Q&A: Extensions of Time and COVID-19

In this blog post, Steering Committee member, Mark Watson, answers questions related to EOT claims arising from COVID-19. These questions are excerpted from our fifth Construction Clinic session, which took place in May 2020. The entire webinar may be viewed on-demand on YouTube.

Question 1

Question: In the FIDIC Yellow Book, 1999 Edition, Sub-Clause 17.3 (Employer’s Risks), foresees one of the Employers' risks as any operation of forces of nature. This might be associated with the current pandemic, COVID-19. That is a force of nature. But in the FIDIC Yellow Book, the 2017 Edition, the clause for Employer's risks does not exist. So my question is, does FIDIC 2017 override all contracts made before 2017?

Answer: The 2017 Edition of the FIDIC forms of contract, does not override any of the previous editions of the FIDIC standard form contracts. And the reason is that each edition of the FIDIC contract is, by itself, a separate and independent contract. So it will not override any previous editions.

Question 2

Question: We are using the FIDIC Red Book, 1999, consequently coronavirus is considered a force majeure The site’s still working as fast, but affected a bit. So how can Contractors submit an EOT claim or are they not entitled?

Answer: If I understand it correctly, the contractor is still progressing the works, although at a much slower rate than what was planned to progress the works under his Sub-Clause 8.3 programme. If this is correct, then your question and the following question are very similar and I will respond to those simultaneously.

The following question is, "If a contract is signed after the commencement of COVID-19 pandemic, would you agree that disruption cause would not be considered force majeure?"

In response to both questions, the disruption or the rate of progress changes would not be considered a force majeure. Therefore, you would not raise your EOT claim under Sub-Clause 19.4 (Consequences of Force Majeure). These rate of progress issues you will refer to the provisions of Sub-Clause 8.6 (Delays caused by Authorities).

Now Sub-Clause 8.6 has got two circumstances. The first circumstance relates to where your actual progress is going to delay completion of the works, and the second circumstance relates to where your actual progress is less than your planned progress under your Sub-Clause 8.3 programme.

In both those circumstances, you can raise your claim for extension of time for completion under Sub-Clause 8.4 (Extension of Time for Completion). And specifically, because this deals with the COVID-19 pandemic, I would raise it under Sub-Clause 8.4(e), because under the COVID-19 limitations, you might be required to have fewer people on site because of the social distancing issue. Sub-Clause 8.4 provides a clause that says, ". . . is or will be delayed." Now, where your rate of progress delays completion, that falls under that first category, is delayed. Where your rate of progress is less than your planned progress, it could potentially cause delay in the future of your works.

If you do not raise your EOT claim under Sub-Clause 8.4, you run two risks. The first risk is you could run into a time bar scenario. The second risk is that the Engineer, when he sees that your rate of progress is less than what you planned under your Sub-Clause 8.3 programme, can instruct you to provide additional resources to accelerate and provide additional goods, to meet or to catch up to your progress plan under the 8.3. Therefore, it is very important that under these circumstances, your claims went under 8.4 and you submit those notices timeously.

Question 3

Question: In reference to FIDIC Red Book, the 1995 Edition, if a party submits notice of dissatisfaction, the DAB's decision does not become final and binding. Therefore, is this party entitled to withhold any due payments until the dispute is finally resolved through arbitration?

Answer: In the circumstance where a party raises a notice of dissatisfaction under Sub-Clause 20.4 (Related Claims), the DAB's decision will still be binding on both parties and the catchword phrase is that unless or until it is revised in an arbitral award. Until it is revised by an arbitral award, the DAB decision will still be binding. Therefore, you cannot withhold any payments, and this we often refer to as "rough justice". That means, pay now, dispute later.

Question 4

Question: Assume there was a construction contract being signed under FIDIC conditions or else. Now, in the course of implementing the contract, there was a delay, and the delay was caused by the Employer due to design changes. Now down the line, the Contractor came up with a claim head that he's entitled to compensation on overhead costs due to benefits paid to employed project superintendents, foremen, field engineers, etc.

This matter was referred to the Adjudicator for him to decide. The Adjudicator is coming up with an argument that the Contractor has to produce evidence to show that the Contractor's employees were onsite all the time, the project was delayed for the claim head to be valid and with merit. My question is, is the line of following by the Adjudicator correct?

