SAB 3112 CONTRACT AND ESTIMATION 1 PROJECT 1

CONTENT 1. 1.0 INTRODUCTION........................................................................................................ 2 2. 2.0 TYPE OF DELAY........................................................................................................ 3 2.1 NON-EXCUSABLE DELAYS.............................................................................. 4 2.2 NON-COMPENSABLE EXCUSABLE DELAYS................................................ 4 2.3 COMPENSABLE EXCUSABLE DELAYS.......................................................... 4 3. 3.0 CAUSES OF DELAY................................................................................................... 5 4. 4.0 EXTENSION OF TIME (EOT).................................................................................... 6 5. 5.0 CONCLUSION............................................................................................................. 7 6. 6.0 REFERENCE.............................................................................................................. 11

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1.0 INTRODUCTION Delay is generally acknowledged as the most common, costly, complex and risky problem encountered in construction projects. Because of the overriding importance of time for both the Client (in terms of performance) and the Contractor (in terms of money), it is the source of frequent disputes and claims leading to lawsuits. To control this situation, a contract is formulated to identify potential delay situations in advance and to define and fix obligations to preclude such controversies. A substantial number of General Conditions clauses address this subject in one way or another. For the practice of contract document in Malaysia the Standard Form of Contract, P.W.D Form 203(Rev. 2007) is the one of the document. The clause related to the Delay and Extension of Time is clause number 43 of the form. Under some circumstances, a Contractor may be entitled to claim delay damages if he finishes later than an Client-accepted early completion schedule but is still ahead of the official contract completion date. This may occur if the Contractor establishes a direct cause-and-effect relationship between Clients breach of a contractual obligation and the delay. In addition, the Contractor has the burden of establishing its increased costs as a result of the delay.

It is found in practice that not everything in the contract can be taken at face value and applied in cookbook fashion. Circumstances play a great deal in determining which clause(s) will be applied to a particular delay claim. Also, contract law encompasses concepts of reasonableness and fair dealing, implied obligations and warranties, constructive acceleration, etc. A good general understanding of the principles involved and the operation of the applicable clauses are essential to help make appropriate decisions and take the proper action in those delay situations.

In a large and complex project there will be a certain amount of give and take policy among the parties competing for the same time and space. Time, energy, and money must not be diverted in pursuing claims and disputes over minor delays, disruptions, and interferences. Accordingly, the General Conditions in Client issued contracts typically contain clauses that the Contractor on notice can plan for certain events. Further delays that occur due to these events can be termed as non-excusable delays.

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Often contract clause will require that a delay claim be submitted in writing within a stipulated number of days from the commencement of a delay. Further, within those stipulated number of days, after the termination of any such delay, the Contractor is required to file a written notice specifying the actual duration of the delay. Failure to give either of the above notices shall provide sufficient ground for denial of an extension of time. By giving notice, the Contractor warns the Client in taking alternate action to avoid or reduce the excess costs.

However, delays do not always result from a single catastrophic event. They frequently develop slowly during the course of work. Minor delays are generally overlooked until their cumulative effect becomes financially apparent. By the time a Contractor recognizes that there is a problem, many different parties and natural forces would have contributed to the situation. Failure to comply with the notice requirements can contribute to the situation which may or may not defeat the claim.

To avoid acceleration claims from Contractors in delay situations, it is best to:

Issue formal (change order) schedule extensions in a timely manner when justified Avoid ordering early or inappropriate completion Respond in a timely manner to any Notice of Claim from the Contractor

2.0 Types of delays Delays can be grouped in the following four broad categories according to how they operate contractually: Non-excusable delays Excusable non-compensable delays Excusable compensable delays Concurrent delays

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2.1 Non-excusable Delays

Non-excusable delays are delays, which the Contractor either causes or assumes the risk for. These delays might be the results of underestimates of productivity, inadequate scheduling or mismanagement, construction mistakes, weather, equipment breakdowns, staffing problems, or mere bad luck. Such delays are inherently the Contractors responsibility and no relief is allowed. These delays are within the control of the Contractor or are foreseeable; however, it is not necessary that they be both.

2.2 Non-compensable Excusable Delays: When a delay is caused by factors that are not foreseeable, beyond the Contractors reasonable control and not attributable to the Contractors fault or negligence, it may be excusable. This term has the implied meaning that neither party is at fault under the terms of the contract and has agreed to share the risk and consequences when excusable events occur. The Contractor will not receive compensation for the cost of delay, but he will be entitled for an additional time to complete his work and is relieved from any contractually imposed liquidated damages for the period of delay.

