Tag: Extension of Time

Ansell Murray Limited Commercial Support

In the previous post we reviewed the outline of how the construction industry in the United Kingdom treats Sub Contractors and Sub-Sub Contractors. In this post we will examine how the little guy can strike back by just using the available rules, regulations and legislation together with their own Sub contracted commercial support.

Ansell Murray Limited as a boutique Consultancy is able to offer commercial advice and support at any time of the life cycle of the works as well as, as much or little support as is required. A new company may need robust systems to capture what they are doing and more mature business may be expanding on taking on works where not only the contract to be entered into is more complex and onerous but may require more compliance.

In the following sections we will set out typical functions that can be undertaken.

Pre Contract Advice / Support

As the title implies these are activities that take place prior to a contract being awarded and can even be in support of a tender and include:

  • Build up of “Actual Cost” rates for Labour, Plant and Materials
  • Preliminaries Build up and Requirements
  • Estimating
  • Review of proposed form and contract and schedule of amendments
  • Design implications (Professional Indemnity & Warranty requirements)
  • Condition Precedents and their potential Implications
  • Main Contract programme requirements and support
  • Notice Service requirements
  • Specific recurring requirements of the contract

Of course nothing is going to stop “subby bashing,” however the risk of payment problems can also be reduced by ensuring that a fair contract and contract procedures are in place.

Ideally, you should incorporate your own Terms & Conditions of business into any order which can be done by careful submission prior to commencing work, making the last document on file the contract.  If this is achieved it can only be trumped by the later signing of a formal contract, which does not have to be done before payment is to be made, such malpractice is outlawed by the Construction Acts.

Ansell Murray Limited are well placed to assist in this key pre contract activity to ensure many of the terms in the contract cannot be turned into disastrous “subby bashing” tools.

Contract period Advice / Support

During the period of construction works the works can either run smoothly with little or no real change in what has been contracted for and at the other extreme can be delayed and disrupted, subject to dispute. Ansell Murray Limited to provide commercial and project management support at both ends of the spectrum as well as the eventualities in between.

  • Application for Payment support, including dealing with all contractual reporting requirements
  • Management of Change Control, be these Variations or Compensation Events
  • Payless Notice support
  • Robust support of Variation / Compensation Event entitlements
  • Robust support against Contra Charges for additional contractor labour
  • Claim of Compensation and associated interest for Late Payment
  • Invoicing and Payroll (Employee’s and Sub Contractors)
  • Management of supply chain commercially, including ensuring back to back contract provisions and reporting to the supply chain
  • Notice service requirements
  • Insurance liability
  • Programme management, including period updates

In the event Ansell Murray Limited had been utilised during the Pre-Contract phase our primary objectives are to ensure the following are as favourable as possible to the Sub Contractor:

  • Onerous payment periods and lengthy due dates are removed and are at worst in line with legislation defaults
  • Retention, Liquidated and Ascertained Damages, Main Contractor Discount advice and support
  • Letters of intent where issued and being subject to Contract
  • Condition precedents (Extension of Time, Loss & Expense entitlements and Practical Completion)
  • Unrealistic programmes, time requirements & time essence clauses
  • Ensure “Pay when paid” or “Pay when certified” clauses are removed and are in line with current legislation
  • Termination and Suspension rights
  • Set off clauses are removed
  • Onerous adjudication clauses are removed and are in line with The Scheme for Construction Contracts.
  • Insolvency of the Employer and or Contractor advise and support

During the construction phase there is often a false belief that there is nothing that can be done about Contractors entering into contracts and then ignoring them, to the detriment of the Sub Contractor undertaking the work.

Because in large organisations people effectively learn how to mechanically undertake their day to day job, many do not understand their duties and obligations under the contract that they are effectively administrating. In effect the rules that protects a Sub Contractor from bad practices

Often the paying parties do not understand the Payment Notice requirements and that their timing and content are critical. As well as this they fail to recognise the power of payment applications becoming the sum due where the rules of assessment and certification are not followed. In effect your payment application becomes the sum due. If the paying party wants to contest this it must prove its case in later proceedings, which if made up and is not supported by contemporaneous evidence will be impossible.

