaustive classification.
A contract to do a whole work in consideration of the payment of different sums for different parts of the work is prima facie subject to the same rules about completion as an ordinary lump-sum contract.
A contract where the amount of work when completed is to be measured and valued according to a schedule or at cost plus a fixed fee or percentage of the cost, or at a reasonable price, is usually described as a “measurement and value contract” and is contrasted with a lump-sum contract. If the agreement is to do a whole work to be measured and valued and paid for on completion, entire completion may be a condition precedent to payment.
• Measurement and Value Contracts
Normally the rule of substantial completion will apply so that if the work is substantially performed the contractor will be entitled to have it measured and valued and to be paid at the contract rate for the work done, subject to the employer’s counterclaim for damages for defects and omissions.
In a repairing or jobbing contract the contractor is prima facie entitled to be paid for the work he has carried out though he may, if he chooses, contract not to be paid until completion.
• Cost Plus Percentage Contracts
These contracts sometimes contain an elaborate description of the method of calculating the cost. Where they do not and there is a simple agreement to pay a percentage upon the cost of labour and materials, “cost” means the actual cost honestly and properly expended in carrying out the works.
The contractor is not disentitled from such cost merely because it exceeds what was anticipated. There would normally be an implied term that the contractor would carry out the works with reasonable economy so that expenditure in excess of what was reasonable would be irrecoverable. It would be a question of fact and degree in each case.
III Quantum Meruit
The expression quantum meruit means “the amount he deserves” or “what the job is worth,” and in most instances denotes a claim for a reasonable sum. It is used to refer to various circumstances where the court awards a money payment whose amount at least is not determined by a contract.
A claim on quantum meruit cannot arise if there is an existing contract between the parties to pay an agreed sum where there is:
(i) An express agreement to pay a reasonable sum
(ii) No Price fixed
If the contractor does work under a contract express or implied and no price is fixed by the contract, he is entitled to be paid a reasonable sum for his labour and the materials supplied pursuant to an implied term.
If such a contract, or an express agreement to be paid a reasonable sum, is for a whole work, completion may be made a condition precedent to payment. In any event, at common law it seems that in the absence of clear words the contractor is entitled from time to time to demand payment on account of the value of the work it has done.
(iii) A Quasi-Contract
This may occur where for instance there are failed negotiations. If work is carried out while negotiations as to the terms of the contract are proceeding but agreement is never reached upon essential terms, the contractor is entitled to be paid a reasonable sum for the work carried out.
Whilst an obligation to pay a reasonable sum has been held to apply in a number of cases, it does not apply to all cases of failed contracts:
- A claim in quantum meruit for architect’s fees was rejected on the grounds that the architect had taken on a risk of the project not proving profitable and it was not unjust to visit upon it the consequences of that risk, Stephen Donald Architects Ltd v Christopher King  94 Con.L.R.1.
- There was no such obligation where negotiations were entered into on express terms that each party was free to withdraw from negotiations at any time and were “subject to contract” even where the costs which were sought had been incurred for the purpose of putting that party in a position to obtain and perform the contract and the other party had received no benefit, Regalian Properties v London Docklands Development Corporation  1 WLR 212
(iv) Work outside a contract
Where there is a contract for specified work any extra work of the kind contemplated by the contract will be paid for as provided by the contract. Payment will be at contract rates or, in the absence of such rates, a reasonable sum.
In the absence of either any contractual provision for the execution of work outside its original scope or any separate agreement, the right to payment of a reasonable sum is purely restitutionary.
(v) Work under a void or unenforceable contract
The entitlement is based upon restitutionary principles. If a contractor carries out work or renders services under a contract subsequently found to be void or unenforceable, he may be entitled to a quantum meruit for the work or services. This principle does not of course apply to an illegal contract.
B Assessment of Reasonable Sum
The Courts have laid down no rules limiting the way in which a reasonable sum is to be assessed. Different considerations can arise depending on whether the claim is for a quantum meruit in the absence of a contract or a reasonable price payable within a contractual framework.
Where a quantum meruit is recoverable for work done outside an existing contract, the work cannot generally be regarded as though it had been performed to any extent under the contract. The contractor should be paid at a fair commercial rate for the work done.
Useful evidence in any particular case may include:
o abortive negotiations as to price,
o prices in a related contract,
o a calculation based on the net cost of labour work done and materials supplied, and
o the opinion of experts as to a reasonable sum.
