Common Sense Delay Analysis Common Sense Delay … Sense Delay Analysis...• City Inn argued that the strict ‘but for’ test of causation ... Conditions of Contract for CE works

Common Sense Delay Analysis Common Sense Delay Analysis Common Sense Delay Analysis Common Sense Delay Analysis –––– A A A A Contradiction in Terms?Contradiction in Terms?Contradiction in Terms?Contradiction in Terms?

Vincent Connor & Amit Garg

Society of Construction Law Hong Kong

14 July 2011

This Evening’s Talk

• Dominant, Relevant and Concurrent Events: what exactly IS the law these days?

• How do (or should) Tribunals go about “apportioning”the consequences of delay?

• Do expert programmers tend to just “muddy” the waters?

• Is it time to forget all about Conditions Precedent in EOT provisions in HK contracts?

Dominant, Relevant and Concurrent Events: what exactly IS the law these days?

Trollope & Colls v North West Metropolitan Hospital Board (1973)

• Addressed the prevention principle

• Requirement of proof of delay to actual progress

• Impossibility or impracticability to do the work within the stipulated time

• Actual prevention and actual delay are ‘key’

Balfour Beatty Building Limited v Chestermount Properties Limited (1993)

• Contractor already late, then Architect instructs further

works via a variation. EOT granted, but Contractor still late, LDs payable, Contractor challenges.

• It is for the Architect to decide whether an EOT is “fair

and reasonable having regard to the incidence of

relevant events”

• Identified problems where there are concurrent causes of delay – however, no solution was proposed.

Henry Boot Construction (UK) Limited v Malmaison Hotel (Manchester) Ltd (1999)

• Contractor late, LDs deducted by Employer. Contractor claimed part of delay caused by failure to give information on time; andvariations

• 2 concurrent events: either on its own would have caused delay to the Works regardless of the effect on the other event

• Dyson J:A contractor will be entitled to an EOT as a result of aRelevant Event, notwithstanding the concurrency of another event which is not a Relevant Event.

• Applying only to circumstances arising from ‘true concurrency’?

Royal Brompton Hospital NHS Trust (No.7) v Hammond & Others (2001)

• Construction delayed by 43 weeks + 2 days, but Architect awards EOT of the same period. Settled with substantial payment to contractor.

• The Employer then sued professional team, incl. Architect

• Where delay caused by a Relevant Event commenced later than a delay for which the contractor is responsible, EOT will only be due if the Relevant Event caused delay to completion over & above that caused by the contractor’s delay

• Consequently, there would be no EOT during the period of concurrency…

Multiplex v Honeywell (2007)

• The ‘essence’ of the prevention principle

• Purpose of EOT provisions – and protection for parties

• 3 propositions

– Legitimate actions of the employer can still amount to

prevention if they cause delay

– No time at large if there’s an EOT provision

– Ambiguity in an EOT clause should be construed in favour of the contractor

City Inn v Shepherd Construction (2010)

• Should Shepherd be entitled to EOT in respect of delay caused by the occurrence of Relevant Events when

during the same period other events for which it was

responsible also may have delayed completion?

• City Inn argued that the strict ‘but for’ test of causation should be applied, therefore no EOT entitlement

City Inn on Appeal…

• Lord Drummond Young’s judgment upheld by the Inner House of the Court of Session

– ‘But for’ test of causation does not apply to Clause 25

– Royal Brompton was disapproved – true concurrency

of causes is not necessary

The 5 Propositions

1. A Relevant Event must delay or be likely to delay the

works;

2. Causation is to be resolved using the principles of

“common sense” rather than “philosophical principles of

causation”;

3. Decision-maker can decide causation using whatever

evidence he/she considers appropriate. This may be a

critical path analysis, but the absence of one is not fatal

4. If a dominant cause can be identified, that will be given effect to

5. Where no dominant cause, an apportionment between

them can be carried out in a fair and reasonable way

Influence of City Inn…

• Decision not binding on English or Hong Kong courts, but persuasive

• Arguments for the strict application of the ‘but for’ test to

concurrent delays may be less likely to succeed

• Possible move away from concepts of ‘true concurrency’

and causation towards “fair and reasonable” decisions, plus dominant causes

• BUT case settled before getting to the Supreme Court!

