Claims for Extension of Time (or EoT claims) and their associated disputes play a critical role for many contractors and developers in determining who, if anyone, makes a profit, and how much they make.
In an ideal world, all projects would run on time, nothing unexpected would occur, and liquidated damages would be a thing of the past.
This isn’t an ideal world, and so we have contracts to help sort things out.
In this article we’re going to explore the fundamental ins and outs of extensions of time for construction projects, including:
- The importance of the qualifying cause of delay;
- Dealing with time bars; and
- Delay analysis.
Why Are Extension of Time Claims So Important?
Almost every construction contract for a decent sized project contains provisions about when the project is supposed to finish.
This is commonly called the “date for practical completion”.
They will also contain provisions about the events that will have to occur for the contractor to say that the project is practically complete. When these requirements are met is called the “date of practical completion”.
Absent an EoT, if the date of practical completion is after the date for practical completion, then the contractor might have to pay liquidated damages.
An extension of time claim, if allowed, will extend the “date for practical completion” by the allowed delay period. This means if the contractor reaches practical completion later, they will not have to pay liquidated damages to the principal (at least, not for the delay associated with the allowed claim). They might (but might not) also be entitled to some costs associated with the delay.
Here’s a picture to help:
Do You Get Delay Costs with an EoT Claim?
There is no automatic entitlement to delay costs associated with an EoT claim. Fundamentally they are about time unless the contract says otherwise.
So, in some cases, where you can establish that there has been a qualifying cause of delay, then your contract might also allow you to claim delay costs.
But it is certainly not the case that you should assume you will get the costs associated with a valid delay claim.
The Basics of EoT Assessment
Here’s a standard EoT clause:
“The Contractor shall be entitled to such extension of time for carrying out WUC (including reaching practical completion) as the Superintendent assesses (‘EOT ’), if:
(a) the Contractor is or will be delayed in reaching practical completion by a qualifying cause of delay; and
(b) the Contractor gives the Superintendent, within xx days of when the Contractor should reasonably have become aware of that causation occurring, a written claim for an EOT evidencing the facts of causation and of the delay to WUC (including extent).
Looking at that, you can see we need to establish that:
- there was “qualifying cause of delay” (or QCD for short);
- the contractor complied with the “time bar” inside the clause; and
- the QCD actually delayed the contractor in reaching practical completion.
It All Starts with a Qualifying Cause of Delay
So what is a “qualifying cause of delay”.
Most contracts contain provisions, often lengthy, describing what type of delay event might allow you to claim an extension of time. These defined events are the “qualifying” causes of delay.
They might include, for example:
- breach of contract by the principal or the superintendent;
- insufficient access to the site;
- changes in the law;
- industrial events;
- delays by statutory authorities in providing necessary approvals;
- inclement weather;
- force majeure events.
Importantly, there is no standard list here, so each contract is going to be read on its own terms. If the event isn’t in there, then it won’t be something you can claim.
The first question to always ask yourself with an EoT claim is this: do we have a qualifying cause of delay? If so, what do we say that is?
Answering those questions involves a factual investigation. What actually happened, and did what happened fall within the express wording of the contract?
Understanding and Managing your Contractual Time Bars
Time bars in construction contracts are a complicated area, and this article can’t go into them in great detail.
Our starting advice is this: if your contract requires you to do something within a particular timeframe, then do that.
This means it’s critical to:
- inform your project team about the importance of communicating potential delay-causing events;
- be aware of the timeframes in the contract for these notices; and
- have a process of drafting, approving and sending the notices that functions well.
This is good contract administration, of course, but is often forgotten in the ebb and flow of project delivery.
Of course there are arguments that are often run about whether time bars in contracts are effective or not. The most common are (in very brief shorthand):
- Waiver – the principal has clearly elected to abandon its rights to strict compliance with the contract;
- Election – the principal has chosen one right over another so that they cannot now rely on them both; and
- Estoppel – where the contractor has relied on a representation or promise made by the principal such that it would be unjust to now allow the principal to resile from that promise.
