Construction e-Brief: Back in time

In July 2015, the Society of Construction Law published “Rider 1” which amended its Delay and Disruption Protocol first published in 2002 (the “Protocol”).

Prospective Analysis v Retrospective Analysis

This amendment has been made in response to debate in the courts over recent years as to which method of delay analysis should be used on construction projects, and whether delay impact should be assessed prospectively or retrospectively once the work has been completed and the effects of delay events are known. The courts have become increasingly turned off by theoretical delay analysis, and have stressed that any claim for extension of time must be based in fact.

The Protocol, as originally drafted, championed “time impact analysis” when assessing extension of time entitlement, which is a prospective approach. This was the recommendation of the Protocol even after the works had completed.

By way of explanation, a prospective approach simply requires a Contractor to demonstrate the likely effects of a delay event, which may ultimately prove to overestimate or underestimate the extent of the delay. A prospective approach may not take account of subsequent measures taken by the Contractor to mitigate delay, re-sequence, re-deploy resources, or accelerate. The eventual actual delay caused by the event is not assessed as the subsequent progress of the works is not considered. A prospective approach is theoretical in this sense.

In a retrospective approach, the Contractor must demonstrate, as a matter of fact, that the event relied upon actually caused delay to the prevailing completion date. A retrospective approach takes account of what actually happened after the delay event occurred, and is therefore based in fact.

Adyard

The Protocol’s suggested approach came in for criticism in the courts, most notably in the case of Adyard[1].

Adyard’s expert placed great reliance on the Protocol in seeking to justify a claim for an extension of time on account of variations by means of a prospective analysis. Mr Justice Hamblen held that the Protocol had no contractual effect and was of no assistance.   He decided it was necessary to establish causation in fact, which involves showing that actual delay to completion was caused. A prospective theoretical analysis did not achieve this.

What seems certain as a result of the Adyard case is that, once the work is completed, there are risks in adopting a purely theoretical prospective analysis to assess alleged delay caused by an Employer Risk Event. A factual retrospective analysis, which will take account of subsequent progress and events, is recommended.

Rider 1

In Rider 1, the Protocol continues to recommend that the Employer/CA and the Contractor should deal with Employer Risk Events contemporaneously, and should not wait for the effects of such events to become known. The Protocol essentially recommends that the parties should adopt “time impact analysis” as the methodology for assessing delays on a project. This is a prospective approach.

This “prospective” approach, using a contemporaneous critical path impacted by the alleged delay events, is probably common sense where the works are on-going and there is a requirement to estimate delay occurring in the future.

Further, the contract may dictate that all applications for an extension of time should be made and assessed during the works, and it may not contain a provision for a review of the extension of time entitlement after completion of the works.

The key change to the Protocol has been to delay analysis following completion of the works, where the effects of delay are known.

“Core Principle 12” of the Protocol originally provided that:

“The Protocol recommends that, in deciding entitlement to EOT, the adjudicator, judge or arbitrator should so far as is practicable put him/herself in the position of the CA at the time the Employer Risk Event occurred.”

Further, Guidance Section 3, paragraph 3.2.11, recommended time impact analysis for use after the works had completed.

Perhaps in response to Adyard, “Core Principle 12” of the Protocol has been amended in Rider 1 dated July 2015 to read:

“…where an EOT application is assessed after completion of the works, or significantly after the effect of an Employer Risk Event, then the prospective analysis of delay…may no longer be appropriate.”

Further paragraph 3.2.11 of the Protocol no longer recommends that time impact analysis be used once the work has been completed.

Guidance Section 4 of Rider 1 also now makes it clear that using the impacted as-planned analysis and time impact analysis have risks because of their theoretical nature.

Gordons’ View

It is likely that, when assessing an extension of time after the works are complete, “windows” analysis is likely to be most appropriate, provided there is a reliable baseline programme and subsequent programme updates.

This method establishes the critical path from contemporaneous evidence and divides the progress of the works into windows (usually monthly).   The extent of critical delay to completion can be seen at the end of each window. Thereafter, the Employer/CA must assess, with reference to the project records, whether the alleged Employer Risk Events have caused any delay within the window in question.

Slavish adherence to computer programmes and theoretical analysis is unlikely to be well received in the courts.

[1] Adyard Abu Dhabi v SDS Marine Services [2011] EWHC 848 (Comm)

For more information on this, please contact a member of the construction team.