FAIR AND REASONABLE ASSESSMENT IN GRANTING

FAIR AND REASONABLE ASSESSMENT IN GRANTING

EXTENSION OF TIME

NOR AZIZAN BINTI MUHAMED

A report project submitted in partial fulfillment of the

requirements for the award of the degree of

Master of Science in Construction Contract Management

Faculty of Built Environment

University Teknologi Malaysia

MAY, 2009

iii

DEDICATION

To my beloved mother and father, my siblings, my beloved friends

Beloved Husband

Mohd Fadhillah Bin Mohd Nor

“Thank you for your love and support”

My Children

My dear son, Muhamad Haziq, my dear daughters, Nurul Ilyana and Nurul Iman

“You all are the heart of my life’

iv

ACKNOWLEDGEMENT

First and foremost, I wish to express my deepest gratitude to Allah S.W.T. for

giving me the inspiration and physical strength to prepare this final project. I am also

profoundly indebted and grateful to all the special people and parties who

responded to the survey and offered their invaluable contributions to help bring this

project to fruition

In particular, I want to express my sincere appreciation to my main thesis

supervisor, Assoc. Prof. Dr. Maizon Hashim, for her encouragement, guidance,

constructive criticism and understanding. I would also like to extend special thanks

to Assoc. Prof. Dr. Rosli B. Abdul Rashid and the other lecturers of Master of

Science (Construction Contract Management) for their guidance, advice and

motivation. Without their continued support and interest, this thesis would not have

been the same as presented here.

Finally, I would like to express my deepest love and appreciation to my

family, especially to my husband for his support and understanding given to me

when I really need them. I could never adequately express my gratitude to all the

great people who had played a vital role in bringing this thesis to fruition. I do

sincerely hope that the success of this thesis will in some way be a tribute to them.

Thank you

v

ABSTRACT

In most contracts, the employers delegate the role of assessing the

contractor’s application for extension of time to the Contract Administrators or

Superintending Officers. In making any determination under a building contract,

Contract Administrators or Superintending Officers have the duty to act fairly and

reasonably on a rational basis. Any assessment they make must be based on reasons

that can stand up to scrutiny by the other parties to the contract. They should carry

out a detailed, logical and methodical analysis of the documents and other evidence

submitted in support of the application for an extension of time. Failure to act fairly

can lead to invalidation of their certificates. However, it is difficult to give the actual

definition of ‛fair and reasonable assessment’ in granting extension of time. A

dispute arises when there is an issue of determining whether the Contract

Administrator or Superintending Officer acts correctly regarding the ‘fair and

reasonable assessment’ in granting extension of time. The objective of this study is to

identify how Superintending Officers or Contract Administrators approach their

duties in assessing Extension Of Time fairly and reasonably. The approach adopted

in this research is based on four case laws and five case studies in housing projects

located in various areas in Pahang, hoping that the findings will assist the

Superintending Officers or Contract Administrators to assess the Extension Of Time

to contractors fairly and reasonably. However, an analysis of past courts’ judgments

indicate no case law that clearly defines ‘fair’ and ‘reasonable’ assessment for

granting extension of time, although the English case of John Barker Construction

Ltd v London Portman Hotel Ltd (1996) 83 BLR 31, held that there was a guideline

for the Superintending Officers or Contractor Administrators to act in a fair and

reasonable way in assessing the contractor’s applications for extension of time.

vi

ABSTRAK

Kebiasaannya dalam sesuatu kontrak, tanggungjawab untuk membuat

penilaian untuk lanjutan masa telah diwakilkan oleh Pihak Klien kepada Pegawai

Kontrak atau Pegawai Penguasa. Pegawai Penguasa atau Pegawai Kontrak

mempunyai kewajipan tugas secara adil dan munasabah dalam membuat sebarang

penilaian dan keputusan. Sebarang penilaian yang dibuat mestilah bersandarkan

alasan yang kukuh oleh pihak yang berkontrak. Mereka hendaklah membuat

penilaian secara terperinci, logik dengan menganalisa segala dokumen serta bukti-

bukti untuk membantu dalam membuat penilaian untuk lanjutan masa. Kegagalan

berbuat demikian boleh mengakibatkan sijil lanjutan masa yang dikeluarkan tidak

sah. Walaubagaimanapun, adalah sukar untuk memberi maksud sebenar penilaian

secara adil dan munasah. Masalah timbul apabila penilaian yang dibuat oleh Pegawai

Penguasa atau Pegawai Kontrak dipertikaikan. Kajian ini bertujuan untuk

mengenalpasti bagaimana pendekatan Pegawai Penguasaatau Pegawai Kontrak

berlaku adil dan munasah dalam membuat penilaian terhadap lanjutan masa.

Pendekatan yang digunakan dalam kajian ini adalah berdasarkan empat kes

mahkamah serta lima kajian kes dalam projek perumahan di Negeri Pahang. Melalui

analisis mahkamah, didapati tiada satu pun kes yang menerangkan secara jelas

maksud adil dan munasabah dalam membuat penilaian untuk lanjutan masa,

bagaimanapun melalui kes Mahkamah Inggeris, John Barker Construction Ltd v

London Portman Hotel Ltd (1996) 83 BLR 31 ada menjelaskan garis panduan untuk

berlaku adil dan munasabah dalam membuat penilaian lanjutan masa terhadap

kontraktor.

vii

TABLE OF CONTENTS

CHAPTER TITLE PAGE

DECLARATION ii

DEDICATION iii

ACKNOWLEDGEMENT iv

ABSTRACT v

ABSTRAK vi

LIST OF CASES xiii

LIST OF TABLES xv

LIST OF FIGURES xvi

LIST OF ABBREVIATIONS xvii

LIST OF APPENDICES xviii

CHAPTER 1

INTRODUCTION 1

1.1 Introduction 1

1.2 Problem Statement 3

1.3 Objective of the Study 5

viii

1.4 Scope of the Study 5

1.5 Research Methodology 6

1.5.1 Stage 1 : Identifying The Research Issue 7

1.5.2 Stage 2 : Literature Review 7

1.5.3 Stage 3: Data Collection 7

1.5.4 Stage 4: Research Analysis 8

1.5.5 Stage 5 : Conclusion And Recommendation 8

CHAPTER 2

CONSTRUCTION DELAYS 10

2.1 Introduction 10

2.1.1 Definition Of Delay 11

2.2 Types of delays 12

2.2.1 Excusable delay 13

2.2.1.1 Excusable delays/compensable delays 13

2.2.1.2 Excusable/non-compensable delays 14

2.2.2 Non –Excusable delays 14

2.3 Concurrent delays 15

2.4 Causes of Delay 15

2.4.1 Owner –Caused Delay 17

2.4.2 Designer –Caused Delay 17

2.4.3 Contractor –Caused Delay 18

2.4.4 Subcontractor –Caused Delay 18

2.4.5 Delay not caused by parties to the design 19

2.4.6 Prevention of Delay 19

2.4.6.1 Pre-Contract Stage 19

2.4.6.2 Post-Contract Stage 21

ix

2.5 Conclusion 21

CHAPTER 3

EXTENSION OF TIME 23

3.1 Introduction 23

3.2 Purpose of extension of time clause in building contract 24

3.3 The ground for extension of time 24

3.4 Neutral Events 25

3.5 Employer’s delays 26

3.6 Relevant event of extension of time under IEM Form Condition

of Contract 26

3.7 Procedure for claiming an extension of time under express

Contract provisions 36

3.8 The Procedure of claiming of extension of time under JKR 203A

form of contract 38

3.9 Timing of the Notification 42

3.10 Detailed Particulars Of the extension Of Time Claimed 43

CHAPTER 4

ASSESSMENT OF EXTENSION OF TIME 45

4.0 Introduction 45

4.1 Fair and Reasonable Extension Of Time 46

4.2 Basis of Assessment 48

4.3 The Assessment Process 49

x

4.4 Duties of the Engineer/Architect/S.O in Granting Extension of

Time 50

4.5 The Law Cases Relating to Fair And Reasonable Extension Of

Time 51

4.6 The Protocol Of The Society Of Construction Law – Granting

Extension Of Time 53

4.6.1 Programme and records 54

4.6.1.1 Core Principle 54

4.6.1.2 Guidance 54

4.6.1.3 Commentary 55

4.6.2 Extension Of Time 56


4.6.2.2 Guidance 57


4.6.3 Float 59

4.6.3.1 Core Principles 59

4.6.3.2 Guidance 59


4.6.4 Concurrent Delay 61

4.6.4.1 Core Principles 61

4.6.4.2 Guidance 62


4.6.5 Retrospective delay analyses 64


4.6.5.2 Guidance 64


4.6.6 Mitigation of delay and loss 65


4.6.6.2 Guidance 65

4.6.7 Monetary claims 66

xi

4.7 Conclusion 67

CHAPTER 5

DATA ANALYSIS AND RESULT 68

5.1 Introduction 68

5.2 Findings and discussions 76

5.3 Case Study No.1 78

5.4 Case Study No. 2 79




5.8 Findings and discussions 82

5.9 Conclusion 86

CHAPTER 6

CONCLUSION AND RECOMMENDATIONS 87

6.1 Introduction 87

6.2 Summary of Research Findings 87

6.3 Problems Encountered When Conducting This Study 90

6.4 Recommendations 90

6.5 Further Studies 92

6.6 Conclusion 92

xii

REFERENCES 94

Appendix A 95

xiii

LIST OF CASES

CASE PAGE

Balfaour Betty Building Ltd v Chestermount Properties (1993) 32 CON LR 139 75

Boskalis Westminster Construction Ltd v Liverpool City Council

(1983) 24 BLR 83 33

Henry Boot Construction (UK) Ltd v. Malmaison Hotel

(Manchester) Ltd (1999) 70 CLR 32 63,74,78, 89

Hounslaw London Borough Council v Twickenham Garden

Development Ltd [1971]Ch 233 48

John Barker Construction Ltd v London

Portman Hotel Ltd (1996) 83 BLR 31 v, vi, 47, 49, 51, 68,76,86,88,92

Lebaupin v. Crispin (1920) 2 KB 714 29

Liew Ter Kwang v Hurry General Contractor Pte Ltd

(2004) 3 SLR 59 51, 71,77,88

Lian Soon Construction Pte v Guan Qian Realty Pte Ltd (2000)

1 SLR 495 73,77,85,89

xiv

London Borough of Merton v Stanley Hugh Leach Lt 91985) 32

BLR 51 37

Matsoukis v Priestman [1915] 1 KB 681 29

Penang Development Corporation v Teoh Eng Huat [1992] 1

MLJ 749 29

Peak Construction (Liverpool) Ltd v McKinney Foundations Ltd

[1970] BLR 111 24

Royal Brompton Hospital NHS Trust v Hammond & Ors (No 7)

[2001] 76 Con LR 148. 63

Sheffield District Railway Company v Great Central Railway

Company (1911) 27 TLR 451 47

Simplex Concrete Piles Ltd v St Pancras Borough Council

(1958) 14 BLR 80 32

Walter Lawrence And Sons Ltd v Commercial Union Properties

(UK) Ltd (1984) 4 CON LR 37 30

Westminster City Council v. Jarvis & Sons Ltd (1970) 7 BLR 64 34

xv

LIST OF TABLES

TABLE NO TITLE PAGE

Table 5.1 – Summary of causes of delay works and types of delay .......................... 84

Table 5.2 – Comparison of the numbers of days EOT applied by contractors and

approved by clients ................................................................................. 85

Table 6.1 – The cases law that explained ‘fair and reasonable’ in assessment for

granting extension of time ...................................................................... 89

xvi

LIST OF FIGURES

FIGURE NO TITLE PAGE

1.1 RESEARCH METHODOLOGY .................................................... 9

2.1 CAUSES OF DELAY ................................................................... 16

3.1 EXTENSION OF TIME: COMMON RELEVANT EVENTS ..... 36

3.2 FLOWCHART ON THE GENERAL PROCEDURE FOR

CLAIMING EXTENSION OF TIME – PART 1 .......................... 40

3.3 FLOWCHART ON THE GENERAL PROCEDURE FOR

CLAIMING EXTENSION OF TIME – PART 2 .......................... 41

xvii

LIST OF ABBREVIATIONS

S.O - Superintending Officer

PWD 203 (10/83) - Standard Form of Contract to be used where Bills of

Quantities Form Part of the Contract (Revised 10/83)

IEM.CE 1/89 - Standard Form of Contract to be used where Bills of

Quantities Form Part of the Contract of Civil Engineering

Construction

EOT - Extension of time

BQ - Bills of Quantities

CA - Contract Administrator

M & E - Mechanical and Electrical

TNB - Tenaga Nasional Berhad

JBA - Jabatan Bekalan Air

JKR - Jabatan Kerja Raya

xviii

LIST OF APPENDICES

APPENDIX TITLE PAGE

A IEM CONDITIONS OF CONTRACT FOR WORKS

MAINLY OF CIVIL ENGINEERING CONSTRUCTION 95

1

CHAPTER 1

INTRODUCTION

1.1 Introduction

A contractor is under strict duty to complete on time except to the extent that

he is prevented from doing so by the employer or is given relief by the express

provision of the contract. The effect of extending time is to maintain the contractor’s

obligation to complete within a defined time and failure by the contractor to do so

leaves him liable to damages, either liquidated damages or general, according to the

term of the contract.

In the absence of the extension provisions, time is put at large by prevention

and contractor’s obligation is to complete within a reasonable time. The contractor’s

liability can then only be for general damages but first must be proved that he has

failed to complete within a reasonable time. 1

1 Brian Eggleston , “Liquidated Damages and Extension Of Time In Construction Contract”, Second Edition, (Blackwell Science,1992), pp.162

2

According Lim Chong Fong,2 the operation of clause 43 modifies the liability

of the Contractor to complete the Works by the Date for Completion specified in the

Appendix and to pay Liquidated and Ascertained Damages to the Government upon

the failure of the Contractor to meet the deadline. It imposes a duty on the

Superintending Officer to grant a fair and reasonable extension of time for the

completion of Works in certain specified circumstances.

The period of work may be extended, subject to any extension of time

granted by the architect for delays that are not the fault of the main contractor under

the contract. When the contractor applies for an extension of time, it is often the case

that the architect will take some time to review before making a decision or withhold

the decision until the delay becomes apparent. In the absence of the instruction from

the architect, the contractor cannot recover the cost of acceleration of the work to

meet the completion date.