Raising these arguments is expensive, time consuming and often difficult to prove. The easiest path is just to comply with the time periods.
Delay Analysis, Concurrent Delays, and Contractual Issues
At some point you have to consider how much delay there has been and what extension, if any, the contractor might be entitled to.
We only get to this point if you:
- had a qualifying cause of delay; and
- have complied with the time bar, or didn’t have to.
To assess a delay, we need to look at the contract programme, critical path, float and concurrency.
Programme and Critical Path
As you probably know, the contract programme is the series of events or activities, logically linked in a sequence, that need to be completed. This is used to define the quickest and most efficient way to complete a project.
The “critical path” is the sequence of activities which determines the shortest possible time to complete the project. Determining what is, or is not, on the “critical path” is the speciality area of building programmers, so we’re not going to dive too deeply into it here.
But, for example, if items A, B and C need to take place in that exact order, then a delay in completing A will also affect items B and C. The delay affects the “critical path” because the entire project is impacted by the delay in completing A.
Whereas, if activity G simply needs to be completed at some point, a delay doing it will not necessarily push back all the other activities and will not always affect the “critical path”.
This, then, introduces the concept of “float”.
There are three concepts of “float”:
- “Terminal float” – the duration between planned completion and the current contractual date for completion;
- “Free float” – how long an individual activity can be delayed, without delaying the start of its successor activity; and
- “Total float” – how long an activity can be delayed, without delaying the project completion date.
We look at the practical effect of float shortly. The diagram below sets out the concepts of critical path and float in summary form:
How Does the Critical Path Affect Extension of Time Claims?
If a delay impacts the critical path, that will necessarily extend the time needed to complete the project as compared to the original programme.
So, if that delay is from a qualifying cause of delay, the contractor will often become entitled to an EoT.
“Float” gets considered at this point, depending on the terms of the contract. The question is usually put as “who owns the float?”. This is how it works in big picture terms:
- A contractor might be delayed and the critical path impacted without necessarily affecting its ability to complete the works under contract by the date for practical completion.
- In that instance, there are two ways of treating the delay (depending on the terms of the contract):
- In some cases, the contractor will be entitled to an extension of time even though it could probably still finish by the date for practical completion. In this case the contractor “owns the float”;
- In other cases, the contractor will not be entitled to an extension of time unless it’s determined that the date for practical completion has actually been effected. In this case, the principal “owns the float”.
Which is right in your case will ultimately depend on what your contract says.
What is Concurrency and Why Does it Matter?
As we mentioned at the start, timing and delays aren’t always as simple as they sound.
It’s common, for example, that an activity will be delayed by two things.
One of those things might be a QCD, and one might not. So what happens then?
This question ultimately comes down to what your contract says. Most construction contracts will have something to say about concurrent delays, and how they should be treated in assessing a claim for extension of time.
Some of the most common treatments in construction contracts are:
- That in assessing the EoT claim, the superintendent should apportion the delay between the qualifying cause and non-qualifying cause; or
- That, to the extent there is overlap between a qualifying cause of delay and non-qualifying cause, the contract will not be entitled to an EoT to the extent the delays are concurrent (that is, you carve out the time where both types of delay were occurring).
In every case though the first step is to know your contract, as that will govern the process.
EoT In a Nutshell – Practical Advice
So, we’ve looked at qualifying causes of delay, time bars, float and concurrency. These form the fundamental elements of any extension of time claims.
Given the importance of extension of time claims and the severe effect that they can have on project profits, having a rigorous system in place to govern them makes a lot of sense.
In real terms, that means:
- Notify early for any possible delays, and always following the contract;
- Keep records which help to prove the:
- qualifying causes of delay; and
- delays to the programme actually caused by those QCDs.
- Update your contract programme regularly, incorporating the impact of the critical delays.
If you need help establishing or disputing an extension of time claim in your next project, then you know where to find us.