Library

Case law and guidance publications for:

Delay and disruption - the distinction

Extensions of time

- Benefit of an extension of time

- Notice of delay

- Time at large and the prevention principle

- Float in relation to time

- Non-excusable delay

- Excusable non-compensable delay

- Excusable compensable delay

- Concurrent delay

Quantification of a contractor's loss caused by delay:

- Preliminaries

- Off-site / head-office overheads and profit

Quantification of employer's loss caused by delay: 

- Liquidated damages

- General damages at common law

Quantification of a contractor's loss caused by disruption:

- What is disruption

- Causes of disruption

- Proving disruption

- Methods of calculating disruption costs

Global claims for delay and/or disruption:

- What is a global claim?

- Are global claims permissible

- Proving a global claim

- Proof of causation

- Apportionment

- Obligation to prove causation

Resources: 

- Robert Gemmell, Quantification of Delay and Disruption in Construction and Engineering Projects, Second edition, 2021, Thomson Reuters

- The University of Melbourne's Construction Law guide

- AACE International Recommended Practice No 25r-03: Estimating Lost Labor Productivity in Construction Claims

- Australasian Legal Information Institute ("AustLII")

- British and Irish Legal Information Institute ("Bailii")

- Delay and Disruption Protocol (2nd ed, Society of Construction Law, 2017)

- RICS Construction and Infrastructure Training: Australia

 

Delay and disruption – the distinction

Bell BCI Company v United States, Fed CL No 03-1613C (2006) at 4

“There is a distinction between (1) a “delay” claim and (2) “disruption” or cumulative impact claim. Although the two claim types often arise together in the same project, a “delay” claim captures the time and cost of not being able to work, while a “disruption” claim captures the cost of working less efficiently than planned”

Ramsey and Furst (eds), Keating on Construction Contracts (9th ed) [TR linked]

‘Disruption occurs where there is disturbance of the contractor’s regular and economic progress and/or delay to a non-critical activity even though, on occasion, there is no or only a small ultimate delay in completion. The delaying effect can often be small because the works affected are not on the critical path to completion of the project or because the contractor is able to overcome the disruption through the application of additional resources. Typical causes of disruption are variations to the works, late instructions, out of sequence working, work area congestion, work area access restrictions, inadequate material deliveries, inadequate skill mix of labour, insufficient supervision, loss of morale, or reworking modifications. As many of these disruptive effects may also be symptomatic of poor project management by the contractor, separating out the different causes is crucial.’

Delay and Disruption Protocol (2nd ed, Society of Construction Law, 2017) paragraph 9 [SCL Protocol linked]

"The construction industry often associates or conflates delay and disruption. While they are both effects of events, the impacts on the works are different, the events may be governed by separate provisions of the contract and governing law, they may require different types of substantiation and they will lead to different remedies. Having said that, the monetary consequences of delay and disruption may overlap and, further, delay can lead to disruption and, vice versa, disruption can lead to delay.

In referring to “disruption”, the Protocol is concerned with disturbance, hindrance or interruption to a Contractor’s normal working methods, resulting in lower productivity or efficiency in the execution of particular work activities. If the Contractor is prevented from following what was its reasonable plan at the time of entering into the contract for carrying out the works or a part of them (i.e. it is disrupted), the likelihood is that its resources will accomplish a lower productivity rate than planned on the impacted work activities such that, overall, those work activities will cost more to complete and the Contractor’s profitability will be lower than anticipated. Work that is carried out with a lower than reasonably anticipated productivity rate (i.e. which is disrupted) will lead to: (a) activity delay; or (b) the need for acceleration, such as increasing resources, work faces or working hours, to avoid activity delay; or (c) a combination of both – and therefore, in each case, loss and expense. Hence, ‘disruption’ is concerned with an analysis of the productivity of work activities, irrespective of whether those activities are on the critical path to completion of the works."

Delay and Disruption Protocol (2nd ed, Society of Construction Law, 2017) paragraph 18.1 [SCL Protocol linked]

“Disruption (as distinct from delay) is a disturbance, hindrance or interruption to a Contractor’s normal working methods, resulting in lower efficiency. Disruption claims relate to loss of productivity in the execution of particular work activities. Because of the disruption, these work activities are not able to be carried out as efficiently as reasonably planned (or as possible). The loss and expense resulting from that loss of productivity may be compensable where it was caused by disruption events for which the other party is contractually responsible.”

Van Oard UK Ltd v Allseas UK Ltd [2015] EWHC 3074;

RWE Npower PLC v Alstom Power Ltd (2009) WL 5641217 [Bailii linked]

The courts are sometimes faced with combined claims for loss and expense due to delay and disruption which can require separation.

 

Extensions of time: benefit of an extension of time

Benefit to the Employer

- Establishes to new completion date and prevents time for completion becoming at large.

- Maintains the employer's right to deduct LADs.

Peak Construction (Liverpool) Ltd v McKinney Foundations (1970) 1 Build LR 111

The inclusion of a mechanism in the contract to extend time for completion in the event of delays which are the employer’s responsibility will preserve the employer’s right to deduct LAD.

Benefit to the Contractor

- Limits the risk of LADs. 

 

Extensions of time: notice of delay

Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd (No.2) [2007] EWHC 447 (TCC) at [103] [Bailii linked]

The court explained that contractual terms requiring a contractor to give prompt notice of delay serve a valuable purpose in that:

- Notices enable matters to be investigated whilst things are still current; and

- Such notice sometimes gives the employer the opportunity to withdraw instructions when the financial consequences become apparent.

