fidic2 lecture eot related costs in construction

7/23/2019 FIDIC2 Lecture EOT Related Costs in Construction

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Extension of Time (EOT) and Related Costsin Construction

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Presented at theFIDIC Middle East Contract Users’ Conference

February 2013 – Dubai, UAE

ByKhalil T. Hasan

Construction Solutions (www.cspk.org )



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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.



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•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



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The FIDIC Provisions define the conditions where delay may beclaimed 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.)



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Meanwhile the principles of how delay and relatedcosts should be calculated are not defined by FIDIC.This leads to issues; issues which are usually

contentious due to various 'schools of thoughts' andvaried interpretations existing worldwide.

Disputes are the usual outcome.



Contentious Issues in Delay Analysisresulting in Disputes

– Critical Path

– Who owns the Float?

– Concurrent (or Contractor) Delays and how these effectEntitlement

– 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.

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

Society of Construction Law’sDelay and Disruption Protocol (SCL Protocol)

AACE 29R-03 (Forensic Schedule Analysis)



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The SCL Protocol wasfinalized in October 2002 afterseveral years of deliberations

and considerable debate andagreement between expertsfrom different backgrounds



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The objective of the SCL Protocolwas to bring reasonableness and

fairness into the delay assessment

process and to eliminatewidespread manipulation of

complex delay issues



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The SCL Protocol tried to standardize

the issues such that disputes would be

reduced or eliminated



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It is recommended that;

should be adopted as a Standardand should be, where possible,

incorporated in the Construction

Contracts



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The SCL Protocol can be downloaded from:

www.eotprotocol.com



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The remaining slides of this lecture will

review and discuss the basic Principlessuggested and recommended by the

SCL Protocol



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Basic Principlessuggested and recommended by

the SCL Protocol



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The Principles suggested by theSCL Protocol are simple.

Some of the key principles suggestedby the Protocol are;



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RULE NO. 1

If there is an Employer’s delay, which is beyond the Contractor’scontrol, 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 (orDelay Damages under FIDIC)]



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RULE NO. 2

For the case of recovery of delay (or prolongation) costs incurred due tothe Employer delays, the Contractor must be able to prove that there hasbeen 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 toprove that he has not been responsible for Concurrent Delays to

the Time for Completion]



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RULE NO. 3

Where Contractor’s Delay to Completionoccurs concurrently with Employer’s Delayto 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 resultof Rule No. 2]



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The foregoing Rules proposed by the SCL Protocol aremeant to bring fairness and reasonableness into the

delay assessment process.

[The emphasis of the SCL Protocol is that no one Partyshould benefit from default of the other Party]



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The Illustrations demonstrating the principles of the SCLProtocol are contained in the following Figures A to G



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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 Float = 5.5 Weeks

Path 2

Figure A - Accepted Contract Programme

Weeks

Path 1

Contract Start

Date

Contract

Completion Date



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1 2 3 4 5 6 7 8 9 10 1112 13 14 1516 17 181920 2122

PRIORTOEXCUSABLEDELAY(UPDATEWITHACTUALPROGRESS)

Path1 Float =3.0 Weeks


AFTEREXCUSABLEDELAY

Excusable Delay

Path1 Float =1.0 Week


(a) 2.0 Weeks (a) 5.5 Weeks

(b) 1.0 Weeks (b) 0 Weeks

(c) 0 Weeks (c) 1.0Weeks

d) 5.5Weeks d) 2.0Weeks

(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) 5.5Weeks d) (a) plus (b)

<=Date of Excusable Delay

Figure B- DelayImpact 1

Weeks

Path1

Contract StartDate

ContractCompletionDate

Path2

(3) Compensationfor Delayto

Progress

(1) EOTEntitlement (2) Periodof ProlongationCosts

(4) Other Compensation

Contract

CompletionDate

Impact onPath1

=2.0Weeks

Path2

Path1



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Principles & Provisions of the SCL Protocolrelevant 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 begranted 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 1.12.1If as a result of an Employer Delay, the Contractor is prevented from completing the worksby the Contractor’s planned completion date (being a date earlier than the contractcompletion 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 thecontract completion date (and therefore no entitlement to an EOT), provided also that atthe time they enter into the contract, the Employer is aware of the Contractor’s intention tocomplete the works prior to the contract completion date, and that intention is realistic andachievable.



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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 2122


Path1Float =3.0Weeks


AFTEREXCUSABLEDELAY

Excusable Delay

Float =-0.5Week

(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


(c) 0 Weeks (c) (a) plus (b)

d) 3.0 Weeks d) NIL

Contract

CompletionDate

Impact onPath1

=3.5Weeks

Path2

Path1

Path2


Progress




Figure C- DelayImpact 2

Weeks

Path1

Contract StartDate

ContractCompletionDate



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Core Principle No. 4 - Procedure for granting extension of timeThe EOT should be granted to the extent that the Employer Risk Event isreasonably predicted to prevent the works being completed by the thenprevailing contract completion date…..The goal of the EOT procedure isthe ascertainment of the appropriate contractual entitlement to an EOT; theprocedure is not to be based on whether or not the Contractor needs anEOT 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 Eventalready to have begun to affect the Contractor’s progress with the works,or for the effect of the Employer Risk Event to have ended.