Therefore, contractors may take the risk of incurring liquidated damages for

the delay rather than spend extra money on acceleration. It should also be noted that

under no circumstances will the contractor be entitled to receive financial

compensation from the employer for the delay itself , as time can be extended

without increasing the overall cost of the contractor. The only entitlement for

monetary compensation from the employer is for the direct loss and /or expense

suffered by the main contractor as a direct consequence of the cause.3

According to Entrusty Group4, the evaluation to derive at the Extension of

time entitlement (EOT) can indeed be a complex subject especially when there is

more than one delaying events. Invariably, an evaluation of EOT will be made based

2 Lim Chong Fong , “The Malaysian PWD Form Of Construction Contract”, (Sweet & Maxwell Asia, 2004), pp.92 3 Teresa Cheng, Evia Wong, Gary Soo, “Construction Law And Practice In Hong Kong”, (Sweet & Maxwell Asia, 2004),pp.344 4 Enstrusty Group,“ Is The Contractor Still Entitle To Extension Of Time Where Is Concurrent Delay?”, First Quarter, (Master Builders Journal, 2006), pp.74-75

3

on programmes submitted by the contractor (Kevin, 2005)5. Besides the programmes,

the contractor is advised to provide relevant information related to delay such

variations and architect’s instruction for references, towards consideration for EOT

(Lim, 1998).6 Teresa Cheng 7 views that being fair and reasonable is the measure of

the extension of time to be granted to the contractor in relation to the causes(s) so

submitted.

1.2 Problem Statement

In construction contract, time may be stated either by reference to specified

date or by reference to a construction period.8 This practice has important

repercussions for parties to the contract, as a failure to complete by the date

stipulated may expose the contractor to claim for damages. Alternatively, where a

liquidated damage clause is inserted, delay will make the contractor liable for certain

liquidated amounts usually calculated at a daily or weekly rate in the contract itself.

It is important to all parties that the project be finalised by a specified date,

the standard forms of contract now provide details on the issues of delay in

completion and liquidated damages. The contract usually provides that the contractor

can apply for extension of time due to certain matters but not the fault of the

contractor, that the project is being delayed. The general procedure, for example, in

clause 43 I.E.M Condition of Contract For Works Mainly Of Civil Engineering

Construction’, the contractor shall use constantly his endeavours to prevent delay and

shall do all that may reasonably be required to the satisfaction of the Engineer to 5 Kevin,R.,“Analysing Extension of Time: What The Courts Have To Says”, First Quarter, (Masterbuilders Journal.1, 2005), pp.74 -75 6 Lim P.K.,“ Evaluation Of The Contractor’s Claim For Extension Of Time”, (PAM Continuing Professional Development Course, 25April 1998), pp. 1-21 7 Teresa Cheng, Evia Wong, Gary Soo, “Construction Law And Practice In Hong Kong”, (Sweet & Maxwell Asia, 2004), pp.350 8 Martin, R.L.,“ Introduction Time Within Contracts”, (Bullet-Proof EOTs Conference, Kuala Lumpur, July 2004), pp. 1-21

4

proceed the works. The certificate issued by the Engineer under this condition shall

be referred to as the “Certificate of Delay and Extension of Time”.

A grant of extension of time to the contractor will only be issued for the

period of time which is found to come within the extension of time entitlements. At

numerous stages through this process, disagreement can arise between the parties,

and the potential for financial liability to the contractor at the end of the day makes

the issue one on which parties are unhappy to compromise.

The issues can also become contentious because the decision as to whether or

not to grant extension of time is generally placed in the hands of the architect. A

contractor may be dissatisfied if there is a delay by the architect in dealing with his

application for an extension, or having dealt with the application, coming to a

decision which is unfavourable or not sufficiently favourable to the contractor.

The assessment of claims for extension of time is extremely complex. The

Superintending Officer or Contract Administrator acts as independent adjudicator,

and he must acts fairly, reasonably and impartially to both his employer and the

contractor.

The main issue lies in the actual definition of ‛fair and reasonable assessment’

in granting extension of time. A dispute arises between the employer and the

contractor when there is a reason to challenge the Contract Administrator’s or

Superintending Officer’s ‘fair and reasonable’ assessment of extension of time.

5

1.3 Objective of the Study

The objective of the study is to identify how Superintending Officers or

Contract Administrators approach their duty to assess Extension of Time fairly and

reasonably.

1.4 Scope of the Study

The approach adopted in this research is based on case laws and case studies.

The projects that will be investigated in this research are the housing projects i.e.

Perumahan Warga Felda (PWF) at Felda Schemes. There are two on going projects

which are located in Keratong 3 and Muadzam, Pahang and there were three

completed projects located in Mempaga, Bukit Goh and Lepar Hilir. The studies are

to identify how the Superintending Officers approach their duty to assess extension

of time fairly and reasonably. The detail of the five case studies as follows:

Case Study 1 Cadangan Pembangunan Perumahan yang

Mengandungi 160 Unit Rumah Kos Rendah Satu

Tingkat, 45 Unit Rumah Kos Sederhan Rendah satu

Tingkat Dan Satu Unit Pencawang Elektrik Di Felda

Mempaga 2, Mukim Sabai, Daerah Bentong, Pahang

Darul Makmur.

Case Study 2 Membina Dan Menyiapkan Rumah Kos Rendah Dan

Kos Sederhana Rendah Satu Tingkat, Kedai Satu

Tingkat Dan Kerja-Kerja Infrastruktur Yang Berkaitan

Di Felda Bukit Goh, Kuantan, Pahang Darul Makmur.

6

Case Study 3 Cadangan Membina Dan Menyiapkan 192 Unit Rumah

Rumah Kos Rendah, 58 Unit Rumah Kos Sederhana

Rendah, 5 Unit Kedai, Bazaar, Pencawang Elektrik

Dan Kerja-Kerja Infrastruktur Yang Berkaitan Di

Felda Lepar Hilir Saujana, Kuantan, Pahang Darul

Makmur

Case Study 4 Membina Dan Menyiapkan Rumah Kos Rendah

Setingkat, Rumah Kos sederhana Rendah Setingkat,

Kedai Setingkat, Pencawang Elektrik Dan Kerja-Kerja

Infrastruktur Yang Berkaitan Di Felda Keratong 3,

Mukim Keratong, Daerah Rompin, Pahang Darul

Makmur

Case Study 5 Cadangan Membina Dan Menyiapkan 125 Unit Rumah

Kos Sederhana Di Atas Lot 2263-2268, 2173 di Bandar

Muadzam Shah, Mukim Bebar, Daerah Rompin,

Pahang Darul Makmur

1.5 Research Methodology

In order to achieve the objectives of this study, a systematic process of

conducting this study had been organized. Basically, this study process comprised

five major stages, which involved identifying the study issue, literature review, data

collection, data analysis, conclusion and suggestions.

7

1.5.1 Stage 1 : Identifying The Research Issue

The study issue arises from intensive reading of books, journals and articles

which can be attained from the UTM library, Building Construction Information

Centre (BCIC) and Resource Centre of Alam Bina (RC).Based on the study issue, the

objective of the study has been identified. In addition to that, this research is

executed to review the relevant court decisions with the intention of identifying how

Superintending Officers or Contract Administrators approach their duty to assess

Extension of Time fairly and reasonably.

1.5.2 Stage 2 : Literature Review

Collection of various documentation and literature regarding the study field is

of most important in achieving the research objectives. Besides, secondary data is

collected from reading materials in printed form like books, journals, research paper,

magazines, reports, proceedings, seminar paper as well as information from the

internet. It is important to identify trends and developments over time in construction

industry, as well as the general state of knowledge concerning the subject area of

delay such as background, definition, type, procedures, relevant events and etc.

1.5.3 Stage 3: Data Collection

In this stage, after identifying all the background and relevant issues through

literature review, legal cases based on written opinions of courts, which are related to

the study issue, will be collected from different sources such as All England Law

8

Reports, Malayan Law Journals, Singapore Law Report and etc. via UTM library

electronic database, namely Lexis-Nexis Legal Database. Data from the five case

studies had also been collected from Felda Engineering Services Sdn Bhd.

1.5.4 Stage 4: Research Analysis

Once the previous related court cases under Malayan Law Journal were

collected, reviewing and clarifying of all the facts of the cases will be conducted. The

data from the five cases also were also collected in housing projects procured by

Felda Engineering Services Sdn Bhd. The focus will be to identify how

Superintending Officers or Contract administrators approach their duty to assess

Extension of Time fairly and reasonably. After presenting the issues of each case

based on case studies, a thorough discussion and comparison will be done in order to

achieve the objectives of this study.

1.5.5 Stage 5 : Conclusion And Recommendation

In this stage, reviews on the whole process of the study will be made to

identify whether the study objective has been achieved. After presenting the study

findings, recommendations and limitations of the study and a topic for further

research emerge. Figure 1.1 shows a flowchart of the research methodology to

achieve the objectives of the study.

9

Figure 1.1: Research Methodology

RESEARCH METHOD Data collection:

- Legal cases in relation to the fair and reasonable in assessing

extension of time

- Access to UTM library electronic database(Lexis-Nexis Legal

Database)

- Collect cases from All England Law Report, Malayan Law

Journal, Singapore Law Report, Current Law Journal and etc

- Data from case studies.

DISCUSSIONS

CONCLUSION & RECOMMENDATIONS

LITERATURE REVIEW Construction delay, types of delay, causes of delay, extension of time,

purpose of granting EOT, The ground for EOT, relevant events, procedure for

claiming EOT, Timing of the notification, detailed particulars of EOT,

assessment of EOT, duties of engineer in granting EOT, fair and reasonable

EOT, the law cases relating fair and reasonable and the Protocol Of The

Society Of Construction Law

RESEARCH ISSUE The issue is that a dispute arises when there is an issue of determining whether the

Contract Administrator or Superintending Officer acts correctly regarding the ‘fair

reasonable’ assessment of extension of time

RESEARCH OBJECTIVE To identify how Superintending Officers or Contract Administrators approach their

duty to assess Extension of Time fairly and reasonably.

10

CHAPTER 2

CONSTRUCTION DELAYS

2.1 Introduction

The majority of construction contracts provide a time for completion9, and a

provision that failure to complete by that date will entitle the employer to liquidated

damages at a certain rate per day. However, delays may occur during the progress of

the works that may cause the employer damage but which do not delay the overall

completion. Such delays will generally not entitle the employer to claim damages

and so in attempt to prevent such delays occurring it is common for construction

contracts to include terms that define the manner in which the works are to be

progressed.

9 Martin, R.L.,“ Introduction Time Within Contracts”, (Bullet-Proof EOTs Conference,Kuala Lumpur, July 27, 2004),pp.6

11

2.1.1 Definition Of Delay

Callahan10 defines that a delay in construction is the time during which part

of construction project has been extended or not performed due to unanticipated

circumstances. Delays that do not extend the project completion are called

“noncritical delays” whereas delays that result in extended project completion are

known as “critical delays”.

In construction claims, a delay can be described in two ways11. Firstly, it can

be the time during which some part of the construction project has been extended

beyond what was originally planned due to an unanticipated circumstance. Secondly,

a delay can also be the incident that affects the performance of particular activity,

without affecting project completion.

An incident of delay can originate from within the contractor’s organization

or from any of the other factors interacting upon the contracted project. Incidences of

delay from within the contractor’s organization are essentially those occurrences that

the contractor himself has caused. Incidences outside of the contractor’ organization

may be caused by the owner, the designer, other prime contractors, subcontractors,

suppliers, labor unions, natural forces, or any member of other organizations that

participate in the construction process.

Beyond a certain point, major or minor delays and other impact on the work

can interrupt normal construction activity and result in project delay. According to

10 Callahan, M.T.,Quackenbush,D.G.and Rowings, J.E., “Construction Project Schedulling”, Second Edition, ( Mc Graw Hill Inc, New York, 1992) 11 Barry B. Bramble, Michael T.Callahan,“ Construction Delay Claims”, Second Edition, (1991), pp.1-2

12

Barrie and Paulson12 this situation will cause an increase in cost leading to

contractor ‘s claims and disputes.

Many things may occur in the construction project to increase the time of

performance of the overall project or affect any given activity. Most common causes

are:

(a) differing site condition

(b) changes in requirements or designs

(c) inclement weather,

(d) unavailability of labor, material or equipment

(e) defective plans and specifications, and

(f) owner interference.

These and other delays not only increase the time required to perform the

contract work but may also increase the costs of many parties involved. 13

2.2 Types of delays

Determining the legal consequences of the delay depends upon correctly

identifying the type of delay that has occurred. Construction delays fall into two

major categories:14

12 Barrie, D.S. and Paulson, G.A., “Construction Project Management”, Third Edition, ( Mc Graw Hill Inc. New York, 1992) 13 Barry B. Bramble, Michael T.Callahan,“ Construction Delay Claims”, Second Edition, (1991),pp.2-3 14 Smith, Currie & Hancock’s, “Common Sense Construction Law, A Practical Guide For The Construction Professional”, Third Edition, (John Wiley & Sons, Inc, 2005), pp.239

13

(a) excusable

(b) non excusable

2.2.1 Excusable delay

An excusable delay provides a basis under the contract for an extension of

time. In order to be excusable, the delay must be on the critical path for completion

of the project. Non critical activities may be exempt from time extension claims up to

the time they become critical. Excusable delays are also either compensable or

noncompensable.

2.2.1.1 Excusable delays/compensable delays

Generally, a delay is deemed compensable to the contractor15 when its cause

is within the control of, is the fault of, or due to the negligence of the owner. A

compensable excusable delay permits the recovery of both time and money.

Examples of compensable delays are failure of the employer to furnish the

site to the contractor by the agreed date, faulty design, or incomplete drawings and

specifications. For this type of delay, the contractor is entitled to a time extension

and damages for extra costs associated with the delays.

15 Teresa Cheng, Evia Wong, Gary Soo, “Construction Law And Practice In Hong Kong”, (Sweet &Maxwell Asia, 2004), pp.345

14

2.2.1.2 Excusable/non-compensable delays

A noncompensable excusable delay permits solely recovery time. The delays

occur when the contractor is delayed by occurrences that are not attributable to either

the contractor or owner. Under such circumstances, the contractor should receive a

time extension, but no additional compensation. Examples of excusable/ non-

compensable delay would include an industry-wide strike, excessive bad weather,

floods, etc, or delays stemming from those designated as beyond the control of the

contractor in the delay clause- acts of Gods, and so on.16

2.2.2 Non –Excusable delays

In this category, the contractor’s own actions/inactions have caused the delay,

which could have been avoided if the contractor had taken proper action. These can

result from the fault of the contractor, his subcontractor, or suppliers. Examples of

nonexcusable delays by the contractor are lack of manpower; use of improper

equipment; failure to order materials in a timely fashion or defective work that must

be removed and replaced.

The contractor is not entitled to either damages or extension of time from the

owner. In fact, the owner could conceivably recover damages from the contractor.