De Beers UK Ltd v Atos Origin IT Services

• IT outsourcing contract – London to Botswana

• Confirmed the English Law approach that where there is a concurrent delay the contractor should get an EOT but no loss and expense

• Reasoning: contractor is entitled to the time within which to complete which the contract allows or which the employer’s conduct has made reasonably necessary

• No express reference to City Inn nor critique of construction & engineering contracts or caselaw

• However: Hudson’s 12th Edition does take the same view…

Adyard Abu Dhabi v SDS Marine Services

• Disputes arising from 2 shipbuilding contracts

• Right of rescission and also an EOT mechanism

• Late delivery – so SMS rescinded

• ‘Prevention principle’ argued – but unsuccessful

• Evidential reasons also for failure of the claim

Adyard Abu Dhabi… analysing the law

• What was wrong with the AAD argument?

• Necessary to show an event was likely to cause or did cause actual delay to progress ( therefore: consistent with Balfour Beatty v Chestermount Properties)

• Concurrent delay:

– Henry Boot v Malmaison Hotel followed

– Disapproved minority opinion in City Inn v Shepherd

– Approved the majority decision & “the 5 propositions”

– Causation in fact must be considered & established

2. How do (or should) Tribunals go about “apportioning” the consequences of delay?

Origins of the ‘Apportionment’ concept

John Doyle Construction v Laing Management (2004)

• The principles to be applied in addressing global claims

– Court may be able to identify a causal link in the global claim

– Causation is the subject of common sense and if a dominant cause can be found than that may be enough

– In some cases it may be possible to apportion

• Note also: AMEC Process & Energy v Stork Engineers (2002) et seq. – Thornton J’s ‘battlefield’ analogy

City Inn, again…

– Overriding emphasis on decision-maker making a “fair and reasonable” decision; albeit based on available evidence.

– Multiple causes - is there a ‘dominant’ cause?

– If no ‘dominant cause’ – apportionment between causes may be appropriate.

– Apportionment - ‘degree of culpability’ and ‘causative significance’ of the delays, i.e. Length of delay; and Proportion of the project affected

The Dissenting Judgement in City Inn…

• Lord Carloway – rejected the concept of apportionment

• In his view, the sole task is to consider whether the Relevant Event, in isolation, will delay completion.

• If that is so, then one should consider whether an EOT

would in the circumstances be fair and reasonable.

The leading judgement - Lord Osborne

“It may not be of importance to identify whether some

delaying event or events was concurrent with another, in any of the possible narrow senses described, but rather to

consider the effect upon the completion date of relevant

events and events not relevant events. For that reason, discussion of whether or not there is true concurrency, in

my opinion, does not assist in the essential process to be followed under clause 25”

Applying the Test

• Has the Contractor proved that Completion has been delayed by Relevant Event(s)?

YES

• Are there other delays to Completion for which the

Contractor is responsible?

YES

• Can it be said that any cause of delay was dominant?

NO

• Is apportionment appropriate?

YES

How to apportion?

• “Broadly similar” to apportionment between wrongdoers where contributory negligence.

• There are two elements: the degree of culpability in each factor and significance of each factor in causing the

delay – the latter being more important

• Consider: length of delay caused and significance of event for the Works i.e. How much of the project does it

affect? How many other operations are affected?

• BUT remember the effect of Adyard and Henry Boot…!

3 Do Expert Programmers just ‘muddy’the waters?

Approach of Shepherd’s Expert

• Considered the evidence from two Shepherd witnesses

• First, he tested Shepherd’s original (paper) programme for reasonableness and completeness

• Second, he identified where there had been critical delay on the project when compared to as-build data.

• Third, he identified why these delays had occurred

• No computer-generated logic-linked CPA prepared

• Importantly, he considered it necessary to “understand the construction process” and “identify events in that construction process which logic, experience and common sense tell you will be critical to completion of the works.”

Approach of City Inn’s Expert

• He was the only witness for City Inn; no witnesses to fact

• He prepared a computer-generated critical path analysis of the project as-built

• He started from the last activity and worked backwards, identifying logic links and rescheduling the programme

• He identified what he regarded as a critical path

• None of the alleged ‘events’ fell on the critical path…

The Judge’s View 1

• An as-built critical path analysis is not the only approach - indeed it has “serious dangers of its own”

“The major difficulty … is that in the type of programme

used to carry out a critical path analysis any significant

error in the information that is fed into the programme is liable to invalidate the entire analysis…It is easy to make

such errors. That seems to me to invalidate the use of an as-built critical path analysis to discover after the

event where the critical path lay, at least in a case where full electronic records are not available from the

contractor.”