CMA Assets Pty Ltd v John Holland Pty Ltd [No6] [2015] WASC 217 [AustLII linked]

The court upheld a requirement for strict compliance with notice provisions as a condition precedent to an entitlement to an extension of time. CMA was delayed by the acts of John Holland that were within John Holland’s knowledge and control but CMA’s claims were denied due to CMA failing to comply with the notice provisions. Simply making John Holland aware of the cause of delays did not exhaust the notice requirements of the subcontract.

Steria Ltd v Sigma Wireless Communications Ltd [2007] EWHC 3454 (TCC) [Bailii linked]

The court was of the view that the notification requirement in the contract operated as a condition precedent even though it did not contain an express warning as to the consequences of non-compliance.

 

Extensions of time: time at large and prevention

What is time at large and the prevention principle?

Turner Corporation v Co-ordinated Industries Pty Ltd (1994) 11 BCL 202, 212

The concept of the prevention principle is set out by Rolfe J.

‘Whilst the so-called principle may be stated in general terms it seems to me it can only have that application, usually, in circumstances where the contract does not provide for the effect of breach causing prevention.’

Multiplex v Honeywell [2007] EWHC 447 (TCC) [Bailii linked]

Three propositions derived from the court’s review of case law:

  1. Actions by the employer which are perfectly legitimate under a contract may still be characterised as prevention if those actions caused delay beyond the contractual date;

  2. Acts of prevention by an employer do not set time at large if the contract provides for an extension of time in respect of those events; and

  3. Insofar as the extension of time clause is ambiguous, it should be construed in favour of the contractor.

Origin and operation of the prevention principle

Holme v Guppy (1838) 3 M & W 387; 150 ER 1195

The rule that prevention excuses performance of a promise to pay liquidated damages appears to have been first laid down in Holme v Guppy.

SMK Cabinets v Hili Modern Electrics [1984] VR 391 [AustLII linked]

Time at large: prevention principle rejected – apportionment of damages

Robinson v United States 261 US 486 (1923)

The Peak principle: cannot apportion damages

Peak Construction (Liverpool) Ltd v McKinney Foundations (1970) 1 Build LR 111

Time bar to applications for an extension of time

Turner Corporation Ltd v Austotel Pty Ltd (1994) 13 BCL 378 at 384-385

CMA Assets Pty Ltd v John Holland Pty Ltd [No.6] [2015] WASC 217 (2015) [AustLII linked]

The Gaymark position

Gaymark Investments Pty Ltd v Walter Construction Group Ltd [1999] NTSC 143 [AustLII linked]

Multiplex v Honeywell [2007] EWHC 447 (TCC) at [95]-[105] [Bailii linked]

City Inn v Shepherd Construction Ltd (2007) CSOH 190 CA 101/00 [Bailii linked]

Overcoming prevention: discretionary extension of time provision

Peninsula Balmain Pty Ltd v Abigroup Contractors Pty Ltd [2002] NSWCA 211

Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd [2001] NSWSC 752 [AustLII linked]

Delay to progress versus delay to completion

Lim Chin San Contractors Pte Ltd v LW Infrastructure Pte Ltd [2011] SGHC 162

Exclusion of the prevention principle: express term in the contract

CMA Assets Pty Ltd v John Holland Pty Ltd [No 6] [2015] WASC 217 at [865] [AustLII linked]

Failure to properly operate the extension of time procedure

Peak Construction (Liverpool Ltd v McKinney Foundations Ltd (1970) 1 BLR 111 at 122

Hawl-Mac Construction Ltd v Campbell River (1985) 60 BCLR; (1984-5) 1 Construction Law Journal 370 (BCSC)

Anderson v Tuapeka County Council (1900) 19 NZLR

Amalgamated Building Contractors Ltd v Waltham Holy Cross UDC [1952] 2 All ER 452

Bernhard’s Rugby Landscapes Ltd v Stockley Park Consortium Ltd [1998]

Time at large: reasonable time to complete

Bernhard’s Rugby Landscapes Ltd v Stockley Park Consortium Ltd [1998]

Pantland Hick v Raymond & Reid [1893] AC 22 at 32, HL

Astea (UK) Ltd v Time Group Ltd [2003] EWHC 725 [Bailii linked]

J&J Fee Ltd v Express Lift Co Ltd (1993) 34 Con LR 147 (QBD) (OR)

 

Extensions of time: float

Definition of float

Delay and Disruption Protocol (2nd ed, Society of Construction Law, 2017), p 64 (SCL Protocol linked]

DD Quantum Expert website, Blog DD05 [Linked to blog page]

Ownership of float

Delay and Disruption Protocol (2nd ed, Society of Construction Law, 2017) [SCL Protocol linked]

Ascon Contracting v Alfred McAlpine Construction Isle of Man Ltd (1999) 66 Con LR 119 (QB, TCC) at [91]-[93]

End float: right to contractor to complete early

Glenlion Construction Ltd v Guinness Trust (1987) 39 BLR 94

JF Finnegan Ltd v Sheffield CC (1988) 43 BLR 130 at 133

Alucraft Pty Ltd (in liq) v Grocon Ltd (unreported. Vic Sup Ct, Smith J, 22 April 1994)

Float versus contingency

Andrew Stephenson, ‘Who Owns the Float and Related Legal Issues’ (2004) 20 Building and Construction Law Journal 97

 

Extensions of time: concurrent delay

What is concurrent delay?