Such delays could be compensable to the owner in the form of liquidated or actual

damages paid by the contractor for the late completion, or could be the basis for the

contract termination by the owner.17

16 Smith, Currie & Hancock’s, “Common Sense Construction Law, A Practical Guide For The Construction Professional ”, Third Edition, (John Wiley & Sons, Inc, 2005), pp.239-241 17 Teresa Cheng, Evia Wong, Gary Soo, “Construction Law And Practice In Hong Kong”, (Sweet & Maxwell Asia, 2004), pp.345

15

2.3 Concurrent delays

Concurrent delay, in addition to excusable delay and nonexcusable delay, is

an analytical framework for identifying and evaluating construction delays.

Concurrent delays occur, at least to some degree, during the same period of time that

impact the critical path of a planned sequence of events18. The term ‘concurrent

delay’ is used to describe two or more independent delays that occur during the same

period, either of which had it occurred alone, would have affected the ultimate

completion date. If the concurrent delays consist of delays attributable to both the

owner and the contractor, neither can recover damages from each other.19

2.4 Causes of Delay

There are many ways that a construction project can be delayed. Although it

is extremely difficult to generalize the cause of delay, in most cases delay results

from a failure to plan and to assess possible occurrences and consequences.20

This section will explain the causes of delay by looking at the responsibility

of the major parties to design and construction process for instance the owner,

designer, contractor, sub-contractors and suppliers. In assessing responsibility of the

various parties for delay, one must start with a factual analysis of who did or failed to

do what. This requires a further examination of the contractual responsibilities and

duties implied by law. Generally, the main causes are:

18 Smith, Currie & Hancock’s, “Common Sense Construction Law, A Practical Guide For The Construction Professional ”, Third Edition, (John Wiley & Sons, Inc, 2005), pp.239-241 19 Teresa Cheng, Evia Wong, Gary Soo, “Construction Law And Practice In Hong Kong”, (Sweet & Maxwell Asia, 2004), pp.346 20 Nicholas J.Carnell,“Causation and Delay in Construction”, Second Edition, ( Blackwell Publishing Ltd.,UK, 2005), pp.183

16

(a.) Owner –caused delay

(b.) Contractor –caused delay

(c.) Not caused by parties to the design

The causes of delay are summarized in Figure 2.1 as follows:

Figure 2.1: CAUSES OF DELAY

Adopted : Md. Asrul Nasid

Owner-Caused Delay

– Weather – Acts of God – Strikes and labor disputes

Causes of Delay

Contractor-Caused Delay Delay-Not Caused by

Parties

Designer-Caused Delay Subcontractor

– The project site – Approvals – Owner’s financial obligation – Owner Contract Administration

Responsibilities – Changes in the works – Owner interference – Failure to coordinate separate

prime contractors

– Failure to evaluate – Contractor management

problems – Inadequate Resources – Construction defects

– Design defects – Slow correction – Tardy Shop drawing review – Delay due to tests and inspection

17

2.4.1 Owner –Caused Delay

According to Nee, C.S21, owner – caused delay can be classified into four

main categories:

(a) delay resulting from the owner’s failure to fulfil its contractual

responsibilities;

(b) delay caused by making changes in the work required under the

construction contract

(c) delay caused by interfering with responsibilities of the contractors; and

(d) failure to coordinate activities of any separate contractors

Although specific duties depend upon the individual contract, the owner’s

contractual responsibilities generally are to provide the project site, approvals,

finances, design, and contract administration.22

2.4.2 Designer –Caused Delay

With reference to Rahman et. al’s23 study, delay caused by designers

generally results from four common deficiencies (1) defects in design; (2) slow

correction of design problems; (3) tardy review of shop drawings; and (4) delay in

tests and inspections.

21 Nee, C.S, Extension of Time, “The Issue of Delay Notification”, Faculty Of Built Environment, UTM. Msc. Thesis, (2005) 22 Barry B. Bramble, Michael T. Callahan, “Construction Delay Claims”, Second Edition (1991), pp.84 23 H.A. Rahman , I.A. Abbas & M.A. Berawi,“ Experiences In Handling Project Delays In Construction”, Conference Paper of National Conference Of Construction Industry Development, Johor Bahru

18

The designer is held to a professional standard in malpractice actions. Not all

design errors are actionable. To be actionable, the deficient performance by the

engineer must constitute professional negligence by falling below standard of

performance of the design industry. Even in contract actions, the court may tend to

evaluate the contractually required design performance in terms of the negligence

standard for the performance required by the design industry.24

2.4.3 Contractor –Caused Delay

Delay attributable to the contractor most often stem from five major causes

(1) failure to evaluate the site or design;(2) contractor management problem;(3)

inadequate resources, such as cash, material, or labor, (4) poor workmanship; and (5)

subcontractor failures.25

2.4.4 Subcontractor –Caused Delay

In general, the contractor is responsible to the owner for the nonexcusable

delays caused by its subcontractors. However, if the delay is caused by second –tier

subcontractor, and the general contractor and first-tier contractor, the general

contractor may be excused for the delay. Because the second-tier subcontractor’s

action may be beyond the control of the contractor and may not be due to the

24 Barry B. Bramble, Michael T. Callahan, “Construction Delay Claims”, Second Edition (1991), pp.99 25 Kumurasamy, M.M & Chan, D.W.M, “Contributors o Construction Delays, Construction Management and Economics”, (The University of Hong Kong, 1996),pp.16,17 -29

19

contractor’s fault or negligence, the contractor may not be liable for liquidated

damages nor be compensated for such delay.26

2.4.5 Delay not caused by parties to the design

The delays that are beyond the control of any parties, some of which are dealt

with specifically in contract documents, are adverse weather, acts of God, Acts and

labor problems.27

2.4.6 Prevention of Delay

There are two stages during which preventive measures can be adopted -

during Pre-Contract Stage and Post Contract Stage.28

2.4.6.1 Pre-Contract Stage

The preventive measures to avoid any delay during pre-contract stage are as

follows29: 26 Chappel, D.Smith, V.P, Sims,J.,“Building Contract Claims”, Fourth Edition, (Blackwell Publishing Ltd, UK,2005) 27 A.M. Odeh & H.T. Battaineh,“ Causes of Construction Delay, Traditional Contracts, International Journal of Project Management”, (2002), pp.20, 67-73 28 Ir Harban Singh K.S., “Engineering and Construction Contracts Management, Commencement and Administration, Lexis Nexis-Conference”

20

a) Adequate site and soil investigation must be carried out to obtain up-to-date

and accurate data to enable the design to be proceeded with

b) Adequate time must be accorded to design, tendering and contract formation

c) Requirements of the Employer must be fully evaluated, established and

confirmed

d) Requirements of the Statutory Authority and utilities providers must be fully

investigated and clearly established

e) Works and interfaces in connection with the M & E Services must be clearly

established and incorporated into the design

f) The design and tender documentation must be closely coordinated at all

stage.

g) Drawings, specification and other documents used must fully describe the

requirements of the designers

h) All drawings and other tender documents must be checked for discrepancies

prior to tendering

i) P.C. and Provisional Sums must not be reduced to the minimum. These sums

must not be used as ‘couriers’ for the deferment of design decisions to the

construction stage

29 Ir Harban Singh K.S,“Practical Course On Effective Construction/Engineering Contract Management, Module III:Post Contract Practice”, (HNH Contract Management Services,2002), pp.25-27

21

2.4.6.2 Post-Contract Stage

According to Ir Harban Singh, the preventive measures or actions that can be

taken to avoid any delay during post- contract stage are as follows:

a) All necessary drawings, specifications, Bill of quantities and other details

must be furnished to the Contractor by the date of possession site.

b) All construction details and other information, clarification, decisions,

approvals for samples of materials, etc sought by the Contractor must be

promptly given to him

c) Every effort must be made to meet the Contractor’s approved work

programme in the issue of information/details to him, in the award of P.C.

works, etc.

d) Payment to the contractor must be prompt and in accordance with the

contract

e) No variation works must be indiscriminately ordered unless it is absolutely

essential

2.5 Conclusion

A date for possession and date for completion are normally stipulated in the

contract. The practical result is that the contractor is allowed to commence work

immediately after the date of possession and that he must complete it by the agreed

date. Failure by the contractor to comply with this obligation is a breach of contract.

22

Delay is one of the most common causes of dispute, and of subsequent claims

between the contracting parties in construction projects. All in all, this chapter

discusses the definition of delays, types of delays, causes of delays and prevention of

delays.

23

CHAPTER 3

EXTENSION OF TIME

3.1 Introduction

Murdoch and Hughes30 stated that most building contracts contain express

provisions under which the period allowed for the contractor to undertake and

complete the works can be extended. These provisions cater for delay that is neither

the fault nor responsibility of the contractor. Such provisions obviously benefit the

contractor, who will not be liable to pay damages for delay during the period for

which time is validly extended.

Acccording to Hashim Sikam31, a delay possibly is interpreted as a loss of

time and ‘time’ in a construction project is the ‘construction period’ or in contract

administration ‘contract period’. A loss of time in contract period does not only

affect the client but also the contractor. However if the delay is not due to the

30 John Murdoch and Will Hughes, “Construction Contract, Law And Management”, Third Edition, (Spon Press, 2000), pp.186 31 Hashim Sikan, Salient Points On Contract Administration Of Building And Civil Engineering Works, pp.60

24

contractor’s fault, the contractor shall not be blamed. He has already lost time in the

contract period. Instead he should be compensated with time that has been lost. This

compensation is what is termed as extension of time’ (EOT) in contract

administration. It is therefore not appropriate to regard EOT as means to help the

contractor. As a matter of fact, it is the contractor’ right to be given EOT.

3.2 Purpose of extension of time clause in building contract

Brian Eggleston stated32 that there are several purposes of extending the

completion period of project, which are as follows:

i. To retain a defined time for completion

ii. To preserve the employer’s right to liquidated damages against act of

prevention

iii. To relieve the contractor of his strict duty to complete on time in respect of

delays caused by designated neutral event and by the employer

3.3 The ground for extension of time

A fundamental point is that the time for completion can only be extended

where the contract permits, and is strictly in accordance with the contract provision.33

This was clearly stated in the case of Peak Construction (Liverpool) Ltd v McKinney 32 Brian Eggleston , “Liquidated Damages and Extension Of Time In Construction Contract”, Second Edition, (Blackwell Science,1992), pp.162 33 John Murdoch and Will Hughes, “Construction Contract, Law And Management”, Third Edition, (Spon Press, 2000), pp.186

25

Foundations Ltd [1970] 1 BLR 111. It was held that, as delays on the part of the

City Council in approving remedial works to the piling were not catered for in

extension of time provisions, the right to liquidated and ascertained damages was lost

and time is of the essence. The corporation was left with an entitlement to claim such

damages under common law after it was able to prove the Contractor’s failure to

complete within a reasonable time.34

Gillian Birkby and Paul Brough (1993)35 have categorized the circumstances

for which the extension of time may be granted into two categories:

i. Neutral events

ii. Employer’s delay

3.4 Neutral Events

Neutral events which are not the fault of either party do not call for additional

payment by the employer under the express terms of the contract or otherwise. They

merely entitle the contractor to an extension of time36. Examples of the neutral

events are force majeure, fire, storm and exceptionally inclement weather and also

work by statutory undertakers.

34 Rodney L.Martin,“ Introduction Time Within Contracts”, (Bullet -Proof Eots Conference, 2004), Lecture 1-pp.28 35 Gillian Birkby And Paul Brough , “Extension Of Time Explained ”, (1993) 36 Sundra Rajoo, “The Malaysia Standard Form Of Building Contract (The PAM 1998 Form)”, Second Edition, (Malayan Law Journal Sdn Bhd, 1999), pp.215

26

3.5 Employer’s delays

This covers a variety of delay events caused by the employers such as the

failure to give possession of site, actions of the employer or his nominated

contractor, variation orders, discrepancies between the contract drawings, late

issuance of information and events as stated in Clause 43 IEM/CE Condition of

Contract, the lists of which are 43(c), (f), (g) or (i). Under such delays , the

contractor qualifies for extension of time.37

3.6 Relevant event of extension of time under IEM Form Condition of

Contract

For the purpose of this study, the IEM Condition of Contract Form will be

used. The reasons for EOT38 in the IEM Form are similar to those in PWD Form 203.

This is spelled out in clause 43 as follows:-

a.) by force majeure, or

b.) by reasons of any exceptionally inclement weather, or

c.) by reason of directions given by the Engineer consequential upon disputes

with neighbouring owners provided the same is not due to any act, negligence

or default of the contractor or any sub-contractor, nominated or otherwise, or

37 Lim Chong Fong , “The Malaysian PWD Form Of Construction Contract”, (Sweet & Maxwell Asia, 2004), pp.97-98 38 Hashim Sikan, Salient Points On Contract Administration Of Building And Civil Engineering Works, pp.62-63

27

d.) by reason or loss or damage occasioned by any one or more of the

contingencies referred to clause 34 hereof (provided and to the extent that the

same is not due to any act, negligence, default or breach of contract or any

sub-contractor, nominated or otherwise, whether in failing to take reasonable

steps to protect the Works or otherwise),

e.) by reason of Engineer’s instruction issued under clause 5 hereof, provided

that such instruction areas not issued due to any default or breach of contract

by the Contractor or any subcontractor nominated or otherwise, or

f.) by reason of the contractor not having received in due time from the Engineer

necessary instruction, drawings, levels or instruction in regard to the

nomination of sub-contractors and/supplier provided in this contract for

which he shall have specifically applied in writing on a date which having

regard to the Date for Completion stated in the appendix to these Conditions

or to any extension of time then fixed under these Conditions, was either

unreasonably close to the date on which it was necessary for him to receive

the same, or

g.) by reason of delay in giving site possession of the Site as provided under

Clause 33(b) (i) hereof, or

h.) by reason of any action due to local combination of workmen, strike or

lockout affecting any the trades employed upon the works, provided the same

are not due to any sub-contractor, nominated or otherwise, or

i.) by delay on the part of artisans, tradesmen or others engaged by the Employer

in executing work not forming part of this contract, or

j.) by the contractor’s inability for reason beyond his control and which he could

not reasonably have foreseen at the date of closing at the date of closing of

tender of this contract to secure such goods and/or materials as are essentials

to the proper carrying out of the works, or

28

k.) by delay on the part of Nominated Sub contractor and/or Nominated Supplier

of their works, and such delay shall be caused by the same reasons affecting

their works as stated above in sub –clauses (a) to (j) inclusive (provided that

the same not due to any act, negligence, default or breach of contract by the

Nominated Sub Contractor and/or Nominated Supplier and/or the contractor,

or any of the servants or agents of such Nominated Sub-contractor or

Nominated Supplier or the Contractor).”