Answer: Now I'm going to respond to this question under two separate contracts. But what is important to realize, is that the answer herein lies and is dependent upon the adjudication clauses provided under the specific contact you are working under. So if I refer to the 1999 Edition of FIDIC Red and Yellow Books, Sub-Clause 20.4 (Related Claims), specifically paragraph three, which provides that the Adjudicator or the DAB can request additional information that will assist him or them in making a decision. So under Sub-Clause 20.4, the Adjudicator and the DAB have the right to ask for additional information.

Similarly, under the NEC dispute resolution clause W1.35, the Adjudicator may request the party to provide additional information, and the Adjudicator can take the initiative to ascertain the facts linked to the dispute. That means that the Adjudicator can take initiative to request additional information, to ask more probing questions. So under these two contracts, the Adjudicator or the DAB can request additional information.

The one issue here is that as a Contractor, you have an obligation to retain or keep records that substantiate your actual plan and submit those records together with your plan. What this tells me is that your claim was not properly substantiated and also that the cause and effect of the claim were not properly set out. Therefore, if you do not provide information, the Adjudicator can proceed on the basis that this information doesn't exist and his decision can be detrimental to you, the Contractor. Therefore, it's important that you keep and retain the correct information that substantiates your claim.

The questions covered in this blog were answered by ICCP Steering Committee member, Mark Watson

If you would like to learn more about claims, check out our training partner, Claims Class.

Enjoying the ICCP's articles? Why not sign up to our mailing list and receive new articles straight into your mailbox. Or, want access to a library of members-only content on contracts and claims, check out our Membership page and join the ICCP community today.

Q&A: Prolongation, FIDIC, and Force Majeure

In our third Construction Clinic session, which took place in April 2020, Mark Watson answered questions related to prolongation and FIDIC contractual issues arising from COVID-19. The following questions have been excerpted from that session. The entire webinar may be viewed on-demand on YouTube.

Questions about prolongation under JCT and NEC contracts, are addressed in this post from the first part of Construction Clinic 3.

Question 1

Question: If an Employer’s delay, excusable and compensable, is ongoing and determines the date of completion and, after the effects of COVID-19, there is an additional delay of completion, will the overlapping delay be compensated?

Answer: This question is a hot topic in construction. In terms of the overlapping period, you need to look at the terms of the contract. You’ve got to consider there are two parts under Sub-clause 19.4: part A is Extension of Time and part B, additional payment. Part B is subject to certain requirements under Sub-clause 19.1. If an event is listed as a force majeure event that means it was foreseeable; if it is not listed, that means it was not foreseeable.

If there is a second event, that doesn’t remove the impact of the first event. If the COVID-19 event was an unforeseeable event, it becomes a new event. In terms of the contract, if the circumstances are foreseeable, you are going to be entitled to payment in terms of that.

Question 2

Question: Are notices submitted under FIDIC 1999 Red Book Sub-clause 13.7 and Sub-clause 19.2 mutually exclusive? Or, can the subcontractor claim under both subclauses for the same event?

Answer: If you look under the requirements for Sub-clauses 13.7 and 19.2, there are specific requirements that are different. Sub-clause 13.7 states that it must affect the performance and those effects must be due to a change in the law. (Emphasis added.) That is, a new law is implemented, an old law is taken away, or an existing law is amended.

Whereas, Sub-clause 19.2 talks about a prevention of performance and it must be a force majeure event.

If you refer back to Sub-clause 19.1, the first part talks about what characterizes a force majeure event and the second provides a list of events that meet those criteria. Your event might not be listed, but if it meets the characteristics, it will still be considered as a force majeure event.

Therefore, Sub-clauses 13.7 and 19.2 are mutually exclusive and you cannot use them to claim for the same event. There is unlikely to be a change in the law that prevents or affects performance and is a force majeure event will be in play at the same time.

Question 3

Question: (Part 1 of 5) In response to an EoT claim, the FIDIC Engineer states that one of the delay events was claimed as a force majeure. However, this event is not included in Sub-clause 19.1. Therefore, it cannot be used as the basis for an EoT claim. Is this statement contractually tenable?

Answer: As I stated previously, there are two components to Sub-clause 19.1. The first talks about characteristics and the second lists the force majeure events. If something isn’t listed as a force majeure event, but it’s got the characteristics of one, then you can claim it as a force majeure event.