Keating on Construction Contracts (10th edn, Sweet & Maxwell, 2016), [8-025]

It may be sufficient that:

  • Each delay event, in the absence of any competing event, has caused delay;

  • Each delay event is on the critical path; and

  • The delays caused by the employer and the contractor overlap.


City Inn v Shepherd Construction Ltd (2010) CSIH 68 CA101/00 at [49] [Bailii linked]

‘One might describe events as concurrent on a strict approach only if they were contemporaneous or co-extensive, in the sense that they shared a starting point in time. Alternatively, events might be said to be concurrent only in the sense that for some part of their duration they overlapped in time. Yet again, events might be said to be concurrent if they possessed a common starting point or a common end point. It might also be possible to describe events as concurrent in the broad sense that they possessed a causative influence upon some subsequent event, such as the completion of works, even though they did not overlap in time. In other words, they might also be said to be contributory to or co-operative in bringing about some subsequent event.’

DD Quantum Expert website, Blog DD06 [Linked to blog page]

DD Quantum Expert website, Blog DD07 [Linked to blog page]

DD Quantum Expert website, Blog DD08 [Linked to blog page]

DD Quantum Expert website, Blog DD09 [Linked to blog page]

Kim Rosenberg, ‘Concurrent Delay: What is all the fuss about?’ Construction Law Journal at (2018) 34 Const. L. J. 1.

Concurrency and extensions of time

Henry Boot Construction (UK) Ltd v Malmaison Hotel (Manchester) Ltd (1999) 70 ConLR 32 [Bailii linked]

Royal Brompton Hospital National Health Trust v Hammond (No.7) (2001) 76 Con LR 148 [Bailii linked]

Steria v Sigma Wireless Communications Ltd [2008] BLR 79 (TCC) at [130]-[131] [Balii linked]

Approaches to assessing competing causes (in relation to time)


DD Quantum Expert website, Blog DD10 [Blog page linked]

 

Quantification of a contractor's loss caused by delay: preliminaries / site overheads

Approaches to assess delayed preliminaries / site overheads

The following six approaches can be used:

  1. Global pro-rata approach;

  2. Planned versus actual approach;

  3. Modified planned versus actual approach;

  4. Weighted average delay rate approach;

  5. Delay rate per-day approach; and

  6. Resource-by-resource ‘but for’ approach.

Refer to article DD19 'Quantifying delay costs - preliminaries - approaches to assess a contractor's entitlement' in blog page of the DD Quantum Expert website. [DD Blog page linked]

Relevant case law and guidance publications


Williams v Strait 728 F Supp 12 (DCC 1990) at [28]

The court held that a contractor which did not demonstrate when each piece of equipment arrived at and left site was unable to recover the additional hire costs.

“This court finds that although [the contractor] is not required to prove with accuracy the amount of damages, it failed to establish a reasonable estimate for such items. [The contractor] omits a crucial element in its damage calculations for these items, namely when each piece of equipment arrived and left the site. Moreover, it is quite possible that these same items were used in some other aspect of the construction subsequent to the steel frame collapse. It is unclear from the evidence presented that these items were used solely for the purpose of the erection of the structural steel frame.”

Shore & Horwitz Construction Co Ltd v Franki of Canada Ltd [1964] SCR 589 (CanSC)

During a period of delay, plant and equipment may lie idle. The loss to the contractor in this situation may be the hire charges if the contractor hired the plant and equipment.

Alfred McAlpine Homes North Ltd v Property and Land Contractors Ltd (1995) 76 BLR 59

The contractor may own the idle plant and equipment. In this situation, the contractor must demonstrate that it lost the opportunity to hire out the affected plant and/or equipment for the period for which the claim is being made.

If the contractor is unable to prove that it lost the opportunity to hire out the claimed plant and/or equipment, its claim will be based on factors such as loss of interest on idle capital, maintenance and/or depreciation.

Sunley (B) & Co Ltd v Cunard White Star Ltd [1940] 1KB 740

Plant was owned by the contractor and the costs in relation to its delay claim for plant was limited to the “depreciation costs”.

Laburnum Construction Corporation v United States 163 Ct 339 (1964)

The fair rental value of contractor-owned equipment which stood idle because of employer-caused delays was held to be the correct basis for a claim for damages. It was held that the value should be reduced by 50% due to there being no wear and tear.


McAlpine Homes North Ltd v Property and Land Contractors Ltd (1995) 76 BLR 59 at 92

If the contractor owned the plant and therefore does not incur a hire charge, it is not correct to claim loss and expense by reference to hire charge rates.


Ascon Contracting Ltd v Alfred McAlpine Construction Isle of Man Ltd 1999 WL 1610677

 

Quantification of a contractor's loss caused by delay: off-site overheads / head office overheads & profit


Thiess Watkins White Construction Ltd v Commonwealth of Australia (1998) 14 BCL 61

The court said that clause 35.4 of the contract referred to the contractor’s entitlement to ‘extra costs incurred’. The court considered that this refers to extra costs incurred by reason of delay as distinct from a ‘loss’ where the effect of the delay is that other work cannot be undertaken, and the contractor’s income is less. The court said that only the former are extra costs incurred. The latter is a loss (of opportunity) that did not fall under the definition of ‘extra cost’.

McAlpine Homes North Ltd v Property and Land Contractor Ltd (1995) 76 BLR 59 at 82

“… but modern office arrangements permit the recording of the time spent by managerial staff on particular projects.”


