The importance of good records for retrospective assessment of delay

KEY POINTS

• NEC parties are required by the compensation event process to assess changes to key or completion dates prospectively.
• If the parties decide to deal with delay impacts retrospectively, they both need to keep accurate contemporaneous records to minimise their financial risk.
• Such records include a logic-linked first programme, revised programmes, correspondence, early warning and compensation event notices, productivity records and visual evidence.

Clause 62.2 of the NEC4 Engineering and Construction Contract (ECC) requires the project manager and contractor to assess any change caused by a compensation event to a key date or the completion date prospectively (Wheal 2003).

However, for one reason or another, the parties might decide to deal with the delay impacts retrospectively. In such cases it is important for both parties to keep accurate contemporaneous records to minimise their financial risk. Contractors in particular could lose their entitlement to delay in the absence of good records.

First programme

In ECC clause 31.1 the first programme is included in the contract data or submitted by the contractor to the project manager for acceptance within the period expressed in the contract data.

This first programme represents the contractor’s planned working method and can be used as a benchmark to measure change in the event of any subsequent delay.

It is therefore important that the contractor produces and retains a logic-linked first programme and all correspondence regarding its acceptance to form the foundations of prospective or retrospective assessments of delay. Clause 31.2 sets out the first programme’s requirements, including details of the planned resource required to carry out each activity.

Correspondence

The parties should document and retain all key correspondence relating to compensation events and important verbal communication should also be produced and shared in a written format. Project correspondence is utilised in claims to demonstrate causation, mitigation, the parties’ intentions and, in some cases, the critical path.

If key correspondence is not captured in written format contemporaneously, witness statements may be required to evidence important exchanges, although witness statements generally carry less weight. According to the Society of Construction Law (2017: 16), ‘Written communications should be uniquely numbered, contain a descriptive subject line, be dated and be issued to the agreed distribution list. Any important oral communication ought to be confirmed in writing’.

Early warning notices

The first step in managing change in ECC is the provision of an early warning as set out in clause 15.1, which requires the contractor and the project manager to notify the other as soon as either becomes aware of a matter which could cause a delay to completion or to meeting a key date.

Early visibility of a potential issue provides both parties with the opportunity to collaborate and mitigate the impact of an event by way of an early warning meeting. Failure to provide such notice could impact the relief sought and limit the contractor’s entitlement to the part of the delay which would have remained if early warning was provided.

Compensation event notice

If the delay event is a stated compensation event under clause 60.1, then the contractor must also provide prompt notification that a compensation event has occurred.

The service of such notice must be within 8 weeks of the contractor becoming aware that the event has happened, or the contractor becomes time-barred from being allowed an extension of time. Exceptions to this rule apply if the event arises from a project manager’s instruction, a certification or change to an earlier decision. Therefore, the contractor must retain this contractual record to demonstrate its compliance with clause 60.1.

The project manager confirms whether they agree or disagree with the contractor. At this point, a potential dispute could arise over the principle of whether a compensation event has occurred. Consistency is the key with record keeping and, if gaps exist in the records, the contractor will experience difficulties in demonstrating the effect of a compensation event during that period.

Revised programmes

Once the project manager agrees that a compensation event has occurred, they instruct the contractor to provide a quotation within 3 weeks of the instruction. At this point, the contractor must adequately quantify and demonstrate the effect of the compensation event on a key date or completion.

ECC encourages a prospective approach towards analysing and agreeing on the effect of a compensation event and, if actual progress has been made, then a time-impact delay analysis may be deployed. In addition to a reliable logic-linked first programme, the time impact analysis requires equally reliable updates to the first programme to consider the actual progress achieved.

According to the Society of Construction Law (2017: 15), ‘Updated Programmes are a repository of data regarding progress achieved prior to their data date … Hence, Updated Programmes are also a helpful progress record’.

Resource, progress and productivity records

A common stumbling block for contractors is the demonstration of a causal link between the compensation event and its impact. A consequence of a compensation event is commonly a decline in resource and/or productivity which in turn impacts progress. Therefore, implementing and maintaining an effective system for recording resource and progress information is important in evidencing the entitlement to delay.

Adequate resource and progress records are prerequisite to a productivity analysis, which is required to support a disruption analysis. If the resource and progress information is recorded at a higher level, it may not provide the granularity required to demonstrate entitlement.

Site diaries which record daily resource expenditure, progress, stoppages and reasons for the stoppages against each activity performed are indispensable tools in demonstrating cause and effect, particularly when submitted to and approved by the client. The contractor should also retain this data on a single spreadsheet in a histogram format to avoid the costly process of extracting the data from individual spreadsheets retrospectively.

Visual evidence

‘A picture paints a thousand words’ is a wellknown saying based on a Chinese proverb. Certainly photographic evidence of progress and/or causes of delay is a powerful tool which is often overlooked, although the imagery date and location must be demonstrable.

Summary

The ethos of the ECC is to analyse and agree on change as it becomes apparent. However, for one reason or another, the parties may adopt a wait-andsee approach, and a retrospective analysis of the delay impact may be required. In this case, the records detailed above are vital to undertaking a retrospective delay analysis.

Consistency is key with record keeping and, if gaps exist in the records, the contractor will experience difficulties in demonstrating the effect of a compensation event during that period. The additional resources required for effective record-keeping should be viewed as an insurance against financial risk rather than a burden.

Furthermore, the resource costs are minimal compared to the potential costs the parties are exposed to in the absence of adequate records.

References

Society of Construction Law (2017) Delay and Disruption Protocol (3rd edn), Society of Construction Law, Hinckley, UK.

Wheal N (2023) How to avoid cumulative delay and disruption disputes in NEC contracts, NEC Newsletter, 125 (May): 7.