The TIA route to resolving disputes
Time impact analysis is becoming an increasingly popular method of resolving construction disputes without litigation. MICHAEL HARDY* details the steps to be considered and the benefits of using the method
FUNDS for a large number of construction projects in the region are drying up. This, coupled with a substantial reduction in the cost of labour and materials, has meant that some developers are reconsidering their current projects with a view to renegotiating more favourable terms or seeking to alter the original scope.
Should a developer fail to persuade its contractor to agree to a re-scoping exercise, the developer may then be faced with a claim for delay caused by what, in effect, amounts to a contract variation.
Given the financial pressure developers are currently facing, there may also be increasingly valid grounds for contractors to make extension-of-time claims in respect of delays caused by, for example, non-payment or the late provision of information.
Whatever the cause, the contract administrator (often an engineer) must apply a methodology to determine whether and to what extent an extension of time should be awarded.
There are a number of different ways to determine an extension of time and it is not uncommon for parties to disagree upon the methodology used. If the contract follows a particular industry form, there may already be a specific methodology applicable. However, most standard form contracts fail to address the issue adequately.
For example, the Fidic Conditions of Contract are commonly used in the Gulf yet fail to promote a specific approach to extensions of time. Fidic’s Red Book uses the words: “If and to the extent that completion … is or will be delayed” but fails to consider the appropriate methodology to decide such delay.
Time impact analysis (TIA) is a method typically used to resolve complex disputes. In order to undertake a time impact analysis, the six sequential steps below must be considered:
1. Has a cause entitling the contractor to an extension of time arisen (an “Event of Delay”)?
2. Identify the programme against which any delay is to be assessed. By way of example, in the case of the Fidic Red Book, the contractor is obliged to submit a programme and to revise it “whenever the previous programme is inconsistent with actual progress or with the contractor’s obligations”. Consequently, the last such accepted (or deemed accepted) programme which most recently pre-dates the ‘event of delay’ identified should be used.
3. Without taking into account the event of delay itself, revise the programme identified in Step Two, so that it reflects:
(i) The reality that pertains at the time immediately before the occurrence of the ‘event of delay’; and;
(ii) A plan for the remaining works which complies with the contractor’s duties as to programming and progressing of the works.
4. Identify planned time for completion on the revised programme developed in Step Three.
5. Identify the activities on the revised programme that will be affected by the ‘event of delay’, and then assess the effect of it on each of those activities. Finally, impact the ‘event of delay’ on those activities, in order that the revised programme takes account of the ‘event of delay’.
6. Finally, consider whether the planned time for completion has changed following the impact of the ‘event of delay’ determined at Step Five.
As to Step Three, contractors are often tempted to use an unamended version of the accepted programme to assess events of delay, irrespective of how out of date it may be. Whilst there is no reported case law in England on this point, for the contractor not to revise the programme to reflect the position immediately prior to the event of delay, is often self-serving.
Consider a project where the programme is severely out of date and the contractor is in culpable delay. If the contractor were to be entitled to assess an extension of time against the out-of-date programme, the culpable delay in the period after that programme but before the event of delay occurred would be completely ignored, thereby reflecting reality from a frozen point in time in the past and failing to accurately demonstrate the cause and effect of the delay.
This would permit the contractor to evade liability for culpable delay and effectively provide him an incentive to stop issuing programmes for acceptance in the future, in order to avoid future liability for culpable delay. The contractor could take advantage of its own wrongdoing by benefiting from a breach of contract (be it the culpable delay or the failure to submit revised programmes).
That being said, Article 246(1) of the UAE Civil Code introduces an implied term to carry out obligations in good faith, which would seem contrary to this approach.
Conversely, employers are sometimes tempted to take hindsight into account and to use a programme that post-dates the event of delay. This is similarly not permitted. Time impact analysis does not permit events to be taken into account if they post-date the event of delay in question. In other words, a retrospective approach, which allows the benefit of hindsight, is not permitted.
In relation to Step Five above, another argument known to surface is whether the assessment or “snapshot” date should be the date at which the assessment is made (or ought to have been made) or the date of the occurrence of the event of delay itself. This is probably an arguable point and depends on contractual drafting.
However, reliance on the date of assessment (as opposed to the date of the event of delay itself) would result in differing degrees of hindsight, depending on when the assessment occurred.
For example, the Fidic Red Book allows the engineer to make its determination within either 42 days after receiving the contractor’s particulars of claim, an alternative period mutually agreed or, alternatively, seek further particulars. This leaves the position open to manipulation. Aside from anything else, carrying out the assessment as at the date of the event of delay would ensure consistency irrespective of how quickly the assessment is made afterwards and would also be truer to the concept of a time impact study (as supported by the Society of Construction Law Protocol on Delay and Disruption).
The downside of the time impact methodology is that it places considerable importance on the programme and on the contractor continually updating the programme so as to reflect reality.
However, the benefits of time impact analysis in terms of prudent project management and progress tracking are to a large degree self-evident.
The parties know where they stand as the works progress as regards contractual entitlements flowing from events at the employer’s risk. This works to all parties’ mutual benefit and should help to avoid large scale after-the-event disputes on projects that encounter difficulties.
However, if the actual process of time impact assessment does not take place within a short period after the event occurring, it can be very burdensome and expensive to revisit. Clearly, it is in both parties’ best interests not to adopt a “wait-and-see” approach, but immediate action is something which is sadly more honoured in the breach than the observance.
Developers, contractors and engineers need to be prepared for these issues and to deal with them effectively, so as to protect their contractual rights (both in existing and future contracts) in what are trying economic conditions
Time impact analysis is becoming an increasingly popular method of resolving construction disputes without litigation. MICHAEL HARDY* details the steps to be considered and the benefits of using the method
FUNDS for a large number of construction projects in the region are drying up. This, coupled with a substantial reduction in the cost of labour and materials, has meant that some developers are reconsidering their current projects with a view to renegotiating more favourable terms or seeking to alter the original scope. …
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