2.3 Compensable Excusable Delays

In addition to the compensable delays that result from contract changes by Change Notice, there are compensable delays that can arise in other ways. Such compensable delays are excusable delays, suspensions, or interruptions to all or part of the work caused by an act or failure to act by the Client resulting from Clients breach of an obligation, stated or implied, in the contract. If the delay is compensable, then the Contractor is entitled not only to an extension of time but also to an adjustment for any increase in costs caused by the delay.

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Client-issued contracts specifically address some potential compensable delays and provide equitable adjustments. The usual equitable adjustment clauses in Client issued contracts that apply to delay are:

Changes Differing Site Conditions Suspension

3.0 Causes of delays: According to the clause number 43.1 of P.W.D Form 203(Rev. 2007), if the Works were delayed, the Contractor should give written notice to the officer named in the Appendix mentioning the causes of delay. The followings are causes of delays in construction as referred to the clause:

a) Force majeure as provided under clause 57; b) Exceptionally inclement weather; c) Suspension of Works under clause 50; d) Directions given by the S.O. consequential upon disputes with neighbouring owners provided by the same is not due to any act, negligence or default of the Contract or any sub-contractor, nominated or otherwise; e) S.O.'s instructions issued under clause 5 hereof, PROVIDED THAT such instructions are not issued due to any act, negligence, default or breach of this Contract by the Contractor or any sub-contractor, nominated or otherwise; f) The Contractor not having received in due time instructions in regard to the nomination of sub-contractors and/or suppliers provided in this Contract, necessary instructions, drawings or levels for the execution of the Works from the S.O. due to any negligence or default of the S.O. PROVIDED THAT the Contractor shall have specifically applied in writing on a date which having regard to the Date for Completion stated in Appendix or to any extension of time then fixed under this clause, was neither unreasonably distant from nor unreasonably close to the date on which it was necessary for him to receive the same;

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g) delay in giving possession of the Site as provided under clause 38.4 hereof other than claim in effecting insurance and Performance Bond; h) Delay on the part of artists, tradesmen or others engaged by the Government in executing work not forming part of this Contract; i) 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, materials and/or services as are essential to the proper carrying out of the Works; or j) Delay on the part of the Nominated Sub-contractors and/or Nominated Suppliers to perform their works, due to reasons as stated above in sub-clauses (a) to (i),

Then the officer as in the Appendix shall so soon as he is able to estimate the length of the delay beyond the date or time aforesaid make in writing a fair and reasonable extension of time for completion of the Works, provided always that the Contractor shall use constantly his best endeavours to prevent delay and shall do all that may reasonably be required to the satisfaction of the officer to proceed with the Works. The certificate issued by the officer under this Clause shall be referred to as the `Certificate of Delay and Extension of Time'. 4.0 Extensions of Time (EOT)

Time is an integral part of every plan a company develops for performing contract work. There is a relationship between the schedule, the scope of work, and the project conditions. Changes to any one or more of the above three can affect the time of completion and compensation. Contractor is entitled to EOT for reasons or causes of delays (as mentioned in Clause 43) which is beyond his control. Therefore, Contractor should give written notice of the causes of any delays to the S.O. Otherwise, the S.O. must instruct the contractor to show causes as to why the project is delayed if the S.O. discovered the Contractor is behind his schedule.

To effect the extension of Date of Completion, Certificate of Delay and EOT must be issued. Following are the basic rules of issuing the certificate: All particulars in the Certificate must be correctly inserted;

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Reasons for each EOT granted and reference to the clause must be clearly stated; Nett effective period (in term of days) must be clearly stated; Ensure that insurance coverage does not expire earlier than the extended date for completion.

5.0 CONCLUSSION Some delays are inevitable, but increased understanding of external factors, attention to detail, and proactive communication on your part can help manage costs and keep the project moving forward. In construction, time truly is money. For the client, it may mean a homeowner who faces extra rent costs until he or she can get into a new home or a retailer who cant open during a busy season. For the contractor, delays often bring work stoppages and further delays in starting other projects.

Learning how to aggressively plan for and manage delays can mean the difference between profit and loss, between success and failure. Here are five of the most common reasons for project delays and the steps you can take to prevent them:

1. Inspections - The source of many headaches for contractors, inspections require careful planning and time budgeting. Calling for them before the project is ready, calling for them too late, or failing them can all cause delays.

