CONTRACTOR S APPLICATION FOR AN EXTENSION OF TIME NORHANA BINTI DANIAL

Transcription

1 CONTRACTOR S APPLICATION FOR AN EXTENSION OF TIME NORHANA BINTI DANIAL A project report submitted in partial fulfilment of the requirements for the award of the degree of Master of Science (Construction Management) Faculty of Civil Engineering Universiti Teknologi Malaysia JUNE, 2007

2 To my beloved mother and father iii

3 iv ACKNOWLEGEMENT In preparing this project, I was in contact with many people, researchers, academicians and practitioners. Firstly and of course, I wish to express my sincere appreciation to my project supervisor, Professor Dr. Muhd Zaimi Abdul Majid for his encouragement, guidance and friendship during the writing of this project. Secondly, to my fellow postgraduate student and also practitioner in the construction industry, Aniza Abu Bakar, for her kind assistance, views and tips in this master project. My other fellow postgraduate students should also be recognised for their support. Thanks also due to my parents for their support, and all my colleagues past and present who have offered numerous helpful suggestions.

4 v ABSTRACT Invariably an evaluation of extension of time (EOT) will be made based on the information submitted by the contractor such as work programme and architect s instructions. Lack of information of delay is one of the common mistakes by the contractor in the application of EOT and this can lead to obstacles in prompt settlement of claims for EOT. The objectives of this research are: to identify the information that needs to be considered in evaluating extension of time application; to identify the common mistakes by the contractor in the application of extension of time; and to identify the ways to reduce the mistakes by the contractor in the application of extension of time. The methodology of this study includes literature reviews, data collection and analysis. Data is gathered from responses of questionnaire survey with professionals involved in the construction project. The research findings indicate that insufficient quality of information and poor presentation of the application to show how the progress of the work has been delayed remained as the highest common mistakes. This research highlights the ways to reduce the mistakes to speed up the evaluation process in order to establish the contractor s entitlement for EOT and also to avoid disputes about contractor s entitlement for EOT. In conclusion, the mistakes could be best controlled or reduced by the implementation of a document management system.

5 vi ABSTRAK Penilaian lanjutan masa biasanya dibuat berdasarkan maklumat yang diserahkan oleh kontraktor seperti program kerja dan arahan arkitek. Kekurangan maklumat kelambatan adalah salah satu kesilapan biasa oleh kontraktor dalam permohonan lanjutan masa dan ini boleh membawa kepada halangan untuk penyelesaian segera tuntutan lanjutan masa. Objektif-objektif kajian ini adalah: mengenalpasti maklumat yang diperlukan dalam menilai permohonan lanjutan masa; menenalpasti kesilapan-kesilapan biasa oleh kontraktor dalam permohonan lanjutan masa; dan mengenalpasti cara-cara untuk mengurangkan kesilapan tersebut. Kaedah kajian ini termasuklah kajian literatur, pengumpulan data dan analisis. Data diperoleh daripada maklumbalas kajian soal selidik dengan professional yang terlibat dalam industri pembinaan. Penemuan kajian menunjukkan bahawa ketidakcukupan kualiti maklumat dan kekurangan dalam permohonan untuk menunjukkan bagaimana kemajuan projek menjadi lewat adalah kesilapan-kesilapan yang tertinggi. Kajian ini memfokuskan kepada cara-cara untuk mengurangkan kesilapan tersebut untuk mempercepatkan proses penilaian dalam memberikan hak kontraktor terhadap lanjutan masa dan juga untuk mengelakkan pertelingkahan tentang hak kontraktor terhadap lanjutan masa. Kesimpulannya, kesilapan-kesilapan tersebut dapat dikurangkan dengan melaksanakan sistem pegurusan dokumen.

6 vii TABLE OF CONTENTS CHAPTER TITLE PAGE DECLARATION DEDICATION ACKNOWLEGEMENT ABSTRACT ABSTRAK TABLE OF CONTENTS LIST OF TABLES LIST OF FIGURES LIST OF APPENDICES ii iii iv v vi vii xi xiii xiv 1 INTRODUCTION 1.1 Introduction Background Problem Statement Research Aims and Objectives Research Scopes and Limitations Importance of the Study Research Methodology 7

7 viii 2 PROVISION OF EXTENSION OF TIME IN CONSTRUCION CONTRACTS 2.1 Introduction Contract Provision for Extension of Time Purposes of Extension of Time Benefits of Extension of Time Procedures for Claiming an Extension of Time Conclusion 28 3 THE REQUIREMENTS IN THE APPLICATION FOR AN EXTENSION OF TIME 3.1 Introduction Proof of Entitlement Information That Needs to be Considered in Evaluating Extension of Time Application Construction and Progress Records Common Mistakes by the Contractor in the Application of Extension of Time Major Mistakes Lack of Proper Baseline Schedule Lack of Proper Site Records and Insufficient Quality of Information Practical Ways for Minimising Contractor s Mistakes in the Application of Extension of Time Conclusion 41