Post Contract Advice / Support

Often a Sub Contractor may provide the works in accordance with the contract, yet the Contractor regularly and consistently under values your works. This is often a precursor to a robust Final Account negotiation where the Contractors seeks to maintain his margin on the project by using your monies. The larger the amount due as a Final Account settlement and the more chance the Contractor will use delay tactics to try and struck the best deal for the Contractor, often to the detriment of the Sub Contractor.

And what can you do? Your works are complete, often you will have made all the payments due to your supply chain, but you need the cash flow to fund the next project.

Contractors know this and will then use this to drive down the agreed final value.

But it does not need to be like this. Ansell Murray Limited can be engaged at Final Account stage purely to ensure that you are paid what you are owed together with any agreement on the amounts of effective free money you want to give the contractor.

This should only be necessary where the objectives are clear that the Contractor is seeking a significant reduction in the final cost he will pay. For the sake of the industry as a whole these companies should be challenged to stop their behaviour for the greater good of all Tier 2 / 3 contractors.

By engaging Ansell Murray Limited during the construction phase our clear objectives are to ensure the value that has been earned by your efforts on site are paid in that period and in effect to make the final account negotiation about the final 5% of the contract value.

Claims & Dispute Advice / Support

Sometimes contracts simply do not happen as planned and if you are the innocent party and have suffered loss the contract between the parties will allow you to be compensated for this. Ansell Murray Limited can provide assistance in setting out contractual claims generally around Loss & Expense and Extension of Time claims.

The United Kingdom construction industry offers its customers great flexibility. Many construction project are not fully designed when they commence and can progress with the design continuing in the background. This means changes in scope are inevitable and change means a revision in price being charged to the Employer and usually the programme. In this environment disputes are ordinary and common place, so too is a settlement that both parties can accept. However this is often dependent on robustness of the change and associated detail in the pricing and impact on the programme that is put forward. If this is not efficiently managed it reduces itself and the project to conflict which can affect overall quality, time and health & safety. Ansell Murray Limited can manage and handle these claim processes to ensure they do not result in a larger dispute. This is not limited to large scale industrial and commercial construction and civil engineering but can be something as small as a fit out of a local shop.

However sometimes the claim ends up as a dispute where both parties believe their stance is correct and the only method to resolve the claim will be through Alternative Dispute Resolution (ADR) as usually the legal option in the Technology and Construction Court (TCC) is prohibitively expensive.

On 1st May 1998 the construction industry took a great stride into the future with the introduction of a statutory right to have a dispute determined by Adjudication. In the subsequent 19 years this process has become entrenched as a relatively cost effective way of having a dispute determined in 28 days. It is a decision which is further binding and can only be overturned, revised or confirmed in Arbitration (if the contract contains an Arbitration clause) or in litigation. Please see previous posts in relation to the mechanism of Adjudication at this link: https://ansellmurray.wordpress.com/tag/adjudication/

Ansell Murray Limited offers support in Adjudication whether you are the party commencing Adjudication [The Referring Party) or to assist in defending where you have been referred to Adjudication (The Responding Party).

Can a party commence its own Adjudication without using a company such as Ansell Murray Limited? The short answer is “Yes” and the slightly longer answer is “It’s not advisable.”

An Adjudication is an argument giving each party a reasonable opportunity of putting his case forward and rebutting the case put by the other party to the contract, with the watchword being fairness.

Why is “It’s not advisable?”

The Adjudicator does not make a case for either party or find the evidence to undermine a party’s case. The role is purely to make a Determination based on facts, evidence, rights and duties in the contract and at law. If an adjudicator investigates at all, it will be to clarify points of fact or law in the party’s case. Therefore it is vital that in preparation of a Referral Notice as the party commencing an Adjudication or in the Response where contesting that the facts are laid out clearly and concisely for the Adjudicator, even where appropriate using legal precedent as a justification of an argument. In reality where there are no legal complexities to be considered the Adjudicator will have little time to do much more than simply make his Determination based on the written arguments of each side.

Of course this entire process is not one-sided and only requires a specialist consultancy such as Ansell Murray Limited. As the real strength (or weakness) of a case for a simple claim or even Adjudication is based on the golden rule or “Records, Records, Records.” These records are your evidence to prove your claim or to disprove a claim made against you. For a claim to be successful it demands good evidence.

