Out-Law Guide 5 min. read
02 Apr 2019, 12:37 pm
Accurate record-keeping throughout a project is vital to any successful claim.
A contractor can recover time-related (prolongation) costs through claims for an extension of time (EOT). To do this it will have to demonstrate:
Contractors should focus most of all on demonstrating entitlement to the time and costs claimed as this is the foundation upon which the claim is built. Contracts almost always give the contractor entitlement to additional time in certain circumstances, though time-related costs are not always expressly granted.
The most common cause of delay in infrastructure and energy projects is a change to the scope of work. Changes can be instructed as formal variations by the engineer or project management consultant, or informally.
Where a change has not been formally instructed and causes delay, the contractor must explain:
If the contractor correctly shows that a variation has been instructed then it is entitled to the direct costs associated with the change, the prolongation (time-related) costs affecting the whole project and the time itself, which is granted in the EOT provision.
The contractual variation provisions in Qatar construction contracts do not always entitle the contractor to prolongation costs but contractors should include these in the assessment of the actual costs it has incurred in respect of its variation claims.
Not all delay-causing events will be formal or informal contractual variations. If the employer is responsible for an event which causes delay and the contract does not outline what should happen, the Qatar Civil Code can provide grounds for compensation and relief from the liquidated damages the contractor would otherwise have to pay.
Article 171 (2) of the Civil Code says that where there has been a change in circumstances as a result of an event which was unforeseeable and exceptional in nature and which makes compliance with the contract onerous, though not impossible, the contractor is entitled to have the obligation reduced to a reasonable level. This is a mandatory provision which is implied into all contracts and cannot be excluded.
If a contractor is delayed by an employer but the EOT provision does not grant entitlement to additional time, then Article 171 (2) may be applied. EOT provisions usually have 'catch all' wording saying that the contractor is entitled to an extension for 'any other delay or prevention caused by the employer'. If this is missing and an event takes place which is the employer's responsibility, the mechanism governing 'time' in the contract has effectively broken down.
This leads to a situation which is known in common law jurisdictions as 'time at large', meaning the contractual completion date and the imposition of liquidated damages for not meeting it are no longer appropriate because the project's timescale now differs from the contract's and the contract does not say how time is dealt with in the circumstances which have arisen. In Qatar, where the principle of 'time at large' is unknown, subject to the facts of the case, Articles 171 (2) together with other civil code principles such as those relating to good faith and having regard to the parties' common intention, may be used to readjust the time frame of the contract to a more reasonable time.
There may well be other articles of the Civil Code which appear to give rise to entitlement, but any specific contract agreement will take precedence over all of them except those that are mandatory. The Civil Code says that a contract has the force of law between the parties and can only be altered by mutual consent of the parties, or for reasons prescribed by law. These reasons can be a mandatory article of the Civil Code which is implied into the contract, or because the contractual provision agreed is contrary to public policy.
The contract may not expressly state that a contractor is entitled to costs, even if there is an entitlement to an extension of time. If that is the case then contractors in Qatar which want to establish an entitlement to compensation may need to rely on Article 697 of the Civil Code which says: "The employer shall pay the dues of the contractor upon taking over the work, unless otherwise required by agreement or by practice."
Another approach is to argue that there has been a breach of contract which entitles the contractor to compensation under Articles 256 and 263 of the Civil Code.
Subject to anything inconsistent in the contract, these provisions of the Civil Code may be relied upon to recover prolongation costs, if the corresponding entitlement to an extension of time is established.
Most technical delay analysts will admit that on complex infrastructure or energy projects, demonstrating that a certain event caused a certain delay and made the completion timetable impossible to stick to is an art, not a science.
There are different ways to quantify the delay and some are more robust than others. The main factors to consider when deciding on a methodology are:
In Qatar the most common methodology is a 'time impact analysis' of the delay. This approach identifies the baseline programmes and the monthly updates to it and plots the delay events onto the updated programmes to identify if it impacted the critical path of the project, such that it delayed the completion date.
The time impact analysis method is expressly required in some Qatari public authority standard form contracts. In others it is less clear, but language in the extension of time provision, such as a requirement to demonstrate the delay on the "actual and the then current critical path" would appear to suggest that it is the appropriate methodology to adopt.
Identifying the incorrect methodology can be fatal to the claim. The engineer or project manager determining the contractor's entitlement will refuse to engage with the submission if it does not follow the contractual requirements on methodology.
In arbitration proceedings a tribunal will often prefer to see the delay demonstrated using a time slice windows analysis, which is retrospective. This methodology adopts a similar approach to the time impact analysis, but permits the impact of the event to be scrutinised in hindsight, with the benefit of actual as-built data. Although a time impact analysis methodology has similar advantages to the time slice window analysis, as the time impact analysis is prospective, it usually does not capture the eventual actual delay caused by the events as the subsequent project progress is not considered.
Either of the above methods requires various complete and consistent data sets, such as baseline programmes; updated programmes; minutes of meetings; letters; correspondence between the parties, dairies and so on. Without the available data the outcome of the analysis is unlikely to reflect the actual delay - as the saying goes 'rubbish in, rubbish out'. Therefore, the importance of record-keeping in the context of recovering any entitlement, particularly an extension of time, cannot be overstated.