8 ix 4 RESEARCH METHODOLOGY 4.1 Introduction Literature Review Selection of Respondents Research Design Questionnaire Survey Design Analysis Method Frequency Analysis Average Index Analysis Conclusion 51 5 RESEARCH ANALYSIS AND DISCUSSION 5.1 Introduction Data Analysis for Questionnaire Survey Analysis for General Information of the Respondent Analysis for Background of Project Analysis for Information That Needs to be Considered in Evaluating Extension of Time Application Information for Delays Relating to Reason of Architect s/ Superintending Officer s Instructions Information for Delays Relating to Reason of Late Instructions, Drawings or Level 62

9 x Information for Delays Relating to Reason of Delay by Nominated Subcontractors or Suppliers Summary of Information That Needs To Be Considered in Evaluating Extension of Time Analysis for Common Mistakes by the Contractor in the Application of Extension of Time Analysis for Ways to Reduce the Mistakes by the Contractor in the Application of Extension of Time Conclusion 70 6 CONCLUSION AND RECOMMENDATION 6.1 Introduction Conclusion Recommendations Limitation of the Study Recommendation for Further Study 75 REFERENCES 76 BIBLIOGRAPHY 79 APPENDIX 80

10 xi LIST OF TABLES TABLE NO. TITLE PAGE 2.1 Reasons of delay that can entitle a contractor to claim extension of time and loss and/or expense Relevant events causing delay which extension of time may be given Procedure for an extension of time under PAM 98 and PWD 203A standard form of contract The classification of the rating scales in Section A of the questionnaire The classification of the rating scales in Section B of the questionnaire The classification of the rating scales in Section C of the questionnaire The classification of the rating scales in Section D of the questionnaire Respondent organization 54

11 xii 5.2 Respondent post Respondent experience Standard form of contract used in the construction project that the respondents have experienced Reasons of delay which EOT may be given Information that needs to be considered for the reason of architect s/ superintending officer s instructions Information that needs to be considered for the reason of late instructions, drawings or level Information that needs to be considered for the reason of delay by nominated subcontractors or suppliers Common mistakes by the contractor in the application of EOT Ways to reduce the mistakes by the contractor in the application of EOT 69

12 xiii LIST OF FIGURES FIGURE NO. TITLE PAGE 1.1 Research methodology Respondent organization Respondent post Respondent experience Standard form of contract used in the construction project that the respondents have experienced Types of projects that the respondents have experienced Application for extension of time in construction projects 59

13 xiv LIST OF APPENDICES APPENDIX TITLE PAGE A Questionnaire form 80

14 CHAPTER 1 INTRODUCTION 1.1 Introduction Provision of EOT is made in building contracts for architects/ S.O to grant EOT for the completion of the work where delay due to certain specified causes has occurred. The contractor should be compensated with the time he suffers loss due to causes outside his control. The clause in the standard form requires the contractor to inform the architect/ S.O in writing of the delay fact when he realizes that the progress of the works is delayed. A contractor should be required to supply information about the delay, including identifying the event that led to the delay in order to take into account by the evaluator and to determine whether the contractor is entitle to EOT or not. Lack of information of delays is one of the common mistakes by the contractor in the application of EOT and this can lead to obstacles to prompt settlement of claims for EOT. Besides that, there are other common mistakes that need to be identified and after that knowing the ways to reduce the mistakes.

15 2 1.2 Background of the Study The contractor s obligation is to carry out and complete the works before or on completion date (Nor Ainah, 2001). An employer could impose liquidated damages for contractor s failure to meet the completion date as a result of delaying circumstances. Such delaying circumstances can be of three types which are delays caused by the contractor, delays caused by neutral events and delays caused by the employer or his agents (Sundra Rajoo, 1999). A delay in the building work may arise from a number of causes as mentioned before which may prevent completion by the agreed date. Some events are beyond the control of the builder and it is considered not to take into accounts would be unfair. Instead, the contractor should be compensated with the time that has been lost and this compensation is what is termed as extension of time (EOT) in contract administration (Manson, 1968; Hashim, 2001). Most building contracts contain express provisions for time extension to be granted by the architect in the event of delay that permitted in the contracts. Provision of EOT is stated in the standard form of contract, clause 23 PAM 98, and clause 43 PWD 203A. The operation of EOT provision modifies the obligation of the contractor to complete the works by the date for completion specified in the appendix, and his liability to pay liquidated damages for late completion. EOT is given with the view to extend the contract period and it is given solely to replace the time lost to the contractor. EOT will not be given if the delay is caused by the contractor. By this reasoning, EOT is not given on contractual ground to help the contractor to complete the work because EOT is a right in the building contract and not a privilege (Hashim, 2001). It imposes a duty on the architect to grant a fair and reasonable EOT for completion of the works in specified circumstances.