JF Finnegan Ltd v Sheffield City Council (1988) BLR 124 at 143

“It is generally accepted that, on principle, a contractor who is delayed in completing a contract due to the default of his employer, may properly have a claim for head office or off-site overheads during the period of delay, on the basis that the workforce, but for the delay, might have had the opportunity of being employed on another contract which would have had the effect of funding the overheads during the overrun period.”


Whittal Builders Co Ltd v Chester-le-Street DC

Whittal Builders applied the principle in JF Finnegan.


McAlpine Homes North Ltd v Property and Land Contractor Ltd (1995) 76 BLR 59

“The theory is that because the period of delay is uncertain and thus (the contractor) can take no steps to reduce its head office expenditure and other overhead costs and cannot obtain additional work there are no means whereby [the contractor] can avoid incurring the continuing head office expenditure, notwithstanding the reduction in turnover as a result of the suspension or delay to the progress of the work.

…If [the contractor’s] overall business is not diminished during the period of delay so that whether, for example, as a result of an increase in the volume of work on the contract in question arising from variations etc, … there will be a commensurate contribution towards the overheads which offsets any supposed loss, or if, as a result of other work, there is no reduction in overall turnover so that the costs of the fixed overhead continues to be met from other sources, there will be no loss attributable to the delay… this aspect is brought out in the comparable proposition that [the contractor] has to show that there were no means of reducing the unrecovered cost of the fixed overheads in the circumstances in which he found himself as a result of the events giving rise to the delay. Where [the contractor] is busy and is taking on work all the time it will probably not be possible to demonstrate the effect to which I have referred. Furthermore, it has to be borne in mind that as certain overheads are incurred through thick and thin, so [the contractor’s] head office staff may not always be constantly occupied because of, for example, the seasonal or cyclical nature of business in the construction industry.”


Sunley (B) & Co Ltd v Cunard White Star Ltd [1940] 1KB 740

The contractor must demonstrate, whether basing its calculation of loss on actual loss or by using a formula approach, that actual loss has been suffered, that is, the contractor must show that there has been a loss and that there was other work available which it would have secured but for the delay.


Hudson / Eichleay / Emden formulae[2]

None of the following formulae properly calculates actual loss and therefore should not be a contractor’s first choice.


Hudson formula


Eichleay formula

  • Eichleay Corporation ASBC No 5183 60-2 BCA 2,688 at [13,573]; affd Eichleay Corporation 61-1 BCA 12,894

  • Berley Industries Inc. v City of New York 45 NY 2d 685 (1978)

  • Capital Electric Co v United States 729 F 2d 743 (1984)


Emden Formula

  • Crown Office Chambers, Emden’s Construction Law (Lexis Nexis, subscription service)


Sunley (B) & Co Ltd v Cunard White Star Ltd [1940] 1KB 740 (CA)

For a contractor to make out a claim for loss of profit successfully, it will need to show that it could have used the lost income profitably.


Walter Lilly & Co Ltd v DMW Developments Ltd [2012] EWHC 1773 (TCC); [2012] BLR 503

Even if the contractor at the time is making a loss, the further loss incurred as a result of the delay would be recoverable.

In Walter Lilly, the court held that the use of a formula, supported by evidence of the lost opportunity, was a way to establish loss of profit. However, the court considered that to prove loss of profit, including loss of head office overheads, the contractor had to show that, on the balance of probabilities, that if there had been no delay it would have secured the work which would have contributed to the overheads and/or would have generated a profit and that the loss would not have been sustained.


 

Quantification of an employer's loss caused by delay

Liquidated damages

Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd (“Dunlop”) [1915] AC 79 at 86‑87 [Bailii linked]

Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656 at 662 at [10]-[12]

Andrews v Australia and New Zealand Banking Group Ltd (“Andrews”) (2012) 247 CLR 205 at pp. 216 –7 [9][10] per French CJ, Crennan, Kiefel and Bell JJ

Cavendish Square Holding BV v Makdessi (“Cavendish”) [2015] UKSC 67 [Bailii linked]

Paciocco v Australia and New Zealand Banking Group Ltd (“Paciocco”) [2016] HCA 28 [AustLII linked]

General damages at common law


Hadley v Baxendale (1854) 9 Ex 341 at 354 [Bailii linked]

 

Quantification of a contractor's loss caused by disruption: what is disruption?

On construction projects, changes impact progress in many ways. Courts in the US have distinguished between “discrete” and “cumulative” types of impact on the progress of construction projects. 

Triple “A” South ASBCA 46866; 94-3 BCA 27,194 135 523 at [19]

"Local [or direct] disruption refers to the direct impact that changed work has on other unchanged work going on around it. Conceptually, for the purposes of this appeal “cumulative disruption” is the disruption which occurs between two or more change orders and basic work and is exclusive of that local disruption that can be ascribed to a specific change. It is the synergistic effect … of changes on the unchanged work and on other changes."

The timing and quantification of the impact of a change is difficult to measure and “measuring the impact of multiple, intertwined changes is even more difficult because there can be a compounding and amorphous effect… only becoming apparent in the late stages of a project when work cannot be completed on time.” 