Systematic keeping of all site correspondence, instructions, meeting minutes, record photographs (which with modern technology are date stamped), correspondence in writing and electronic mails, site diaries and site resource record sheets. This is also easily verified by the use of technology such as biometric scanners. These are the types of records that help back up a successful claim.

As stated at the start of this post, as a boutique consultancy, Ansell Murray Limited can be your Estimator, Surveyor, Programme Manager, Project Manager, Commercial Manager or Commercial Director. The name on the badge may be slightly different to your organisations name, but we are there to integrate as much or as little into your organisation as you want.

Go to www.ansellmurray.com to view our website and make contact.

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The Payment Mechanism

In an earlier post we examined Late Payment and the remedies that are available when a Payment is made after the Final Date upon which it was due to be paid.

In some contracts this is straight forward as it can be clearly stated, such as 14 days from the date of invoice etc.

Construction Contracts and indeed any contract that made regular payments based on progress made or value earned and applied for through an Interim Application for Payment (AfP) can be more complex as they need to be in accordance with a number of documents in ensuring the Payment Mechanism is in accordance with current legislation, regulation and statutory instrument. Further where a standard form of contract is used, the terms and conditions in this contract need to be considered, to ensure they are not in conflict with the Acts and Statutory Instruments.

You can at times end up having tyo ensure that you are in accordance with the requirements of 5 separate Documents. These being:

  • The Housing Grants, Construction and Regeneration Act [1996]
  • Local Democracy, Economic Development and Construction Act [2009]
  • The Scheme for Construction Contracts (England and Wales) [1998]
  • The Scheme for Construction Contracts (Amendment) (England) [2011]
  • The contract that is going to be used e.g. Joint Contract Tribunal (JCT), New Engineering Contract (NEC)

In Scotland both The Housing Grants, Construction and Regeneration Act [1996] and Local Democracy, Economic Development and Construction Act [2009] applied. However Scotland had their own Statutory Instrument, The Scheme for Construction Contracts (Scotland) [1998]. Initially the proposed amendments  were laid before the Scottish Parliament for approval. However the amendments subsequently become law through the 2011 amendments coming into force as a United Kingdom Statutory Instrument. The draft regulation in relation to Scotland can be viewed at this link,  http://www.legislation.gov.uk/sdsi/2011/9780111014431/pdfs/sdsi_9780111014431_en.pdf

As can therefore be seen ensuring a Payment Mechanism is legal and workable can be something of a minefield, particularly when the contracts begins to run late invoking Liquidated & Ascertained Damages (LAD’s) or Extension of Time (EoT).

Next time we will examine the Payment Certificate and Payless Notice.

Elements of a successful claim

In the previous post we examined the key components required to demonstrate an effective Extension of Time (EoT) claim from the perspective of the main headings that need to be addressed. It could be argued these headings form the basis of any claim event.

An integral element of this is the Delay Analysis employed.

There are effectively two major forms of Delay Analysis, these being:

• Impacted As Planned Delays Analysis

• Time Impact Analysis

We will investigate these in greater depth in the next posts.

However prior to this we need to evaluate the essential elements of a successful claim. This can be summed up as the 4 main requirements, these being:

Cause

Effect

Entitlement

Substantiation

We could ask the question, What is a claim? It can be defined as follows:

A claim is an assertion of a party’s rights under the terms of a contract or at law.

In the construction industry, a claim is usually in relation to additional time, additional payment or both additional time and payment. A significant driver of a claim will be variations to the contracted works which increase the scope and / or complexity of the works that have been contracted for. By way of example the following could lead to a claim for variation:

• Change to the quantity of works

• Change to the quality or characteristics of work

• Change to the sequence or timing of works

• Change to the levels, positions and / or dimensions

• Omission or addition of works

Some of these examples of variations to the contracted works may also lead to a claim for an EoT which may lead to additional payments being due as a consequence. However this can also prevent the deduction of “Liquidated and Ascertained Damages” (LAD’s) as the EoT (even if granted without costs) moves the date for the completion of the contract works.

Almost any claim, irrespective of form of contract will require the Contractor or Sub-Contractor to demonstrate that they have suffered a delay in some shape or form and here the programme is critical in demonstrating the delay. In effect the programme is both the Contractor or Sub-Contractors plan to complete the project works but also the yardstick to measure delays based on actual progress against the programme.