16 3 EOT shall be exercised by the architect upon the concurrence of the event, upon knowledge of the contract programme and before the final certificate. However, because the EOT clause comprehends delays due to causes of many kinds, it may not be necessary to grant an EOT before completion, in exceptional cases example a strike mean to last beyond the contract date and the extend delay could not be known until after the contract time had expired (Lim, 1998). The evaluation to derive at the EOT entitlement can indeed be a complex subject especially when there is more than one delaying events (Entrusty Group, 2006). Invariably, an evaluation of EOT will be made based on the programmes submitted by the contractor (Kevin, 2005). Besides the programmes, the contractor is advisable to provide relevant information related to delays such as variations and architect s instruction for references, towards consideration for EOT (Lim, 1998). The strength of the contractor s case will depend on the quality of his information (Brian, 1997). A contractor should be required to supply facts about the delay, including identifying the event that led to the delay. The contractor must also provide proof of the events that were allegedly responsible for the delay. The matter of proof is one frequently overlooked by potential litigants in their enthusiasm to formulate arguments as commented by Keith Pickavance (Nicholas, 2005): Poor quality of project documentation leads to poor factual evidence and presents serious difficulties in identifying the rights of the parties. Poor factual evidence such as lack of information of delays is one of the contractor s mistakes in the application of EOT and this can lead to obstacles to prompt settlement of claims for EOT.

17 4 EOT needs serious deliberation and consideration when it is applied to construction projects. There are risks that failure to accurately assess delays to completion of a construction contract will result in unnecessary extensions to the completion time, excessive delay-related costs, or disputes about a contractor s entitlement to EOT or delays costs. Therefore, it is important by the evaluator to consider and refer all the information that related to delays, which can assist them in evaluating EOT application (BLR, 1985). It will be prudent to seek advice about the procedures and all the information that needs to be submitted for EOT application from an architect, engineer or a quantity surveyor, who act as an evaluator when a contractor wishes to apply EOT in relation to delays. 1.3 Problem Statement The contractor s duty is to give the architect as much information as he can about the cause of delays and so assist the architect in performing his duty, as mentioned in clause 23(1) PAM 98, the notice (for extension of time) shall contain sufficient information and reason why delay to completion will result. The contractor s failure to provide information if requested is one of the contractor s mistakes in the application of EOT. No action would be taken by the employer if the contractor failed to submit such information unless the actions are stated in the contract. The contractor s failure to provide related information of delays puts himself at a disadvantage on proof of entitlement to EOT. The next mistake is the submission of work programme by the contractor is not detailed and unrealistic. In Malaysia, generally, the programme of works as prepared by the contractor is usually not detailed, not realistic or not have the activities properly linked to show the critical path. It is usually used for show only more than anything else which is the cause of many incidents where EOT was not

18 5 granted even when the contractor rightly has its entitlement to EOT if a proper programme of works was presented and all the information related to delays was provided (Entrusty Group, 2006). 1.4 Research Aims and Objectives The aim of this study is to identify and recommend the best way to reduce the common mistakes by the contractor in the application of extension of time. To achieve this aim, the following objectives have been identified: 1. To identify the information that needs to be considered in evaluating extension of time application. 2. To identify the common mistakes by the contractor in the application of extension of time. 3. To identify the ways to reduce the mistakes by the contractor in the application of extension of time. 1.5 Research Scopes and Limitations Basically, this research project focuses on explaining provision of EOT in PAM 98 and PWD 203A standard form of contract. Furthermore, several common law cases related to EOT will be used to support explanation and arguments. The scope of this research also will be focusing on the study of the information that needs to be considered by the evaluator in evaluating EOT application. This research is

19 6 limited to professionals (evaluator) working in quantity surveying, architecture and civil engineering firm located in Johor Bahru area. Besides, the study would be made to determine the common mistakes by the contractor relating to the information on the application for EOT. Hence, the view of the Quantity Surveyor, Architect and Engineer to reduce the mistakes is essential towards improving the current mistakes of the contractor in the application of EOT. 1.6 Importance of the Study From the facts as mentioned before, it can be concluded that all the information related to delays are very important to assist the evaluator to recommend or grant EOT to the contractor. The contractor needs to provide sufficient information in order to assist the evaluator in the evaluation process. It is important to identify the information that needs to provide by the contractor in order to get a fair and reasonable extension of time. This research is not only focused to the information that related to the work programme, but it is also considered other relevance information (supporting documents) that caused delays to take into account by the evaluator and to determine whether the contractor is entitle to EOT or not. One of the common mistakes that occurred in EOT application is when the information related to delay was not provided by the contractor. Besides, there are other mistakes that need to be identified to avoid risk of failure to accurately assess delays in the application of EOT and after that knowing the ways to reduce the mistakes. With this study, the contractor could indeed benefit from this study s outcome and have more knowledge about the improvement of the preparation for EOT application in order to speed up the evaluation of the architect to establish contractor s entitlement for EOT and to avoid disputes about contractor s entitlement for EOT.