Although expert evidence is often desirable there is no rule of law that it must be given and in its absence the court normally does the best it can on the materials before it to assess a reasonable sum.
C Duties Under Quantum Meruit
A company working on the basis of an agreement that it be paid a reasonable remuneration cannot wholly ignore the desirability of cooperation with others at work on a complex construction site. Where such an agreement applies there exists at least a duty not to unreasonably interfere with the carrying out of works and an obligation to be aware of other trades’ progress and, so far as consistent with the company’s own legitimate commercial interests, to co-operate in efficient working practices.
A contractor frequently carries out, or is asked to carry out, work for which it considers it is entitled to payment in excess of the original contract sum. To recover such payment he must be prepared to prove:
(i) that it is extra work not included in the work for which the contract sum is payable;
(ii) that there is a promise express or implied to pay for the work;
(iii) that any agent who ordered the work was authorised to do so; and
(iv) that any condition precedent to payment imposed by the contract has been fulfilled.
I “Extra Work”
There is no generally accepted definition of “extra work,” but in a lump-sum contract it may be defined as work not expressly or impliedly included in the work for which the lump sum is payable.
If work is included in the original contract sum the contractor must carry it out and cannot recover extra payment for it, even if he may not initially have thought, at the time of entering the contract, that it would be necessary for the completion of the contract.
• Lump Sum Contract
The question is one of construction in each case, but lump sum contracts may be broadly classified into those in which the contractor’s obligation is defined in wide terms, i.e. “to build a house” and those in which it is defined in exact terms i.e. “to execute so many cubic metres of digging.”
• Indispensably Necessary Works
Where the contractor must complete a whole work such as a house or a railway for A to B for a lump sum the courts readily infer a promise on their part to provide everything indispensably necessary to complete the whole work. Such necessary works are not extras, for they are impliedly included in the lump sum.
• No Implied Warranties by Employer
A contractor who has been put to unexpected expense because of inaccurate quantities or drawings or impracticable plans cannot usually recover the expense by bringing an action for breach of an implied warranty that the plans, drawings or bills of quantities are accurate or practicable.
No such warranties are implied merely from the fact the documents are submitted to the contractor for tender, nor even from their attachment to the contract as a schedule.
• Bills of Quantities Contracts
Very often a lump sum contract will be a “bills of quantities contract.” This term describes a contract where the bills of quantities form part of the contract and describe the work to be carried out for which the lump sum is payable. The quantities “are introduced into the contract as part of the description of the contract work” and “the plans do not go to quantity.”
The contractor may be and usually is bound by the terms of the contract to carry out work in excess of that stated in the bill of quantities if it is necessary to complete the contract, but in a bills of quantities contract such excess work is “extra work.” This type of contract has been said to be “obviously unsafe” for an employer because it can hardly ever be known beforehand what exact quantities of work may be necessary to complete; conversely it may save the contractor much trouble and loss.
A bills of quantities contract is the most exact way of defining the amount of work for which the unadjusted lump sum is payable. Where bills of quantities do not set out the amount of work, that information may be gleaned from other documents such as the drawings read with any specification or other description of the work.
Even in an exactly defined contract there is usually room for the implication of some obligations by the contractor so that its performance is not “extra work.” But the greater the detail used in the bill of quantities or other contract document to describe the obligation for which the lump sum is payable the less scope there is for such implication.
• Measurement and Value Contracts
In these contracts it is usually immaterial whether any particular item of work that a contractor has to do is in the contract or not, because he is entitled to be paid for it at the contract rate if it is applicable, or at a reasonable rate if it is not.
But where such a contract provides for the payment of a specified sum of money for a specified item of work, it is a question of construction to determine what work is impliedly included in that item of work and is not therefore “extra work.”
It may further be important to determine whether the work is of the type contemplated by the contract and therefore governed by the conditions of the contract including price, or is work outside the contract and not therefore subject to the contract conditions or price.
• Other common features
The contract usually gives the employer or the architect power to omit part of the work which in turn requires a consequent adjustment of the contract price. On the construction of the contract this decision may not extend to the ordering of variations.
Removing or limiting an option provided to the contractor by the contract may constitute a variation. Thus, where an engineering contract entitled the contractor to crush and use hard material arising from excavation and demolition works or to import suitable material for fill, an instruction that all hard arisings were to be crushed was held to be a variation, English Industrial Estates v Kier Construction  56 B.L.R.93.