Lim Chong Fong (2004) and Ir Harbans Singh K.S provide detailed

explanations on the relevant event for claiming of extension of time as follows:

(a) Force majeure

‘Force majeure’ 39is seldom defined in the various standard forms of

contracts; the IEM. ME 1/9440 is one of the rare exceptions, which in clause 35.1

stipulates:

Force majeure means any circumstances beyond the control of the parties,

including but not limited to:-

(a) war and other hostilities, (whether war be declared or not), invasion, act

of foreign enemies, mobilization, requisition or embargo;

(b) ionizing radiation or contamination by radio-activity from any nuclear

fuel or from any nuclear waste from the combustion of nuclear fuel,

39 Ir Harban Singh K.S., “Engineering And Construction Contracts Management, Commencement And Administration”, (Lexis Nexis, 2002), pp.369 40 For Mechanical and Electrical Work, See also the Putrajaya Conditions of Main Contract And Nominated Sub-Contract

29

radio- active toxic explosive, or other hazardous properties of any

explosive nuclear assembly or nuclear component thereof;

(c) rebellion, revolution, insurrection, military or usurped power and civil

war; and

(d) riot, commotion or disorder, except where solely restricted to employees

of the Contractor

A French law term is used with reference to all circumstances independent of

the will of man and which are not in his power to control (see Lebeaupin v Crispin

[1920] 2 KB 714]. The term must be interpreted in the light of the nature and general

terms of a specific contract and in this Contract force majeure has a restricted

meaning because such events as earthquakes and exceptionally inclement weather

are dealt with expressly elsewhere. In Matsoukis v Priestman [1915] 1 KB 681, it

was held that force majeure has more extensive meaning and is not confined to an act

of God.

In Penang Development Corporation v Teoh Eng Huat [1992] 1 MLJ 749, it

was held that government policy in support of Bumiputera contractors which had

delayed the completion of housing project did not constitute force majeure. On the

other hand, the encountering of exceptional adverse physical obstruction might so

qualify.41

41 Lim Chong Fong, “The Malaysian PWD Form Of Construction Contract”, (Sweet & Maxwell Asia,2004), pp.97-98

30

(b) Exceptionally Inclement Weather

The emphasis is on the exceptional nature of the inclement weather and the

meaning has to be applied considering two factors. The first factor is the kind of

weather that may be expected at the Site at the particular time when the delay occurs,

and the second factor is the stage in which the Works have reached, for example

whether the Contractor is carrying out earthworks exposed or internal finishing

sheltered. An example of the such a weather condition might include possibly a

typhoon; a fair illustration being ‛Typhoon Greg’ which struck Sabah a few years

ago.

Therefore it is no simple task to establish the ‛exceptional’ status as adverted

to above. To prove that the weather encountered was exceptional, it may be

necessary to provide meteorological records for a reasonably lengthy period of about

10 to 20 years for the area and time on which the claim is premised. Sundra Rajoo

suggests that ‛a complaint of exceptionally inclement weather is valid in a relevant

period if it substantially exceeds the Malaysian Meteorological Department’ 20 –year

averages for that period and area’.

The issues of causation and delay have to be addressed and not merely the

establishment of the occurrence of ‛exceptionally inclement weather’. This was

neatly summed up by Judge Hawser in Walter Lawrence And Sons Ltd v Commercial

Union Properties (UK) Ltd (1984) 4 CON LR 37

‘… When considering an extension on time under clause 23(b) of JCT 63, on

the ground of ‛exceptionally inclement weather’ the correct test for the

architect to apply is whether the weather itself was ‛exceptionally inclement’

so as to give rise to delay and not whether the amount of time lost by the

inclemental weather was exceptional…’

31

(c) Disputes with neighbouring owners

The delay must have arisen as a result of the direction given by

Superintending Officer consequential to a dispute by the Government, or possibly the

Contractor, and the neighbouring owner, though not necessarily of the adjacent site.

The commonest dispute here is over the boundary of the site. As a result of the

dispute, the delay could be occasioned by the reconstruction or suspension of the

work or by a restricted method of working as directed by the Superintending Officer.

There is however the proviso that the dispute must not be due to any act, negligence

or default of the Contractor or for those whom he is responsible, the commonest

being erroneous setting out resulting in boundary encroachment.

(d) Insurance Contingencies (by reason of loss and damage occasioned-

referred to in Clause 34

This ‛relevant event’ deals with insurance contingencies or insurable risks,

i.e. loss or damage occasioned by the contingencies of fire, lighting, explosion,

storm, tempest, flood, ground subsidence, bursting or overflowing of water tanks,

apparatus, or pipes, aircraft and other aerial devices or articles dropped there from or,

riot and civil commotion.

There is nevertheless the proviso that the Contractor would not be entitled to

an extension of time if he or those for whom he is responsible caused the same by

their act, negligence, default or breach of contract, such as failing to take reasonable

steps to protect the Works.

32

If they have contributed partly by their act, negligence, default or breach, then

the entitlement to extension of time would correspondingly be reduced to such extent

of the contribution.42

(e) By Reason Of Superintending Officer’s/ Engineer’s Instruction

The instruction referred to is summarized in clause 5(a). The Contractor’s

entitlement to an extension of time is subject to the proviso that the instruction is not

issued due to any default or breach of contract by Contractor or by those for whom

he is responsible. The reason for the proviso is to negative the possible consequences

of the criticized decision of Simplex Concrete Piles Ltd v St Pancras Borough

Council (1958) 14 BLR 80, where the Contractor was held to be entitled to a

compensable variation notwithstanding that it resulted from the breach on the part of

the Contractor.

(f ) Late instruction, drawings or levels

This ground is basically premised on late constructional information

furnished by the Superintending Office/Engineer to the Contractor for the execution

of work. The S.O/Engineer is obliged to provide the Contractor with further

reasonably necessary information to amplify the Drawings or Bill Of quantities as

and when necessary. The failure of the Superintending Officer to do so in good time

puts the Government in breach of contract.

42Lim Chong Fong, “The Malaysian PWD Form Of Construction Contract”, (Sweet & Maxwell Asia,2004), pp.98

33

(g) Delay in giving possession of the site

According to IEM CE, clause 38(b) stipulated that:

“…If the contractor suffers delay or incurs expenses from failure on the part

of the employer to give possession in accordance with the terms of this

Clause the Engineer shall grant an extension of time for the completion of the

Works and certify such sum as in his opinion shall be fair to cover the

expense incurred which sum shall be paid by the Employer.43

h) Local Combination of workmen, strike, or lockout

The events are limited to only local combination of workers, strikes or

lockout affecting the trade employed upon the Works. Local combination of workers

probably covers obstructive industrial activities short of a strike.

It was held in Boskalis Westminster Construction Ltd v Liverpool City

Council (1983) 24 BLR 83 that a strike by workers employed by a statutory public

water authority which directly contracted with the employer to execute work not

forming part of the contract was not covered by an equivalent clause in the English

standard form.

43 Clause 38(b)-IEM Conditions Of Contract For Works Mainly Of Civil Engineering Construction, “Possession Of Site And Wayleaves”, pp.17

34

It should be noted that the Contractor must not have caused the local

combination, strike or lock out, such as through a failure to pay the workmen’s

wages.

(i) Artists, tradesmen and others

Clause 31 IEM.CE. stated that the Contractor shall permit the execution of

work not forming part of this Contract by artisans or tradesmen or others who may be

engaged by the Employer.44 The Engineer accepts responsibility for delay on the

part of such people. This is however restricted to delay in the execution of their

works and does not extend to delay caused by their returning to carry out remedial

work after purported completion (see Westminster City Council v J Jarvis & Sons Ltd

[1970] 1 All ER 943)

(j) Inability to obtain materials or goods

This applies only if the securing of the goods or materials is beyond the

Contractor’s control, but the shortage must have been one that could not have

reasonably foreseen at the date of the closing of the tender. It should be noted that

this clause is not applicable for the shortage of labor even though it is essential for

the execution of the Works.

44 Clause 31- IEM Conditions Of Contract For Works Mainly Of Civil Engineering Construction, “Artisan And Tradesmen”, pp.12

35

(k) Delay on the part of nominees

Any delay by the sub-contractors, either domestic or nominated is a common

occurrence. It will benefit the Contractor if there is a provision entitling the

Contractor to an extension of time for such a delay. Otherwise the Contractor would

have to assume the delay as a part of his risks in undertaking the Contract and pursue

any loss suffered from the sub-contractor directly. This ground though attractive at

first sight, is of little additional usefulness to the Contractor since the delay on the

part of the nominated sub-contractors or suppliers must similarly have been caused

by the reasons as set out in paragraphs (a) to (j) above. Clause 43(k) IEM. CE 1/89

Form Provides:

By delay on the part of Nominated Sub-contractor’s and/or Nominated

Suppliers of their works and such delay shall be caused by the same reasons

affecting their works as stated above in sub clauses (a) to (j) inclusive

(provided the same are not due to any act, negligence or breach of contract by

the Nominated Sub-contractor and /or Nominated Supplier and/or the

Contractor, or any of the servants .or agents of such Nominated Sub-

contractor or nominated Supplier Or the Contractor). Figure 3.1 on extension

of time : Common Relevant Events, adopted from Ir. Harban Singh K.S.

(2002), Engineering and Construction Management.

36

Figure 3.1- EXTENSION OF TIME: COMMON RELEVANT EVENTS

Source: Adopted From I.R. Harban Singh K.S (2002)

3.7 Procedure for claiming an extension of time under express Contract

provisions

All the standard forms of contracts have included appropriately drafted

clauses to cover the said matter. Though varying appreciably in wording, form and

content, these clauses lay down expressly for the particular application the governing

procedures for extension of time which the contractor must observe to procure a

successful grant. Notable examples for IEM.ME 1/94 Form:

EXECEPTIONALLY INCLEMENT WEATHER

CIVIL COMMOTION, STRIKES, LOCK-OUT etc

LOSS OR DAMAGE TO THE WORKS ACCASIONED BY SPECIFIC PERILS

FORCE MAJEURE

CONTRACTOR’S INABILITY TO SECURE LABOUR, GOODS, MATERIAL etc.

CARRYING OUT OF WORK BY STATUTORY UNDERTAKERS

EXERCISE BY GOVERNMENT OF ANY POWER WHICH DIRECTLY AFFECTS THE WORKS

EXTENSION OF TIME: COMMON RELEVANT EVENTS

DELAY IN SUPPLY OF INFORMATION/VARIATIONS AND EXTRA WORKS

COMPLIANCE WITH CONTRACT ADMINISTRATOR’S INSTRUCTION

FAILURE OF EMPLOYER TO GIVE POSSESION/ ACCESS IN TIME

DELAY ON PART OF NOMINATED SUB-CONTRACTOR/ SUPPLIERS EXECUTION OF WORK NOT FORMING PART OF THE CONTRACT

LATE SUPPLY OF MATERIALS BY THE EMPLOYER OTHER SPECIAL CIRCUMTANCES

37

Clause 31.2 states45

…The contractor shall give to the engineer notice of his intention to make a

claim for an extension of time within 14 days of the circumstances of such a claim

becoming known to the contractor. The notices shall be followed as soon as possible

by the claim with full supporting details.

Lim Chong Fong (2004) said 46that the operative wording of clause 43 similar

to that in the PAM (1969) form of contract which has been interpreted in the English

case of London Borough of Merton v Stanley Hugh Leach Lt (1985) 32 BLR 51

which was concerned with a contract identical with PAM form of contract. The main

principles laid down as alluded to by Professor Powell Smith in the PAM

commentary are as follows:

(i.) The giving of notice by the Contractor is not a condition precedent to the

performance by the architect of his duties under the clause.

(ii) If the architect is of the opinion that the progress of the Works is being or

likely to be delayed beyond the completion date because of one or more of

the specific events, he must estimate the delay and grant an appropriate

extension. He owes this duty both to the employer and to the Contractor.

(iii) The failure of the Contractor to notify the architect when it becomes

reasonably apparent to him that the progress of the Works is delayed is a

breach of contract. It is not fatal to the Contractor’s entitlement to an

extension of time but the architect can take the Contractor’s breach into

account in assessing the extension of time. In this respect, the Contractor

cannot benefit from his breach by receiving a greater extension than he would 45 IEM, ME. 1/94 Form, Condition Of Contract For Mechanical And Electrical Works, “ Entitled Extension Of Time for Completion” 46 Lim Chong Fong, “The Malaysian PWD Form Of Construction Contract”, (Sweet & Maxwell Asia, 2004), pp.98

38

otherwise have received had the architect on notice at the proper time been

able to avoid or reduce the delay by some instruction.

(iv) A document can be a valid notice even if it does not specify a cause of delay

with sufficient detail for the architect to decide whether the event falls within

the specified grounds because different criteria apply to the notice and the

architect’s opinion under the clause. The intention behind the contractor’s

notification is to warn the architect of the current situation regarding progress

and it is then up the architect to monitor the position in order to form his own

opinion and if necessary to seek further information from the contractor.

(v) The Contractor’s duty is to give the architect as much information as he can

about the cause of the delay and to assist the architect in performing his duty.

The Contractor’s failure to provide information if requested is also a factor

the architect can take into account in assessing the extension of time.

3.8 The Procedure of claiming of extension of time under JKR 203A form of

contract

The abovementioned principles apply to clause 43 PWD Form and are similar

to those in IEM Form. In the usual course of events, the initiatives for taking action

under this clause will come from the Contractor when he realizes that the progress of

the Woks is delayed. The contractor’s is not required to give notice of delay which

will be caused by some expected future event, however probable its occurrence may

be. He has only to give notice when it becomes apparent to him that the progress of

the Works is delayed; it seems clear that the Contractor is bound to notify the

Superintending Officer/Engineer of all delays to the progress and not merely those

caused by events listed in the clause.

39

On the receipt of the Contractor’s notice or more usually the Contractor’s

application of extension of time incorporating various consolidated and retrospective

notification of delay, the S.O. (must convey to the Named Officer and the named

Officer) must decide whether the causes of delay specified by the Contractor falls

within (a) to (k) of the Clause 43, if the S.O. (Named Officer) takes the view that

they do not so fall, then subject to the right of the Contractor to seek recourse, no

extension of time arises.

If the S.O. concludes that the cause(s) of delay is covered by item (a) to (k),

he must decide whether completion of the Works is likely to be or has been delayed

beyond the current completion date. In forming his opinion, the S.O. is entitled to

have regard to the proviso to the clause, namely the Contractor must have used

constantly his best endeavours to prevent delay.