20 7 1.7 Research Methodology A few stages of work need to be carried out in order to achieve the stated objectives. Implementation of the stages of work is arranged to ensure the research can easily be done and impressive. This approach is to ensure that all relevant information can be collected and precisely analyzed. Stages of work for this research are elaborated as follows: 1. Planning and pre-discussion The process involved in this stage is survey need to be carried out to identify area of study, for example the study in the aspect of construction contract and all the relevant issues. Detail discussion with supervisor can assist to find out idea about the area of study to be done. Next process is to determine project topic and objectives and state the scope and limitation of project to achieve the objectives. 2. Pre-Study Pre-study is carried out to get a clear description about the research. The literature reviews provide useful guidelines and information on EOT provision in construction contract. Those literature reviews were also used to guide the process of extracting the idea and relevant issues, and to easily prepare the research process. 3. Identify Data Data that needs to be identified is primary data and secondary data to fulfil the research objectives.

21 8 4. Data Collection This process is the most important process to do the research. All the data collected is arranged into a form that can be studied easily. Data collection for this research can be divided to two types: a) Primary Data Collection of primary data is an important process to get the source of information and for the purpose of analysis. It has been obtained from questionnaires of the quantity surveyor, architect and engineer as a practitioner, who has extensive experience and knowledge in evaluating EOT. b) Secondary Data Secondary data has been obtained from reading and studying from printed materials such as standard form of contract (PAM 98 and PWD 203A), books, journals, articles, previous study, and seminar papers to study the information of delay and EOT in construction contracts. Those literature reviews were also used to guide the formation of questionnaire design. 5. Analysis of Data Primary data is analyzed in order to achieve the research objectives. Besides, summary and suggestion of the research are prepared based on the results from the analysis. The methods to analyse the data are detailed elaborated in chapter 4 to ease the process of analysing data.

22 9 6. Writing and Completion All the information will be arranged to understandable form for the purpose of writing before submission to the supervisor. Next is correction process before documentation process can be done. Finally, the complete project is ready to be submitted on the submission date.

23 10 PRE-DISCUSSION Detail discussion with supervisor Detail review on thesis, articles and books IDENTIFY AREA OF STUDY SELECTION OF TOPIC DISCUSSION WITH SUPERVISOR LITERATURE REVIEW IDENTIFY DATA & DATA SOURCES 1st Stage. DATA COLLECTION PRIMARY DATA SECONDARY DATA Questionnaire survey Books, articles, seminar papers, journals, PAM 98 & PWD 203A Standard Form of Contract 2nd Stage. ANALYSIS & INTERPRETATION OF DATA RESEARCH WRITING REVISION & CORRECTION COMPLETION 3rd & 4th Stage. DOCUMENTATION SUBMISSION OF PROJECT 5th Stage. Figure 1.1: Research Methodology

24 CHAPTER 2 PROVISION OF EXTENSION OF TIME IN CONSTRUCION CONTRACTS 2.1 Introduction The legal prevention is of general application in contracts and is to the effect that one party cannot impose a contractual obligation on the other party where he has impeded the other in the performance of that obligation. Given the complexity of construction projects, the very real possibilities of variations, the difficulties of coordination and other unforeseen issues it is, unless some relief is available, almost impossible for the employer to avoid falling into the trap of prevention. Therefore, extensions of time clauses provide this relief (Lawrence, 2001). Extension of time provisions preserve the contractor s obligation to complete within a specified time and in doing so the provisions preserve the employer s right to liquidated damages, when by prevention, he has delayed the contractor and is responsible in part for late completion. It is common to provide an express power for the EOT for completion and if an extension has been granted it operates wholly or partially as a defence to a claim for liquidated damages from the original completion date. If there is no express power to extend for a delay which is not the fault of the employer, the contractor takes the risk of that delay and will not avoid liquidated damages (Lawrence, 2001).

