Frequently Asked Questions

On an Option A contract, in presenting the Cl. 31 programmes, the contractor has not defined any allowance for float or time-risk; rather he has included a terminal risk allowance. With particular reference to the critical path, we consider that not only does this preclude the ability to monitor risk / residual risk as the works progress but it also prevents assessment in terms the sufficiency of the operational resource and time allowances and the deliverability of the programme generally. It is worth noting that the critical path constitutes complex bridge construction works over an environmentally sensitive water course.

 

Could you advise on the resolution of the issue, vis-à-vis the contractor’s position that there is no float within the critical path, and an assessment that a programme with no float on the critical path is impractical / unrealistic and, therefore, cannot be accepted? A risk reduction meeting cannot fully resolve the matter (the contractor has already stated that, due to the their commercial approach on the job, there is no float / risk provision in the C.P. operations) and there only appears to remain a completely unsatisfactory situation whereby these mutually exclusive positions lead to an impasse undermining the programme as a management tool.

 

With reference to the recent changes in national insurance, the contractor has submitted a CE under Option X2. I would appreciate a commentary on admissibility in the light of the facts that the relevant statutes have been on the books from 2008 and 2010 and, hence, were known of at the time of tender. Furthermore, the details of the budget provided not only for an increase in overall rate and but also threshold – effectively providing a reduction for employees earnings under approximately £20,000 p.a..

The Contractor is required to show float and time risk allowance on his programme – see 31.2.  If he does not do so then the PM can reject it under the 2nd bullet of 31.3.  A programme without any time risk allowance or float, or where all the time risk allowance is at the end is also simply not practicable to achieve, and should therefore be rejected under the first bullet of 31.3. 

However with regards to the critical path the Contractor is absolutely correct that there simply cannot be any float within that – by its very definition it is the path that is critical.  In fact one of the accepted definitions of the critical path is that path which has zero float, or, to put it another way, it is the quickest period that the work can be carried out in.  Nowadays the computer software will define the critical path and float for the remaining items once the programmer has entered the time periods for each activity (including any time risk allowances for that activity) and the links between the activities (either logic or resource driven). 

But the Contractor is wrong to lump all his time risk allowances together at the end of the programme.  These should be included for each activity that needs them (not all will).  The amount of these will depend upon many factors including the nature of the activity and the time of year it is being carried out.  That way the programme shown will be achievable, i.e. practicable.  Time risk allowances remain the Contractor’s and the Employer cannot use them when taking assessing the effects of a compensation event. 

With regards to X2 the position is clear – it is a compensation event if the law changes after the Contract Date.  It is irrelevant whether or not that change of law had been announced many months or years before.  So the question is when did the law change – not when was the change announced.  That means that the Contractor is entitled to not allow for the effect of any change in the law that has been announced but not yet enacted.  On the other hand if the law itself had changed before the Contract Date but was not to take affect until a later date then that will not be a compensation event.   I am sorry but I do not know the exact arrangements for bringing in these changed NI contributions, so you will need to get legal advice on that.  However, if the effect of this law change is to reduce employers’ payments, then that needs to be taken into account to in the valuing of the compensation event, i.e. reduce it (see the final sentence of X2.1).  But note here we are referring only to the Employer’s contributions to NI, not the Employee’s.  

Back to FAQs