Human progress gets quicker and quicker.
This exponential growth can be great—for example, think of the eradication of diseases, the iPhone, epic computer speeds, self-driving vehicles, and the other creature comforts.
However, this growth can also be terrible and scary—just think of the nuclear arms race and the spectre of MAD (mutual assured destruction). Some say that the accelerating advancements in artificial intelligence could ultimately destroy the human race.
Similarly, accelerating developments in the construction industry promise great things. But what’s an example of the flipside? One bad example we are seeing more of concerns time bars and their accelerating harsh impact.
Courts have generally found time bars to be ruthlessly effective at killing an otherwise valid claim
What is a Time Bar?
Time bars are poorly understood in the construction industry. We have been involved in a lot of major projects and disputes. Nothing surprises us more than just how poorly understood time bars are, given their prevalence and importance.
A time bar is where compliance with a notice or claim obligation under the contract is a “condition precedent” to the actual entitlement arising. In other words, the entitlement to recover does not arise in the first place if the notice or claim has not been done properly.
The most common time bars live in the clauses that govern entitlements to extensions of time and variations. Time bars also cut across entitlements to recover for latent conditions, changes to programming, changes in law, and document discrepancies, to cite just a few common examples.
For good measure, most construction contracts also contain what is known as a “residual” time bar that is intended to cover every other conceivable claim, even if the clause relevant to that claim does not contain a specific time bar of its own.
Time bars generally have two distinct elements:
- the time within which the notice or claim must be given; and
- the content requirements of the notice or claim itself.
Failure to comply with either element is generally fatal to the entitlement.
The timing and content requirements vary widely from contract to contract. It always depends on the words of the contract in front of you, but courts have generally found time bars to be ruthlessly effective at killing an otherwise valid claim.
So the contractor may have done the extra work or incurred the delay through no fault of its own, but the entitlement to claim the associated costs disappears because of a failure to comply with the procedural steps of sending a notice on time and in the required format.
This can seem awfully unfair. But remember that—generally speaking—courts won’t rewrite contracts that are considered to be unfair. Parties are bound to the contracts that they sign.
Knowing but Not Caring
You might see by now that the concept of time bars is fairly straightforward. You might even say that the concept is simple.
However, just like what Warren Buffett says about investing, time bars are “simple, but not easy”.
They are not easy because it is clear that, even when people do understand what time bars are, they still get tripped up all the time by them.
Sometimes people are just too laid back about how powerful and painful time bars can be. Part of the problem is that the human brain responds well to risks that are vivid and immediate, but not so well to risks that are abstract and remote. Time bars are an abstract thing, interesting for lawyers to discuss but boring for almost everyone else. The risk of missing a time bar is abstract, that is until you miss it and start feeling the real pain.
Sometimes though, missing time bars is not about misunderstanding or being too relaxed about them. Despite the best of intentions, the accelerating complexity and harshness of time bars is leaving a trail of wounded contractors and subcontractors throughout the industry.
What is the Time Bar Arms Race?
When it comes to time bars, it seems to me that there is something of an arms race going on.
When a loophole to a time bar is found, tighter and stricter drafting seems to be the natural reaction. More loopholes are attempted, followed by more attempts to tighten things up. And so on, and so on.
Time bars were once fairly simple. For example:
If the Contractor is or will be delayed in reaching Practical Completion by a cause described in the next paragraph and then within 28 days after the delay occurs the Contractor gives the Superintendent a written claim for an extension of time for Practical Completion setting out the facts on which the claim is based, the Contractor shall be entitled to an extension of time for Practical Completion.
Clauses like this serve a useful commercial purpose:
- They promote timely contract administration.
- They allow the claim to be investigated and dealt with promptly.
- They also allow the principal to monitor its overall exposure on a project, throughout the project, rather than the “horse trading” that often goes on at the end.
- Time bars in subcontracts allow the contractor to sequence its works properly, including to manage or mitigate potential claims by other subcontractors.
- They also allow the contractor to pass through any valid subcontractor claims up to the principal in a timely fashion, so as to not get exposed to “gap risks”.