25 12 A fundamental point is that the time for completion can only be extended where the contract permits, and strictly in accordance with the contract provisions. If delay is caused by some event which the contract does not cover, then the contractor cannot claim an extension (Murdoch and Hughes, 1992). Time extensions may be justified when the contractor experiences delay caused by the labour disputes, fire, extremely unreasonable weather conditions, acts or neglect on the part of employer or a nominated contractor, or other causes beyond the contractor s control (Harold, 1976). Without an EOT clause, the contractor is under a strict obligation to complete on time unless he is prevented from doing so by acts or breaches of the employer or by operation of the law (Vincent; Michael, 1984). 2.2 Contract Provision for Extension of Time All construction contracts usually contain provisions for time extension and monetary claim in the event of delay. The relevant events causing delay which shall be the ground for the contractor to apply for an EOT are detailed and stated under PAM 1998, clause 23, PWD 203A clause 43. Any event falling outside the listed events will not entitle the contractor to any EOT (Entrusty Group, 2006; PAM 1998, JKR 203A). The events for delay can be categorized into three major groups, which are the delays by the contractor, by the client, or by a third party or neutral events (other than contractor and client) (Hashim, 2001; Sundra Rajoo, 1999). The delaying events that are entirely due to the contractor itself are commonly termed as culpable delay. It is sometimes called inexcusable or nonqualifying (for EOT) delays. Strictly, culpable delay is the situation where the contractor has failed to complete the works on completion date and has no entitlement to an EOT let alone monetary compensation. Culpable delay is also sometimes used to describe the situation prior to the date for completion where the

26 13 contractor has fallen behind programme of schedule without cause for extension (Entrusty Group, 2006). If the delaying events are due to defaults by the employer and/or his agents (compensable delays), the contractor will be entitled for both time and monetary claim (depends on the wording of the contract the parties have entered into). Compensable delays occur when the owner or consultant has delayed the contractor in the completion of the work. It entitles the contractor to additional compensation and the contractor may be granted EOT and money. The examples for this event are late decision or information of the Architect/Engineer/S.O, late site delivery, compliance with the Architect/Engineer/S.O, delay by the employer s agents, delays by nominated subcontractors/suppliers, etc. For the delays due to a third party or excusable delays, the contractor is entitled for time extension but no monetary claim. The causes due a third party are those affecting a delay by those other than contractor and the client, and by element of nature (Entrusty Group, 2006; Hashim, 2001; Abdul Rahman, 2006). The grant of an EOT does not carry any automatic entitlement to extra money. The test for granting EOT and the consequential right to loss and/or expense can be displayed in Table 2.1 (Basar, 1997). The clauses which related to relevant events causing delay which EOT may be given, together with description and explanation are indicated in Table 2.2 (PAM 98; PWD 203A; Lim, 2004, Vincent, 1990; Sundra Rajoo, 1999). Table 2.1: Reasons of delay that can entitle a contractor to claim extension of time and loss and/or expense Reason of Delay Extension of Time Loss and/or Expense Contractor s fault (non-excusable) No No Employer s fault (compensable) Yes Yes Nobody fault (excusable) Yes No

27 15 Table 2.2: Relevant events causing delay which extension of time may be given Event Clause Description under PAM 98 Clause Description under PWD 203A Explanation 1. Force Mejuere 23.7(i) Force Mejuere 43(a) Force Mejuere Force mejuere is a term derive from French law and is used with reference to all circumstances independent of the will of man and which are not in his power to control. It is unanticipated event or an event that one cannot reduce to control (e.g. earthquake). 2. Exceptionally inclement weather 23.7(ii) Exceptionally inclement weather 43(b) By reason of any exceptionally inclement weather Inclement weather means severe stormy, harsh or merciless weather/ climate. 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. The reference to meteorological records of local weather over a considerable period of time may be helpful in showing that the weather is exceptional for that area exceeding what may on the evidence of past years be reasonably expected.

28 16 Table 2.2: Relevant events causing delay which extension of time may be given Event Clause Description under PAM 98 Clause Description under PWD 203A Explanation 3. Insurance Contingencies 23.7(iii) Loss or damage occasioned by one or more of the contingencies referred to in clause 20.A, 20.B.1 or 20.C.1 as the case may be. 43(d) By reason of loss or damage occasioned by anyone or more of the contingencies referred to in clause 36 hereof (provided end to the extent that the same is not due to any act, negligence, default or breach of contract by the contractor or any subcontractor, nominated or otherwise, whether in falling to take reasonable steps to protect the works or otherwise). This applies to extension of time granted for rebuild or repair of damages or loss to the works, caused by fire, storm, tempest, lightning, flood, earthquake, aircraft and other aerial devices or articles dropped therefrom, riot, civil commotion and in respect to claim from insurances. 4. Civil commotion, strikes, lockout 23.7(iv) Civil commotion, strike or lockout affecting any of the trades employed upon the works or any of the trades engaged in the preparation, manufacture or transportation of any goods or materials required for the works. 43(h) By reason of any action due to local combination of workmen, strike or lockout affecting any of the trades employed upon the works, provided the same are not due to any unreasonable act, neglect or default of the contractor or of any subcontractor, nominated or otherwise. 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 should be noted that the contractor must not have the local combination, strike or lock out, such as through a failure to pay the workmen s wages.