Appeal of George Hayman Const. Co., E.N.G.B.C.A. No 4541, 85-1 B.C.A. (CCH) || 17847, at 89356, 1985 WL 16440 (Corps Eng’rs B.C.A. 1985) 

"It is generally recognised that certain conditions at construction job sites can prevent laborers from performing their tasks at a normal level of efficiency and that, therefore, the contractor will have to pay more to accomplish the same amount of work than he could reasonably have expected. A variety of causes may produce this result…

Proof of the amount of recovery for labor inefficiency is usually difficult and often somewhat speculative…"


Appeal of Centex Bateson Const. Co., Inc., V.A.B.C.A. No 4613, V.A.B.C.A. No. 5162, 99-1 B.C.A. (CCH) || 30153, 1998 WL 853085 (Veterans Admin. B.C.A. 1998), decision aff’d, 250 F.3d 761 (Fed. Cir. 2000): 

"Impact costs are additional costs occurring as a result of the loss of productivity; loss of productivity is also termed inefficiency. Thus, impact costs are simply increased labour costs that stem from the disruption to labor productivity resulting from change in working conditions caused by a contract change. Productivity is inversely proportional to the man-hours necessary to produce a given unit of product. As is self-evident, if productivity declines, the number of man-hours of labor to produce a given task will increase. If the number of man-hours increases, labor costs obviously increase."



 

Quantification of a contractor's loss caused by disruption: causes of disruption

Delay and Disruption Protocol (2nd ed, Society of Construction Law, 2017), Guideline Part B: Guidance on Core Principles, [18.2] [SCL Protocol linked]

“Disruption events can have a direct effect on the works by reducing productivity (such as piecemeal site access different from that planned, out of sequence works or design changes). They can also lead to secondary consequences on the execution of the works, for example through crowding of labor or stacking of trades, dilution of supervision through fragmented work gangs, excessive ovetime (which can lead to fatigue), repeated learning cycles and poor morale of labour which can further reduce productivity.”


AACE Recommended Practices: AACA International Recommended Practice No.25R-03: Estimating lost Labor Productivity in Construction Claims: TCM Framework: 6.4 – Forensic Performance Assessment (AACE, 2004), PP3-7

  • Absenteeism;

  • Acceleration (directed or constructive);

  • Adverse, or unusually severe, weather;

  • Availability of skilled labour;

  • Variations, ripple impact, cumulative impact of multiple changes, and rework;

  • Competition for labour;

  • Labour turnover;

  • Crowding of labour, or trade stacking;

  • Defective engineering, engineering recycle, or rework;

  • Dilution of supervision;

  • Excessive overtime;

  • Failure to co-ordinate trade contractors, subcontractors, or vendors;

  • Fatigue;

  • Labour relations and labour management factors;

  • Learning curve;

  • Material, tools and equipment shortages;

  • Over-manning;

  • Poor morale of labour force;

  • Project management factors;

  • Out-of-sequence work;

  • Rework and errors;

  • Schedule compression;

  • Site, or work area access restrictions;

  • Site conditions; and

  • Untimely approvals or responses.


 

Quantification of a contractor's loss caused by disruption: proving disruption

Resources: 

Robert Gemmell, Quantification of Delay and Disruption in Construction and Engineering Projects, Second edition, 2021, Thomson Reuters, Chapter 6 at [6.190] [Linked to TR page]

As per any other claim, to be entitled to disruption damages it will be necessary for the contractor/ sub-contractor to demonstrate:

·          liability;

·          causation; and

·          damages.


A difficult hurdle to overcome with disruption claims is proving causation; that is, that the alleged act of one party resulted in disruption to the other.


Appeal of Bechtel Nat., Inc., N.A.S.A.B.C.A. No. 1186-7;, 90-1 B.C.A. (CCH) || ¶22549;, 1989 WL 160470 (N.A.S.AB.C.A,. 1989)

"Appellant has made its showing of causation and resultant injury relying on the general proposition that whenever a defective specification is encountered by the contractor in the course of performing its work, there is disruption or impact to the contractor’s planned and orderly performance of the work, and, as a consequence, of that disruption, the contractor losses productivity and incurs added costs. Appellant maintains that the sheer volume and continued flow of the RFIs affected BNI’s ability to plan the work and had an impact on performance (findings 42 and 46). It does not follow, however, that any impact actually occurred in the performance of the Contract. There must be evidence of the number, timing, and effect of the changes that were issued."

Specialty Assembling & Packing Co. v U.S., 174 Ct. Cl 153;, 355 F .2d 554 at, 572–-573 (1966)

"However, this inability to determine the precise amount of the damages attributable to the Government’s breach of contract does not preclude the court from entering a judgment for the plaintiff. The ascertainment of damages is not an exact science. Hence, it is not essential that the amount of damages be ascertainable with absolute exactness or mathematical precision. It is enough if the evidence adduced is sufficient to enable a court or jury to make a fair and reasonable approximation. In estimating damages, the Court of Claims occupies the position of a jury under like circumstances; and all that the litigants have any right to expect is the exercise of the court’s best judgment upon the basis of the evidence provided by the parties."

Wunderlich Contracting Co. v U.S., 173 Ct. Cl. 180;, 351 F .2d 956 at, 968 (1965)

"A claimant need not prove his damages with absolute certainty or mathematical exactitude. It is sufficient if he furnishes the court with a reasonable basis for computation, even though the result is only approximate. Yet this leniency as to the actual mechanics of computation does not relieve the contractor of his essential burden of establishing the fundamental facts of liability, causation, and resultant injury."

McAlpine Humberon v McDermott International (1992) 58 BLR 1 at 28

The court said that the need for a retrospective and disectional reconstruction via expert evidence on an almost daily basis – analysing every drawing, technical query, and weld procedure to demonstrate whether a contractor had been disrupted by additional drawings – was “just what the case required”.


Walter Lilly & Co Ltd v DMW Developments Ltd [2012] EWHC 1773 (TCC); [2012] BLR 503 at 490

The court said that there is no set way to prove these elements and it is open to contractors to prove them with whatever evidence will satisfy the tribunal to the requisite standard of proof. However, even if such evidence is given, it is still necessary to assess the amount of disruption and the financial impact of that disruption.