Principles & Provisions of the SCL Protocolrelevant to Figure C



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1 2 3 4 5 6 7 8 9 10 111213 14 15 1617 18 19 202122




AFTEREXCUSABLEDELAY

Float =-0.5Week

Excusable DelayImpact onPath2=6.0Weeks

(a) 0 Weeks (a) 5.5Weeks(b) 6.0 Weeks (b) 0 Weeks

(c) 0.5Weeks (c) 6.0Weeks

d) 5.5Weeks d) 0.5Weeks

(a) 3.5Weeks (a) (d) minus (c)

(b) 0.5 Weeks b) NIL

(c) 6.0Weeks (c) Direct Costs of Excusable Delay

d) 3.0Weeks d) 0.2%of Contract Price


Figure D- DelayImpact 3

Weeks

Path1

Contract Start

Date

Contract

CompletionDate

Path2

Path1

Contract

CompletionDate

Path2


Progress





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Core Principle No. 4 - Procedure for granting extension of timeThe EOT should be granted to the extent that the Employer Risk Event isreasonably predicted to prevent the works being completed by the thenprevailing contract completion date…..The goal of the EOT procedure isthe ascertainment of the appropriate contractual entitlement to an EOT; the

procedure is not to be based on whether or not the Contractor needs anEOT 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 Eventalready to have begun to affect the Contractor’s progress with the works,

or for the effect of the Employer Risk Event to have ended.

Principles & Provisions of the SCL Protocolrelevant to Figure D



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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 2122


Contract CompletionDate

Float =-1.5 Weeks

AFTEREXCUSABLEDELAY


Excusable DelayImpact onPath1 =2.0 Weeks

Float =-3.5Weeks

(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)


(c) 3.0 Weeks (c) Direct Costs of Excusable Delay

d) 0 Weeks d) 0.1%of Contract Price

Figure E- DelayImpact 4

Weeks

Path1

Contract Start

Date


Path2

Path1

Path2


Progress





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Guidance Section 1.2.11…an EOT should be granted to the extent that the Employer Risk Event ispredicted to prevent the works being completed by the then prevailing contract completion date. This process requires consideration of theavailable float…

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

Principles & Provisions of the SCL Protocolrelevant to Figure E



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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 2122




Float =-1.5 Weeks

AFTEREXCUSABLEDELAY


Impact onPath1 =2.0 Weeks

Excusable Delay

Float =-3.5Weeks

(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)


(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

Path1

Contract Start

Date

Path2

Path1

Path2

(3) Compensationfor Delay to

Progress





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Guidance Section 1.4.8 Where an Employer Risk Event occurs after the contract completion date, in asituation where failure to complete by the contract completion date has been causedby 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 dueafter the contract completion date, the Employer Risk Event does not exonerate theContractor for all its delays prior to the Employer Risk Event occurring. The effectof the Employer Risk Event should be assessed as described above and any EOTfound due should simply be added to the contract completion date.

Principles & Provisions of the SCL Protocolrelevant to Figure F



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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 2122




Float =-1.5 Weeks


AFTEREXCUSABLEDELAY


Float =-1.5 Weeks

Excusable Delay=3.5Weeks

(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)


(c) 3.0 Weeks (c) NIL

(d) 3.5 Weeks (d) 0.2%of Contract Price

Path1

Path2


Progress



Figure G- DelayImpact 6

Weeks

Path1

Contract Start

Date

Path2



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

Guidance Section 1.4.7 Where Employer Risk Events and Contractor Risk Events occur sequentially buthave 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 sametime, one an Employer Risk Event, the other a Contractor Risk Event and the effectsof 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, butthe effects of them are felt (in whole or in part) at the same time. To avoidconfusion, this is more correctly termed the ‘concurrent effect’ of sequential delayevents.

Principles & Provisions of the SCL Protocolrelevant to Figure G – Slide 1/2



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

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 forprolongationIf the Contractor incurs additional costs that are caused both by Employer Delay andconcurrent Contractor Delay, then the Contractor should only recover compensation to

the extent it is able to separately identify the additional costs caused by the EmployerDelay from those caused by the Contractor Delay. If it would have incurred theadditional costs in any event as a result of Contractor Delays, the Contractor will not beentitled to recover those additional costs.

Principles & Provisions of the SCL Protocolrelevant to Figure G – Slide 2/2



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Guidance Section 3.2.13Although the programme should be the primary tool for guiding theCA in his determination of EOT, it should be used in conjunctionwith the contemporary evidence to ensure that the resulting EOT isfair and reasonable. It will also be necessary for the parties to apply

common sense and experience to the process to ensure that allrelevant factors are taken into account, and that any anomalousresults generated by the programme analysis are managed properly.

Key Guideline, Suggestion and Advice of theSCL Protocol



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Figure No. Question 1 Question 2 Question 3 Question 4

B (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 wehave come to the end of

the Lecture.

You are now a

Qualified and CertifiedDelay Claims Analyst

and Expert.

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FIDIC and Construction Solutionsthank you for your attendance and contribution.

We wish you all Good Luck.

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We urge all participants to review the SCL Protocol on their own.Construction Solutions’ Claims Management Division

(www.cspk.org ) will remain available for further discussions on theforegoing and any other relevant issue.

This Lecture was delivered by the Managing Partner of Construction Solutions,Mr. Khalil Tayab Hasan. For any queries and clarifications, please feel free to

contact Mr. Hasan at;

[email protected]

[email protected]

+971 50 8861709

+92 345 8500195

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