Delay analysis in construction contracts

Delays are encountered in a large number of projects. Schedulers and Project managers need to identify /analyse and implement appropriate corrective steps including actions to prevent such delays from re occurring. The reasons for delays are often due to, improper/insufficient planning, lack of competence/experience of some of the participants, changes in techno commercial terms, delays in permits and Force Majeure. However, in current market situation, the objectives of delay analysis has shifted to allocate the delay damages to the participants.

Since there are so many stakeholders involved in construction projects, such as owners, consultants, and government agencies, a clear understanding of the project scope split and an agreed-upon integrated time schedule is essential. The duration of any project has a direct impact on the financial results of all stakeholders and hence delays need to be analysed for granting of extension of time and levying of damages on parties causing such delays. Government agencies involved in permitting and approvals etc are generally not accountable for delays and seldom sign up on any project schedules.

All project participants are generally mandated by contract to seek for extension of time promptly upon occurrence of a delay event. Owners/ owners engineer have the obligation to review and settle such time extension claims within reasonable time. However, in most projects these extension of time claims are not settled until the end of the project under the pretext that available resources need to be deployed to complete the project and should not be diverted to claims management. Another reason for postponing claim submission/ settlements is due to the human tendency to “postpone the unpleasant” task.

Consultants or EPC contractors tasked with the timely performance must ensure proper/agreed schedules are in place and also ensure a correct/factual monthly update of the schedule. The schedule updates (including critical path updates) must be backed by written contemporary records of the reasons for the delays etc. Experience from analysing delays reveals that schedule updates/contemporary records are not properly maintained in most projects. For carrying out delay analysis, an agreed integrated project schedule focussing on interface obligations of the participants and updated schedules up to the actual completion dates are a must.

Delay analysis carried out in projects for the apportioning of delays to each participant may also additionally result in legal action. Under the above circumstances, delay analysis done at the end of a project is difficult and expensive task and further does not provide a correct apportioning of the delays as this tends to be a “forensic exercise ‘without the essential documents needed.

There are several delay analysis methods used by consultants to carry out “forensic analysis” of delays but the correctness and accuracy from such exercises may not do proper justice to all parties involved. An effective way to avoid such forensic delay analysis at the end of the project is for the settlement of extension of time and cost claims as the events occur. A periodic claim reviews must be mandated by top management of all the participants as a mandatory and professional project management task.

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