Extensions of time and delay analysis: The contract remains king

Delay analysis involves the identification, evaluation and quantification of delays affecting the progress and completion of construction projects. It is a fundamental component of allocating liability for delays,  informing the determination of entitlement to time and money. It is therefore in the interests of all contracting parties that building contracts provide a comprehensive framework for dealing with delay and disruption, so as to minimise the scope of any dispute.

The methodology and application of delay analysis has long been a source of contention in the construction industry, particularly where the relevant facts are known and can be assessed retrospectively. While a variety of delay analysis methodologies exist, some of which are recognised by the Society of Construction Law Delay and Disruption Protocol (the “SCL Protocol”), the selection of an appropriate method of analysis is dependent upon the specific facts, contractual provisions and available records. 

A recent decision in the TCC  involving the challenge of an adjudicator’s decision has highlighted some of the complexities associated with delay analysis and emphasised that operating the contractual provisions remains paramount.  This article looks at the Court’s approach in past decisions and considers whether recent case law has altered the position and what impact this may have.

Previous case law 

English law has historically resisted prescribing any single method of delay analysis. The appropriate approach depends on the contract, the nature of the claim and the evidence available. In disputes determined after delay events have occurred, there has been a recognised approach in considering what actually happened rather than relying on forecasts, which subsequent events have overtaken.

• In Fluor v Shanghai Zhenhua Heavy Industry , Mr Justice Edwards-Stuart held that, whilst generally speaking a prospective analysis may be the correct approach when contemporaneously considering an extension of time during the course of the works, the Court should apply a retrospective analysis to the facts of the case so as to allow it to properly consider the impact of competing causes of delay.
• The Court in Northern Ireland Housing Executive v Healthy Buildings (Ireland)  found that an assessment should be based on the actual cost and time incurred. As Deery J commented: “”
• The SCL Protocol anticipates that, where an extension of time application is assessed after completion of the works, a prospective analysis may no longer be appropriate. 

In principle, therefore, these authorities permit a third party decision maker (be it an adjudicator or judge) to open-up an extension of time award made contemporaneously during the project and undertake a retrospective analysis after the event – which may result in the change to the extension of time that had previously been awarded.

Has the position changed?

The recent case of Mace Construct Ltd v Baltic Investment Holdings Ltd concerned a challenge to an adjudicator’s decision, with one of the issues being whether the adjudicator had the right to open up and review an extension of time awarded by an Employer’s Agent under an amended JCT Design and Build 2016 contract.

The Court confirmed that an adjudicator had jurisdiction to review and revise an extension of time previously granted by an Employer’s Agent. However, when reviewing an extension of time decision, the adjudicator must step into the shoes of the original decision-maker and assess the delay using the same contractual mechanism and the same documentation that had been submitted at that point in time.

The Court acknowledged that this approach required the adjudicator to “ignore what has happened since that date”, effectively ruling out a retrospective assessment (in contrast to some of the earlier decisions). However, the Court also recognised the practical difficulties this created, concluding that they concerned evidential issues rather than procedural barriers and did not prevent the contractual exercise from being undertaken.

The decision makes clear that the exercise is therefore not one of identifying the objectively best delay analysis methodology; rather, it requires the decision-maker to consider the position of the parties at the relevant time under the particular contract.

In practical terms, this means that a Court or adjudicator may have to put hindsight to one side and assess the likely effect of the delaying event using the information available at the relevant time - even though its actual effect is known.

Practical implications

The decision reiterates the fact that an adjudicator (or the Court) may open-up and revise extensions of time granted during the course of the works, which may include the reduction of an extension of time that had been incorrectly overestimated. However, at odds with previous authorities, it provides that an adjudicator undertaking any form of retrospective analysis would be inappropriate in circumstances where the contract required a prospective assessment during the course of the works and this was in fact the exercise undertaken by the parties at the time.

Caution should be exercised before treating the decision as authority of general application. It may be better understood as reflecting the particular wording of the contractual clause and the nature of the adjudicator’s review function, rather than a broader rejection of retrospective analysis in extension of time disputes.

As previously observed by Mr Justice Akenhead, the debate between a prospective and retrospective analysis may be “sterile” in any event, as where each approach is correctly executed, the result should be the same.

The significance of this decision instead, lies in reinforcing the primacy of the contract. The question is not necessarily which methodology produces the most accurate reconstruction of what ultimately happened, but what assessment did the parties agree in the contract should be undertaken?

Key takeaways

• Contemporaneous programmes and records may assume even greater importance. If an extension of time is later reviewed prospectively, the programmes, progress data, notices, forecasts and assumptions available when the original assessment should have been made may be critical in demonstrating what a reasonable prospective evaluation would have concluded.
• Parties should always consider the contractual basis of a delay assessment before selecting a methodology. A detailed retrospective analysis demonstrating the actual critical path may not answer the contractual question if the relevant provision requires a prospective assessment.
• Delay experts may increasingly need to distinguish between evidence relevant to reconstructing the position at the time and evidence which only became available subsequently. This could create difficult questions about the extent to which hindsight should be excluded from an analysis prepared months or years later.
• Whilst the decision was made in reference to an amended JCT contract, analogous provisions are found in other standard forms. For example, the NEC4 suite of contracts generally provides for and assumes that compensation events will be assessed on a prospective basis.
• Contract administrators should ensure that extension of time decisions clearly record the information and assumptions upon which they are based. That may prove important if the decision is subsequently opened up and reviewed.