It is a common misconception that delay and disruption are the same thing. Whilst often linked, they are separate. Put simply:
- Delay is an event causing a delay to critical path activities and therefore, the completion date. It is normally assessed against the critical path.
- Disruption is when planned works are hindered resulting in lower efficiency or loss of productivity. Disruption may but does not necessarily cause delay.
In order to make a claim for delay, the starting position is to the terms of the contract. The contract will usually set out:
- The events for which an extension of time will be granted
Most contracts require the delay to be an event outside the control of the contractor and which causes delay to critical path activities.
- The events for which delay costs will be awarded
Whilst you may be entitled to an extension of time, not all events will give rise to an entitlement to delay costs.
- Notification requirements
It is important to comply with the notification requirements in contracts. Most contracts provide that a failure to comply with the timing provisions will be a bar to making a claim and the Courts have readily upheld such provisions.
- Delay Costs
Sometimes, the contract will set out an agreed rate for delay costs. If there is not agreed rate, you will need to provide evidence to substantiate the amount being claimed.
Common costs include direct additional construction costs, site overheads and preliminaries.
Again, the starting position is the terms of the contract. In order to bring a claim for disruption you will need to establish:
- Legal Entitlement
You must have a legal entitlement under the contract to claim additional costs caused by disruption or prove that the disruption suffered is a breach of contract resulting in damages
- Works have been hindered
This is often done by way of contemporaneous records. It is important that if you facing issues on site in terms of access or other contractors hindering your works that this is documented.
- The disruption resulted in additional costs
You will need to prove that scheduled labour/plant has been under-utilised as a result of the disruption causing you loss. This will be effectively proving that the costs you incurred are higher than what they would have been had the events of disruption not occurred.
There are many ways of quantifying this and it is best to engage a quantum expert for assistance.
What you should do
Contractors should ensure the contract has a mechanism for claiming delay and disruption costs. Clear language is needed to ensure you don’t miss out on costs should a job be delayed or you are caused disruption outside of your control.
Keystone Lawyers can assist with contract drafting.