If the S.O. decides that the completion date will not be affected, he should

notify the contractor of his decision, although this is not expressly stated. If the

contractor wishes to challenge that decision he must seek recourse under 54. 47

If the S.O. decides that the delaying cause(s) either delayed completion or is

likely to result in the failure to complete on time he must then make in writing a fair

and reasonable extension of time for the completion of the Works. It is noted that

clause 43 states “a fair reasonable extension of time” but this is no different from “a

fair and reasonable extension of time”. The clause also says that the S.O. must do

this as soon as he is able to estimate the length of the delay and no time limit is

specified. Figures 3.2 and 3.3 on general procedure for claiming extension of time,

adopted from I.R. Harban Singh K.S (2002), Engineering and Construction Contract

Management.

47 Lim Chong Fong, “The Malaysian PWD Form Of Construction Contract”, (Sweet & Maxwell Asia, 2004), pp.94

40

Figure 3.2 - FLOWCHART ON THE GENERAL PROCEDURE FOR

CLAIMING EXTENSION OF TIME – PART 1


START

Is progress delayed or is likely to be

delayed?

Does the delaying event constitute one of the

‘relevant event’/ grounds under the provision of the

contract?

Is the notice given in writing?

Initiate notification of the delay procedure

Is the notice given within the period expressly

stipulated?

Proceed with the application of the extension of time

process

A B

Has an extension been granted by

the contract administrator?

Is the notice a condition precedent?

Yes

No

No

No

No

No

No

Yes

Yes

Yes

Yes

Yes

41

Figure 3.3 - FLOWCHART ON THE GENERAL PROCEDURE FOR

CLAIMING EXTENSION OF TIME – PART 2


Is the application given in writing?

Is the application made within the period

expressly stipulated?

Is the application complete/ sufficient

and accurate?

Contract Administrator to check application made

Has the contractor used his best Endeavour's to

minimize the delay?

Establish whether contractor has done all that is reasonable

required of him

A B

Is the application a condition precedent?

Yes

No

No

No

No

No

No

Yes

Yes

Yes

Yes

Yes

Contract Administrator to proceed with further assessment

for the possible grant of extension of time

STOP

Prima facie no extension of time can

be granted

Return to contractor for resubmission or reject application as

appropriate

Has an extension been granted by the contract

administrator?

Is the requirement as to sufficiency etc a

condition precedent?

Has the contract administrator requested for

information details etc?

No Yes

Yes

No

Yes

No

42

3.9 Timing of the Notification

Different formulae are employed in defining the precise timing for the

contractor to notify the contract administrator of the delay and of his intention to

clarify the extension of time. These include, inter-alia, the following:48

a) use of the phrases such as ‘the contractor shall forthwith given written notice’

or ‘the contractor shall forthwith of the occurrence of such event notify the

architect in writing

b) employment of specific time periods, e.g. ‘he shall forthwith notify the

Superintending Officer of such event within 30 days of the occurrence of

such event or ‘give to the engineer notice of his intention to make a

claim…within 14 days of the circumstances of such claim becoming known...

The legal effects of such provisions are important; the main concerns being:

a) whether the contractor’s notification or application being the condition

precedent for the granting of an extension of time; and

b) if in the affirmative, the effects of the breach of the said condition precedent.

48 Ir Harban Singh K.S., “Engineering and Construction Contracts Management, Commencement and Administration”, (Lexis Nexis, 2002), pp.440

43

3.10 Detailed Particulars Of the extension Of Time Claimed

Some standard forms of contract require the contractor to submit detailed

particulars of the extension of time claimed49, within a specified time limit. However,

it is not common (although not unheard of) for such particulars to be a condition

precedent to the grant of an extension of time.

Examples of contracts where there is no such requirements: PWD Form/B/T

(clause 45), PW 203A (clause 43), PAM69 (clause 23) and IEM (clause 43) contain

no provisions requiring the Contractor to submit particulars. Examples of contracts

where there are requirements to submit particulars are:

(a) PAM98 (clause 23) requires the Contractor to “… Notify the Architect in

writing identifying the relevant causing the delay, giving particulars of the

expected effect an estimate of the extension of time required. The notice shall

contain sufficient information and reason why delay to completion will

result”.

(b) CIDB (clause 24.2) requires the following to be provided;

(i.) the appropriate contract references (if applicable) to such event of

delay;

(ii.) the estimated length of the delay and of the extension of time

require; and

(iii.) details of the effect of the event of delay on the works programme

accepted under clause 5

49 Rodney L.Martin, “ Introduction Time Within Contracts”, (Bullet-Proof Eots Conference, 2004) -Lecture 1-p.27

44

If the details submitted are insufficient to enable the Superintending Officer

to decide on an extension of time, the Superintending Officer may require the

Contractor to provide further information which may reasonably be required.

45

CHAPTER 4

ASSESSMENT OF EXTENSION OF TIME

4.0 Introduction

IR Harban Singh stated that50 the role of assessing the contractor’s

application for extension of time is usually delegated by the employer to the contract

administrator in most contracts. Hence, although employed by the employer, he must

act fairly, reasonably and impartially to both his employer and contractor.

The IEM conditions of contract include similar list of relevant events to that

of PAM 98, PWD 203A and CIDB. Almost all the Conditions Of Contract stated the

Architect/Engineer/ S.O must grant a fair, reasonable and necessary extension of

time to the contractor.

50 50 Ir Harban Singh K.S., “Engineering and Construction Contracts Management, Commencement and Administration”, (Lexis Nexis, 2002),pp.463

46

4.1 Fair and Reasonable Extension Of Time

According to Sundra Rajoo51, in the law, the word ‘reasonable’ implies an

objective and careful decision by the architect. It does not sanction a rough and ready

approach although a purely scientific analysis of delays is not required. Even though

the contractor is already in culpable delay, the architect has still to assess the effect

of other delays on completion at the time when the works are actually being carried

out. In practice, it is not easy to do so because a large number of events may have

caused the delay, some of which are the contractor’s own responsibility while the

others are that of the employer, architect, consultants or his agents.

Sundra Rajoo 52 also stated that the architect must then give a ‘fair and

reasonable’ extension of time subject to Clauses 23.3, 23.4 and 23.7 and fix a new

Date for Completion. However, if the architect views that it is not appropriate to

grant an extension of time, he has the prerogative to reject it. In this case, it is up to

the contractor to challenge his view in arbitration.

In making any determination under a building contract, Contract

Administrator has a duty to act fairly and on a rational basis. Any assessment he

makes must be based on reasons that can stand up to scrutiny by other parties to the

contract. The engineer should carry out a detailed, logical and methodical analysis of

the documents and other evidence submitted in support of the application for an

extension of time. 53Such an analysis would enable him to correctly assess how much

time should be given to the contractor.

51S Sundra Rajoo, “The Malaysia Standard Form Of Building Contract (The PAM 1998 Form)”, Second edition, (Malayan Law Journal Sdn Bhd,1999),pp.208 52 Sundra Rajoo, “The Malaysia Standard Form Of Building Contract (The PAM 1998 Form)”, Second edition, (Malayan Law Journal Sdn Bhd,1999),pp.208 53 Ir Harban Singh K.S., “Engineering and Construction Contracts Management, Commencement and Administration”, (Lexis Nexis, 2002),pp.464

47

The contractor is entitled to ‘a fair and reasonable extension of time’ under

Clause 43 IEM Condition Of Contract as stated below:

…than the Engineer shall so soon as he is able to estimate the length of the

delay beyond the date or time aforesaid make in writing a fair and reasonable

extension of time for completion of the Works…

According to Lim Chong Fong54, in the assessment of a fair and reasonable

extension of time, it has been held in English case of John Barker Construction Ltd v

London Portman Hotel Ltd (1996) 83 BLR 31 that it has to be a logical analysis in

methodical way of the impact which the relevant matters had or are likely to have on

the Contractor’s planned programme. The extension is flawed if the architect makes

an impressionistic rather than a calculated assessment bearing no logical or

reasonable relation to the delayed caused.

Lim Chong Fong also stated that the Contractor’s entitlement to a fair and

reasonable extension of time is subject to the dual proviso, that is the Contractor

must have constantly used his best endeavours to prevent delay and to do all may

reasonably be required to the satisfaction of the Superintending Officer to proceed

with the Works. The first part of proviso is akin to taking mitigating steps and better

view is that it does not require the Contractor to expand substantial sums of money

(see Sheffield District Railway Company v Great Central Railway Company (1911)

27 TLR 451).

It is dependent upon what is reasonable in the circumstances and it would

normally entail the Contractor reprogramming the works, particularly utilising the

appropriate and available float. As for the other part of the proviso, it is suggested

that that it does not entail more than general obligation to show willingness to do 54Lim Chong Fong, “The Malaysian PWD Form Of Construction Contract”, (Sweet & Maxwell Asia, 2004), pp.95-97

48

what the Contract requires, and does not empower the Superintending Officer to

order acceleration of the progress of the Works or instruct the Contractor to deploy

extra resources.

4.2 Basis of Assessment

In assessing the entitlement for extension of time, the prevailing principles55

that must be taken into consideration, include but not limited to the following:-

(a.) an extension of time can only be validly granted if the procedures which the

contracts lay down are strictly followed;

(b.) an extension of time can only be granted in respect of an event that is

expressly included in the contract as a ‘relevant event’ and which has

delayed or likely to delay completion Hounslaw London Borough Council v

Twickenham Garden Development Ltd [1971]Ch 233

(c.) the delay must be one affecting an activity or activities that are on the critical

path, i.e. one that having ‘little or no float’ that cannot be delayed without

affecting the others

(d.) the ‘net effective’ delay must be assessed based on the contractor’s approved

work programme and interdependence of the operations of the works in

relation to the whole works. Consequential delay must also be considered.

(e.) in the assessment, a logical analysis and not mere impressionistic assessment

must be undertaken in a methodical way of the impact which the relevant

matters had or were likely to have on the contractor’s planned programme:

55Ir Harban Singh K.S., “Engineering and Construction Contracts Management, Commencement and Administration”, (Lexis Nexis, 2002), pp.463

49

John Barker Construction Ltd v London Portman Hotel Ltd [1996]CILL

1152

(f.) the overriding requirement is the satisfaction of the ‛Fairness and

Reasonableness Test’ on the part of assessor

4.3 The Assessment Process

In the assessment process, the contract administrator may utilize all the

relevant records, documents, etc either at his disposal or made available to him by

the contractor as part of the application as sources of information. These should

include, but not limited to the following:56

(a.) personal record maintained by the contract administrator and/or his

representative

(b.) official work records of the contractor

(c.) official progress

(d.) site diaries

(e.) relevant correspondence, e.g. letter, instructions,etc

(f.) drawings, diagrams, etc

(g.) official records of meetings, discussions, etc

(h.) work programme

(i.) records, information, report, etc from third parties and/or independent

bodies; and

(j.) other relevant records, documents

56 Ir Harban Singh K.S., “Engineering and Construction Contracts Management, Commencement and Administration”, (Lexis Nexis, 2002), pp.463

50

The Contract Administrator should use the above information to cross-check

and verify the contractor’s various representations contained in his application and/or

use these as the basis of his own analysis for the entitlement.

Such an exercise is necessary for the Contract Administrator to arrive at the

final entitlement which should be methodical, logical, reasonable and fair and

according to the governing stipulations of the contract. The final entitlement should

be broken down or particularized on an event-by event basis, cross referenced to the

applicable contract provision and with the reasons in support, to enable an

explanation to be afforded in the event of a challenge or a dispute. All attempts must

be made to obviate an extension on a ‘global’ basis except where the circumstances

are extraneous and/or so closely interlinked that it is impossible within reasonable

limits to go on any other basis.

In any event at the end of the assessment process the Contract Administrator

has to arrive at either of the two conclusions, i.e.:

a. that the contractor is entitled to an extension of time; or

b. that the completion date will not be affected in any material way

4.4 Duties of the Engineer/Architect/S.O in Granting Extension of Time

There is a general duty on the architect/engineer to determine a fair and

reasonable extension of time. 57

57 Rodney L.Martin,‘Introduction Time Within Contracts’, Bullet –Proof Eots Conference (2004), Lectural, pp.32

51

This is expressly stated in the various clauses as follows:

(a) PWD Form DB/T clause 45.1, PWD Form 203A Clause 43 and IEM clause 43

require P.D./Superintending Officer/Engineer to make “ a fair and reasonable

extension of time”

(b) PAM69 and PAM98 condition clause 23 require Architect to make/give “a fair

and reasonable extension of time”

CIDB condition Clause 24 provides that the Superintending Officer may

extend the Time for Completion of the Works by such further period or periods of

time “as may reasonably reflect delay in completion of the works” (due to one or

more of the relevant events). It follows that the Contract Administrator cannot

merely take a passive role in the extension process; he must consider his duty to the

employer. 58He must act fairly, reasonably and impartially to both his employer and

the contractor. Failure to act fairly can lead to invalidation of his certificates.59

4.5 The Law Cases Relating to Fair And Reasonable Extension Of Time

As stated earlier, the relevant case relating to fair and reasonable extension

of time, has been held in the English case of John Barker Construction Ltd v London

Portman Hotel Ltd (1996) 83 BLR 31. The High Court in the Singapore case of Liew

Ter Kwang v Hurry General Contractor Pte Ltd [2004] 3 SLR 59 followed the

English case of John Barker Construction Ltd v London Portman Hotel Ltd (1996)

83 BLR 31 in holding that an architect had an implied duty to act fairly and on a 58 Brian Eggleston (1992), Liquidated Damages and Extension Of Time In Construction Contract, Second Edition, (Blackwell Science,1992), pp.164-165 59Ir Harban Singh K.S., “Engineering and Construction Contracts Management, Commencement and Administration”, (Lexis Nexis, 2002), pp.458

52

rational basis in making a fair and reasonable assessment of the extension of time to

be granted. In particular, the architect must:

(a.) carry out a logical analysis in a methodical way of the impact that the

relevant matters which the contractor put forward had on the delay to the

project

(b.) make a calculated assessment of time which he thought was reasonable for

the various items individually and overall, rather than an impressionistic

assessment;

(c.) apply the contract provisions correctly; and

(d.) in allowing time based on the grounds listed in the contract provisions,

ensure that the allowance made bears a logical and reasonable relation to the

delay caused.

According to Lim Chong Fong (2004),60 it is apparent from the above cases

that the assessment of fair and reasonable extension of time is not a straightforward

exercise. As a guide, the Superintending Officer (named Officer) is encouraged to

consult published Delay and Disruption Protocol published by The Society Of The

Construction Law UK which is an excellent document setting out the relevant

principles.

60 Lim Chong Fong , The Malaysian PWD Form Of Construction Contract (2004) , P.97

53

4.6 The Protocol Of The Society Of Construction Law – Granting Extension

Of Time

The United Kingdom Society Of Construction Law (the Society) published

the Delay and Disruption Protocol in October 2002 (reprinted in March 2003) (the

Protocol) to provide useful guidance on common issues that arise in relation to

construction contracts61. The Protocol aims to “provide a means by which the parties

can resolve these matters and avoid unnecessary disputes”. The objective is to

answer some of the common issues that arise on construction contracts where one

party wishes to recover from the other an extension of time and or compensation for

additional time spent and resources used to complete the project.