29 17 Table 2.2: Relevant events causing delay which extension of time may be given Event Clause Description under PAM 98 Clause Description under PWD 203A Explanation 5. Architect s/ S.O. s instructions 23.7(v) Compliance of architect s instructions under clauses 1.2, 11.2, 21.1 or (e) By reason of SO s instructions issued under clause 5 hereof, provided that such instructions are not issued due to any default or breach of contract by the contractor or any subcontractor, nominated or otherwise. The instructions referred to are summaries in the stated clauses. The contractor s entitlement to an EOT is subject to the proviso that the instruction is not issued due to any default or breach of contract by the contractor or by those for whom he is responsible.

30 18 Table 2.2: Relevant events causing delay which extension of time may be given Event Clause Description under PAM 98 Clause Description under PWD 203A Explanation 6. Late instructions, drawings or level 23.7(vi) Contractor not having received in due time necessary instructions, drawings, details or levels from the architect for which he had specifically applied in writing provided that the application was made on a date having regard to the date for completion was neither unreasonable close to the date on which it was necessary for him to receive them. 43(f) By reason of the contractor not having received in due time necessary instructions, drawings, level or instructions, in regard to the nomination of subcontractors and/or suppliers provided in this contract, from the SO due to any negligence or default of the SO and 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 EOT then fixed under this conditions, was neither unreasonably distant from nor unreasonably close to the date on which it was necessary for him to receive the same. The failure of the architect/ SO to provide the contractor with further reasonably necessary information to amplify the drawings or bill of quantities as and when necessary or in good time puts the employer in breach of contract. That notwithstanding, it is essential in order to sustain a claim for an EOT for the contractor to have made a specific written application to the architect/ SO for the information and this must have been done at the right time.

31 19 Table 2.2: Relevant events causing delay which extension of time may be given Event Clause Description under PAM 98 Clause Description under PWD 203A Explanation 7. Delays on the part of nominated subcontractors or suppliers 23.7(vii) Delays on the part of nominated subcontractors or nominated suppliers for the same reasons as set out in the sub-clauses 23.7(i) to 23.7(vi) and sub-clauses 23.7(viii) to 23.7( xii). 43(k) By the delay on the part of the nominated subcontractors and/or nominated suppliers of their works and such delay shall be caused by the same reasons affecting their work as stated above in subclauses (a) to (f) inclusive (provided that the same are not due to any act, negligence, default or breach of contract by the nominated subcontractor and/or nominated supplier and/or the contractor, or any of the servants or agents of such nominated subcontractor or nominated supplier or the contractor). Delay on this ground is very common but it does not include a situation where the nominated subcontractor or nominated supplier has ceased work altogether, for example through receivership or liquidation. The contractor is allowed EOT on account of delays on the part of the nominated subcontractors or nominated suppliers for the same reason as set out in the clause 23.7, PAM 98 and 43, PWD 203A. Essentially, the contractor is entitled for an EOT if the delays of the nominated subcontractors or suppliers fall within the same relevant events for which the contractor himself if in delay would be given an EOT.

32 20 Table 2.2: Relevant events causing delay which extension of time may be given Event Clause Description under PAM 98 Clause Description under PWD 203A Explanation 8. Delay on the part of artists, tradesmen or others engaged by the employer 23.7(viii) Delay on the part of artists, tradesmen or others engaged by the employer in executing work not forming part of this contract. 43(i) By delay on the part of artists, tradesmen, or others engaged by the Government in executing work not forming part of this contract. This provision permits the employer to carry out the work not forming part of the contract. The employer accepts responsibility for delay on the part of such people. This is however restricted to delay in the execution of their work and does not extend to delay caused by their returning to carry out remedial work after purported completion. 9. Delay in the supply of material and goods 23.7(ix) Delay in the supply of materials and goods which the employer had agreed to supply for the works - - It must be noted that there is no express provision in the conditions to allow for the possibility of the works being carried out using materials and goods which are to be supplied by the employer. But such circumstances do in reality exist and if there is a delay caused by the employer in supplying the materials and goods, the contractor should be entitled to an appropriate EOT. This could possibly include instances where the delay is caused by the employer having supplied the materials and goods on time but they proved defective either before use or after being built into the works. In such situation, the employer should indemnify the contractor.

33 21 Table 2.2: Relevant events causing delay which extension of time may be given Event Clause Description under PAM 98 Clause Description under PWD 203A Explanation 10. Testing and inspection 23.7(x) Opening up for inspection any work covered up or the testing of any work, materials or goods in accordance with clause 6.3 (including making work in consequence of such opening up or testing) unless the inspection or test showed that the work, materials or goods were not in accordance with the contract. - - This clause requires the contractor to provide test report and samples before commencing work. Generally, architect is reluctant to open up, unless there is high degree of suspect of the works and premature defects arising. The contractor can recover the cost and time of opening up, testing and making good, unless this has been provided for in the contract bills or unless the inspection or test shows that the works, materials or goods are not in accordance with the contract. 11. Act of prevention or breach of contract by the employer 23.7(xi) Any act of prevention or breach of contract by the employer not mentioned in this clause This is a useful clause, because of employer s agent, action of constant interruption, on large projects these days. If the contractor alleges that there has been an act of prevention or breach of contract by the employer, the architect can continue to administer the contract and grant EOT as and when he considers these appropriate.

