Should you approve that time extension? What will be the cost? What contract administrators should know
A key part of the role of architects who act as contract administrators is to determine whether or not contractors are entitled to an extension of time for the completion of their works. This can be extremely complex, usually requiring the contract administrator to do two things.
First they must review the building contract and assess what events entitle the contractor to an extension of time if it delays the works. For example, while the building contract will almost certainly require the contractor to be granted an extension of time for delay caused by the instruction of additional works, it may not do so for delay caused by adverse weather conditions.
Secondly, they need to assess whether or not, as a matter of fact, a particular event has delayed the works. For example, it might be that while some information has been provided by the employer later than it should have been under the building contract, this has not delayed the works because the contractor did not need it before it was provided. There might also be inconsistencies in the evidence about what progress had been made at any particular stage. It is not uncommon, for example, for meeting minutes, correspondence and programmes to suggest that different amounts of progress had been made at a particular point in time. The contract administrator then has to decide which evidence is likely to be the most reliable.
Rejecting an application can result in the employer claiming liquidated damages from the contractor; and granting one can result in the contractor claiming costs incurred as a result of the delay from the employer
Large sums of money often rest on the contract administrator’s decision. This is because rejecting an application can result in the employer claiming liquidated damages from the contractor; and granting one can result in the contractor claiming costs incurred as a result of the delay from the employer.
Given the impact liquidated damages and irrecoverable prolongation costs can have on cash flow for contractors, it is not surprising that they often seek to challenge adverse contract administrators’ adjudication decisions.
The short timescales available for adjudication proceedings (between 28 and 42 days unless both parties agree a longer period), mean that the employer usually has just 7-10 days to produce the evidence on which it wishes to rely in order to defend any claim for an extension of time. The employer must, therefore, usually rely almost entirely on the contract administrator being able to justify its decision rather than on independent programming experts – as might be the case in arbitration or court proceedings.
As a result, contract administrators should ensure that they keep a properly collated copy of all of the documentary evidence they have considered when making their decision; and a record of why they reached particular conclusions based on that evidence.
As well as enabling the employer to respond within the required timescales, a clear, concise and reasoned analysis from a contract administrator often gives the adjudicator an initial impression of a well-run project on which the contractor is being treated professionally and fairly. The importance of first impressions should not be underestimated in adjudication, given the short timescales within which parties have to change those impressions.
In practice, most employers accept that extension of time claims are factually complex and that an adjudicator might reasonably take a different view to a contract administrator based on the same evidence. However, adjudication can be expensive and a contract administrator may find itself facing a claim from an employer to recover its costs if the adjudication resulted from the contract administrator making a decision without proper care or without keeping the records necessary to defend its decision.
Doug Wass is a partner at Macfarlanes LLP
IN PLAIN ENGLISH: ADR
The term ADR (or alternative dispute resolution) is usually used to refer to all forms of dispute resolution which are cheaper and quicker alternatives to court and arbitration proceedings. Such alternatives include adjudication, mediation, conciliation, early neutral evaluation and dispute boards. The courts encourage parties to seek to resolve their disputes by ADR rather than incur the costs of court proceedings. Costs penalties are sometimes imposed on a party who the court considers has unreasonably refused an offer by another party to undertake a form of ADR.