Picture this: You are a contractor working on a complex project which is behind time. $300,000 for liquidated damages has been set off by the principal against your final payment claim. You have suffered significant additional costs due to delays in the progress of the works. The superintendent has rejected three of the seven EOTs you submitted. The cause of these delays was not within your control. In fact, you believe that most of the delays resulted from the principal’s actions or inaction.

This is a scenario we see all too often – usually from the perspective of a contractor facing an uphill battle to recover their costs on a project gone wrong. In this two-part series, we aim to:

  1. update contractors on necessary entitlements to bargain for during the pre-contract negotiation phase; and
  2. provide tips when administering the contract to maximise a contractor’s position in the event of a delay related dispute.

The first article will outline steps to formulate a valid EOT claim that will ensure success in mitigating the impact of liquidated damages under most principal-amended AS4902 contracts. The second article will discuss recovery of additional costs suffered as a result of delays outside your control.

Satisfying preconditions and substantiating your EOT claim

A typical principal-friendly clause 34.3 of AS4902 contract (EOT clause) is comprised of three parts:

  1. Identification of the ‘qualifying causes of delay’, defining each cause of delay that may entitle the contractor to claim an EOT.
  2. A mechanism for the contractor to notify the superintendent that it is claiming an extension of time for completion.
  3. Preconditions that must be satisfied before the contractor is entitled to an EOT, such as timeframes for submitting notices or claims (time-bars), documents evidencing delay to the critical path of the works, identification of concurrent delays and mitigation measures.

Bargain for wide definitions of qualifying and compensable causes of delay

Identifying the event that gives rise to your entitlement to an EOT is the first step in any claim. If the event is a ‘qualifying cause of delay’, then you are entitled to submit a claim for an EOT. If it isn’t, then you will have agreed to take on the risk of that type of delay and you do not have entitlement to claim.

When negotiating the terms of the contract, contractors should review the definitions of ‘qualifying cause of delay’ and ‘compensable cause of delay’ carefully. The contractor should consider if it will be vulnerable to any other causes of delay outside its control, which are not part of the definition in the contract. Obvious examples include force majeure events (i.e. COVID-19 related event), inclement weather, delays caused by local authorities, changes in law and discovery of latent conditions. These are neutral events. You will only be entitled to relief for these events if they have been expressly included in the definitions of ‘qualifying’ and ‘compensable cause of delay‘ in the contract.

Principal-friendly contracts often limit the definition of ‘qualifying cause of delay’ to causes such as ‘breach of contract by the Principal’ or ‘a negligent act of the Principal’. A contractor should never accept this position. At a minimum, the definition should be amended to include any act, default or omission of the superintendent, principal, or the principal’s other contractors.

Identify the contractual preconditions

Most contracts require that a contractor provide a ‘notice of delay’ (NOD). A NOD is generally a short notice informing the principal that an event has occurred or is expected to occur, which may delay the works. The notice may also require the contractor to estimate the anticipated length of delay. A NOD is not an EOT claim and should not be confused as such. However, it is an important document and should not be ignored, as a failure to serve a NOD may result in rejection of your EOT claim.

What to include in your EOT claim?

Most modern principal-amended AS4902 contracts contain a time-bar, that specifies a timeframe in which a contractor must submit an EOT claim following the discovery of a qualifying delay event (e.g. 10 business days). A failure to submit within this timeframe results in a loss of entitlement to an EOT for that delay event.

The drafting of a time-bar is a technical process, as it must contain specific wording in order to be considered enforceable. Given the potential detrimental outcomes of time-bars, contractors should always proceed with the assumption that the time-bar is valid and submit any EOT claim as soon as possible once aware of a delay event.

Unfortunately, submitting an EOT claim is not as straightforward as a one-line statement that the critical path of the works has been delayed by an event outside your control. You must carefully cross-reference all requirements in clause 34.3 with your EOT claim submission and consider whether an independent individual reading your claim would reasonably regard each contractual requirement as being met.

In our experience, if you follow the below formula when preparing your EOT claim, you will satisfy most EOT preconditions:

  1. describe the delay event in detail, including the date you became aware of the delay, with reference to the NOD and attachment of contemporaneous site records;
  2. specify the number of days of extension being claimed and be clear about the definition of days, e.g. calendar, business or working days (refer to the contract);
  3. insert the contractual definition of ‘qualifying cause of delay’;
  4. describe how the delay event falls into one of the ‘qualifying causes of delay’;
  5. explain how the delay event actually ’caused’ delay to the date for completion;
  6. attach an impacted construction program which shows how each activity on the critical path has been affected by the delay event; and
  7. explain what you have done to prevent and/or mitigate the

Overcoming concurrency

Concurrent delay is when two or more events occur within the same period, each independently causing a delay to date for practical completion. Below is an extract of a typical principal amendment to clause 34.4 of AS4902:

When more than one event causes concurrent delays and the cause of at least one of those events, but not all of them, is not a qualifying cause of delay, then to the extent that the delays are concurrent, the Contractor shall not be entitled to an EOT for practical completion.

The effect of this amendment is that the onus is on the contractor to demonstrate that there are no concurrent non-qualifying delays within the period that an EOT is claimed. It can be tricky to ascertain concurrent delays in prolonged complex projects.

When analysing concurrent delays, an individual assessment of each delay should be performed including its impact on other activities and the project date for completion. The quality of planning, programming and record keeping can be instrumental in the outcome of a claim.

Measures to avoid the risk of objection to your EOT claim due to failure to account for concurrent delays include:

  1. developing an as-built program using daily reports; and
  2. comparing these as-built programs and records with the as-planned programs to determine which activities were delayed and whether concurrent delays occurred.

This article has focused on measures contractors can take to ensure success with their EOT claims. The next article will look at how to formulate and quantify a delay costs claim for a compensable cause of delay.

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader’s specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

Key Contacts:

Jason Pungsornruk - Principal
Jason Pungsornruk – Principal
David Cheel - Associate
David Cheel – Associate

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