Extension of time claims and the four main types of construction delay
Construction project delays tend to affect two main factors on a project: money and/or time. In general, delays can be categorised into four types, which can help you to understand if an extension of time claim is what you need or if a different route is preferable.
The four types are: non-critical, critical, excusable or compensable. Here, Dr. Apirath Prateapusanond, Managing Director of Quantum PPP Consulting and Regional Director of Tungsten Capital Thailand explains.
Non-Critical Delays are those that do not affect the overall project completion date. There is no need to request an extension of time and no party has to pay extra money for the delay. For example, the employer instructs the contractor to change the bathroom tiles during the first month of building, when works are not on the critical path. That is not to say that other claims can still be raised for disruption or additional costs arising for inflation, expedited delivery, inefficient supervision etc.
Critical and Non-Excusable Delays are those that affect the overall project completion date. For example, when a contractor’s insufficient manpower, poor management, or a subcontractor’s late delivery of materials, result in a project being pushed off schedule. These are delays that are on the critical path. Thus, “No Extension of Time (EOT) and Liquidated Damages (LD) is applied” and a wise contractor has to re-baseline the schedule at his own cost.
Critical, Excusable and Compensable Delays affect the overall project completion date and are where the controlling party, such as the employer, the employer’s representative or the employer’s management contractors, should grant an Extension of Time and allow additional costs to the contractor. For example, if the employer issues change orders, design or material revisions, late work inspection, late site handover or late design approval in which the delayed works are on the critical path. Therefore, EOT and prolongation costs* should be granted.
Critical, Excusable and Non-Compensable Delays** are those that affect the project completion date, are excusable but do not entitle the contractor to additional costs. This kind of delay is often caused by external factors, bad weather, force majeures or exceptional factors which are specified in the contract. This delay type may allow for a time extension but not additional monies, subject to the specified terms of the Contract. Thus, an EOT should be granted without prolongation cost.
What is time extension?
Extension of Time (EOT) is a request to extend the construction time, to change the completion date specified in the contract which has Liquidated Damages (LD) imposed. The LD may be applied when passing the final completion date, practical completion date, handover date, building permit or milestone dates written into the contract.
Why the Extension of Time request is needed?
For a contractor, the EOT request is to prevent an LD fine that would normally be a maximum of 10% of the project value.
The contract must be consulted for any time barr considerations so that the EOT request is properly made.
For the employer or owner, the EOT request or EOT grant will allow the employer more time to make design revisions, corrections or additions. Timely extension granted by the employer would help the contractor to manage their resource better and ultimately reduce the contractor’s cost and claim damages against the employer in the future.
To continue his entitlement to apply LD in future, the employer or owner must ensure that such requests are dealt with in a timely manner.
Four things you should do for a successful EOT request
The very first thing is to have is a “positive mindset” to deal with the problems, challenges and obstacles causing the project delay. Even when a project completes on time, there are many delay events that occur during the construction period, but thanks to acceleration or mitigation actions the completion date is not extended.
However, there are many projects that cannot be accelerated, causing construction to be delayed from the initial schedule. Therefore, we must have a positive mindset, preparing systems, procedures and the teams to expect an EOT claim.
For example, for a construction project worth 1,000 million Baht, liquidated damages of 10% (equal to 100 million Baht) is something that no one wants if they are not the cause of the delay.
In my experience of EOT requests, many project records and an extensive retrospective document searches are required in order to prove each delay event. The party with a well-prepared document management system and clear document evidence in writing baseline schedule submissions, delay notifications with causation, effects and actual installation dates, will be able to answer all questions clearly, quickly and accurately. That party has already won more than half the victory.
The four most important things when requesting an Extension of Time, which should be prepared at the beginning of all types of construction project, are:
The critical path baseline schedule
The baseline schedule specifies the work details, scope of works or activities, timing, sequencing, and persons responsible for each activity. A good baseline schedule must have the activities or scope of all works related to the parties involved in the project and identify the critical path. The critical path schedule helps all parties to be aware that their works are on critical path and if delayed will affect the project completion date. The baseline schedule along with the critical path has great benefits when proving project delays or time extensions.
The good baseline schedule should be well planned with productivity rates of major activities. It should also know the number of working teams and the number of workers assigned within the planned duration in the baseline schedule.
Therefore, the submitted baseline schedule should always be submitted with the manpower plan, project management plan and equipment plan, along with the working constraints and limitations.
A delay is like a fire, if it is recognised early it can be managed, mitigated and eliminated on time. A good delay notice system itself is like a safety alarm system.
Typically, the delay notice is specified in the contract to submit the delay notice within the specified period of five days to 28 days. In order that the notifications can be done quickly and in the same direction, the construction delay notice form should be accepted by all parties from the beginning of the construction work. To avoid project delay, it needs to prepared for handling alongside the delay. You should be aware of it early and discuss solutions before it is out of control.
The employer must be willing to listen and consider the notification as a good thing. If there is any notification, smile and consult the contractor for a solution. In a case where it cannot be solved, for example you need to revise the design that’s already approved or installed, the employer will have to expedite the work or accept the delay and allow for an extension of time.
Electronic document management systems
Construction documents are very essential for proving the critical delays to the project completion date, whose causes the project delays and the responsible party(ies).
The most common cause of construction delay is late design revisions. This may not have a negative impact at all if they are made during the first month. Costs may be higher for the additional work or lower for reduced works.
On the other hand, if such revisions take place much later, after the construction project has started, materials are ordered and installed, design revisions are likely to have not only a time impact but additional repair and material costs as well.
We recommend using the QConZol document management service, introduced to the industry by Dr. Apirath Prateapusanond, Managing Director of Quantum PPP Consulting Co., Ltd. in Thailand. The system should be used by all parties in the construction project, including owners, consultants, design consultants, contractors and manufacturers, in order to reduce costs, increase accuracy, avoid unnecessary construction delays and to maintain a good relationship amongst all parties in the construction project.