Infrastructure delivery – 5 tips for managing delay claims

Infrastructure delivery – 5 tips for managing delay claims

With a predicted $80 billion to be spent between in NSW by 2021[1], there are bound to be significant delays felt by the community as construction is planned and commences.

As part of this spend, the State government has renewed its focus on light rail (being lost after the partial completion of the inner west light rail line to Lilyfield in 2000). The announcements for the new western light rail lines to Parramatta, the Sydney CBD light rail network, Newcastle CBD light rail and the planned Newcastle light rail network shows that light rail is here to stay.

While these projects will significantly expand and revitalise the public transport systems of both NSW’s major cities, they are also prime examples of some of the delays that contractors can encounter when delivering infrastructure programs. For example, the Sydney Light Rail has been plagued with delays since construction commenced.[2] The discovery of thousands of unused, unknown underground services and delivery cables in George Street has delayed the light rail network by up to 18 months and has costed millions.[3]

Claiming delays 

A contractor’s right to delay costs generally exists as a right under contract.  If there is a delay in the works, a contractor may be entitled to claim for an extension of time (EOT).  In some circumstances, there may also be an entitlement to claim for some or all of the costs associated with that delay.  However, this right arises under contract and the ability to claim such costs is usually linked to a particular type of event or effect on construction.

Our top 5 tips for ensuring delays are properly assessed and managed are:

  1. Understand the risk profile for the project

This is paramount.  As part of any procurement process, and well before any contract is signed, all documents and information (including the site) should be reviewed.  Each project should be individually assessed as the risks around delay may vary dramatically between projects (for example the type and effect of latent conditions).

This analysis should give an insight into what problems or risks for delay might arise.  These risks should be considered both in terms of who controls the risk, if the risk should give rise to the ability to claim for additional time, and whether costs may arise from the potential delay events.

Usually, if the contractor cannot control the risk then the ability to claim an EOT may be appropriate.  Where the delay arises from acts of the principal and where that risk is in the hands of the principal, the ability to claim delay costs may be appropriate.[4]

The context of this will also include the nature of the project.  Some projects may have a set or unmoveable delivery date (for example, the Commonwealth Games), and in that instance the ability to change methodologies, claim for additional resources, or accelerate, may be the appropriate mechanism to address delay events.

  1. Make sure delay claims are available in your contract

This means EOTs, where appropriate, and delay costs, where appropriate. The right to delay costs is a contractual right.  Without it, there may be limited or no rights to time or cost.  Accordingly, this should be considered at the time of tendering, through negotiation and before the execution of the contract.

In this context, it is critical to not only consider and agree on the appropriate measure of what costs could arise from the delay, but what events should link to a right to claim for such costs and what mechanisms are used to assess or calculate that cost.

  1. Know what Know the avenues available to claim under the contract.

A critical element of being able to claim an EOT and/or costs if a delay event occurs is knowing what dl. It is vital to understand when a delay event that events a claim for time or cost arises and how to address that event. The document that will dictate the approach that should be taken is the contract.  Anyone working on the project should know and understand what events give rise to an EOT or claim for delay costs.

  1. Understand the program and critical path for the project

Programming, programming, programming.  Without it, it is not possible to assess the critical path of the Project, or whether there has been a delay. Programming should be done before tender, updated during the negotiations, and continually assessed during the project life.

During project delivery, a number of delays may arise at the same time. For example, what rights to delay claims (including for delay cost) arise, if a delay is caused by you at the same time as inclement weather and potentially the uncovering of latent conditions, such as unknown services? It is vital to understand how those delays are dealt with under your contract.

Knowing which delays may have an impact on the critical path, will be necessary to assessing any claim and whether any rights to cost or time arise from that claim.

  1. Contract administration is vital

You must make sure the contractual regime is complied with, if a delay occurs.  This means making an extension of time claim, and delay costs in accordance with the requirements of the contract.  These requirements will vary significantly across each contract, and if a claim is not made strictly in accordance with the contract it may be subsequently barred.  This means a claim should be made within the time provided, and with all necessary supporting documentation, including supporting the cost component of any such delay claim.

For further information and assistance, contact Hamish or Michael at h.geddes@morrisseylaw.com.au or m.morrissey@morrisseylaw.com.au.

Disclaimer: This publication by Morrissey Law & Advisory is for general information and commentary only and should not be considered or relied upon as legal advice. Formal legal advice should be sought in relation to any matters or transactions that may arise in relation with communication.

[1] https://www.budget.nsw.gov.au/treasurers-message

[2] http://www.abc.net.au/news/2016-08-09/light-rail-construction-to-cause-sydney-cbd -delays/7704766

[3] As above

[4] The principles developed my Max Abrahamson around risk management, ‘the Abrahamson Principles’, are a useful tool in assessing this risk.

morrisseylaw