The court accepted an approach that involved listing the relevant events relied upon, describing what additional or extended resources were deployed, and linking them to the causes of delay or disruption relied on. All the additional or extended resources were costed in an analysis which picked up allocations of time for staff and resources at particular times and applied to those allocations costs which were obtained from the contractor’s computerised record keeping system. The contractor also made allowances for its own inefficiencies.


Tate & Lyle Food and Distribution Ltd v Greater London Council [1982] 1 WLR 149

Do not apply an arbitrary percentage to labour costs.


Aerospace Publishing Ltd v Thomas Water Utilities Ltd (2007) 110 Con LR (CA)

Management staff may also experience disruption, e.g. where staff is diverted from normal duties. To prove the extent of disruption to management, it will be necessary to keep records of time spent on the project.

In Aerospace Publishing, the Court of Appeal concluded that a claim may fail on the basis that evidence that could be expected to be advanced was not advanced, which would have included evidence that the disruptive event caused disruption to the business.

 

Quantification of a contractor's loss caused by disruption: the methods

An issue in quantifying disruption costs is supporting those costs that can be quantified discretely from those that must be estimated or priced indirectly. If costs for loss of productivity can be discretely identified and supported via a separate cost code or other method, then for those costs a method of approximating loss of productivity is not required.

If the disruption costs can be directly tracked, it would not be necessary to resort to an approximation of the loss of productivity.

John E. Green Plumbing and Heating Co., Inc v Turner Const. Co., 742 F .2d 965 at, 968 (6th Cir., 1984)

In this case, Green certainly had it within its power to provide the court with an accounting for the number of extra hours caused by change orders for which it was paid. Green also should have been able to provide a breakdown by job activity for the number of hours that would have been required in the absence of malfeasance by Turner in the performance of its construction management duties. Because of its failure to do these things, there was “‘no basis for allocation of the lump sum [claimed] between those causes which were actionable and those which were not”, making “it proper to reject the entire claim”.

Contractors should/ must directly track disruption/ loss of productivity costs where it is able to do so.

There are several methods used by practitioners to calculate loss of productivity. These include:

·          direct evidence;

·          total and modified total cost;

·          project comparison studies;

·          productivity factors;

·          speciality industry studies;

·          general industry studies;

·          the measured mile method;

·          baseline productivity method;

·          system dynamic modelling;

·          earned value analysis; and

·          visual observation or judgment.

The measured mile method (continuous baseline)

The measured mile method is often considered to be the most robust and reliable method. It also calculates loss of productivity due to the actual effect of alleged impact. This helps to eliminate disputes over the validity of cost estimates, or factors that may have had an adverse effect on productivity due to no fault of the employer. 

Delay and Disruption Protocol (2nd ed, Society of Construction Law, 2017) Guidance Part B, Guidance on Core Principles [SCL Protocol linked]

“Measured mile analysis: This compares the level of productivity achieved in areas or periods of the works impacted by identified disruption events with productivity achieved on identical or like activities in areas or periods of the works not impacted by those identified disruption events…”


Clark Concrete Contractors, Inc v General Services Administration GSBCA 14340; 99-1 BCA 30

“a measured mile analysis compares work performed in one period not impacted by events causing loss of productivity with the same, or comparable work performed in another period that was impacted by productivity-affected events.”

PJ Dick Inc., V.A.B.CA. No 5597 et al.,; 01-2 B.C.A. (CCH) II 31647;, 2001 WL 1219552 (Veterans Admin. B.C.A, 2001)

"We, as most other courts and boards, recognise that quantifying the loss of labor productivity is difficult and that the determination of the dollar amount of damages for labor inefficiency with exactitude is essentially impossible. In recognising this fact, we expect that measurement of the amount of inefficiency would usually be supported by expert testimony. The use of a “measured mile” analysis developed by a qualified expert is recognised as the most reliable, though not exact, methodology to quantify labor inefficiency. A measured mile (or good period versus bad period) analysis compares the actual labor costs or labor productivity of performing work during a period that was so impacted. Such an analysis generally presumes that the labor costs or productivity rates being compared are for the same work and, ideally, results in a standard (the actual, unimpacted productivity of a contractor’s labor) against which the effect of the Government-caused change to working conditions can be measured."

W Stephen Dale and Robert M D’Onofrio, Construction Schedule Delays (Thomson Reuters, 2017 ed) Section 19.2, p 851.

Because the measured mile has the ability to isolate the productivity loss during an impacted period from all other project factors via achieved progress in an unimpacted period, it is the only disruption method that touches on causation. The effect may be limited, but a properly applied measured mile will contrast work including specific impacts with work that lack the impacts. The filtering effect of the exercise isolates the impacts that cause disruption and that thereby corroborate other causation evidence. In that regard, it may be able to assist in making the evidentiary connection between an impacted period and a loss of productivity. By contrast, other methods for proving disruption make less effort to isolate a specific impact and focus more on other elements.

How the measured mile analysis should be conducted

See Robert Gemmell, Quantification of Delay and Disruption in Construction and Engineering Projects, Second edition, 2021, Thomson Reuters, chapter 6 at [6.330]


The baseline productivity method (intermittent baseline) 

In summary, this method is similar to measured mile except:

  1. Calculate the baseline based on a subset of high-production work periods rather than use periods of good productivity.

A leading cause of a court rejecting a measured mile analysis is that the work performed in the undisrupted periods is not comparable. Conversion factors based on earned value concept are used to alleviate comparable problems.

