Construction Law/Prolongation Costs in case of Concurrent Delay
QUESTION: Dear Sir;
Our Contract is an Oil & Gas bespoke one in which is stated that the governing law is the laws of England & Wales. The Contractor was granted an EOT of 9 months due to some delays by the Employer which affected the critical path and resulted in such 9 months. At the time of Contract taking Over date, the Contractor wouldn't have completed some activities which have not been connected at all with Employer's delay i.e. those activities are delayed by the Contractor and they are considered concurrent delays. My questions, Sir;
1- in this case, does the Contractor deserve prolongation costs compensation due to the continuity of Camps and other site overhead being still open?
2- Does he deserve prolongation costs for the office overhead as he claimed and used Hudson's formula to estimate those costs (despite that the Contract has no mention to this formula at all)
3- Some friends with experience advised me that since there are concurrent delays by the Contractor, the overhead (camps and else) would have been to be opened in all cases and accordingly Contractor must bear all prolongation costs incurred, and they advised me to refer to SCL. I refereed to it and found it advising to separate, if we are able, the costs between those delayed by Employer and those delayed concurrently by the Contractor
4- Our planner said to me it is difficult to do such separation .
5- please advise me what to do and please help me, if possible, with references or supporting documents (or their names) relevant to English Laws since it is the governing law.
Your urgent reply, Sir, will be appreciated since I am , as the Consultant CA, working now on prolongation costs claim already submitted by the Contractor
Thank you so much
ANSWER: Dear Mr khaled,
While thanking you for your question,may I respond as follows
1.In the delay scenerio explained, the contractor is entitled for time extension as per SCL even there is concurrent delay after 'delay analysis' and also for time related expences proven from duely maintained contemporary record.This delay analysis will help you to seperate out the costs.Some contractors avoid doing this delay analysis.
2.Has he produced duly audited company balance sheets for the period so that you can check the time related expenses actually incurred for the 9 month period instead of using Hudson formula etc? You are only obliged to pay additionally time related proven expenses in the extended period from actual record maintained .
3. As in 1 please
4.Do you have a scheduling engineer and if so, he will be quite familiar with it.
5.I feel you should ask the contractor to provide delay analysis though CPM networking before proceeding further.You may at least discuss with him on this aspect and let me study his answer.I am not clear if this 9 month delay is concurrent for both parties for the total 9 months?
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QUESTION: Dear Mr. Liaqat;
let me explain the situation more thoroughly to help you give me your final decision.
Our project consists of Pipeline + 17 Controlling stations + SCADA monitoring system. Events caused by Employer (such as delay in land acquisition & delay in performing demining for some land plots as demining is an Employer obligation & Change Orders instructed by Employer regarding re-sizing of 6 stations out of the 17 ones & delay by Employer to provide some information about SCADA to the Contractor), all these events led to affect the critical path and extended the Time of Completion by 9 months as mentioned previously.
During this 9 months extended period, Contractor completed and handed over the pipeline (which is the major portion of the project) in the second month. He is still working in all stations noting that we are now in the 5th month of the EOT period (the 6 stations delayed by Employer and also the remaining 11 stations delayed by Contractor without any effect from Employer's events mentioned above on those 11 stations).
He is also still working in SCADA (which is supposed to be completed by the end of the 9 months i.e.it is the critical activity of the EOT period).
The 11 stations delayed by the Contractor still suffering some problems of resources attributable to the Contractor himself but they are expected to finish, let's say, in the 7th month. i.e. there are 7 months under concurrent delays of Employer's and Contractor's together while 2 months will be under Employer's delay only.
Now, what do you see , Sir?:
1- is the Contractor entitled to prolongation costs for the first 7 months (out of the 9 months) or only for the last 2 months where the delay will be only due to Employer?
2- The separation mentioned in the attached highlighted SCL clauses; does it mean separating the costs within the first 7 months between both parties or separating the total period of 9 months into 7 months with no entitled costs and 2 months with entitled costs?
2- if he is entitled for prolongation costs in the first 7 months; so logically he will be entitled to the share which in under Employer's delay only. now what if he couldn't submit an accurate Delay analysis with proven records that enables us (as the Consultant) to review and distinguish his share from Employer's share?
Sorry for long message but i wanted to give you all the details since it is very vital to me ... Thank you so much for your time Mr. Liaqat .
Awaiting your response please have my regards
ANSWER: Dear Mr. Khaled,
Thank you for providing exhaustive details and I feel better to advise on the matter. My response to your new 03 questions is as follows:
(1) In my view Contractor entitlement is for time extension is for 09 months out of which monitory consideration should be given as compensation for last two months only. This is on the basis of approximate delay analysis that I can consider from the provided data. I have acted as FIDIC's The Engineer and would normally not give EOT unless Contractor has produced time impact analysis of all delay events in chronological order right from the first delay event.
(2) I consider it that SCL permits this monitory compensation consideration for last two months as per depicted scenario.
(3) SCL is quite clear that this consideration of separating costs can only be considered if the cost and time delays could have been separated out and so I will not consider first seven months for separation of cost criteria. The Contractor should have regularly updated his baseline program for these seven months. This coupled with contemporary record in form of daily reports and monthly reports could only have provided some basis to review the matter if first seven months were needed to be included for cost compensation.
I hope I have communicated my views clearly.
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QUESTION: Dear Mr. Liaqat;
I don't know how to thank you, as usual you are the best expert who help us diligently and patiently.
However, since this issue is very critical, I still have a minor confusion. You, in answers (1) & (2), confirmed that in the first 7 months no entitlement for prolongation costs to the Contractor , then, in answer (3) you opened the door again that he could be entitled if there are contemporary records such as daily & monthly reports which may enable him to sepration. Actually, yes the Contractor used to submit detailed daily & monthly reports detailing the activities, respective manpower and equipment, problems he encounters, etc.
This means that I can't now close the issue and recommend that No prolongation costs in the first 7 months but , in order to be logical and fair in front of the Employer, I should recommend that the Contractor have to submit a full study and breakdown based on a Delay Analysis and proven records first to identify the total actual prolongation costs and second to apportion (separate) them into one portion referring to Employer's delay and another portion referring to Contractor's delay. Contractor shall be entitled only to the first portion referring to Employer's delay.
If the Contractor failed to submit such study as well as apportionment to the extent it can convince us that it is true and accurate enough, No prolongation costs shall be entitled for those 7 months.
Is this OK ??
Thank you so much Sir
Dear Mr. Khaled
I only re-opened the matter in question 3 again as i was not sure of the position and recording of the same in contemporary record.I agree with your approach now it is injured party which has to come with all substantiation to prove his claimed amount.I still not clear if the contractor updated his base line program every month in these 7 months and is this in line with your approach now intended to be followed now? Please re-check this point.