The Judge’s View 2

“…older methods are still plainly valid, and if computer-based techniques cannot be used accurately there is no alternative to using older, non-computer-based techniques.”

• A number of errors were identified in the Lowe programme (many of them accepted in evidence) which “inevitably (made) his as-built critical path analysis of very doubtful value.”

• The Court preferred Shepherd’s expert’s approach and awarded a 9 week EOT.

Computer-generated, logic-linked CPAs

• Such CPAs – City Inn is not a rejection, but clear that absence will not cause an EOT claim to fail.

• Court’s final decision due to a large extent to the lack of

a reliable CPA

• BUT such CPAs will still be very persuasive in the right

circumstances – up to the decision-maker

• Concurrency is not the issue – it’s the effect on the completion date which is the issue. Implications?

4. Time to forget all about Conditions Precedent in EOT terms in HK contracts?

EOT Clauses Comparison

Page 30

Notification Method of Analysis

FIDIC 1987

(reprinted in 1992)

Initial notice within 28 days of

event; Interim particulars every 28

days;Final particulars within 28 days

Since final determination is

made after event completion and only actual

prolongation costs recoverable, preferable to

prove actual delay

HKSAR General Conditions of

Contract for CE works (1999)

Notice required within 28 days Engineer’s determination is usually after event

completion – preferable to prove actual delay

MTR Contracts Notice period not clearly defined (sometimes notice may not be

necessary as in TCC)

Engineer can make a contemporaneous

determination

Some commonly-encountered provisions

• One of the most common issues referred to legal advisers:

– e.g. FIDIC

Clause 8.4

“…If the Contractor considers himself to be entitled to an extension of Time for Completion, the Contractor shall give notice to the Engineer in accordance with Sub-Clause 20.1 [Contractor’s Claim]…”

The Contractor shall be entitled subject to Sub-Clause 20.1 [Contractor’s Claims] to an extension of the Time for Completion ….” ,

Clause 20.1

“…If the Contractor fails to give notice of a claim within such period of 28 days, the Time for Completion shall not be extended…”

Is there a Condition Precedent ?

– NEC 3 - Clause 61.3

“ The Contractor notifies the Project Manager of an event which has happened or which he expects to happen as a compensation event ...

If the Contractor does not notify a compensation event within eight weeks of becoming aware of the event, he is not entitled to a change in the Prices, the Completion Date or a Key Date unless the Project Manager should have notified the event to the Contractor but did not.”

Is there a Condition Precedent ? – The MTRC Conditions

Target Cost and Civils forms

“68.3 The Contractor shall within 28 Days after the cause of any delay has arisen or as soon thereafter as is reasonable in all the circumstances deliver to the Engineer full and detailed particulars of any claim for an extension of time he wishes to make in respect of such delay.


The Target Cost and the Civils Forms

“68.1 If, in the opinion of the Engineer the Contractor is or is likely to be delayed in achieving a Completion Obligation by reason of:(a) … [to] (j) ………

……. then as soon as is reasonable after receipt by the Engineer of particulars in accordance with Clause 68.3, the time for achieving such Completion Obligation shall be extended by such period as in theopinion of the Engineer may be justified …

the Engineer shall as soon as is reasonable and whether or not the Engineer is in receipt of particulars in accordance with Clause 68.3…extend the time for achieving such Completion Obligation by such period as in the opinion of the Engineer may be justified


• So the MTRC Civils form seems to contain a condition precedent

“after receipt by the Engineer of particulars in accordance with Clause 68.3,”

• the Target Cost version makes clear that there is no condition precedent

– “whether or not the Engineer is in receipt of particulars in accordance with Clause 68.3”

– or does it?

“by such period as in the opinion of the Engineer may be justified”

Conditions Precedent – the hidden CP

• Steria v Stigma Wireless Technologies Ltd (2007)

• The Judge found that

– the words "provided that" made the clause a condition precedent

– An effective notice needed：

• first to identify the relevant circumstances have occurred

• second to indicate that those circumstances have caused a delay to the execution of the sub-contract works

• third, originate from the Subcontractor

– The fact that the Contractor knew the facts did not make a difference

The MTRC Conditions – a hidden condition precedent?

