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Delay and Disruption: Separate Entities or Indistinguishable Bedfellows?

18 August, 2020

Delay and Disruption:
Separate Entities or Indistinguishable Bedfellows?

John Delaney, Director, Base Quantum Ireland Ltd

In the face of restricted working practices and social distancing at work, what are the likely impacts on construction operations? If works are undertaken under unanticipated restraints that inevitably increase the time required to complete tasks and/or cause tasks to require additional resources and/or reduce the productivity of the resources allocated to such tasks, the likely impacts can reasonably be expected to be the often mentioned delay and disruption, and the resulting claims based on these matters.

Whilst these matters are common in our industry, there seems to be a degree of misunderstanding of how delay and disruption come about, how they are related and the distinctions between them.

A brief commentary of these issues is worthy of repetition.

Delay

Delay is first and foremost a time issue. Simply put, work activities require longer periods than originally planned for. A potential consequence of delay is that a project’s completion is delayed beyond the completion date defined in the contract, provided the affected work activities are on the critical path.

Depending on whether it is the employer or the contractor who causes the delay there are two broad results. In the event of:

  1. Employer culpable delay:
    • The contractor is entitled to an Extension of Time (“EOT”) and, where the contract permits, compensation for time related costs incurred due to the delays;
    • Further compensation could arise if the contractor has incurred additional costs in taking measures to accelerate to mitigate the delays (again, contract permitting); and
    • The contractor is relieved from the imposition of Liquidated and Ascertained Damages (“LADs”) for the duration of the EOT.
  2. Contractor culpable delay:
    • The contractor is not entitled to an EOT; and
    • The employer may impose LADs as per the contract if completion occurs beyond the completion date.

Disruption

Disruption is considered to be a disturbance or hindrance to the contractor’s normal working methods, where the usual consequence is reduced productivity or efficiency in carrying out the works. If the contractor is prevented from following its reasonable plan for undertaking works, determined at the time of entering into the contract, the likelihood is that its resources (labour and plant) will achieve a reduced productivity rate compared to that planned and estimated for in the price. The result of this will be that the activities will cost more to complete and the contractor’s anticipated profits will be diminished for those particular work activities.

The potential consequences of disruption are:

  • Activity delay, including the potential failure to complete works within the contract period if the disrupted activity is on the critical path;
  • The need for acceleration, such as increasing resources, re-sequencing works activities, and increasing work faces or working hours to avoid or mitigate activity delay; or
  • A combination of both.

In each scenario the likely impact for the contractor would be unanticipated loss and expense.

Delay and Disruption

In themselves, delay and disruption are independent of each other, however they are often combined in the preparation and presentation of a claim. This may ignore their distinctions and fail to identify the events that caused each and the different resulting effects experienced. Combined delay and disruption claims are typically considered global in nature and as such are less persuasive of their merits.

It is therefore ever more important that contractors clearly understand the definitions of delay and disruption, as well as the differences and potential relationship between them.

Delay is concerned with the time it takes to complete work activities, specifically those on the critical path to completion of the works. Disruption is concerned with an analysis of the productivity of work activities, irrespective of whether those activities are on the critical path. It should be remembered that:

  • Disruption is not delay;
  • Disruption may cause delay; and
  • Disruption may be caused by delay.

Although separate issues, delay and disruption are often inherently interrelated. A loss of productivity (i.e. disruption) can lead to activity delay and, if the impacted activities are on the critical path, this can result in critical delay. In this situation, contractors will have grounds (assuming the contract provides for such) to claim for:

  1. An EOT and associated loss and expense (the delay claim); and
  2. Loss and expense resultant from the lost productivity (the disruption claim).

A delay claim captures the time and cost of work taking longer due to events for which the contractor is not responsible. It is, however, possible for works to be disrupted and yet still be completed by the contract completion date. In this situation, contractors will NOT have grounds to claim for an EOT, but they may have grounds to claim for the loss and expense incurred due to the lost productivity. A disruption claim captures the cost of working less efficiently due to events for which the contractor is not responsible.

Equally, delay can lead to disruption. If contractors realise that the project is experiencing critical delay but has not been or is unlikely to be granted an EOT, acceleration measures may be required. It is possible that the acceleration measures implemented will lead to some work activities being carried out with a lower productivity than planned and hence at greater cost.

Contractors need to be aware of productivity as much as progress. Every month contractors will measure progress against their baseline programme, but it is rare to find a similar continuous measure of productivity.

The commercial consequences of delay and disruption can also appear to overlap. For example, if the acceleration measures taken to mitigate an activity delay lead to a loss of productivity, the cost of implementing those measures should be recovered under the disruption claim, although the primary cause of the disruption may have been a delay event. Subject to the contractual circumstances, both claims should be advanced – the delay claim to obtain relief from LADs and potentially prolongation costs; and the disruption claim to recover loss and expense incurred due to reduced productivity. Determining where these costs sit is a complex topic in itself, which is beyond the scope of this article.

It is important for contractors to be diligent in avoiding duplication in any claimed entitlement for delay and disruption; and it is important for employers to recognise any potential duplication and seek to identify appropriate credits.

If contractors keep in mind the distinction between delay and disruption when preparing claims, they will be more likely to persuade employers of their merits:

A delay claim captures the time and cost of not being able to work; and
A disruption claim captures the cost of working less efficiently than planned.” i

In the new Covid-19 era of restricted working practices and social distancing, it seems that related delay and disruption in construction activities is inevitable. Contractors should focus more closely on measuring and recording productivity with the same accuracy that they traditionally record progress. Not only will this improve their ability to commercially manage their projects but, with proposals based on accurate records and costing, it should allow contractors to engage with their supply chain and employers in a collaborative manner.

It seems appropriate therefore to recognise that whilst delay and disruption often end up as indistinguishable bedfellows, they are best regarded as separate entities, however intertwined they may well be.


i Bell BCI Co V United States, Fed C1 No 03-1613C (filed 14 July 2006)


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