Back to the future: will the SCL protocol work?

Concern at frequent time and cost overruns is not unknown in the construction and engineering industry. Indeed, over the years several august committees have scrutinised the industry and attempted to prescribe the correct medicine for these and many other ills. The Housing Grants Construction and Regeneration Act 1996 was the first concrete effort at righting some of the most obvious wrongs, but whilst it has led to speedier and more cost-efficient resolution of disputes, it has not reduced the need for those disputes in the first place. The Society of Construction Law (“SCL”) has now stepped in and has prepared guidance on how to deal with the problems of delay and any associated compensation. The purpose of their guidance “is to provide the material necessary for the parties to avoid unnecessary disputes”.

The SCL Protocol

The SCL published its “Protocol for determining extensions of time and compensation for delay and disruption” in November 2001. Such was the level of interest in the industry that the consultation period was extended by one month and the results of that consultation can now be found in the revised Protocol, which was published on 15 May 2002. (Copies of the full Protocol can be downloaded from www.eotprotocol.com.) The substance of the Protocol is divided into 4 sections:

• Section 1 – summarises the SCL’s position on the “core issues”, delay and compensation;
• Section 2 – covers the preparation and maintenance of programmes and records;
• Section 3 – deals with extensions of time during the course of the project; and;
• Section 4 – deals with disputed extension of time issues after completion of the project.

Key recommendations

The key lessons from each section are summarised in 20 core issues relating to delay and disruption. These include the following:

• Extensions of time will only relieve a Contractor from Liquidated Damages and do not provide an automatic entitlement to monetary compensation.
• Applications for extensions of time must be made and dealt with as close to the delaying event as possible. An extension should be granted if the event is likely to affect the contract completion date and the aim of any procedure is to establish the correct date for completion, not to relieve the Contractor of the liability to pay
• Liquidated Damages. Prolongation costs should be calculated by reference to the actual costs during the actual period when the delaying event took effect.
• Concurrency can occur both in terms of causation and effect. Where each party separately causes a delay to completion of equal length, the Contractor’s own delay does not preclude the award of an extension of time for the Employer’s delay. Where only the effects of a delay are concurrent, then the Contractor can recover compensation for the Employer’s delay if he can identify the additional costs caused by the Employer.
• Float belongs to the project and not to either party. The existence of float must be taken into account when establishing any extension of time due. If use of the float denies the Contractor an extension of time, he may still be able to claim compensation for the loss of time, provided that the costs of that time were in the parties’ contemplation when they entered the contract.
• Variations and their effects in terms of time and money should be agreed before implementation, if possible.

Will the protocol work?

“The Protocol exists to provide guidance to all parties to the construction process when dealing with time/delay matters. It recognises that transparency of information and methodology is central to both dispute prevention and dispute resolution.”

The Protocol examines the issues of delay and compensation from two perspectives:

• during the currency of the project; and
• after the event.

During the contract

During the currency of the project the Protocol recommends that programmes are prepared, approved and regularly updated (by reference to detailed contemporaneous records) on common software packages. The existence of these documents will facilitate consideration by the Contract Administrator of any application or need for an extension of time shortly after the delay has occurred.

This is obviously common sense. However, there are two points to note. First, the adage “garbage in, garbage out” must be borne in mind. Sensible procedures, regular programme updates and timely analyses of the effects of events are the toolkit provided by the Protocol, but these will be of limited value if the baseline programme is unrealistic. Following the procedures in the Protocol is no substitute for a proper programme in the first place. Thus, in order to gain maximum benefit from the Protocol both parties will have to devote a great deal of attention to the programme. Whilst the Contractor will have to prepare the programme, the Employer will need to contribute meaningfully to its development by providing the necessary information about the works.

Second, the Protocol recommends that the programme is approved and provides model wording governing the approval procedure for inclusion in the contract. No provision is made, however, for what happens when the parties cannot agree on the programme. The dispute could be dealt with under the contractual disputes procedures, but in practice it may be difficult for the project to recover from such an inauspicious start. Again, therefore, the success of the Protocol depends on the spirit adopted by the contracting parties.

After the event

Where the dispute is being dealt with after the event the Protocol’s preferred method of delay analysis is time impact analysis. The Protocol also states that time impact analysis should be used wherever circumstances permit, both for prospective and retrospective analyses.

Time impact analysis involves charting the effect of a delay at the point in time when it occurs, allowing the likely consequences of the event to be determined. Time impact analysis does not impact all of the delaying events into the approved programme; the method takes account of the actual progress before each event and the programme that the Contractor intended to follow after the event and, as the last delaying event is impacted, an as-built record of the project stretches out behind it.

In the real world it is probable that the effect of a delaying event will not remain exactly as it is predicted on impacting, and that other events, such as a re-programming exercise or period of acceleration, will have an effect. Where the contract requires the Contractor to prove the actual delay suffered as a result of a particular event (and the actual prolongation costs) it is not, therefore, sufficient simply to point to the predicted effect. The as-built data that is a by-product of the time impact analysis methodology must be used to establish, as far as possible, which event caused critical delay. The Protocol does not explain how this is to be done.

The fact that so many people have contributed to the development of the revised Protocol is evidence of a desire to reduce the incidence of disputed delay and disruption claims and to ensure that if they cannot be avoided they are dealt with consistently. A consultation workshop was held on 22nd May, following which the Protocol will be finalised and launched at a seminar to be held in July.

For further information please contact Kate Tye at [email protected] or on +44 (0)20 7367 3506.