What is construction project delay?
Every Project starts with a definitive time schedule to complete but many time projects end up exceeding the time duration assigned to them. The consequence of these delays not only occur on the time duration of the project but the cost part of the project. And if the Project is being done through external agencies or through some purchase contract then there will always be a dispute that who is the reason for the project delay and its consequence on the costing of the project. When there is a dispute over ownership of the delay then there should be a mechanism to decide and finalize the claim ownership. So, first of all, we should know how many types of delays are there and why they occur.
- Delay due to force closure like natural calamities or the situation which are not in control of both client and contractor like strike etc.
- Delay by the contractor due to the poor mobilization of resources like the man, material, and machines
- Delay due to the client due to change in the scope or non-availability of proper clearness in the scope of job.
Type of claims raised
Based on these three types of delay which can happen following three types of claims processed
- Claim by contractor for extension of time for completing the project
- Claim by contractor for the extra costing due to prolong mobilization at the site.
- Claim by Client in terms of Liquidation Damage (LD) due to non-completion of the project on the specific duration of time for the business loss to the client for the completed project.
How the project delays handled in India
In India, as we are lacking in applying the best project management practice so as we also lack in settling delay claims also. There is no proper code or any legal frame work to handle the project delay claims. The clause of Liquidation Damage (LD) always incorporated in the Public sector/Govt contracts however there is no method to establishing the ownership of the delay and arriving at the time or cost conclusion on these delays. In every purchase order contractor load 5 – 10 % of the anticipated amount for the penalty due to project delay and so on never try to complete the project in the time. This lackadaisical approach also caused that most of the project of Public sector/Govt got delayed substantially.
There is no baseline committed schedule both by client and contractor or time bound schedule analysis which can be referred during the execution of the work and for establishment of the ownership of delay.
In many cases, there is no fault of the contractor in project delay but as no mechanism is there to establish this, client always has upper hand in these type of contracts. In many instances scope of the project changed in between, or some force majeure delay the project, but contractor cannot claim for these delays for extension of the time or mobilization over burden. Most to most contractor gets extension in the time, but in very rare case goes up to arbitration or to the court of law. In court too, there is no law or procedure for establishing the delay as like in US where AACE (The Association for Advancement of Cost Engineering) has the clear guideline for establishing the project delay
International best practices in Project delays claims
Best project management practices are used in the developed world like US and Europe rather in Indian construction industries. Same goes with the Delay claim settlement procedure too. A clear guideline and procedure are established in these countries for processing the delay claim. So as per AACE (The Association for Advancement of Cost engineering), there are three types of claims
A. Excusable delays
These are the delays which are beyond the control of the contractor and he can claim for compensation. These are of two types
- Compensable delays which are compensated to the contractor in term of time extension or cost escalation. These can be due to change of scope by client or delay in providing clearance for the execution of the works
- Non-compensable delays are the delays which are beyond the control of client too like natural calamities, force majeure etc.
B. Non-Excusable delays
These are the delays which cause due to the poor work performance by the contractor. This may be due to non-mobilization of proper man, machine and material resources. If this is established by the client, then the contractor may be liable to pay the penalty as Liquidated Damage (LD) to the client for his business loss due to non-completion of the work on time. This depends on the terms and conditions mentioned in the tender documents.
C. Concurrent Delays
These are the delays which occur both by the contractor and client concurrently and it is very hard to determine the who caused the delay in the defined period. Time Impact analysis and Schedule forensic analysis used for determining the effect of the contractor and client on the schedule delay independently and then the decisions are taken for deciding the delay claims.
Based on these three type of delay there are techniques developed for carrying out the schedule analysis, so the actual impact of the delay can be determined on the overall project due to delay of event or the activity. In these techniques, the valid questions always remain that who owns the float of the activity. If in a given duration of the time client and contractor both delay their part of the activity, but the activity of the contractor has float in it which do not delay overall project, but the client activity is on critical path so delaying the overall project. In such cases, the float always stays with the person or organization which is making the schedule. Following are the techniques for delay claim analysis.
- As planned Vs As built schedule
- Impacted as Planned
- As Planned but for
- Collapsed As built
- Window Analysis
- Time Impact Analysis
We will discuss these methods in detail in our next blog.
Way forward for the Indian construction projects
In India, Projects are handled like hire and fire. Except for a few big infrastructure projects, schedule preparation and monitoring are not done in any projects. This further leads to the disputes and arbitration when delay in project occurs. It is very much required that project should be properly planned before starting of the execution of the project and Project schedule shall be thoroughly prepared and accepted and approved by both client and contractor. The thorough time given in the schedule preparation will minimize the future risk of blame and claims for the delay. And if the delay occurs for any of the reason it can be sorted out by comparing with the original agreed schedule through common schedule analysis techniques