• Effect of Building Regulations
Compliance with building regulations as the works are carried out may require unanticipated work to be done. Subject to relevant express terms, there is normally an implied term by the contractor not to complete the work in a manner which contravenes Building Regulations or other statutory requirements as to methods of construction.
So, can the contractor recover extra payment for unanticipated work required to comply with building regulations?
The answer depends upon, inter alia:
(i) whether the work for which the contract sum is payable is defined in terms wide enough to include work unspecified but necessary to comply with building regulations, and
(ii) where the contract work was not defined in such wide terms, whether the contractor sought the employer’s instructions before carrying out the unanticipated work or whether he can otherwise show a promise to pay.
II Agents Authority
An architect or other agent of the employer in the position of the architect has no implied power to vary the terms of the contract or to vary the contract works such as by ordering extras, or to order as extras works impliedly included in the work for which the contract sum is payable.
If therefore the contractor has carried out extra work under the authority of the architect it must show:
(i) that the architect had an authority to order extra work, and
(ii) that the particular work for which it is claiming was properly ordered within the scope of that authority.
If there is a written contract the question is one of construction, otherwise it is a question of fact.
If work outside the contract is ordered to the knowledge of the employer then, subject to ordinary principles of agency and offer and acceptance, the contractor will normally be able to recover a reasonable price for such work on a fresh contract.
III Payment for “Extra Work”
The mere fact that a contractor has carried out “extra work” does not of itself entitle him to demand extra payment. He must show an express or implied contract to pay. He may do so either by proving that the work was properly ordered under a provision in the original contract entitling him to payment, or that there is a fresh contract to pay for the work.
• Work done without Request
If the contractor has undertaken to do specified work with certain materials for an agreed price, and without request uses better materials or does more work, this does not entitle him to demand extra payment. Permission by the employer to do work different from that contracted must be distinguished from a request.
It is possible that a contractor who in an emergency, when it is impossible to obtain instructions from the employer, pays out money in preserving the employer’s property can obtain payment.
• No knowledge of Increased Expense
If the contractor has undertaken to carry out certain work at an agreed price and the employer consents to the execution of different work, the employer is not liable for any increased cost unless he knows, or must be taken to know, that the different work will cost more.
• Absence of consideration
The contractor may refuse to carry out certain work unless the employer promises to pay for it as extra work. If it appears that the work is not in fact extra because it is included in the work for which the original contract sum is payable, the employer’s promise may not be binding for lack of consideration.
• Work exceeding contract limit
Contracts sometimes have clauses limiting the value of variations that can be ordered. Problems can arise in determining whether the value has been exceeded.
• Recovery without written orders
The general rule is that in the absence of written orders, or other formalities that are conditions precedent to payment, the contractor cannot recover either under the contract, or on a fresh contract to pay a reasonable sum, even though the employer has had the benefit of the extra work.
• Work outside the contract
“Extra work” may be of the kind contemplated by clauses of the contract which provide for the ordering of extras or it may be so peculiar and so different that it is outside the contract. It may be work outside the contract if it is carried out after completion of the original contract work or is not within the scope of the variation clause.
A court can determine whether extra work is properly within the terms of the variations clause and can make the necessary declaration and monetary judgment to give effect to that determination.
DELAY & DISRUPTION
Claims for delay and disruption represent a common feature of construction disputes. They are often difficult for a party to present and for contract administrators and tribunals to assess given the factual complexity of major construction projects. Further confusion arises in distinguishing between claims based on delay and claims based on disruption, the exact meaning of those concepts and the contractual requirements that must be satisfied in order to establish an entitlement to further payment, damages or other relief.
The Society of Construction Law’s Delay and Disruption Protocol (October 2002) seeks to assist in the management of projects and to provide authoritative guidance setting out 21 core principles. There is little evidence of the Protocol being adopted as part of the day-to-day management of projects but it does provide an important source of reference and has secured some judicial consideration and approval.
TIME FOR COMPLETION
A Express Completion Date
Construction contracts normally identify a specific date for the commencement and completion of the relevant works or section of the works, obliging the contractor to proceed”
o “with due expedition and without delay,”
o “regularly and diligently” and
o “so that Completion is on or before the Completion date.”
These phrases appear in the Standard Form of Building Contract.
