Isn't non-payment "prevention" by the Employer. 

Hi Mr. Mike Testro and Dear All!

• I mean, If the Employer delayed the payment of contractor up to 3 months or more then against his monthly invoice certified by the Engineer so, is there mentioned any specific clause in FIDIC which can entitle the contractor for grant of EOT.   
• I have a clause (69.4 regarding Contractor's Entitlement to Suspend Work) in my contract, which describes something like that " Without prejudice to the Contractor's entitlement to interest under Sub-Clause 60.10 (Time for Payment) and to terminate under Sub-Clause 69.1, the Contractor may, if the Employer fails to pay the Contractor the amount due under any certificate of the Engineer within 28 days after expiry of time stated in Sub-Clause 60.10 within which payment to be made, subject to any deduction that the Employer is entitled to make under the contract, after giving 28 days ' prior notice to the Employer, with a copy to the Engineer, suspend work or reduce the rate of work.
• If the Contractor suspends work or reduces the rate of work in accordance with the provisions of this Sub-Clause and thereby suffers delay or incurs costs the Engineer shall, after due consultation with the Employer and the Contractor, determine:

          (a) any extension of time to which the Contractor is entitled under Clause 44, and

          (b) the amount of such costs. which shall be added to the Contract Price"

• So, can I link this clause with EOT claim due to delay in payment by the Employer.

 

   

Dear All,

 

Can any one explain, if there is any clause regariding delay in payment will entitle the Contractor for the Extension of Time.

 

Shahzad,

Clarify your opinion in order to continue and reach to final conclusion.

Ashraf

Contractual support in respect of Payment delay is Extension of Time clauses whereby in most of the Contracts it is explicitly stated that any delay in payment will entitle the Contractor for the Extension of Time as well as associated costs and further Extension of Time is mostly awarded on the basis of late payments in arbitration being as vital issue.

So be acknowledged that financial crunch always directly impact the overall progress of project. Therefore I think that there is no question of irrelevancy that such delays may cause only financial disruption and it has no direct impact on the progress of works.

Jawad,

If you wish to conclusively prove cause and effect - use T.I.A.

95 updates is not that great a number - I know of T.I.A’s with a 1000 plus updates.

You get out what you put in, but as always an analysis should be proportionate to the money at stake.

If there’s alot of money at stake, taking short cuts or choosing a less intensive method of analysis to save you work is not the thing you should be doing.

Dear Jawad

If you have alot of concurrent events that makes it very difficult to seperate the effect of the late payments from other delays that were encountered during the same period of time, then i would recommend for you another method of delay analysis that i’m not sure if you are aware of in details, its the "Impact as-Planned" analysis. Simply, you update the latest revision of the approved programme just before the first event happen (in your case when the time the first payment was due has just ellapsed), dont change any logic, dont revise any relations even if that was the case on site, just keep the schedule "as-planned". Now, according to that updated "as-planned" schedule, conclude the critical dates you are targeting to concentrate on them in your analysis, (for example, placing orders of materials, mobilization of a main subcontractor, ...etc). Now, using the total floats of those activities compare that target to the actual acheived (or could been acheived) due to the disrupion caused by an Employer Delay Event, then just conclude it simply as follows:

" If the Employer had not delayed the Contractor any payments during the period from ..... to ..... , and as per the approved master programme of works, the overall project delay would have been equal to (X) , however; due to the delay of the Payments by the Employer, some activities could not be achieved as planned, and this would have already delayed the project to an overall delay of (Y), therefore; we request the Engineer to certify an EOT equals to (Y-X)".

It is very crusial here to understand, the concurrency of the delay does not waive your right for the delay but waives your right for the prolongation cost only.


Cheers

Dear Jawad and ALL,

Sorry i am late, but was really busy for a couple of weeks.

This thread addresses one of the questions in Construction Industry that should be resolved and defined cleary in any COC.

Jawad

The Society of Construction Law has issued a "DELAY AND DISRUPTION PROTOCOL" which is a very valuable document in my opinion. The Protocol discusses many issues, one of them is DISRUPTION (PAGE 31 of the PROTOCOL).

you can get your soft copy of the protocol by loggin on to this site http://www.eotprotocol.com

The answer to your questions is dependant on many factors (for example, when did this delay first occur? when did it end ? was there any site records for prodcutivities before the event ? and after the event ? the Contractor might use evidence that payments for sub-contractor’s was due by ....... and were actually paid by ......, salaries were not paid for ........ therefore the following manpower had to be release ....... " all these issues should be prepared by the Contractor.

Now, to evaluate the effect of this disruption, we have to define two senarios:
a- what would the Contractor’s progress would be if this disruption did not occur ?
b- what is the actual Contractor progress during the affected period of time ? (whether that period is 60 days after the payment is due or else).

Ofcourse for the evaluation of the EOT we will look at the delayed path (usually the original critical path, but not necessarily).

Now the Contractor has to prove two things:

a- If these payments were not delayed , he would "ACTUALLY" be able to do this job by this time frame. The Contractor might refer to any records, documents, or even other sites to prove his point, this will be accepted by the arbitrator.

b- The "ACTUAL" progress on site, i.e when the payment was made to the subcontractor, supplier, ...etc, and the effect of that on the schedule.

Once you establish these facts, you can deal with it as an event and perform a time impact analysis on the schedule.

This is ofcourse in addition to the financial impact which i dont find any problem in evaluating it (simply the delayed actual interium payments times the actual bank interest for the delayed duration), in addition to the pronlongation cost (if applicable) that will result from the time impact analysis.

It is therefore recommended that the Contractor submits at least a monthly valuation of the impact of any Employer caused disruption, some contractor’s include this analysis in their monthly progress reports which is really helpful as a record for interuim determinations of any EOT or cost impacts.

In conclusion, there is no equation or definitive way to do it, however; disruption causes loss in efficiency and therefore time lost and cost lost. you have to prove that, analyse the time impact and cost impact in the way they "actually" had an impact on your programme, and i am sure it will be convencing.

Jawad,

Any retrospective analysis (planning or otherwise) is tedious, painstaking, and very time consuming - that’s what it’s all about and why parties get others to do it!

Jawad,

Interesting question - what John has said is correct - the only thing I would add that you need to think about is that you are claiming for a BREACH OF CONTRACT by the Employer and are therefore seeking DAMAGES for this breach, ie a monetary value that put’s you in the same position as that had the contract been properly performed. This is not the same as a cost and expense claim under the contract.

Any effect of the reduced cashflow is therefore claimable, but quantifying it may prove difficult. I would do a comparison of as planned versus actual for the affected periods and try to isolate those differences that can be directly attributed to the reduced working capital available. This is going to involve more accounting than planning. You’ll have to establish the planned cashflow which should be easy enough, but then ACCURATELY establish the actual cashflow, which is going to involve a painstaking operation. When you have the actual cashflow you can look at those periods that the maximum available was hit and then look at the programme and say, we could have been doing this but due to the lack of capital we couldn’t and therefore the effect on progress was this.

Hope this helps