Because calculating the baseline productivity does not require a continuous period of un-impacted work, the baseline productivity method is applicable to a wider range of project scenarios than the traditional measured mile method, even where a project is disrupted from the outset or throughout thereafter.

How the baseline productivity method should be conducted

See Robert Gemmell, Quantification of Delay and Disruption in Construction and Engineering Projects, Second edition, 2021, Thomson Reuters, chapter 6 at [6.590]


Total cost methods

Total unit cost method: costs incurred during the impacted and un-impacted periods are divided by the completed units of work. Deduct the non-labour costs. The difference in labour cost per unit installed should reflect the impact on labour productivity.

Total labour cost method: subtract the labour cost in the tender and in any change orders and claim settlements from the total labour cost expended. 


Project comparison studies

Comparable work method: there are two forms:

  1. Comparison of productivity in the impacted and un-impacted periods on the same project; and

  2. Comparison of productivity in the impacted period with productivity in an un-impacted period carried out on a similar project.

Comparable project method: comparison of productivity for a task on one project with the productivity of a same or similar task on another project. This method should only be used as a gauge.


General and speciality industry studies

Employs data from specific studies, e.g. could be used a gauge or a sense check or for future estimating purposes as a guide. 

There are many published studies on loss of productivity, for example:

- Mechanical Contractors Association America (“MCAA”);    

- National Electrical Contractors Association (“NECA”);

- Business Industry Roundtable;

- US Army Corps of Engineers (USACE) Modification Impact Evaluation Guide;

- Bureau of Labor Statistics; and

- Leonard Thesis.

Details of the above published studies are in Robert Gemmell, Quantification of Delay and Disruption in Construction and Engineering Projects, Second edition, 2021, Thomson Reuters, chapter 6 at [6.960]


System dynamic modelling

A graphical illustration of a project which aims to simulate project performance as it is being built. Then the modelling simulates how the project would have been built had there been no changes.


Earned value analysis

The total number of hours estimated to complete a task comprises the “earned hours” and those hours are earned once the task is completed. The earned hours may be different to the actual hours. If the estimate of hours is correct, then the difference between the earned hours and actual hours, in theory at least, is the resultant positive or negative impact on productivity.


What is the most appropriate method to quantify disruption costs?

Direct evidence followed by using the measured mile and/or baseline productivity methods are the most robust methods for analysing the impact of disruption on construction projects and therefore should be the preferred choice when deciding which method of analysis to use. However, the measured mile method is not always applicable, in which case it will be necessary to opt for the baseline productivity method and/or one of the other methods described earlier in this section.

The courts prefer methods of calculation which are directly related to the project in question and calculations which are evidenced by contemporaneous project documentation.

If there is insufficient project documentation to undertake either a measured mile/baseline productivity analaysis or earned value analysis, it is best to use one of the project comparison methods, provided the cost data is available.

If there is no project data available at all, either the speciality industry or general industry studies are options.

 

Global claims for delay and / or disruption

What is a global claim?

A contractor may decide to claim the net difference between actual and planned costs and allege that the difference was caused by the cumulative effect of events for which the employer is liable and which gives the contractor an entitlement to additional time and/or payment.

John Holland Pty Ltd v Hunter Valley Earthmoving Co Pty Ltd [2002] NSWSC 131 at [12] [AustLII linked]

The term “global claim” is used to describe a claim which does not readily permit the individual identification of each of its component parts.


Are global claims permissible?

A court will not deny a claim for damages on the ground that it is difficult to establish the exact amount of damages. However, a contractor will have to establish how the loss was caused.

Nauru Phosphate Royalties Trust v Matthew Hall Mechanical & Electrical Engineers Pty Ltd [1994] VicRp 67; [1994] 2 VR 386 [AustLII linked]

The court expressed the view that it may be permissible to maintain a composite delay/disruption claim, that is a global claim, where it was impossible or impractical to identify a specific nexus between each of the alleged events and the particular delay/disruption caused.


John Holland Construction & Engineering Pty Ltd v Kvaerner RJ Brown Pty Ltd (1996) 8 VR 681

The decision in Nauru should not be taken as allowing for leniency.

In John Holland v Kvaerner, the court allowed a “total cost” claim where it was impracticable to disentangle that part of the loss which was attributable to each head of claim, and that this situation was not created by the conduct of the contractor.


Proving a global or total cost/time claim

If all the events causing loss have been demonstrated by the contractor as being the liability of the employer, then the courts do not always demand that the contractor demonstrates its additional costs/loss on a cause-by-cause basis.


Walter Lilly & Co Ltd v DMW Developments Ltd [2012] EWHC 1773 (TCC); [2012] BLR 503

The court emphasised that a mechanistic approach should not be adopted and that it is open to contractor’s to prove their claim with whatever evidence will satisfy the tribunal and the requisite standard of proof. There is no set way for contractors to prove their claim.


John Doyle Construction Ltd v Laing Management (Scotland) Ltd [2002] Scot CS110 [Bailii linked]

“… However, if all the events are events for which [the employer] is legally responsible, it is unnecessary to insist on proof of which loss has been caused by each event”.

It is therefore essential to show that the contractor is not responsible for any of the alleged causes of loss. In reality, this is difficult.


Wunderlich Contracting Co v United States 351 F 2d 956; 173 Ct Cl 180 (1965) at 968; 199

The calculation of loss need not be exact, as long as the contractor has satisfied the burden of establishing the fundamental facts of liability, causation and resultant loss.