If the contractor fails to complete the works by the completion date it will be liable to pay damages to the employer for the breach of this time obligation. If no time is specified for completion of the contract a reasonable time for completion will normally be implied, section 14 Supply of Goods and Services Act 1982.
Where there is no express provision regarding time periods, business efficacy usually results in the implication of a term that the contractor will proceed with reasonable diligence and maintain reasonable progress. In each case the court will consider the contract itself and its surrounding circumstances. There is no rule of general application.
B Time of the Essence
There is no general concept of time being of the essence of a contract as a whole. The question is whether time is of the essence of a particular term. It normally arises in the context of failure to complete a contract on a date specified, but it can arise in relation to other terms of the contract, i.e. the giving of notices.
Where a reasonable time for performance has elapsed and either time was not originally of the essence or has ceased to be of the essence by waiver or agreement the employer can serve a notice requiring completion by a certain date.
(i) Reasonable Time to Complete
If the parties fail to agree a fixed period within or date by which the works are to be completed, the court will normally imply a term into the contract to the effect that the contractor is to complete the works within a reasonable time.
What is a reasonable time will depend upon all the circumstances of the case.
(ii) Prevention Principle
The principle is based on the notion that an employer cannot insist upon the performance of an obligation which it has prevented the contractor from performing. In such circumstances “time is at large.”
In order to analyse and explain the causes of delay the parties to a dispute often rely upon expert evidence from programming or delay experts. There are generally considered to be four or five different methods of delay analysis that such experts undertake:
(i) as planned versus as-built
(ii) impacted as-planned
(iii) collapsed as-built
(iv) windows analysis; and
(v) time impact analysis.
They each have their own individual methodologies, advantages and disadvantages. All of these techniques are aimed at identifying and assessing the causes, duration and timing of delay to individual work activities and, crucially the progress and completion of the works as a whole. Some are retrospective whilst others concern a prospective analysis.
(i) As-Planned v As-Built
This method involves a comparison between the contractors’ original planned programme for the works (which is taken to represent the contractor’s original intent) and the final as-built programme (which should record what in fact took place.)
The main advantages of this technique are that it is grounded in the facts of what actually happened during the works and it focuses on determining the causes of previously identified delay. It also has the advantage of being a simple and relatively inexpensive form of analysis.
Its main disadvantage is that it merely identifies periods of delay to certain work activities without explaining the causes of such delay or any consequential delay to the completion date of the works as a whole.
(ii) Impacted as-planned
This method involves making adjustments to a planned programme to reflect the omissions/additions to the works and other relevant events which may have had an impact on the progress of the works. The revised schedule that is produced is used to show the impact of the changes made to the original planned programme.
In contrast to the “as-planned v as-built” method, the “impacted as-planned” technique does not involve comparison with an “as-built” programme. The impact of potential delay events is considered individually thereby quantifying the extent of “delay” attributable to each event.
The whole approach however suffers from the obvious major weakness that its conclusions are essentially “theoretical” and insufficiently grounded in fact unlike with the “as-planned v as-built” method.
(iii) Collapsed as-built
This method represents the opposite approach to the “impacted as-planned” methodology. The “collapsed as-built” method starts with the “as-built” programme as its base. It then sets out the alleged effect of delay events in order to show what would have happened during the project but for the delaying effects of the relevant events.
The delay events to be analysed are removed from the “as-built” programme in reverse chronological order so as to demonstrate their alleged impact on the progress and completion date of the works.
It has the advantage of being relatively simple to produce once a reliable and detailed “as-built” programme is available. It also benefits from being, at least to begin with, rooted in the factual record of what actually happened on site as set out in the “as-built” programme as well as identifying periods of delay to the completion date.
On the other hand, it is also ultimately hypothetical in the sense that it depends upon an assumption as to what the sequence of activities would have been absent the delay event under consideration.
(iv) Windows Analysis
There are two forms of windows analysis: “time slice” windows analysis and “as-planned v as-built” windows analysis, each of which seeks to establish the contemporaneous or actual progress of the project. The project is broken down into manageable periods or “windows” in which to consider the progress and the effects of delay events.
The “time slice” method is usually applicable where there is regular and detailed progress updates over the course of the project. Monthly periods are often selected for the individual “windows.” The basic process involves using an original “as-planned” programme with “as-built” information to reflect the actual status of the works at the beginning and end of each period.
The “as-planned versus as-built” windows analysis method is usually applicable where there are few or irregular progress updates. In this method the contemporaneous progress is established by a combination of both common sense and practical analysis of the available facts. The “windows” tend to be defined by significant milestones or events that occurred within the project.