Most forms of contract require the Contractor or Sub-Contractor to submit a programme within a stipulated time frame, which then becomes the Contract (Baseline) or Approved Programme and updated accordingly periodically. A Joint Contract Tribunal (JCT) form of contract requires the programme to be submitted as soon as possible after the execution of the contract. However this will be to the start and completion dates that will be included within the contract data.

The programme update requirement should be stipulated in the contract, but for the protection of both parties should be at least within each Application for Payment (AfP) period. These updated programmes will be a record of progress made thus far and also be able to predict events that are yet to take place, based on the update. This is particularly relevant where an activity moves onto the critical path of the programme. In the event an EoT has been claimed and granted, this should be reflected on the next period updated programme and in particular showing where the contract-end date has moved to. This is particularly important where LAD’s could be levied.

In the event of a claim, it is good practice to produce an “As Build” programme at the start of any delay as this will provide a detailed record of actual progress that can be demonstrated at the time that the delay has crystallised.

It also needs to be borne in mind that not every delay will lead to a change in the completion date as the possibility exists that if the event is not on the critical path that the delay can be mitigated by moving the sequence of the programme around, however this could lead to disruption, which in itself could be subject to a financial claim. This could be on a number of grounds, although this list is not exhaustive, such as:

• Acceleration costs to catch up on the programme

• Non Productive costs • Additional staff costs

• Abortive costs

This leads to the question. What should the Contract or Approved Programme demonstrate?

• The intentions of the party at the time of contract

• The time and sequence of how the works are planned to be implemented

• A clear critical path

• Dates that require input from the Employer, particularly where it links to the critical path

• Dates that require input from key Stakeholders, particularly where it links to the critical path

• Identify “float” within the programme and who “owns” the float whether it is the Employer, Contractor or the project.

Who owns the float is particularly important as this will be utilised for any delays before the completion date can be affected by any delays. Where the project owns the float any initial delays by either Employer or the Contractor will utilise the float, whereas if the Contractor owns the float, then any Employer delays can immediately have an impact on the project end date.

You have had a delay event, its impacted on the end date of the contract and will attract a cost, what three things are critical to being able to demonstrate this delay successfully?

• Good records

• Good records

• Good records

And perhaps most important of all, a claims specialist to ensure that not only is the claim prepared in accordance with the contract requirements but in a way that is easy to follow and able to allow a third party to assess and determine liability in favour of the company bringing the claim.

Extension of Time

There are a number of claims that will be made under a contract, yet perhaps the one that is most often needed is an Extension of Time (EoT) to complete the works that have been contracted.

Amazingly despite these types of claims often being relatively straight forward they often fail because the party making the claim fails to adequately demonstrate their entitlement in the submission.

When drafting an EoT there are 8 key elements that need to be included, these being:

• The claim event

• Liability for the claim event

• Contractual compliance

• Contractual entitlement

• Statement of claim

• Substantiation

• Cause & Effect

• Delay analysis

We will now examine each of these main headings in a little detail

The claim event

This is exactly what the title says it is, state the event that has lead to the claim e.g. weather event and then provide the circumstances that lead to the event. This element should be short and concise and acts as an effective Executive Summary of what is to follow, where you detail the claim in greater detail.

Liability for the claim event

In outlining “The claim event” you are setting out what has caused the claim to be formulated and submitted. In this section you need to demonstrate liability lies with another or the other party to the contract and you want to determine liability for the event.

If the claim is by a Sub Contractor to a Main Contractor the possibility exists that the Main Contractor will have a similar right under the Main Contract with the Employer, particularly around weather events or force majeure. These types of events will usually entitle the party bringing the claim to an EoT, but this will obviously be dependent on the specific form of contract and its provisions.

In the Joint Contract Tribunal (JCT) Minor Works Contract grounds for an EoT are dealt with at Clause 2.7. In other forms such as the New Engineering Contract (NEC) often the claim will be dealt with as a Compensation Event.

Contractual compliance

Generally the Contractor or Sub Contractor will be required under the terms of the contract to submit notice(s) with detailed particulars, particularly in relation to an EoT. Where the time frame is silent in the contract then it will be within a reasonable time period.

Of course what is reasonable?

This is why it is better to define periods during the contract negotiation for the protection of all parties.