Question 4

Question: (Part 2 of 5) Doesn’t Extension of Time to the contract automatically entitle the Contractor to prolongation costs?

Answer: I’ll use the same example of COVID-19 in regard to Sub-clause 19.4, which also has two parts. If the event is not listed in part A, but it has the relevant characteristics, you can claim for Extension of Time. According to part B, however, you can only claim costs for listed events. So, COVID-19, lockdown, pandemic, etc. must be listed as a force majeure event. If it’s not listed, you can’t claim for costs.

Question 5

Question: (Part 3 of 5) In the absence of an approved baseline programme, how could the Contractor establish his EoT claim?

Answer: Under FIDIC, you do not have an approved baseline programme, you have an 8.3 programme which is a detailed time programme. In an 8.3 programme, the only obligation placed on the Engineer is that he must notify you to the extent that your 8.3 programme does not comply with the conditions of contract. In the first instance, a baseline programme, in the second instance, if the updates to your 8.3 programme do not comply with the realities of the site or if you specify a certain method that you will employ to execute the works and you change your method, the Engineer can notify you within the prescribed period, that you need to ensure that your programme complies with the conditions of contract or with the conditions at site.

If the Engineer does not provide you with a response within the prescribed period after you submit your pre-programme, you can continue working toward the actual programme. So, there is no obligation or requirement for an approved baseline programme in terms of FIDIC conditions of contract.

Question 6

Question: (Part 4 of 5) The consultants say they cannot accept your delay analysis because it is based on a programme that is not approved by the FIDIC Engineer.

Answer: The FIDIC Engineer does not approve any programme; the Engineer has got the right to say that it does not comply. However, the disadvantage that you have if the programmes do not comply with the contract or does not reflect realities at site, is that when the Engineer makes his determination, he can discard your actual programme. That is provided for under Sub-clause 20.1 which says the Contractor must retain all required documents in order to substantiate his claim. The programme is one such document, but not on its own. You’ve got to have other documents to substantiate your programme. So, if the Engineer decides he wants to discard your programme, it could be detrimental to your contract in that it could be awarded an EoT which is less than what he is entitled to or the Engineer could just say, “I’m giving you no time.”

Your programme plays a crucial role in substantiating your actual claim. Without the programme, the Engineer can still make his determination, because when he does determination under Sub-clause 3.5, he has the opportunity to speak to both parties and he can get clarification about the programme at that time.

The only reason an Engineer can exclude your claim, as he’s done here, is under the last paragraph of Sub-clause 20.1, which states a claim can only be excluded if the Contractor fails to submit his claim within the proscribed period. That means the Contractor has been time-barred from the claim. That’s the only time the Engineer can exclude the claim.
What he’s done here is not best practice. I would suggest that you sit down with the Engineer and try to resolve the matter, because it can become a costly exercise.

When you have a programme that is unreliable, for lack of a better word, you can use a delay analysis method knows as As-Planned vs. As-Built in Windows method. This method does not rely on an approved baseline programme or any programme, for that matter. That method is a static method. It utilizes all of your contemporaneous documents, photographs, daily diaries, minutes of meetings, and you try and establish the contemporaneous critical path on a common sense basis. One of the biggest flaws in a critical path programme is that it could be incorrectly linked or it could be reflecting what the contract wants to reflect, when it needs to reflect what actually happened. If you use that as the basis for your delay assessment, you could get the answer that it’s impracticable. So we see a move to the As-Planned vs. As-Built in Windows method.

Question 7

Question: (Part 5 of 5) Who owns the float when a Contractor was delayed and the contract has accelerated?

Answer: In the circumstance where the contract is delayed and there is acceleration, normally there will not be any permanent float, because you’ve got to recover the delays to the completion date. One of the easiest ways to recover the delays to the completion date is to reduce the total float values. Both parties are under obligation to mitigate risks, even if they are not the cause of the risks. Therefore, in this circumstance, the float will belong to whoever gets to it first.

The questions covered in this blog were answered by ICCP Steering Committee member, Mark Watson

If you would like to learn more about claims, check out our training partner, Claims Class.

Enjoying the ICCP's articles? Why not sign up to our mailing list and receive new articles straight into your mailbox. Or, want access to a library of members-only content on contracts and claims, check out our Membership page and join the ICCP community today.