A major advantage of the windows analysis methods is that they attempt to analyse the causes of delay contemporaneously and with a firm base in the “as-built” record of what actually happened on site within a particular window. This has the added benefit of reducing the amount of information to be assessed at any particular time because it is only the period of time relevant to a particular window that is being reviewed.
A major disadvantage with these approaches, however, is that they are only as useful as the quality of the “as-built” data on which they rely. It is often difficult to obtain after the event sufficiently detailed records of events occurring within a particular window or overall progress at the end of each window period.
(v) Time Impact Analysis
This involves producing an updated planning programme as at the date of a particular alleged delay event and then impacting onto it the assumed effect of the delay event itself. It is therefore a prospective form of analysis that seeks to analyse the position of (and impact on) the project at the time of the relevant delay event being analysed.
As with “windows” analysis much will depend upon the reasonableness of the updated “as-planned” programme used as the base line for the analysis.
Disruption occurs where the contractor’s progress is interrupted even though on occasion the ultimate delay in completion is nominal. The delaying effect can often be small because the contractor is able to overcome the disruption through the application of additional resources.
Typical causes of disruption are variations to the works, late instructions, inadequate material deliveries, inadequate skill mix of labour, insufficient supervision or reworking of modifications. As many of these disruptive effects may also be symptomatic of poor project management by the contractor, separating out the different causes is crucial.
(i) Employer’s Fault
It is usually for the contractor to decide on the sequence of the works, the methods of working etc. If the employer then disrupts the contractor’s progress of the works by, for example, failing to provide plans at the proper time, the contractor would generally have an entitlement to claim its additional costs as a result of that disruption. Such a claim must however be considered in context and by reference to the contract terms as a whole.
Most lump sum construction contracts contain detailed provisions concerning the ordering of extra or varied work. The intention is to allow the employer to vary the work at any time prior to completion. The ordering of contractual variations is a contractual entitlement, not a breach of contract, and the contractor is obliged to carry out the varied work with additional payment for the varied work. Insofar as a variation disrupts the orderly and economic execution of the works as a whole, the contractor should receive additional payment as part of the cost of the variation.
(iii) Late instructions
If instructions, nominations, information, plans or details are required, they must be supplied at reasonable times. What is reasonable depends upon the express terms of the contract and all the circumstances. The prime consideration is that instructions should be given at such times and in such manner as not to hinder or prevent the contractor from performing its duties under the contract.
A contractor cannot unilaterally determine what is a reasonable time for the provision of information, and a contractor does not prove a claim based on late instructions merely by establishing non-compliance with requests for instructions which it has sent to the architect or engineer. In most cases, the critical question will be to determine on all the facts when the contractor really needs the instructions.
Most construction contracts are affected by the weather and whilst this is to be expected and a matter of contractor’s risk, most standard forms of contract allow extensions of time for completion due to exceptionally adverse weather, although they rarely entitle the contractor to additional compensation.
However, if as a result of an employer default progress has been delayed, a contractor may be entitled to compensation for the disruptive effect of weather, if for example, the delay caused the works to be carried out in the winter rather than summer.
Proof of Disruption
Disruption claims are often difficult to establish and the evidential requirements for proving disruption claims should not be underestimated. In short the contractor must establish:
(i) that there was disruption of its activities;
(ii) that the disruption was caused by a matter which attracts liability under the contract or for its breach;
(iii) how much disruption was caused, and
(iv) what sum is required either pursuant to the contract or as damages for its breach to recompense the contractor for the disruption.
The disruption attributable to each cause relied upon should be identified separately, particularised and proved.
Primary evidence will be required explaining the nature of the disruption and its cause. In general the closer this evidence is to “the coal face” the more convincing it is likely to be.
Disruption to the contractor’s methods of working can result in increased costs due to factors such as the purchase of further materials, the need for additional temporary plant and equipment. Whilst the direct cost of the plant and equipment should not be difficult to identify, analyse and quantify as they will be additional costs immediately referable to specific events, labour is more difficult.
Labour cannot suddenly be moved around site to different tasks, particularly if it is skilled task-specific labour, nor can it be engaged at short notice for short periods. Equally, plant cannot be moved around site and work phases cannot be continually opened and closed without a loss of productivity. It is customary therefore to use experienced surveyors.
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