Lessons can be learnt from Brazil’s big build for the World Cup, which was the subject of delays to 75% of its construction projects. Just two of 12 stadia were complete by the initial deadline, with two reaching completion within weeks of the start of the tournament. Potential reasons for the delays include bad planning, allegations of corruption, disorganisation and poorly managed projects and tenders.
So, what is the general position in relation to timing and delay in construction contracts and how is delay best dealt with?
It is often inevitable, especially in major construction projects such as the World Cup, that an element of delay will creep into practical completion. It is, therefore, both prudent and advisable that building or engineering contracts contain three key provisions:
- The date for completion (including, where relevant, a programme of works);
- The mechanism for changing or extending the date for completion; and
- The consequences of a failure to meet the deadline for completion.
With these three elements fleshed out and agreed in the building contract, all parties know the score, the deadlines and the consequences of failing to meet those deadlines.
Where parties do not provide a date for completion in the contract, the fallback position is that the works must be completed within a ‘reasonable’ time. What is a ‘reasonable’ time is a question of fact in each case and this is open to interpretation and therefore, argument.
Contractors may be able to claim an extension of time for completion where the delay is either caused by the employer or is not the contractor’s responsibility under the contract. If the employer is to blame for the delay and no provision has been made for this under the contract then time will be “at large” and the introduction of a ‘reasonable’ time for completion will apply. In any event, the innocent party should take care to comply with the contractual mechanism for extending time for completion to avoid scoring an own goal by potentially letting the delaying party off the hook by making a procedural error.
Where a contractor fails to meet the completion deadline at its own default, the employer may claim damages from the contractor (whether liquidated or unliquidated). In certain extreme circumstances, the employer may terminate the contract and engage a replacement contractor to complete the works; a loss for both parties.
Realistic completion dates, diligent project management and detailed programmes of work all encourage the delivery of construction projects on time and on target. Detailed timing and delay provisions within the building contract provide further assurance in dealing with delay as and when it arises. Follow these recommendations and hopefully you will avoid some of the near misses in reaching practical completion goals that were experienced in delivering the World Cup stadia.
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