By way of an example in the International Federation of Consulting Engineers (FIDIC) form of contract at Clause 44.2 states:

44.2  Provided the engineer is not bound to make any determination unless the contractor has

(a) Within 28 days after such an event has arisen, notified the engineer with a copy to the  employer and 

(b) Within 28 days, or such reasonable time as may be agreed by the engineer after such notification submitted to the engineer detailed particulars of any extension of time to which he may consider himself entitled in order that such submission may be investigated at the time.

It may be the case that the submission of these notices is expressed as Condition Precedent and in the event the Contractor or Sub Contractor fails to comply with condition may result in the wavering of any entitlement.

It is therefore essential for the parties to understand their obligations and expressed provisions of the contract and as a consequence to comply with the provisions. A contract is an even handed document (or at least should be) and all parties should endeavour to comply with all provisions therein, particularly if they want to rely on provisions to establish entitlement.

Contractual entitlement

As a general rule the contract (particularly where a standard form) will contain specific provisions which may entitle the Contractor or Sub Contractor to an EoT for one or a series of events.

By way of an example under FIDIC, there are a number of different conditions:

Clause 6.4 – Late Drawings
Clause 12.2 – Adverse physical obstructions or conditions
Clause 27.1 – Discovery of fossils or antiquities
Clause 36.5 – Additional tests not provided for
Clause 40.2 – Suspension of the works
Clause 42.2 – Failure to give possession of site
Clause 44.1 (a) – Additional or extra work
Clause 44.1 (c) – Exceptionally adverse climatic conditions
Clause 44.1 (d) – any delay, impediment or prevention by the Employer
Clause 44.1 (e) – any special circumstances, other than through default by the Contractor
Clause 69.4 – Contractor’s suspension of the works

Statement of claim

As the claim is effectively in two parts, first you demonstrate entitlement (as demonstrated in “Liability for the claim event”, “Contractual compliance” and “Contractual entitlement”) and then the details of what has transpired to lead to the claim. Therefore it makes sense to again make a clear and succinct statement on what the Contractor or Sub Contractor is claiming.

Substantiation

This is where the claim will succeed or fail effectively as its one thing to prove a contractual entitlement it’s another to prove that you have that entitlement based on what has occurred.

This section needs to be robust and will have all the evidences that the Contractor or Sub Contractor seeks to rely upon as the documentary evidence. This documentary evidence will be made up of a number of different contract and non contract documents, which all drawn together in a single document support the assertions made in the overall claim document. These can include, but be limited to the following:

• Letters
• Site Instructions
• E-mail’s
• Method Statements
• Risk Assessments
• Progress Reports
• Record Photographs
• Minutes of Meetings
• Programme’s (Baseline and updated)
• Schedules
• Trackers
• Statements of Fact
• Expert Witness Statements

Cause & Effect

Being read and drafted together with the “Substantiation” will be the “Cause & Effect” which as the title suggests is where you demonstrate a cause; e.g. adverse weather for a prolonged period outside of the normal for that period; with the effect; which would in all likelihood be delay to works on site at the minimum and may result in works that are damaged and require to be re-done.

In order to be successful in a claim merely listing the events in chronological order should not be sufficient to demonstrate a full entitlement. The real art in putting together the claim is for the narrative to tell the person assessing the claim a story describing how the event has affected the works.

This should commence with what the planned works were and how they were affected, in particular making reference to planned sequences, durations and mythologies (Note how the list in the previous section becomes important here, the status of the works to the planned at the time of the claim event and detailing the changes that took place as a direct result of the claim event.

Delay analysis

Undertake a delay analysis which demonstrates the effect to the programme.

There are a number of internationally recognised delay analysis methods and the most appropriate method will effectively be determined by circumstances surrounding the claim event. This can include but not be limited to the following:

• Level and detail of records available
• The robustness of the Baseline Programme and effects of any periodic updates
• Available time (Particularly around contracts that time bar events after the passing of a period of time)

• Degree of accuracy

• Level of proof required under the contract.

We will review Delay Analysis Methods in greater detail later.
Of course every claim will be different and some may need very basic details under the defined headings detailed above, but likewise others can be extremely complex and may be to demonstrate more than one entitlement. Like any document it should be clear and concise to enable the person that has to make a Determination being able to do so based on the submission. If the claim submission is haphazard and difficult to follow, it could lead to the claim being rejected even though there was an entitlement.