The Protocol contains core principles relating to delay and compensation, and

guidance notes in four sections, in relation to:

(a) the Protocol’s position on core principles and on other matters relating

to delay and compensation;

(b) preparing and maintaining programmes and records

(c) extensions of time during the course of the project; and

(d) dealing with disputed extension of time issues after completion of the

project –retrospective delay analysis.

The Protocol provides a suggested approach to deal with a contractor’s claims

for extension of time (EOTs) and compensation of delay. Matters covered by the

61 Aliens Arthur Robinson, The Society of Construction Law , Delay and Disruption Protocol

54

protocol are: programme; entitlements to extensions of time, Floats, Concurrent

delays, Retrospective delay analyses, Mitigation and Monetary claims.

4.6.1 Programme and records:

4.6.1.1 Core Principle

The contractor should prepare a programme showing the manner and

sequence of the works (which programme should accepted by the Contract

Administrator (CA) and keep the programme up to date to record progress and

EOTs.

4.6.1.2 Guidance

The protocol suggests that its recommendations, that a contractor should

submit a programme as early as possible in the project of the manner and sequence in

which the works are to be performed, should apply equally to smaller projects. The

Protocol recommends that the parties reach an agreement on the programme, in

particular to:

- the form of programme

- the interaction with the method statement (which describes how

the Contractor intends to construct the works);

55

- the time within which the contractor should submit a draft

programme for acceptance

- a mechanism for obtaining the acceptance of the CA of the draft

programme

- the requirements for updating and saving of the accepted

programme.

The parties should also agree on the software to be used to produce the

programme. The Protocol also recommends that the parties reach an agreement on

the records to be kept to allow for delay analysis.

4.6.1.3 Commentary

Although it is generally considered good practice management to maintain up

to date programmes and records, it may be time intensive to do so, and accordingly,

this cost should considered at the time the contract sum is priced. In relation to

smaller projects, to which the Protocol recommends these practices apply equally,

additional time spent on programming may not be required or be viable. The use of

the same software may be difficult due to issues with intellectual property rights, or

licensing arrangements, and the ability for the parties to make changes to the

programme should be considered at the outset.

56

4.6.2 Extension Of Time


(a) Purpose

An EOT relieves the contractor for liability for delay damages (such

as Liquidated Damages (LDs)) for any period prior to the extended contract

completion date.

(b) Entitlement to extension of time

The contractor will potentially only be entitled to an EOT for those

events in respect of which employer has assumed risk and responsibility

(Employer Risk Events)

(c) Procedure for granting extension of time

The EOT should be granted to the extent that the Employer Risk event

is predicted to prevent the works being completed by the then prevailing

contract completion date.

The entitlement to an EOT should be based on the contract not on the

question of whether or not the contractor needs an EOT in order not to be

liable for liquidated damages.

(d) Effect of delay

For an EOT to be granted, it is not necessary for the Employer

Risk Event already to have begun to affect the contractor’s progress with the

works, or for the effect of the Employer Risk Event to have ended.

57

(e) Incremental review of extension of time

Where full effect of an Employer Risk Event cannot be predicted with

certainty at the time of initial assessment by the CA, the CA should grant an

EOT for the then predictable effect.

The EOT should be considered by the CA at intervals as the actual

impact of the Employer Risk Event unfolds and the EOT increased (but not

decreased, unless there are express contract terms permitting this) if

appropriate.

4.6.2.2 Guidance

The protocol identifies that the main effect of an EOT is to relieve a

contractor of its liability for liquidated damages during the period of the

extension, not as often incorrectly believed, give rise to an automatic

entitlement to compensation for prolongation cost. Some standard form

contracts provide that specific delay events, at the employer’s risk, will not

entitle the contractor to prolongation costs, such as delay resulting from

adverse weather conditions.

The protocol suggest that although not all contracts require the

contractor to give notice of the occurrence of an employer Risk Event

irrespective of weather it is likely to affect the contract completion date,

notice should be given by the contractor to the CA of an Employer delay as

early as it is aware of any. The impact of such an event should be dealt with

co-operatively by the parties.

58

Assessment of the EOT application should be undertaken within one

month of its receipt. The CA should not wait until the effect of the Employer

Risk event is known before assessing the application for an EOT. The EOT

should be granted on the most predictable effect, and increased at a later stage

if appropriate.

A Contract should allow a CA to determine that an EOT is due on his

or her own initiative, whether or not the contractor has applied for one or

provided sufficient information. The clause should also entitle the contractor

to an EOT for an act of prevention or breach by the employer. Consideration

by the CA of an EOT should also take into account the available float and

concurrency.

4.6.2.3 Commentary

The procedure and time limits for application for an EOT is generally

governed by the contract, as it is contained in most standard form contracts.

The one month period for assessing the Contractor’s entitlement to an EOT is

consistent with the Australian Standard Contracts such as AS2124-1992

(clause 35) and AS4000-1997 (clause 34.5)

59

4.6.3 Float

4.6.3.1 Core Principles

(a) as it relates to time

Where there is remaining float in the programme at the time of an

employer Risk event, 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

activity paths affected by the Employer Delay.

(b) as it relates to compensation

If as a result of an Employer Delay, the contractor is prevented from

completing the works by the contractor’s planned completion date (being a

date earlier than the contract completion date), the contractor should in

principle be entitled to be paid the costs directly caused by the Employer

Delay, notwithstanding that there is no delay to the contract

completion date ( and therefore no entitlement to an EOT), provided also at

the time they enter into the contract, the employer is aware of the contractor’s

intention to complete the works prior to the contract completion date, and that

intention is realistic and achievable.

4.6.3.2 Guidance

The Protocol describes float as “the amount of time by which an

activity or group of activities may be shifted in time without causing delay to

60

contract completion date”. It strongly recommends the ownership of the float,

which may ultimately determine entitlement to an EOT as a consequence of

Employer Delay, should be adequately addressed in the contract.

A contractor should not be automatically entitled to an EOT merely

because an Employer Delay to Progress takes away the contractor’s float for

a particular activity. The Protocol’s position is that an Employer Delay

should only result in an EOT if it is predicted to reduce the total float on the

activity paths affected by the delay to below zero i.e.: The Project/Principal

owns the float.

The Protocol again urges the importance of programming and the

updating of programmes to enable accurate identification of the float and the

consequences of Employer Delay (for Concurrent Delay) on the float.

The Protocol also recognizes that there may be an entitlement to

compensation for Employer Delay notwithstanding that an EOT has not been

granted because of the availability of the float. This may be the case because

the parties have recognized, contractually, that the loss of float may have cost

consequences for the Contractor alternatively because at the time the Contract

is entered into the Employer is aware of the Contractor’s intention to

complete works on a date prior to the Contract Completion Date.

The Protocol recommends that the contracting parties address both the

issues of the relationship between float and an entitlement to an EOT and

entitlement to compensation for loss of float even where there is no

entitlement to an EOT to avoid uncertainty in such circumstances.

61

4.6.3.2 Commentary

Float is not usually dealt with in standard form contracts, and the use

of the Protocol sensibly to overcome this. It has been suggested that this

recommendations could lead to avoidance of dispute in circumstances where

a principle uses the whole of the float and the contractor becomes liable for

liquidated damages at the end of the project. However, given that this

recommendation is in some respects inconsistent with a leading UK decision,

it remains to be seen whether the courts will accept this approach.

4.6.4 Concurrent Delay

4.6.4.1 Core Principles

(a) Its effect on entitlement to extension of time

Where Contractor Delay to completion occurs or effects concurrently

with Employer Delay to completion, the Contractor’s concurrent

delay should not reduce any EOT due.

(b) its effect on entitlement to compensation for prolongation

If the contractor incurs additional costs that are caused both by

Employer Delay and concurrent Contractor Delay, then the Contractor

should only recover compensation to the extent it is able it is able

separately identify additional costs caused by the Employer Delay

from those caused by the Contractor Delay.

62

However, if the additional cost incurred in any events as a result of

the Contractor Delays, the Contractor will not be entitled to recover

these additional costs.

(c) Identification of float and concurrency

Accurate identification of float and concurrency is only possible with

benefit of a proper programme, properly updated.

4.6.4.2 Guidance

The Protocol aims to provide an agreed manner in which issues of

concurrency can be resolved. Where an event of employer Risk and

Contractor risk occur at the same time, the contractor should nevertheless be

entitled to an EOT for the delay to completion. Risks events which occur

sequentially, but whose effects are concurrent, should also not reduce the

amount of an EOT due to the Contractor as result of Employer delay. To

accurately identify concurrency, an up to date programme is required.

The Protocol’s position on concurrency prevents an employer or CA

from taking advantage of the contractor’s delay after the contract completion

date by issuing instructions and making changes without giving an EOT. This

means that if the Employer’s new instructions further extend the period of the

works and the Contract Completion Date, that delay will be concurrent.

63

4.6.4.3 Commentary

The “dominant” cause approach, which is frequently adopted to

determine whether a contractor should be entitled to an EOT in circumstances

of concurrent events of delay, has not been applied by the Protocol. Given

that disputes often arise due to conflicting arguments over cause of or

contribution to delay the Protocol attempts to move away from the

apportionment of blame for the delay and reduction of the EOT.

The protocol is in one sense contractor friendly in adopting the

position that the contractor gets EOT notwithstanding concurrent delay. This

is a position which has been adopted in the UK in two recent cases Henry

Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70

Con LR32 and in Royal Brompton Hospital NHS Trust v Hammond & Ors

(No 7) [2001] 76 Con LR 148. It appears that the Protocol approach is

becoming the preferred approach in the UK.

There is some balance in that the contractor must still prove that he

has incurred additional costs as a consequence of the employer delay beyond

costs due to the contractor’s concurrent cause of delay, before the contractor

is entitled to compensation, notwithstanding the possibility of an entitlement

to an extension of time.

64

4.6.5 Retrospective delay analyses


The adjudicator, judge or arbitrator should so far as practicable, put

him/herself in the position of the CA at the time the Employer risk event

occurred.

4.6.5.2 Guidance

The person assessing whether the contractor is entitled to an EOT

should use an updated programme to establish the status of the works for the

period over which an EOT is claimed, to determine whether the entitlement

should have been recognized by the CA at that time.

4.6.5.3 Commentary

The protocol’s view is correct in principle but in practical terms it is

nevertheless difficult to assess the amount of information that a CA would

have had at the time he or she assessed the claim.

65

4.6.6 Mitigation of delay and loss


(i) Subject to the Contract, the duty to mitigate loss does not extend to

requiring the contractor to add extra resources or to work outside its planned

working hours.

(ii) The contractor must not take unreasonable steps that increase its loss.

4.6.6.2 Guidance

The protocol considers that the contractor’s duty to mitigate its loss has

two limbs:

(a) the contractor must take reasonable steps to minimize its loss; and

(b) the contractor must not take unreasonable steps that increase its loss

The contractor is usually required in construction contracts to do all it can

to avoid, overcome or reduce delay. This duty does not extend to carrying out

any change in scope any more efficiently than the original scope, spend more

money in order to negate the effect an employer Risk Event, for example

adding extra resources by working outside its planned working hours or

otherwise. The employer should pay the contractor the costs of taking such

measures to mitigate the loss if it requires the contractor to do so. The

66

method, speed and timing of the activities under the contract are generally at

the contractor’s discretion subject to any agreed programme or method.

4.6.7 Monetary claims

Prolongation costs, the protocol advises, should be based on costs incurred.

Whether or not the cause of prolongation compensation is governed by a provision in

the contract or arises from a breach of contract, it is up to the contractor to

demonstrate that he has actually suffered loss and/or expense before becoming

entitled to compensation, unless the contract or indeed the applicable law provides

otherwise.

The tender allowance, on the other hand, has limited relevance to the

evaluation of prolongation and disruption caused by a breach of contract or any other

cause that requires the evaluation of additional costs.

The protocol expresses views on such matters as claims for the recovery of

head office costs using Hudson’s Formula and its rival Emden’s formula, together

with interest and finance charges, profit, acceleration and claims for the recovery of

costs incurred in preparing claims.

67

4.7 Conclusion

In construction, time is extremely important. The construction phase can be

divided into three basic time-related stages, namely commencement, progress and

completion. A delay in any of the stages, especially the first stage, will have a huge

impact on the other stages and this can result in a significant increase in the

construction cost and wastage of human hours. Therefore, it is imperative for all

relevant parties to organize, co-ordinate and plan properly in order to execute the

construction efficiently from commencement until completion within the time and

budget provided.

However, timely completion of projects is not always the case. Consequently

contractors and employers need to have recourse to claiming EOTs and liquidated

damages respectively. The grounds for granting extension of time, procedure for

claiming and also the basis of assessing EOT have been discussed in this chapter.

68

CHAPTER 5

DATA ANALYSIS AND RESULT

5.1 Introduction

This chapter will look into case laws and projects that involve works which

have experienced delays. Five (5) case studies have been selected in order to have an

understanding of delayed projects, causes of delay and the grounds for the issuance

of extension of time. The case laws that explain ‘fair and reasonable’ assessment in

granting extension of time are as follows:

Case No. 1: John Barker Construction Ltd v London Portman Hotel Ltd (1996)

83 BLR 31

Under this case, on 1 December 2004, Barker applied an extension of time for

the full period of delay which was six weeks. An extension of time was awarded by

69

the architect, but not for the full period of delay. The dispute was referred to the

Official referee’s court, and was heard before Mr Justice Toulmin.

The judge was not persuaded that the architect’s assessment of a fair and

reasonable extension of time was methodical and logical. His conclusion was that the

architect’s assessment was irrational, illogical and fundamentally flawed and he

mentioned in his judgment that the architect did not carry out a logical analysis in a

methodical way of the impact which the relevant matters had or were likely to have

on the planned programme. He made an impressionistic, rather than a calculated,

assessment of the time which he thought was reasonable for various items

individually and overall.

There are two important observations in this case as follows:

(i) Mr Recorder Toulson QC held that a fair extension of time

called for a logical analysis of the impact of relevant

matters in a methodical way.

(ii) An analysis using CPM techniques was held to be fair way

of assessing a reasonable extension of time, However, it

was not suggested that such techniques were the only ways

of assessment.