Prevention You need to be able to tell when a job is truly ready for inspection. Acquiring at least a working knowledge of as many skills on the job as possible will serve you well. In addition, spend time with subcontractors to understand more of what they do. Remember that failure of an inspection may not only require more of your time but may also necessitate a subcontractor returning. Youll also need knowledge of how inspections work in the area of your project; systems differ from city to city and suburb to suburb. In one locale, one inspector may arrive to conduct four inspections at once. Another city may require six inspections -

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some of which may depend on passing others - by six different people on six different days. 2. Subcontractor delays - While a general contractor has only a few projects in progress at a time, a subcontractor usually has many at a time. A delay in any one of those will likely cause a delay in your job. The priority of your project may be lower with a given subcontractor because he or she has a number of active projects - some of which may be larger and more financially lucrative than yours.

Prevention Contractors need some clout or leverage with subcontractors. With a general contractor, that leverage is future work. For individuals serving as their own general contractors, that leverage will need to be financial.

Penalties for not starting on time can help, but few subcontractors will agree to contracts with such clauses. You will have better success by getting to know your subcontractors, understanding what they do, and communicating frequently and clearly with them about deadlines. 3. Delays in shipping times - If the windows you ordered right on schedule dont arrive on time because of unforeseen problems at the suppliers warehouse, you cant keep the house dry when it rains, and the electricians cant start on time. Sound familiar? Windows, cabinets, appliances, and special-order items are common sources of delays. A late shipment of even one item can throw off subcontractors schedules.

Prevention Steer clients toward in-stock items whenever possible, or use suppliers that maintain larger local stocks of needed items. Otherwise, double the estimated shipping time for your planning purposes. If a client decides to order something on his or her own, specify exact dates - with a buffer - for when you will need the items. 4. Client change of mind - Every contractor knows that once a project begins to take shape, the client can visualize better and will request changes. And, given that the client is the (paying) client, he or she can make changes - if he or she understands the consequences.

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5. Prevention Detailed, proactive communication with clients before a project begins can set the stage. While you cant anticipate every client request, you can outline some specific examples so that they understand the time and cost consequences of changes. Clients may not realize that a seemingly simple request, for example, could require a change in design, reengineering, re-filings with the municipality, and reordering of materials. Also, explain the chain effect of changes to clients, with examples. Moving a wall, door, or window just a few inches also could mean that you need to call back a plumbing or electrical subcontractor and need to work with their schedules.

Be sure to work with a designer - a good one who understands construction - and make sure that both you and the designer have thought through the project clearly before beginning. Then, firmly agree on the design with your client at the start, with a written sign-off. You may not eliminate change requests, but youll have set up a clear system for handling them. 6. Weather - Meteorologists have a hard enough time predicting tomorrows weather. So how, you say, can you anticipate and account for weather problems in your project? One standard key is always to build some degree of extra time into your project timeline. How much and where in the schedule you build this in depends on the nature of your project and the area of the country in which you are working.

Prevention If your project is primarily indoors, the added time may be minimal - but not zero. Keep in mind that you may be dependent on materials shipping from other parts of the country that could be adversely affected by weather. Also, remember that while you may be working comfortably inside, you - and your team - must get to and from the job site. Should snow, rain, storms, or other factors come into play, it is likely you will lose some time.

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In your project timeline, youll need to remember the types of weather delays that can affect various parts of your project. For instance, frost can be a cause of delay in pouring concrete. If you can adjust your schedule to pour concrete in a warm season, you can avoid this possibility. Otherwise, youll need to build in extra time for this task. Contractors in the Southwest United States can generally count on low humidity and plan painting accordingly; those in the South will need to factor in extra time.

For major outdoor work in many areas of the country affected by severe winters, super-structures to cover your work may make sense. Since they are expensive, youll need to do careful cost-benefit analyses to determine your savings. The bottom line is to plan and account for the unexpected. When forecasters say there is no chance of rain, and you dont have a roof on your project, know that it will rain, and you will need to allocate time for clean up. Become a good time manager and account for possible delays in your schedule. And if things go more smoothly than you anticipate, you - and your client - will be ahead.

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REFERENCE 1. Standard Form of Contract To Be Used Where Drawings and Specifications Form Part of The Contract , P.W.D Form 203 (Rev. 2007). 2. 3. http://rakan.jkr.gov.my/ http://www.scribd.com/doc/6106511/Delay-in-Construction-Projects-and-ItsConsequences 4. Aminah Md Yusuf & Ir Rosli, Kontak Dan Taksiran, Dekstop Publisher, J.B