34 22 Table 2.2: Relevant events causing delay which extension of time may be given Event Clause Description under PAM 98 Clause Description under PWD 203A Explanation 12. Disputes with neighbouring owner (c) By reason of directions given by the SO consequential upon disputes with neighbouring owners provided the same is not due to any act, negligence or default of the contractor or any subcontractor, nominated or otherwise. The delay must have arisen as a result of the direction given by the SO 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 SO. 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.

35 23 Table 2.2: Relevant events causing delay which extension of time may be given Event Clause Description under PAM 98 Clause Description under PWD 203A Explanation 13. Delay in giving possession of site (g) By reason of delay in giving possession of the site as provided under clause 38(d) hereof. This is to be read in conjunction with clause 38(d), PWD 203A where the SO is empowered to issue and so issue, an instruction revising the date for possession due to the inability or failure on the part of the employer to give possession of the site on the date for possession fixed in the letter of acceptance. 14. Inability to obtain materials or goods (j) By the contractor s inability for reason beyond his control and which he could not reasonably have foreseen at the date of closing of tender of this contract to secure such goods and/or materials as are essential to the proper carrying out of the works. This applies only if the securing of the goods or materials are beyond the contractor s control, but the shortage must have been one that could not have reasonably been foreseen at the date of the closing of the tender. It should be noted that this clause is not applicable for shortage of labour even though essential for the execution of the works.

36 Purposes of Extension of Time The operation of EOT clause modifies the liability of the contractor to complete the works by the date for completion specified in the appendix and to LAD to the employer upon the failure of the contractor to meet the deadline. It imposes a duty on the architect/ S.O to grant a fair and reasonable EOT for the completion of the works in certain specified circumstances. The effect of extending the time for completion prevents the architect/ S.O from issuing the Certificate of Noncompletion until and unless the revised completion date has passed (Lim, 2004). Extension of time clauses, therefore have various purposes (Brian, 1997): a) To retain a defined time for completion b) To preserve the employer s right to liquidated damages against acts of prevention c) To give the contractor relief from his strict duty to complete on time in respect of delays caused by designated neutral events 2.4 Benefits of Extension of Time The express provisions for EOT in building contracts obviously benefit the contractor who will not be liable to pay damages for delay during the period for which time is validly extended. In addition and less obviously, the power to extend time is also for the employer s benefit, for the following reason (Murdoch and Hughes, 1992). At common law, the contractor s obligation to complete the works by the specified date is removed of the employer delays the contractor in the execution of the works. Thus if the contract administrator issues and instruction which increases

37 25 the amount of work to be done, or is late in giving the contractor necessary instructions, the specified completion date no longer applies. In this situation, time is said to be at large and the contractor s obligation is merely to complete the works within a reasonable time. In order to fix what is reasonable, all the circumstances of the particular project must be taken into account, but in many cases, it will simply mean that the amount of delay for which the employer is responsible will be added to the old completion date (Murdoch and Hughes, 1992). The importance of losing the fixed date is that, a contractor who may be liable to pay damages for delay which is his fault, can no longer be made liable for liquidated damages. Even where the delay caused by the employer is a very small part of the overall delay, the employer cannot simply discount this and claim liquidated damages for the remainder. The liquidated damages provision fails altogether, and the employer can claim only for losses actually due to the delay. It is therefore very much in the employer s interest to extend time for delays which are his fault, thus enabling claims for liquidated damages from the revised completion date (Murdoch and Hughes, 1992). 2.5 Procedures for Claiming an Extension of Time In the usual course of events, the initiative for taking action under EOT clause will come from the contractor when he realises that the progress of the works is delayed. The contractor is not required to give notice of a delay which will be caused by some expected future event. 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 architect/ S.O of all delays to the progress and not merely those caused by events listed in the clause (Brian, 1997). Nevertheless, the architect is not prohibited to give EOT without received any notice of delays from the contractor (Nor Ainah, 2001).