The Target Cost and the Civils Forms

“68.4 The Engineer shall upon the issue of a Certificate of Completion in accordance with Clause 74 review all the events of the kind referred to in Clause 68.1 which may have occurred and of which particulars shall have been given to him as aforesaid and shall grant and certify to the Contractor such further extension of time (if any) for the achievement of the relevant Completion Obligation or Obligations as in the opinion of the Engineer may be justified.”

The Contract in City Inn v Shepherd

• JCT Standard Form with bespoke amendments

• Clause 13.8.1 – submission and agreement of time and cost estimates where the contractor considers that an

instruction will give rise to delay or change to contract

sum.

• 13.8.5 If the Contractor fails to comply with any one or more of the provisions of Clause 13.8.1, where the

Architect has not dispensed with such compliance under Clause 13.8.4, the Contractor shall not be entitled to any

extension of time under Clause 25.3.

Waiver of Conditions Precedent

• A condition precedent as to notification etc can be waived by conduct – such as a meeting, as long as the parties were present (not just the certifier)

• A single instance of ‘conduct’ was sufficient, when followed by a failure by City Inn to raise the ‘lack of compliance’

• Acting to one’s prejudice in the light of the waiver did not necessarily have to be shown, but Shepherd had to and did establish that they would have acted differently had City Inn raised the ‘notification’ point.

Conclusions

• Concurrent Delay – the Henry Boot analysis prevails; BUT:

• City Inn LIVES! Apportionment is open to a decision maker; BUT

• Apportionment has challenges

• …And a sound approach to analysis relies on common sense, judgement and experience; and maybe some IT

• Conditions Precedent (obvious and hidden) are alive too – but beware of conduct e.g. Waiver.

Confidential – Please do not distributePage 1

“Common Sense Delay Analysis”- A contradiction in terms

Presentation to SCL – 14 July 2011

Presented by:Vincent Connor & Amit Garg

Confidential – Please do not distribute


Introduction

» Amongst the topics suggested

› Do we need expert programmers in construction & engineering disputes?

‒ Or can we just shoot them?

» I have heard numerous complaints

› Arbitrators & judges mentioning that delay experts seem to confuse the issue further

› Frequently contractors cannot understand their claim consultant’s voluminous reports and the accompanying less understood technical terms

› And More…

» Why do we find ourselves in such a situation?

Page 2


A Brief Lesson in History

» Late 50s –Dupont developed CPM programme

› Went from a simple bar chart to a CPM programme

› Logic-linked

» Disputes on large scale infrastructure and government contracts in US started using critical path analyses

› Construction law embraced CPM Scheduling over the last 40 years

» Availability of cheap computing power and development of scheduling softwares

» SCL protocol & analysis based on computer simulation

Page 3


What made the waters muddy?

» Analyses consisting of

› Computer simulation

› With pages of Primavera print-outs as support

› Along with use of less understood terms

» What compounds the problem

› Unlike say manufacturing, construction is full of variables

› Project records are not always perfect

› Programmes consisting of thousands of activities

» And all this complexity in the most practical of industries – Construction

» Objective – Remove the ambiguity


Critical path – It’s Common sense

» Critical path – the longest sequence of activities that lead to project completion.

» A delay to any of the activities on this path will result in a delay to the project

› Such a delay is termed as a critical delay

» Critical path shifts during the course of the job

› Non – critical activities can become critical and vice-versa

› Important to evaluate what was critical at the time of the delay event


Categories of Delay Analyses

» Static v Dynamic

› Dynamic – involves programme calculations through simulation

› Static – Evaluation of programme using common sense, avoids significant computer calculations

» Prospective v Retrospective

› Prospective

‒ Measures likely delay

‒ During the project

› Retrospective

‒ Measures Actual delay

‒ After the fact

Page 7

Main Methods of Analysis

» Prospective (establishes ‘likely delay’) and Dynamic

› Impacted As-Planned

› Time Impact Analysis

» Retrospective (identifies ACTUAL DELAY)

› Collapsed As-Built Analysis (establishes hypothesis of what would have

happened ‘but-for’ delay)

› Windows / Snapshot / Time Slice Analysis (establishes ‘actual delay’)

› As-Planned v As-Built (establishes ‘actual delay’)