In this case, the judge held that the effect of the architect making

impressionistic assessment instead of a logical analysis of delay rendered his

extension of time fundamentally flawed. The judge said:

‘‘ I accept that [the architect] believed, and believes, that he made a fair

assessment of the extension of time due to the Plaintiffs. It is fairly apparent that the

70

Defendants were concerned by the overrun of the contract in time and costs, and I

have no doubt that[the architect] was conscious of this, but I believe also that he

endeavoured to exercise his judgment independently. However, in my judgment his

assessment of extension of time due to the Plaintiffs was fundamentally flawed in a

number of respects, namely:-

(a) [The architect] carry out a logical analysis in a methodical way of

the impact that the relevant matters which the contractor put forward

had on the delay to the project

(b) He made an impressionistic, rather than a calculated, assessment of

the time which he thought was reasonable for the various items

individually and overall. (The Defendants themselves were aware of

the nature of [the architect’s ]assessment, but decided against seeking

to have any more detailed analysis of the Plaintiffs’ claim carried out

unless and until there was litigation)

(c) [The architect] misapplied the contractual provisions, as more

particularly set out above. Because of unfamiliarity with SMM7 he

did not pay sufficient attention to the content of the bills, which was

vital in the case of JCT contract with quantities

(d) Where [the architect] allowed time for relevant events, the allowance

which he made in important instances (such as the items relating to

walls or he cutting of pockets in bathrooms screeds) bore no logical or

reasonable relation to the delay caused.

This case provides a clear warning to everyone whose duty it is to assess and

certify extensions of time that anything less than a thorough delay analysis may

invalidate the certificate. The consequences of that could well be that the certifier

could find himself in breach of his professional contract and liable to the employer

for breach of duty.

71

Case No. 2: Liew Ter Kwang v Hurry General Contractor Pte Ltd [2004] 3 SLR

59

In this case Mr Liew Ter Kwang is the owner of semi-detached house in

Mayflower Rise, Singapore. He had applied for leave to appeal on three questions of

law. In the originating motion, these questions were formulated as follows:

(a) Whether the arbitrator erred in agreeing that extension of time could

be granted on grounds not provided for in cl 23 of the Conditions

(b) whether the arbitrator erred in law in agreeing that an architect can

properly assess an extension of time without carrying out a detailed or

logical or methodical analysis of the extension of time granted based

on supporting documents, but by simply making an empirical

assessment or estimate

(c) whether the arbitrator has power under cl 37(3) of the Conditions to

review the architect’s or consultants’ decisions and/or certificates only

if there is clear evidence of the architect or consultant not acting

professionally, independently or fairly, or whether the arbitrator may

do so on other grounds.

In the first question, the arbitrator found that the architect’s granting of the

Extension of time of six weeks to be in order because he thought the architect had

considered that the delay arising from the late supply of the roof tiles was not solely

caused by the contractor. Counsel for Mr. Liew challenged that the finding on the

basis of that reason did not fall within cl 23(1) of the Conditions

For the second question, according to the judgment, in making any

determination under a building contract, an architect has Duty to act fairly and on a

72

rational basis, any assessment he makes must be based on reasons that can stand up

to scrutiny. It has been held that in order for an architect to make a fair and

reasonable assessment of the time extension to be granted, he must:

(a) carry out a logical analysis in a methodical way of the impact that the


project

(b) make a calculated assessment of time which he thought was reasonable for


assessment;

(c) apply the contract provisions correctly; and

(d) in allowing time based on the grounds listed in the contract provisions, ensure

that the allowance made bears a logical and reasonable relation to the delay

caused.

For the third question, the arbitrator did not appear to have carried out a

proper evaluation or review of the architect’s decision. Instead, there was a

presumption that the architect was right unless it could be proven that he did not act

professionally, independently and fairly. He further upheld the architect’s decision to

extend time beyond the time initially allowed by the contract to complete on the

ground that there was no evidence to show that the architect and engineers had acted

unprofessionally or unfairly.

73

Case No. 3: Lian Soon Construction Pte v Guan Qian Realty Pte Ltd [2000] 1

SLR 495

In this case, the main Contractor entered into a SIA contract (4th. Edition)

with the Employer for the construction of a 10 storey block of residential apartments.

The Contractor granted an extension of time of 52 days. The Employer relied on

these purported certifications and computations as set-offs in the summary judgment

proceedings.

In this case, the processing of the extension of time application reached an

impasse regarding the submission of a critical programme. Although the Architect

had intimated that in the absence of such a programme, he would assume that the

events relied on did not fall within the critical path and he would ‘evaluate

accordingly’, he left the matter in limbo.

For a whole year, he did not indicate one way or the other his position in

regard to this matter, leaving it quite ambiguous and uncertain. What was involved in

a time extension exercise was, basically, to assess how much more time the main

contractor should fairly and reasonably be entitled to have beyond the time initially

allowed by the contract to complete the works as a result of the delay events which

had occurred.

The Architect was required to make a fair estimate and assessment, and not to

give a precise arithmetic calculation. There was no requirement in Clause 23 for a

critical path programme. Even in the current, revised, version of the clause, all that

was required was the submission of a ‘sufficient explanation’ of the reasons why the

delay to completion will result.

74

The assessment of extension was within the competence and expertise of the

architect. He had to do his best with the submission of the material required by the

clause to be submitted, and should not shift the responsibility to the main Contractor.

An analysis of the inter-relationship between all these events and consequent impact

on the overall completion date was within the Architect’s own responsibility and

competence, rather than the Contractor’s.

The court summed up by holding that the architect failed to act upon the main

Contractor’s application for time extension; he failed to make a decision or to make

it in time, and he seemed to have taken one position at the time of receipt of the

application (that he would not or could not grant any extension) and a another a year

later (that the plaintiffs were entitled to 52 day extension). The architect did not

properly exercise his power in respect of the matter of extension of time and delay

certificate. The court therefore found that the purported decision on the extension and

the delay certificate was a nullity for the purpose of the summary proceedings.

Case No. 4 : Henry Boot Construction (UK) Limited v Malmaison Hotel

(Manchester) Ltd (1999) 70 Con LR 32

In the arbitration, the contractor was claiming an extension of time on the

basis of various events. The Employer wished to challenge this claim by advancing

both a negative and a positive case. The negative case was that the events relied on

by the Contractor had not caused the alleged or any delay. The positive case was that

delay had in fact been caused by other events. The Contractor argued that it was not

within the jurisdiction of the Arbitrator to consider this positive case and that he was

only entitled to consider events puts before him by the Contractor. This proposition

was rejected both by the Arbitrator and the Court.

75

The basic principle is encapsulated in para 12 of Dyson J’s judgment in Henry Boot :

“ First it is agreed that the analysis of Colman J in Balfaour Betty Building

Ltd v Chestermount Properties (1993) 32 Con LR 139 should be applied. In his

valuable interpretation of cl 25 of this form of the contract, Colman J said, inter alia,

that the purpose of the power to grant extension of time under cl.25.3 was to fix the

period of time by which the period of time available for completion ought to be

extended having regard to the incidence of the relevant events measured by the

standard of what is fair and reasonable. The completion date as adjusted was not the

date by which the contractor ought to have achieved practical completion, but the

end of the total number of working days starting with the date of possession within

which the contractor ought fairly and reasonably to have completed the works.

In Henry Boot, Dyson J dealt with the questions of concurrent delays and

whether it is permissible to consider other events. In relation to the first question

Dyson J said, at para 13 of his judgment:

‘Second, it is agreed that if there are two concurrent causes of delay, one

which is a relevant cause and the other is not, then the contractor is entitled to an

extension of time for the period of delay caused by relevant event notwithstanding

the concurrent effect of the other event. To take a simple example : if no work is

possible on a site for a week not only because of exceptionally inclement weather ( a

relevant event) but also because the contractor has a shortage of labour (not a

relevant event) and if the failure to work during it that week is likely to delay the

works beyond completion date by one week, then it is considered fair and reasonable

that the architect be required to grant an extension of time of one week, and he

cannot refuse to do so on the grounds that the delay would have occurred in any

event by reason of the shortage of labour.’

76

In relation to the second question, Dyson J held that an architect is not

precluded from considering the effect of other events when determining whether a

relevant event is likely to cause delay to the works beyond completion. It seems to

follow that where there is true concurrency as identified the Contractor gets an

extension of time for the relevant period and the employer’s claim to liquidated

damages fails. That seems a fair outcome.

5.2 Findings and Discussions

Based on my findings, there appears to be no case law which gives a clear

definition of ‘fairly’ and ‘reasonably’ in the assessment for granting extension of

time. In Case No.1: John Barker Construction Ltd v London Portman Hotel Ltd

(1996) 83 BLR 31, the judgement was that the architect’s assessment of extension

of time due to the Plaintiffs was fundamentally flawed. He did not carry out a logical

analysis in a methodical way to assess the impact the relevant matters had or were

likely to have on the construction plan. Instead of making a calculated assessment

of the time due to the contractor, he made an impressionistic assessment, which he

thought was reasonable, for various items individually and overall.

The court held that there were two important observations to be noted in this

case for a fair determination in assessing extension of time . They are as follows:

(a) a fair extension of time called for a logical analysis of the impact of

relevant matters in a methodical way.

(b) an analysis using CPM techniques was held to be a fair way of

assessing a reasonable extension of time, However, it was not

suggested that such techniques were the only ways of assessment.

77

In the Case No 2 : Liew Ter Kwang v Hurry General Contractor Pte [2004]3

SLR 59, the arbitrator approved the architect’s act of assessing the application for

extension of time by simply making an empirical estimate. It was held that there was

no evidence to show that the architect and engineer had acted unprofessionally or

unfairly. According to the judgment, in making any determination under a building

contract, an architect has a duty to act fairly and on rational basis, any assessment he

makes must be based on reasons that can stand up to scrutiny. In order for an

architect to make a fair and reasonable assessment of the time extension to be

granted, he must:

(a) carry out a logical analysis in a methodical way of the impact that the


project

(b) make a calculated assessment of time which he thought was reasonable for


assessment;

(c) apply the contract provisions correctly; and

(d) in allowing time based on the grounds listed in the contract provisions, ensure

that the allowance made bears a logical and reasonable relation to the delay

caused.

In Case No.3: Lian Soon Construction Pte v Guan Qian Realty Pte Ltd

[2000] 1 SLR 495, the architect did not properly exercise his power in respect of the

matter of extension of time and delay certificate. Under his duty, the architect was

required to make a fair estimate and assessment, and not to give a precise arithmetic

calculation. The assessment of extension was within the competence and expertise of

the architect. He had to do his best with the submission of the material required by

the clause to be submitted, and should not shift the responsibility to the main

Contractor.

78

In the Case No.4 : Henry Boot Construction (UK) Limited v Malmaison Hotel

(Manchester) Ltd (1999) 70 Con LR 32, there seems a fair outcome when the

architect is not precluded from considering the effect of other events when

determining whether a relevant event is likely to cause delay to the works beyond

completion. It seems to follow that where there is true concurrency as identified the

Contractor gets an extension of time for the relevant period and the employer’s claim

to liquidated damages fails. The next step was the assessment of extension of time in

housing projects procured by Felda Engineering Services Sdn Bhd.

Below are the five case studies that the Engineer had granted extension of

time in Felda Engineering Services Sdn Bhd.

5.3 Case Study No.1

Project Name : Cadangan Pembangunan Perumahan yang

Mengandungi 160 Unit Rumah Kos Rendah Satu

Tingkat, 45 Unit Rumah Kos Sederhana Rendah Satu

Tingkat Dan Satu Unit Pencawang Elektrik Di Felda

Mempaga 2, Mukim Sabai, Daerah Bentong, Pahang

Darul Makmur.

Contract Number: 59/09/03/B

Contractor : Jentayu Padu Sdn Bhd

Client : Felda Properties Sdn Bhd

Architect : Jazlan Azmi Architects Sdn Bhd

Project Manager : Felda Engineering Services Sdn Bhd

Quantity Surveyor : Felda Engineering Services Sdn Bhd

M & E : Allied Engineering Services Sdn Bhd

Original Contract Sum : RM 8,576,316.00

New Contract Sum : RM 9,011,305.43

79

LAD : RM 5,000.00 per day

Start Work : 1.04.2004

Original Completion Date: 01.07.2005

Actual Completion Date: 28.10.2005

EOT 1 : 02.07.2005 - 10.09.2005 (71 days)

EOT 2 : 11.09.2005 - 28.10.2005 (41 days)

5.4 Case Study No. 2

Project Name : Membina Dan Menyiapkan Rumah Kos Rendah Dan

Kos Sederhana Rendah Satu Tingkat, Kedai Satu

Tingkat Dan Kerja-Kerja Infrastruktur Yang Berkaitan

Di Felda Bukit Goh, Kuantan, Pahang.