But the clauses are no longer so simple. This appears to be a reaction, at least in part, to some earlier cases that took a quite generous (and in some cases surprising) approach in finding that fairly casual correspondence met the simpler time bars.
In recent years, the time requirements seem to be getting more and more compressed. Sometimes absurdly so. It is not easy to drop everything and jam in a notice within 24-48 hours of an event, especially when you are trying to deliver a complex infrastructure project with a million moving parts.
Even worse, the actual content that must go into each notice and claim is getting so complex that people either physically can’t comply with them or are getting tripped up. This imposition seems to be a specific response to earlier clauses which did not expressly require the claimant to use a particular form of words in its notice. Now many clauses mandate the use of specific words, even to the extent of requiring specific subject lines on the notice. In some contracts, strict pro-forma notices with detailed content requirements are actually included as annexures.
For example, for an EOT, it is rarely enough to just set out the facts of the delay as a prompt to having the claim assessed by the independent superintendent. Often we now see a requirement for the claim to contain specific words on the face of the claim, along with detailed particulars of the impact of the delay, proof that there are no concurrent delays, and proof that the contractor has done everything possible to mitigate or avoid the delay. Further, updated claims must be provided every week with revised particulars. Any misstep along the way risks the claim being pronounced dead on arrival.
Some contractors (and of course, subcontractors) find it virtually impossible to comply with these detailed requirements, especially within the compressed windows within which they are now required. These strict requirements change the dynamic significantly. Instead of the time bar promoting fast and efficient (and, dare I say it, cooperative) contract administration as it is meant to, it can create a siege mentality with cornered tigers and a distracting war of paper.
The complexity of these time bars seem to be accelerating over time. It is scary to see where things might end up.
What has Caused the Arms Race?
I think you can’t really blame any of the individual players in the industry for this arms race.
Depending on where you sit in the industry, you probably have a different perspective on this issue. Those perspectives all have merit.
For a principal, are the stricter time bars required for deterrence? Are they a reaction to excessive legislation (for example, security of payment) where it seemed the “simpler” time bars were too easy to flout in order for claimants to get quick payment?
For a contractor looking at subcontractors, do the same drivers apply? Probably. It is foolish for a contractor to have basic time bars when it has to commit to such complex ones up the chain.
For both principals and contractors, there is also the risk of knock-on effects with potential claims by other contractors, subcontractors, and other stakeholders, including self-inflicted impacts. A less charitable view of the situation is that harsh time bars can be an effective way to insulate yourself from the risks within your own control. Of course there can be unintended consequences in taking this approach.
I’m sure that there are multiple reasons for this arms race and this article is not about playing the blame game. Construction contracts seem to have become a lot stricter on a number of fronts, time bars just being one aspect of this.
At this point it would probably be remiss of me to not mention lawyers. After all, I am one, and we are often blamed for the strict contracts (and much worse things). For what it is worth, my biased opinion is that lawyers are not the root cause of the arms race, but they have certainly contributed to it. It reminds me of the old saying:
This town is way too small for one lawyer to make a living, but two lawyers could probably scrape by and three could even do pretty well for themselves.
The rapid acceleration of strict time bars keeps us all busy on all sides of the contract negotiation and on all sides of the eventual (or inevitable) disputes. If you want balanced contracts, then no experienced lawyer can really claim any moral high ground with a straight face. We can all be guilty at times of drafting clauses that perhaps go further than is strictly necessary. We also do our best to overcome time bars when our client is exposed by one. However, to some degree we have an excuse. This is because, on a matter-by-matter basis, we act on client instructions and are trying to keep their interests paramount. This includes shifting risk away from our clients. On a project-by-project basis, the lawyers can’t change the way the game is played, despite what personal views we might have about the need for industry-wide change and some leadership towards balance and fairness.
Again, this article is not about the blame game because it will not help to solve any of the problems facing the construction industry right now.
The problem with the time bar arms race is this—who is prepared to give up the (figurative) nukes first? The situation does not look like it will change any time soon.
Unless things unexpectedly change, one can assume that time bars will remain tough, and will perhaps get tougher and tougher over time.
