Practical Law

The Society of Construction Law (SCL) has recently issued a consultation draft of the second edition of its Delay and Disruption Protocol (Protocol). The object of the Protocol is to provide guidance on some of the common delay and disruption issues that arise on construction projects. Its stated purpose is to provide a means by which the parties can resolve these matters and avoid unnecessary disputes.

SCL has asked that feedback is given to feedback@eotprotocol.com by 8 July 2016 and if you have any interest in this topic I would encourage you to read it and give your views.

The consultation draft includes updated guidance on concurrent delay, a topic which it recognises is contentious.

In my view, the consultation draft rightly deals with the topic in two parts:

• The meaning of concurrent delay.
• How the law deals with concurrent delay once it is established.

I’ll address the second of these issues (the easier one) first.

How does the law deal with concurrent delay?

The key question is whether the contractor is entitled to an extension of time (EOT) where there are concurrent causes of delay, one of which is caused by a contractor risk event (contractor delay) and the other by an employer risk event (employer delay).

The starting point must always be the contract. Increasingly, I come across contracts (particularly on international projects) that set out what will happen in the event of concurrent delay.

If the contract does not expressly address the point, the position under English common law is that the contractor will usually be entitled to an EOT for employer delay, even if that delay runs concurrently with a contractor delay. A number of cases adopt this approach. This position, which is now relatively settled, is reflected in the consultation draft (paragraph 3.10), and indeed in the earlier edition.

What does “concurrent delay” mean?

This is the much harder question. In considering whether a contractor is entitled to an EOT, I find it useful to start from first principles and follow a three step test:

• Has an employer risk event occurred?
• Did/will the event affect the progress of the works?
• Did/will the delay to progress cause a delay to completion?

The last two steps are questions of causation and the correct test will depend on the terms of the contract. However, the majority of construction contracts are not particularly clear on this point:

• The JCT forms require the contract administrator/employer’s agent to grant an EOT if completion of the works “is likely to be delayed thereby”.
• The FIDIC forms provide that the engineer/employer must grant an EOT to the extent that completion “is or will be delayed”.

Where there is a single cause of delay, the correct test must be whether the completion date would have been delayed but for the employer delay. If so, the contractor will be entitled to an EOT.

However, the “but for” test does not work where there are two or more causes of delay as the test provides that neither event has caused the delay (because the delay would have happened but for either). Logically, this cannot be correct, but what is the correct legal test?

The consultation draft states that:

“For concurrent delay to exist, each of the Employer Risk Event and the Contractor Risk Event must be an effective cause of Delay to Completion (and not merely incidental to the Delay to Completion).”

Clearly this must be correct, and it is strongly supported by case law, Royal Brompton Hospital National Health Service Trust v Hammond and Adyard Abu Dhabi v SD Marine Services. However, it does not take us much further in terms of the test of causation.

It is interesting that the Protocol does not adopt the “John Marrin definition” of concurrency, which was approved by the court in Adyard (at paragraph 277):

“A useful working definition of concurrent delay in this context is a period of project overrun which is caused by two or more effective causes of delay which are of equal causative potency.”

Perhaps it was felt that including reference to “equal causative potency” was too vague for guidance which is aimed at providing practical assistance.

It is always difficult to deal with concurrent delay in the abstract and the consultation draft helpfully illustrates its guidance with the following example:

“There is a contractor risk event which delays completion from 21 January to 25 February. Independently and a few weeks later, a variation is instructed by the employer which, in the absence of the preceding contractor risk event, would delay completion from 6 February to 20 February.”

The consultation draft recognises that on one view, both events are effective causes of delay to completion for the period from 6 to 20 February because either would have caused delay in the absence of the other. It points out that this view may be supported by older cases which predated critical path analysis.

The alternative view is that the employer delay would not result in a delay to completion because the works were already going to be delayed, and therefore the contractor is not entitled to an EOT.

The consultation draft prefers the second approach. In other words, where an employer delay to completion occurs after a contractor delay to completion but continues in parallel with it, that is not concurrent delay. The employer delay is said to have no impact on completion. The basis for this position is said to be recent English court decisions. I would be interested to see the dicta upon which the draftsmen rely.

Let’s consider how the guidance might change if the scenario is altered. Say the contractor delay and the employer delay start at the same time but the contractor delay lasts longer (in other words, its bar sticks out the furthest). Following the logic of the consultation draft, the contractor would not be entitled to an EOT, because in the end the employer delay had no effect on completion.

What would happen if the events overlap but do not start or end at the same time? Is the overlapping period concurrent delay? If not, then only delays which start and end at the same time can be concurrent. This would be very favourable to the employer and a very narrow approach.

The guidance in the consultation draft places much weight on the timing of the events. It is also heavily reliant on the “critical path”:

“3.10.6 …the analysis of the effects of the delay events is simpler if it considers only those events that will result in Delay to Completion … so that the grant of an EOT follows the outcome of the critical path analysis.

……
3.10.10 Concurrent delay only arises where the Employer Risk Event is shown to have caused Delay to Completion or, in other words, caused critical delay (i.e. it is on the longest path) to completion.”

In the examples discussed above, either of the two events, on its own, would have delayed completion. In my view they are both effective causes of delay for the period of overlap. I think there is a strong argument that the contractor should be entitled to an EOT for the employer delay, based on Akenhead J’s reasoning in Walter Lilly & Company Ltd v Giles Patrick Cyril Mackay and another.

As it stands, the guidance may encourage an employer to hide behind the contractor’s delays. The employer may have always needed to issue an instruction to change the works, but the canny employer may wait until the contractor is in its own period of delay.

Focusing on the exact timing of events and the “critical path” is likely to encourage parties to rely heavily on delay analysts, and on them identifying the critical path, which is by no means an exact science and different analysts may find a different critical path. This emphasis may distract the parties from applying the legal test of causation (and a healthy dose of common sense) to the facts.

All that being said, it is much easier to comment on, than to draft, these things in the first place, and I hope that the consultation draft will generate an important debate on this issue.