Contractor : MMN Bina Sdn Bhd


Architect : Jazlan Azmi Architects Sdn Bhd

Project Manager : Felda Enngineering Services Sdn Bhd





LAD : RM 5,000.00 per day

Start Work : 01.09.2004


EOT 1 : 02.09.05 - 30.11.2005 (90 days)

EOT 2 : 31.11.2005 - 31.01.2006 (62 days)

EOT 3 : 01.02.2006 – 30.04 .2006 (89 days)

EOT 4 : 01.05.2006 -30.11.2006 (214 days)

80


Project Name : Cadangan Membina Dan Menyiapkan 192 Unit Rumah

Rumah Kos Rendah, 58 Unit Rumah Kos Sederhana

Rendah, 5 Unit Kedai, Bazaar, Pencawang Elektrik

Dan Kerja-Kerja Infrastruktur Yang Berkaitan Di

Felda Lepar Hilir Saujana, Kuantan, Pahang Darul

Makmur


Contractor : Kejuruteraan Seberkas Sdn Bhd


Architect : Jazlan Azmi Architect






Start Work : 11.10.2004


LAD : RM5,000.00 per day

EOT 1 : 12.01.06 -12.03.06 (60 days)

EOT 2 : 13.03.06 – 13.06.06 (93 days)

EOT 3 : 14.06.06 -30.09.06 (109 days)

EOT 4 : 1.10.06 – 31.03.2007 (182 days)


Project Name : Membina Dan Menyiapkan Rumah Kos Rendah

Setingkat, Rumah Kos sederhana Rendah Setingkat,

81

Kedai Setingkat, Pencawang Elektrik Dan Kerja-Kerja

Infrastruktur Yang Berkaitan Di Felda Keratong 3,

Mukim Keratong, Daerah Rompin, Pahang Darul

Makmur


Contractor : MMN Bina Sdn Bhd


Architect : Jazlan Azmi Architect





New Contract Sum : RM21,119,809.57

Start Work : 22.11.2004


EOT 1 : 23.05.06 -31.08.2006 (101 days)

EOT 2 : 01.09.2006 - 28.02.2007 (181 days)

EOT 3 : 01.03..2007 – 14.04.2007 (45 days)


Project Name : Cadangan Membina Dan Menyiapkan 125 Unit Rumah

Kos Sederhana Di Atas Lot 2263-2268, 2173 di Bandar

Muadzam Shah, Mukim Bebar, Daerah Rompin,

Pahang Makmur


Contractor : Jentayu Padu Sdn Bhd


Architect : Arkitek Ehwan Sdn Bhd

Project Manager : Felda Engineering Services Sdn Bhd

82




LAD : RM5,000.00 Per day

New Contract Sum : RM10,664,830.00

Start Work : 03.07.2006


EOT 1 : 04.10.2007 -31.05.2008 (240 days)

EOT 2 : 01.06.2008 - 28.09.2008 (120 days)

EOT 3 : 29.09.2008 - 31.01.2009 (125 days)

EOT 4 : 01.02.2009 - 21.04.2009 (80 days)

5.8 Findings and discussions

The summary of the causes of delay and the granting of extension of time to

the contractors are summarized as below:

ITEM CAUSES OF DELAY CASE

STUDY

1

CASE

STUDY

2

CASE

STUDY

3

CASE

STUDY

4

CASE

STUDY

5

A By force majeure

B By reasons of any

exceptionally inclement

weather

C By reason of direction

given by the Engineer

consequential upon

disputes with

neighbouring owners

D By reason of loss or

83


STUDY

1

CASE

STUDY

2

CASE

STUDY

3

CASE

STUDY

4

CASE

STUDY

5

damage occasioned by

any one or more of the

contingencies referred to

in Clause 34

E By reason of Engineer’s

instruction issued under

Clause 5

F By reason of the

Contractor not having-

received in due time

from the Engineer

necessary instructions,

drawings, levels or

instructions in regard to

the nomination of sub-

contractors and/or

suppliers

G By reason of delay in

giving possession of the

Site as provided under

Clause 38 (b) (i) hereof

H By reason of any action

due to local combination

of workmen, strike, or

lockout affecting any

trades employed upon

the Works

I By delay on the part of

artisans, tradesmen or

others engaged by the

84


STUDY

1

CASE

STUDY

2

CASE

STUDY

3

CASE

STUDY

4

CASE

STUDY

5

employer in executing

work not forming part of

this Contract

J By the contractor’s

inability for reason

beyond his control and

which he could not

reasonably have

foreseen at the date

closing of tender of this

contract to secure such

goods and/or materials

K By delay on the part of

nominated sub-

contractors and or

nominated suppliers of

their works, and such

delay shall be caused by

the same reasons

affecting their work as

stated above in sub

clauses (a) to (j)

Table 5.1 - Summary of causes of delay works and types of delay

Based on table 5.1 above, most causes of delay for the five case studies were

due to Clause 43(e) IEM Condition Of Contract by reason of Engineer’s instruction

issued under Clause 5, which included the variations, additional works because of

changing design, sizes, new works, requirements by Authorities such as TNB and

JBA and for electrical works and water supply or piping works. The other reasons

were delay in giving possession of the site due to presence of squatters and shortage

85

of labour. The table for the entitlement extension of time by the Contractor for the

five case studies are summarized as follows:

Table 5.2 – Comparison of the numbers of days EOT applied by

contractors and approved by clients

Referring to table 5.2, among the five case studies above, only one case study

shows that the extension of time given was similar to that the contractor had applied

for. In the other four case studies, the number of days applied by the Contractor did

not match with the number of days approved by the Engineer. Even though the

number of days for extension of time granted did not match perfectly with the

number the contractor applied for, there was no evidence o show that the engineer

had acted unprofessionally or unfairly. It was held in Case No.3 Lian Soon

Construction Pte v Guan Qian Realty Pte Ltd [2000] 1 SLR 49, that the assessment

of extension was within the competence and expertise of the architect who had to do

his best with the submission of the material required by the clause and should not

shift the responsibility to the main Contractor.

In determining a fair and reasonable assessment of Extension of Time, the

Engineer or Contract Administrator must apply the principle that is set out in the case

CASE

STUDIES

NO OF DAYS

CONTRACTOR

APPLY EXTENSION

OF TIME

NO OF DAYS CLENT

APPROVED

EXTENSION OF

TIME

NO. OF

DIFFERENCE

(DAYS)

1 112 112 0

2 939 455 484

3 815 476 339

4 524 327 197

5 749 565 184

86

of John Barker Construction Ltd v London Portman Hotel Ltd (1996) 83 BLR 31 and

Liew Ter Kwang v Hurry General Contractor Pte Ltd [2004] 3 SLR 59.

During the two-day course entitled ‘Contract Administration For Contracts

Based On IEM Conditions Of Contract’ which was conducted on 13-14 April 2009,

Ir. Harban Singh K.S. held that for Felda , it is the normal practice for the Engineer

to calculate the extension of time as follows:

Estimate length of delay (Excusable delay) = A days

No. of days saved through mitigation = B days

Estimate for extension of time = A days – B days

5.9 Conclusion

It is apparent from the above cases law that the assessment of a fair and

reasonable extension of time is not a straightforward exercise. It also appears that

there is neither a fixed nor a single way of assessing a fair and reasonable extension

of time. This is further corroborated when it has been held in the English case of

John Barker Construction Ltd v London Portman Hotel Ltd (1996) 83 BLR 31 that it

has to be a logical analysis in a methodical way considering the impact which the

relevant matters had or are likely to have on the contractor’s planned programme.

Also, in the five case studies above, although the period of extension of time did not

match with the period applied for by the Contractor, the engineer’s decision in

assessing the application for extension of time is not a violation of the law on the

ground that there was no evidence to show that the engineers had acted

unprofessionally or unfairly. There has been no case law that clearly states the

meanings of ‘fairly’ and ‘reasonably’ in assessment for granting extension of time.

87

CHAPTER 6

CONCLUSION AND RECOMMENDATIONS

6.1 Introduction

This final chapter concludes the study by listing and summarizing the result

of the analysis in accordance with the research objective based on literature reviews,

interviews and the case studies and result analysis.

6.2 Summary of Research Findings

In general, the objective of this research has been achieved through the

analysis of the cases law and case studies for housing project procured by Felda

Engineering Services Sdn Bhd. The objective was to identify how Superintending

88

Officers or Contract Administrators approach their duty in assessing Extension Of

Time fairly and reasonably. A summary of the above case laws is appended below:

No Cases Explanation of ‘Fair and Reasonable’

assessment in granting extension of time

1 John Barker Construction Ltd

v London Portman Hotel Ltd

(1996)

The assessment of a fair and reasonable

extension of time involves an exercise of

judgment, but the judgment must be fairly

and rationally based. Although there was

no bad faith or excess of jurisdiction on the

part of the architect, his determination of

the extension of time due to plaintiffs was

not a fair determination, nor was it based

on a proper application of the provisions of

the contract and it was accordingly invalid.

2 Liew Ter Kwang v Hurry

General Contractor Pte Ltd

[2004] SGHC97[2004]3 SLR

59

The arbitrator approved the architect’s act

of assessing the application for extension of

time by simply making an empirical

estimate. He further upheld the architect’s

decision to extend time on the ground that

there was no evidence to show that the

architect and engineers had acted

unprofessionally or unfairly.

89

3 Lian Soon Construction Pte v

Guan Qian Realty Pte Ltd

[2000] 1 SLR 495

The Architect was required to make a fair

estimate and assessment, and not to give a

precise arithmetic calculation. There was

no requirement in Clause 23 for a critical

path programme. Even in the current,

revised, version of the clause, all that was

required was the submission of a ‘sufficient

explanation’ of the reasons why the delay

to completion will result. The assessment

of extension was within the competence

and expertise of the architect.

4 Henry Boot Construction

(UK) Limited v Malmaison

Hotel 70 Con LR 32

‘… it is agreed if there are two concurrent

causes of delay,…take for example, if no

work is possible on our site for a week not

only because of exceptionally inclement

weather (a relevant event), but also because

the Contractor has a shortage of labour) not

a relevant event , and if the failure to work

during that week is likely to delay the

works beyond the Completion Date by one

week, then it is considered fair and

reasonable that the Architect be required to

grant an extension of time of one week…”

Table 6.1: The cases law that explained ‘fair and reasonable’ in

assessment for granting extension of time

The above table 6.1, summarises all the cases discussed above and give a

view of the explanation of ‘fair and reasonable’ assessment in extension of time for

each case. Failure by a certifier to act fairly can lead to invalidation of his

certificates. But even where the certifier acts fairly, that will not be enough to sustain

his decisions if it can be shown that he has failed to apply the machinery of the

contract to his decision making process.

90

According to the five case studies above, even though the period of extension

of time did not match with the period applied by the Contractor, the engineer’s

decision in assessing the application for extension of time is not a violation of the

law on the ground that there was no evidence to show that the engineers had acted

unprofessionally or unfairly. There has been no case law that clearly states the

meanings of ‘fairly’ and ‘reasonably’ in assessment for granting extension of time.

6.3 Problems Encountered When Conducting This Study

There some constraints in conducting this study. The cases relating to this

study are also limited. This limitation led to fewer cases being found to support the

findings, especially those decided in Malaysia Court.

6.4 Recommendations

Some guidelines are recommended for Superintending Officer or Contract

Administrator to act fairly and reasonably when considering applications for

extension of time:

(a) The contractor must appreciate the application procedures which are

inclusive of express contract provision, timing of the notification, form of

notice, content of notice, timing of the application and contents of the

application. The Contract administrator must appraise these procedures

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assiduously in order to ensure that a fair and reasonable decision is made

to the applications.

(b) The Contractor has to submit as much information as he can about the

causes of the delay to assist the architect in performing his duty. The

Contractor’s failure to provide accurate information if requested is also a

factor the architect can take into account in assessing the extension of

time.

(c) Extension of time should not been given randomly and without serious

consideration of the events that cause the delay The assessment of

extension of time must be granted on a fair and reasonable and rational

basis according to the contract. The basis of assessment must be

consistent and similar to all the projects. In the assessment of fair and

reasonable granting of extension of time, the Superintending Officer ,is

encouraged , as a guide, to consult the recently published delay and

Disruption Protocol published by the Society of Construction Law UK,

which is an excellent document setting out the relevant principles.

(d) There is no exact formula stated in the contract on how to assess

extension of time. For a fair and reasonable assessment in granting

extension of time, there must be a clear basis and the clear meaning of

‘fair and reasonable’. So the Contract Administrator and the Contractor

must set out the procedure on how to assess the extension of time during

the award of the Contract to the Contractor.

It is hoped that the body of this work and recommendations will contribute to

a better understanding of the problems involved in the construction industry

and will help to stimulate an implementation of a more systematic and

professional approach in the granting of extension of time and pave the way

for a further research in this contentious issue.

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6.5 Further Studies

A future research on a related topic ‘The entitlement of extension of

time due to concurrent delay’ will be a beneficial consideration. The

objective of this research will be to determine the circumstances surrounding

concurrent delays in construction and the entitlement of extension of time to

the Main Contractor.

6.6 Conclusion

The main finding of this research is that there is no case law with a clear

definition of ‘fair and reasonable’ assessment for granting extension of time. In the

five case studies above, owing to relevant events, the contractor was granted

Extension Of Time by the client. Even though the period of extension approved by

Superintending Officer/Engineer did not match the number of days the contractors

had applied for, there was no evidence to show that the engineer had acted

unprofessionally or unfairly because there is no case law which clearly described the

meaning of ‘fair’ and ‘reasonable’ in assessment for granting extension of time.

This point comes out very strongly in the recent case of John Barker

Construction Ltd v London Portman Hotel Ltd (1996) 83 BLR 31 where the judge

held that the effect of the architect making impressionistic assessment instead of a

logical analysis of delay rendered his extension of time fundamentally flawed. This

case provides a clear warning to everyone whose duty it is to assess and certify

extensions of time that anything less than a thorough delay analysis may invalidate

the certificate. The consequences of that could well be that the certifier could find

himself in breach of his professional contract and liable to the employer for breach of

duty.

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One of the roles of the Contract Administrator is the assessment of claims for

extension of time. Accordingly, though the Contract Administrator is usually

appointed by and paid by the Proprietor (and may sometimes be the Proprietor’s

original design consultant), the Contract Administrator’s role is principally to decide

major issues of potential dispute under the contract between the Proprietor and the

Contractor.

In such contracts there is (at least) an implied term that the Superintendent

will act fairly. There is a strong contractual agreement that if the Superintendent.

does not act fairly towards the Contractor, this constitutes a breach of contract by the

Proprietor.

It should be noted that the Contract Administrator’s ultimate decision as to

the granting of any extension of time is subject to two important exception that are

highlighted in the standard forms of contract. These are namely:

(a) the contractor is not entitled to any extension of time where the

instructions or acts of the employer and/or the Contract Administrator are

necessitated by or intended to cure any default or breach of contract by

the Contractor and

(b) the contractor shall have constantly used his ‛best endeavours’ to prevent

delay and has done all that may reasonably be required of him to the

satisfaction of the Contract Administrator to prevent delay or further

delay in the completion of works.

All in all, the Contract Administrator or Superintending Officer plays a

pivotal role in the successful management of a contract and an appropriate and

responsible assessment of delays and granting of Extension of Time will not only

keep any possible disputes at bay but also smoothen the completion of the project.

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REFERENCES

Bramble, B.B, Callahan, M.T. (1992) Construction Delay Claims, 2nd Edition, John

Wiley & Sons, New York

Chow Kok Fong, (1988), “An Outline of the Law & Practice of Construction

Contract Claims”, Longman, Singapore.

Eggleston. (1997), B.Liquidated damages and Extension Of Time, 2nd Edition.

Oxford: Blackwell Science Ltd

Hashim Sikan, (2003), “Extension Of Time” The Malaysian Surveyor (3rd Quarter,

Vol 38.3)

Lim Chong Fong (2004), The Malaysian PWD Form Of Construction Contract,

Ir. Harbans Singh K.S.,(2002), “Engineering And Construction Contract

Management, Post-Commencement Practice”, Lexis Nexis Business

Solutions

Jimme Hinze(2001), Construction Contract, Second Edition

Keating, D(1978), Building Contracts, 4th ed. London Sweet & Maxwell

Murdoch, J. and Hughes, W.Construction Contracts - Law and Management, 3rd

edition, Spon Press, London

Nicholas J. Carnell, Causation and Delay In Construction Disputes, Second Edition

Smith, Curie & Hancock(2001), Common Sense Construction Law, a Pratical Guide

For The Construction Professional , John Wiley & Sons, Canada

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APPENDIX A

IEM CONDITIONS OF CONTRACT FOR WORKS MAINLY OF CIVIL

ENGINEERING CONSTRUCTION

Documents

FAIR AND REASONABLE ASSESSMENT IN GRANTING