Impacted as-planned

» Purpose –To determine likely impact of a delay

› Prospective

» Method - Insertion of delay into baseline programme

› Dynamic

Page 9

Issues with Impacted As-planned

› Usually done by the Contractor

‒ Cheap and quick

› Hypothetical impact

‒ Assumes perfection from the contractor

› Dynamic method

‒ Assumes correct logic in baseline

› If used, results need to be verified with as-built progress

› Use if all delays are at the start of a project



Time Impact Analysis

» Purpose – Determine likely impact of delay during the course of a project

» Method – Insert delay event into progressed programme

› Very similar to impacted as-planned except usage of programme updated with all as-built data up to the event

› Iterative process for each delay event

» Example

› Updated programme shows delay of 5 days

› After inserting event, delay is 15 days

› Therefore delay due to event = 10 days


Issues with Time Impact Analysis

» Similar to Impacted as-planned

› Results assume perfection in future

› Analysis dependent of which delays are selected to be used as fragnets

» Expensive and yet leads to a hypothetical impact

» Dynamic method - Assumes correct logic in programmes

» Typically used by Contractors

› Results in optimistic calculation of delays


Issues with Time Impact Analysis

» In principle it sits well with most contract clauses

› And it provides the employer to take action to either award EOT or remove cause of delay

» However, if used

› Programming logic needs to be verified

› Progress data used must be correct

› All delay events need to be incorporated (not just one party’s)

» What’s interesting is its use in an after-the-fact scenario


Collapsed As-built (but-for)

» Purpose – to determine delays after the fact (retrospective)

» Method – Remove “selected” delay events from an as-built programme

› Dynamic

Page 14

Issues with Collapsed As-built

» Defensive method – frequently used by an employer

› Because on a construction end, lot of activities are completed together

› Removal of one set of activities does no bring back the project completion date

» As-built programme does not have logic

› And one has to reconstruct relationships (pitfalls of a dynamic analysis)

» If used, a common sense review of the hypothetical conclusion must be undertaken

» Can be used, if the job is sequential in nature or if delay event is at the tail

of the job



Snapshot / Windows Analysis (Time Slice method)

» Purpose – to “discover” actual delays incurred during the course of a project (retrospective)

» Method – Based on the review of programmes produced during the project (static)

› Divide project into time slices (Windows) based on updates / critical path shifts

› Calculate critical delay incurred in each Window by comparing progress at the end of each window to planned critical sequence at the start of Window


Issues with Windows Analysis (Time Slice Method)

» Based on the accuracy of the programmes used

› Inherent logic

› As-built data


As-Planned v As-Built Analysis

» Purpose – To “discover” delays incurred during the course of the project (retrospective)

› Especially in absence of good programming information

» Method – Compare as-planned sequence to as-built progress

› Apply common sense, practical planning and PM experience in evaluating sequence of work


Issues with As-planned versus As-built

» Time consuming

» It is suggested that a simple analysis may not distinguish between concurrent delays

Page 19

Which method is appropriate?

» Criteria for selection:

› What does the Contract require?

› The context for the analysis – or what is the question which requires an answer?

› Does the lack of information preclude the use of any of the approaches?

› Do time/cost constraints eliminate certain options?

› What works best?

‒ Secretariat’s experience

‒ Lawyers’ experience


Page 20

Problems with Prospective Analysis used After-the-fact

» The delay events complained of have happened in the past. It is improper to

establish the likely delay of something that has already occurred.

‒ “Why look in the crystal ball, when you can read the book?”

» Prolongation costs can only attach to actual delay not likely delay

» Normally recommend Retrospective Analyses After-the-fact



Problems with Dynamic Analyses

» Based on “determining impact” versus “discovering cause”

› I.e. assume knowledge of delay event

› Resulting in a perception of bias when conducting dynamic analysis

» Computer simulation needs to be done very carefully

› Success based on assumptions made

» Can appear hypothetical and detached from reality


Conclusions

» Normally recommend to stay away from computer simulation based

analysis (dynamic analyses)

» Usually perform static analyses

» Conclusions are drawn based on common sense, and an understanding of the construction process

» In summary, common sense delay analysis is possible

» Hopefully by conducting one, expert programmers will not need to muddy

the waters anymore

Common Sense Delay Analysis Common Sense Delay … Sense Delay Analysis...• City Inn argued that the strict ‘but for’ test of causation ... Conditions of Contract for CE works

Documents