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MANAGING THE RISK OF DISRUPTION AND PROLONGATION IN CONSTRUTION CONTRACTS
A Talk given by Rob Buchanan at the Joint Meeting of the ICE and South East Branch at the Rose & Crown Hotel, Tonbridge on 14 November 2006.
A joint meeting with the ICE at Tonbridge brought together an assorted group of civil engineers and members of the SE branch. They enjoyed tea or coffee and sandwiches before being entertained to a well balanced talk by Rob Buchanan aided by Sam Boyling both Solicitors of Pinsent Masons. Rob is also a Chartered Civil Engineer and gave a practical spin to the presentation.
To set the scene, both prolongation, or delay, and disruption were defined in refreshingly simple terms. "Delay occurs when an element of the work takes longer than planned." "Disruption is lost efficiency." As a contrast, we were treated to some other definitions which had emanated from various construction law textbooks. These were more than worthy of Donald Rumsfeld's convoluted mind. The magnitude of the problem for the construction industry was underlined by research that was quoted which showed that 40% of projects monitored in 2004 overran the contract period, and that for public sector projects the percentage overrunning was even greater. It was explained that the risk of overrun can be managed, but that where overrun does occur, all of the parties suffer, from the Employer through the contractors and sub-contractors down to the consultants. The ill fated Wembley Stadium was quoted as an example of how delay can damage a party's reputation.
Sam Boyling dealt with the management of the risk, explaining that the contract itself is the key tool. This places the risk of certain events upon particular parties. The Extension of Time clause was discussed and Sam explained that it had to include an express power to extend time in the event of a default of the Employer; without it, time will become "at large" where an Employer commits an Act of Prevention. It was stressed that an event giving rise to prolongation may not also enable the contractor to recover disruption costs. Equally, disruption costs may be recoverable without any entitlement to an extension of time. The more recent contracts try to ring-fence the Employer's risks by making the timely submission of notices a condition precedent to granting extensions. In these cases, failure to give proper notice or to keep proper records may void a claim. The necessity of updating programmes accurately was stressed and an example of the pitfalls of failure so to do was given in the case of Great Eastern Hotel Co Ltd -v- John Laing Construction. Here Laing effectively acquired the risk of delay by poor and inaccurate programming.
The presentation ended with practical tips for the management of disruption and prolongation. The key advice was "Get real from the outset", sound advice which could be usefully applied to many other situations. Specific advice was offered for all the separate parties, from Employer through to consultant. A short period for questions followed where it was apparent from the questions asked by the more senior persons that, notwithstanding the continuing production of new and better contracts the problems of disruption and delay remained very much as they have done for the past many decades.
Martin Moorhead