Legal questions: additional work
12 May 2017
Charles Blamire-Brown looks at contract completion dates and when additional work should lead to an extension of time
My contractor's programme has scheduled completion for 6 weeks earlier than the contract completion date. If I issue instructions for additional work that should take no more than 2 weeks, is the contractor entitled to an extension of time?
This is an all too familiar issue that often causes confusion. If you read your contract carefully and follow the guidance in the latest draft of the Society of Construction Law (SCL) Delay and Disruption Protocol, issued for consultation in June 2016, you should not go far wrong.
In the scenario described, the contractor has built 6 weeks of float into its programme, by which I mean the time available for an activity in addition to its planned duration. In this case, the activities comprising the works have a planned duration that ends 6 weeks earlier than the completion date. The 6 weeks is effectively additional contingency built in to the programme: if things run as planned, it should not be needed. The float in this scenario is built in at the end of the programme, and so is sometimes referred to as 'terminal float'.
The contractor may consider that it has built this in as a contingency for its own benefit and use as part of its freedom to plan its works. In contrast, the employer may argue that it has effectively paid for this float as part of the contract price, so should have the benefit of using it for its delay events. The question is, therefore, who owns the float.
Position under JCT
In the scenario under consideration, the additional work is likely to be a relevant event, and as such it would entitle the contractor to an extension of time (EOT). However, this is only to the extent that the effect of the relevant event is to delay completion of the works or any section beyond the completion date.
The contractor may be entitled to extension of time insofar as the relevant event delays works beyond the completion date
Assuming that, in this case, the contractor would have completed 6 weeks earlier than the planned date if it were not for this relevant event, that additional work will cause a 2-week delay to the planned completion. The question is whether the terminal float can be used up by the relevant event or should be preserved for the contractor's benefit should it face future delays.
Absent any express wording to the contrary in the contract, the position is likely to be that the float should be used up for the relevant event, and to the extent there is still some float left there is no entitlement to an EOT. The draft SCL protocol confirms that
"Unless there is express provision to the contrary … an EOT should only be granted to the extent that the Employer Delay is predicted to reduce to below zero the total float on the critical path affected by the Employer Delay to Completion".
In our scenario, 4 weeks of the float remain after the relevant event, and there is therefore no entitlement to an EOT.
The Joint Contract Tribunal (JCT) neither refers to nor distinguishes between terminal or activity float. The above position is therefore equally applicable to both.
Position under NEC
Under the New Engineering Contract (NEC), the additional work is likely to be a compensation event. This will entitle the contractor to an adjustment of the completion date, to the extent that the effect of the compensation event is to delay completion of the works beyond planned completion as shown on the accepted programme.
As noted above, the additional work would cause a 2-week delay to planned completion. Accordingly, under the NEC the contractor would be entitled to a commensurate adjustment to the completion date. This has the effect that terminal float is preserved for the contractor’s benefit and use, unlike the situation under the JCT.
In terms of activity float, the position under the NEC is the same as it is under the JCT; that is, the float will be used for the benefit of the project on a first come, first served basis.
Entitlement to money
The contractor should in principle be entitled to compensation for its costs even if the delay does not result in an EOT, provided that the employer is aware of the contractor's intention to complete the works before the contract completion date and that intention is realistic and achievable.
If the contractor can show that time-related preliminaries were based on completing by the planned date, and that at the time of tendering completion by this point was realistic and achievable, they may be able to recover the time-related preliminaries for these additional 2 weeks.
Charles Blamire-Brown is a senior associate at Pinsent Masons LLP
Related competencies include: Contract administration
This feature was taken from the RICS Building Surveying journal (March/April 2017)