Construction Law/Extesnion of time
QUESTION: Dear Femi,
Hope you are doing fine.
Relating to Design and Build Project under FIDIC, first edition 1995
Pursuant to Sub-Clause 16.1, the Contractor may suspend or reduce rate of work after giving not less than 7 days prior notice to the Employer. If the Contractor suffers delay and/or incurs Cost as a result of suspending work or reducing the rate of work, the Employer’s representative shall agree or determine any extension of time, and the amount of such Cost the Contractor is entitled to.
1. The Contractor notified the Employer that due to its failure to pay the amounts due under certificate of the Employer’s representative, they would reduce rate of work. I would appreciate if you give me an idea of what is expected of a Contractor who wants to claim for extension of time and Cost in this regard?
• Can the Contractor simply request for extension of time counting the number of days after the expiry of the time specified in the contract? [without justifying the reduction in the rate of work and the impact on its work programme and completion time of the project]
• Can the Contractor claim extension of time counting also the number of days before the expiry of the date of the 7 days prior notice the have to give?
Being deeply indebted in advance and looking forward to receiving your replies, I remain.
ANSWER: Dear Alemu,
Thanks for your questions.
Regarding this, the Contractor is to ensure that the notice of 7 days is properly served and he should not reduce the rate of the works at any time before the expiration of the seven day notice. This answers your third question.
To your second question, the Contractor cannot simply claim time extension using the duration of days from when he started reducing the rate of works but he is to justify with the reduction in the resources planned for the execution of the works in line with the project cash flow which had been tailored to the schedule of payment to be made by the Employer. And the reduction of the resources will definitely help the Contractor to demonstrate the impact of the reduction on the "as planned" productivity. This answers your second question.
On your first question, What is expected of a Contractor who intends to claim based on the above provisions are as follows:
1. Planned cash flow - expenditure planned and payments planned - This would be based on productivity planned to generate the payment certification planned which is expected to be generated by the Cash flow expenditure planned. (EVM)
2. Evidence to demonstrate that, Contractor has been keeping to his planned productivity prior to the non-payment circumstance. This would enable you to determine the percentage loss of productivity (due to Contractor's own inefficiencies before Client's contribution by the delayed payment.
3. Records and quantum of resources planned vs actual deployed on the project - Labour / Staff, plant and materials. This would be compared with the productivity to determine the lost productivity and related time which may then result in extension of time.
4. Value of the payment certificate being delayed to the cash flow planned during the period of delay to ascertain the percentage effect (except where the effect results in more impact) otherwise, it would be understood that, the percentage of the effect would be directly related to the percentage of the resources deployment to be recorded during reduction.
5. The event that trigger the reduction of resources (rate of work) may trigger other claims which are not limited to time, but costs and other incidental claims, like loss of overheads, loss of profit on tied down capital..etc.
I hope i am a bit clear?
---------- FOLLOW-UP ----------
QUESTION: Dear Femi,
Hope you are doing fine.
A Contractor was already 30 days late after the completion time of the contract. On the 31st day, an incident happened for which the Contractor was not responsible. Because of the incident, suspension took effect for 70 days. The Contractor resumed execution and took 50 days to complete the works that remained at the time of the incident. In fact, the remaining works had to take only 30 days as per the Contractor’s work programme.
What would be the approach to work out the extension of time and determine up to which date the Contractor shall be entitled to? What would be the implication of the suspension? Should the impacted completion time not in any case be before the date on which the suspension ended plus the time the contractor requires to complete the outstanding works as per the work programme?
Based on the above example, would it be original completion time + 130 days, or original completion time + 100 days? Or what else would it be?
As usual, I really do not have words to thank you enough in advance.
I really apologise, i thought i have answered you. I am just checking now and found out that i have not.
Based on the information you have supplied in the question, I can tell you that, any delay events that occur in contract has a rule of analyzing their consequent effects. This is the principle of "cause and effect" For example, If the Contractor is the cause of any delay, he would be responsible for his delay and there will not be any extension of time and also no cost. If the Employer is the one responsible for the delay event or if the delay event is such that the Employer has retained the risk i.e. "Employers Risk"; the Employer would be responsible for any time and cost impact.
In the scenario you have given, It is clear that suspension is clients responsibility and as such you would need to analyze the impact of the 70 days. You have to note that, the duration of the delay may not be directly proportional to the effect (impact) on the programme. May be, by the time you plug in the dates of the period of suspension, you may have less or more than 70days as the impacted effect on time. You would need to check the progress of the works prior to suspension and update your programme as at such date of commencement of suspension and ofcourse which will show the Contractor's delay and its effect. Thereafter, plug in the dates for which the project was suspended and you will see if it drive your programme beyond the 70days suspension or not. You cannot determine EoT entitlement only on the duration of the actual delays but rather, you need to analyze the impact of the 70days suspension and grant the appropriate entitlement.