38 26 The clause in the standard form requires the contractor to inform the architect in writing of the delay fact when he realizes that the progress of the works is delayed. Basically, the contractors need to give a notice in reasonable time that stated relevant causes that resulted to delays. The contractor also needs to explain about the expected impact, and estimation of time extension needed, with the notice or subsequently (Nor Ainah, 2001). The notice shall contain sufficient information and reasons why delay to completion will result. The contractor s failure to provide such information can be a factor which the architect can consider in assessing the EOT (Sundra Rajoo, 1999). On receiving the written notice from the contractor, the architect, if he satisfied that the cause of the delay comes within one of a number of ground listed, is to grant an EOT. The architect is to consider making an EOT independently in the light of his knowledge of the progress of the works and of other matters affecting or likely to affect its progress (Sundra Rajoo, 1999). The architect must then fix a new completion date which is fair and reasonable in the circumstances. The architect also has power to fix a new completion date after the date of practical completion of the building (Manson, 1968). If the architect/ 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. The contractor must seek recourse under clause arbitration if he wishes to challenge that decision (Lim, 2004). The standards form of contract used in Malaysia include a procedure relating to the granting EOT. Variously, these procedures include the submission of an initial notice concerning the delay, submission of back up details to support the initial notice and further details to keep up to date the information previously submitted. Table 2.3 indicates the procedure for an extension of time under PAM 98 and PWD 203A standard form of contract (Michael, 2001).

39 27 Table 2.3: Procedures for an extension of time under PAM 98 and PWD 203A standard form of contract Clause Contractor s Obligations Clause S.O s / Architect s Obligations PAM If and when it become reasonably apparent that the progress of the works is being or likely to be delayed, forthwith of the occurrence of such event notify the architect in writing identifying the relevant events causing the delays, giving particular s of the expected effect and estimate of the EOT required. The notice shall contain sufficient information and reasons why delay to completion will result. Submit to the architect his application for EOT complete with particulars and estimates in a reasonable time before the Date of Completion Upon receipt a contractor s notice, consider events causing delay and by written notice to the contractor give a fair and reasonable EOT. He regard to the sufficiency of the particulars and estimates submitted by the contractor, ascertain and fix such new date for completion within a reasonable time form receipt of the notice. Not fix a date for completion earlier that the Date of Completion stated in the Appendix Constantly use his best endeavours to prevent delay. PWD 203A Upon it becoming reasonably apparent that the progress of the works is delayed, forthwith give written notice of delay to the S.O. Constantly use his best endeavours to prevent delay. 43 If in his/ her opinion the completion of the works is likely to be delayed or has been delayed by specified events so soon as he/ she is able to estimate the length of the delay.

40 Conclusion The phrase extension of time is common to most construction contracts. Simply, the phrase means the postponement of the date by which completion of the contract works is to be expected. One of the contractor s obligations under the building contract being the completion of the works on time usually expressly specified within the contract terms. The significance and effects of EOT provisions in construction contracts is two folds. First, the EOT affect the extent to which the contractor is liable for liquidated damages in the event of delays to the completion of the works within the stipulated completion date. Second, EOT is granted to the contractor due to delay by the employer. In addition, EOT provisions specified the events as grounds upon which the contractor may be entitled to an EOT and serve to streamline the role of architect/ S.O. in determining the contractor s right to an EOT.

41 CHAPTER 3 THE REQUIREMENTS IN THE APPLICATION FOR AN EXTENSION OF TIME 3.1 Introduction An EOT is granted if a contractor has been delayed and the cause of the delay is one that gives the contractor an entitlement under the contract. A contractor should be required to supply facts about the delay, including identifying the event that led to the delay. The contractor must also provide proof of the events that were allegedly responsible for the delay, including the actions or inactions of the architect/ S.O or other events beyond his control, and to demonstrate that the delay affected the critical path activities and hence delayed completion. Invariably, an assessment or evaluation of EOT will be made based on the programmes submitted by the contractor. It may seem surprising therefore that while most contracts call for an as-planned programme, many do not expressly require them to be taken into account when evaluating EOT. However, the courts, in tune with practise, regularly make their decisions taking into account evaluation based on as-planned programme.

42 Proof of Entitlement All claims whether for loss and expense, extra cost, or for EOT, should meet the legal requirement of linking damage with cause. A claim for loss and expense or extra cost is not effective without a cause and a claim for EOT is not effective without a relevant event. Standard forms of contract display the principle by requiring each and every claim to stand on its own merits (Brian, 1997). Standard forms of contract usually require the contractor to give notice of delays or make his application within reasonable time of the happening of the delaying event and to provide such details and particulars information as are necessary to assist the architect/ S.O in making his decision (Brian, 1997). The burden to prove the delays will directly rests on the contractor whether the application is made before or after completion and whether the delaying event is the employer s fault or neutral. The contractor will have to produce evidence that delay occurred and that the cause of the delay gave an entitlement to an EOT if the contractor wishes to challenge liquidated damages by obtaining an EOT from the contract administrator or arbitrator. Consequently, it is up to the contractor to keep records as evidence of both delay and cause. The strength of the contractor s case will depend on the quality of his records (Brian, 1997). It is not only important to the contractor to keep the records. A similar burden rests with the architect/ S.O to protect the employer s position. Ideally, both parties have the same mind as the contract progresses on the causes and extents of any delays. There is probably no effective substitute for the monthly progress meeting at which the parties make their own report, and they jointly agree by discussion what should be placed on record as the true state of affairs (Brian, 1997).