Therefore, What Can be Done Today?
As I mentioned earlier, time bars are simple but not easy. However, some small steps can go a long way in saving you the immense grief that can be caused by them.
Here are just a few suggestions:
Understand the Time Bars
Understand what time bars are and how strict they are. Be under no illusions about that.
Read and understand your contract.
Take it as given that time bars are (almost always) enforceable and that non-compliance with them will (almost always) defeat your genuine claim for time and/or money.
If at all possible, don’t ignore time bars during the negotiation of your contract documents. Consider what the requirements are and the likely costs of complying with them. Find the time bars in your contract and note down all of the requirements. Because time bars often appear scattered throughout the contract, it can be surprising how onerous they are when you put them in one place and see the full impact.
If the contract requires you to send a 3 kinds of notice within 24 hours, followed by a confirmation within 72 hours, followed by weekly notices on every single claim until determined – are you geared up to deliver the kind of militant compliance that will be needed? Are your people on site fully primed to get that happening, and your admin team ready to deliver?
If not, can you negotiate in some way to meet both parties’ needs? Sometimes even the principals on the projects aren’t fully aware what the flood of paperwork they might receive is really going to look like.
Change your Focus
When considering the time bar in front of you, change your focus from abstract to vivid.
As I mentioned earlier, the hard thing about time bars is that they are a boring abstract concept. It takes real effort to think about them in a vivid way that drives real action.
Run some hypotheticals. For example, on a major infrastructure project, have a proper think about the daily cost of not getting your EOT due to the failure to meet a time bar. Make the risk real—actually calculate the lost delay costs claim (you’ll be barred from them also without the EOT).
Calculate the extra costs you will have to eat of having people, sheds, and equipment on the site for longer. Calculate the erosion of float in your program (that’s if you had any float in the first place). Even worse, pile on the extra risk of liquidated damages. If you miss the contractual date for completion, without valid EOTs, you will likely be liable for LDs, even if you did not cause the delay.
Add it all up – how much could it cost? In a major infrastructure project, we could be talking about hundreds of thousands of dollars per day, if not millions per day.
Weigh it Up—How Can the Risks be Managed?
So by now I have probably (or hopefully) won you over about the importance of complying with time bars. However, you might be thinking something like:
Thanks for the simplistic tip—but how do I stay on top of these horrendous time bars while I’m also trying to deliver a quality job, with a million technical changes, interface issues, cost-control issues, safety concerns, stakeholders to manage, and a client relationship to maintain?
That’s a good question and, like I accept, none of this is easy.
I guess the best way to think about it then is in sheer dollar terms. Cost control is a core competency of good project management. Failure to comply with time bars is one painfully easy way to undo all of your good work elsewhere.
Remember, we are talking about possibly leaking small fortunes every single day. That is not good cost control or acting in the best interests of the company you serve.
Compare that to the cost of the investment in, say, additional contract administration support or some regular external legal help. There is no real room to be pennywise at the front end in the context of the colossal losses to be faced at the back. Commit the resources.
But Commit the Right Resources
Blindly throwing bodies at the problem is not the solution. Extra bums on seats alone won’t do it. The wrong resources can make it even worse.
The additional support needs to competent, experienced, and closely “plugged in” to the project. They need to have the temperament to grind away on notices and claims, and to have excellent rapport with the project team. They need to have the skills to adapt to new problems in real time, and to chase up the multiple unresolved issues.
They need to be able to balance the hard and soft skills. They also need to know their place in the zoo.
Early Intervention is Key
Unless the rules change, there is no shortcut to relentless contract management.
However, if you feel like the project is going awry and you are being drawn into a costly and distracting paper war of notices and claims, then you might need some strategic support to overlay the daily tactics.
Is self-preservation at the site level preventing reasonable behaviour? When and how should matters be escalated to be resolved?
For all of these issues and more, it can help to get some targeted advice throughout the delivery of troubled projects, in order to ensure that the means are focused on the ends.
A little bit of help with these suggested steps can go a long way and save a lot of money. The team at Batch Mewing can bring a lot of value throughout the delivery of your major projects.