J Crosby & Sons Ltd v Portland Urban District Council (1967) 5 BLR 121 at 133, 136, 162;

and

London Borough of Merton v Stanley Hugh Leach Ltd (1985) 32 BLR 51

J Crosby & Sons was followed by London Borough of Merton which involved a claim in which the employer argued that all the delay claimed was due to the contract administrator’s instructions. The court held that if loss and expense is incurred due to several reimbursable events which all contributed to the disruption costs incurred by the contractor, it was an artificial exercise to apportion those additional costs to each of the causative events.


However, the court did say:

“Implicit in the reasoning of Donaldson J was first that a rolled up award can only be made in a case where the loss or expense attributable to each head of claim cannot in reality be separated, and, secondly, that a rolled up award can only be made where apart from that practical impossibility the conditions which had to be satisfied before an award can be made have been satisfied in relation to each head of claim.


John Holland Construction & Engineering Pty Ltd v Kvaerner RJ Brown Pty Ltd (1996) 8VR 681 at [25]

“Where the loss is caused by a breach of contract, causation for the purposes of a claim for damages must be determined by the application of common sense to the logical principles of causation.”


Proof of causation


John Holland Construction & Engineering Pty Ltd v Kvaerner RJ Brown Pty Ltd (1996) 8VR 681 at [15]

It will be necessary for the contractor to demonstrate that the scope and cost of the work not affected by the alleged breach was reasonable.


Downer Connect Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2008] VSC 77 at [34] [AustLII linked]

It will be necessary for the contractor to show that its tender price was reasonable.


Ipex ITG Pty Ltd v Melbourne Water Corporation (No3) [2006] VSC 83 [AustLII linked];

and

Ipex ITG Ltd (receivers and managers appointed) v Melbourne Water Corporation [2012] VSCA 169 [AustLII linked]

The plaintiff claimed the difference between the cost of the labour and the quantity of labour agreed to be provided. However, the argument did not establish a true basis for the damages claimed in that there was no evidence that the work could have been carried out by the agreed resources had there been no breach. This was upheld by the appeal court.


Apportionment

Apportionment in relation to a global claim involves apportioning part of the global loss claimed to the causative events for which the employer can be held responsible.


John Doyle Construction Ltd v Laing Management (Scotland) Ltd [2004] Scot CS 141 [Bailii linked]

This case concerned a global claim for concurrent delay. The court considered that evidence adduced during proceedings could possibly lead to a basis for an award of a lesser sum than was being claimed on a global basis. The court drew on the law in relation to contributory negligence and contribution as an analogy to apportionment of loss in relation to a global claim.

The court also considered that a contractor should be able to recover part of its loss and expense in a situation where the employer or architect was culpable and considered that the practical difficulties of carrying out an apportionment exercise should not prevent this.


Banabelle Electrical v New South Wales [2005] NSWSC 714 [AustLII linked]

Where contractors globally combine claims for breach of contract with claims under the contract, the claim may fail because there may be different methods to assess entitlement and/or loss. The claim in Banabelle Electrical v New South Wales failed for this reason.


Obligation to prove causation


Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184 [AustLII linked]

The NSW Court of Appeal confirmed that Australian courts require proof of causation in the context of a global claim, but that courts recognise that a contractor may advance a global claim where it is impractical to disentangle the composite loss attributable to a series of causes and that situation was not brought about by the contractor.

The Court of Appeal formed the view that it is unlikely that a global claim will succeed if other causally significant events exist for which the defendant is not responsible. The Court of Appeal declined to follow John Doyle in which the court said it was possible in some cases to apportion loss between the causes.


John Holland Construction & Engineering Pty Ltd v Kvaerner RJ Brown Pty Ltd (1996) 8 VR 681

The court dealt with an application to strike out pleadings which succeeded. The claim was that the alleged breaches had caused all of the contractor’s losses calculated by reference to the difference between the tender estimate and the actual costs. The court said that the mere difficulty of estimating the damages flowing from a breach was not sufficient to deny relief to a plaintiff but said:


“But even in such a case, the plaintiff must identify the loss alleged to have been suffered and which cannot be quantified and how it is that this loss was caused by the breach.”


Having identified the claim as a global claim the court said:

“The logic of such a claim is this:

  1. the contractor might reasonably have expected to perform the work for a particular sum, usually the contract price;

  2. the proprietor committed breaches of contract;

  3. the actual reasonable cost of the work was a sum greater than the expected cost.

The logical consequence implicit in this is that the proprietor's breaches caused that extra cost or cost overrun. This implication is valid only so long as, and to the extent that, the three propositions are proved and a further unstated one is accepted; the proprietor's breaches represent the only causally significant factor responsible for the difference between the expected cost and the actual cost. In such a case the causal nexus is inferred rather than demonstrated… The unstated assumption underlying the inference may be further analysed. What is involved here is two things: first, the breaches of contract caused some extra cost; secondly, the proprietor's cost overrun is the extra cost… [The second aspect] involves an allegation that the breaches of contract were the material cause of all the contractor's cost overrun. This involves an assertion that, given that the breaches of contract caused some extra cost, they must have caused the whole of the extra cost because no other relevant cause was responsible for any part of it.”


Laing Management (Scotland) Ltd v John Doyle Construction Ltd [2004] BLR 295 [Bailii linked]

It is accordingly clear that if a global claim is to succeed, whether it is a total claim or not, the contractor must eliminate from the causes of his loss and expense all matters that are not the responsibility of the employer.


Irene Henderson Ltd v Eddie Mair Ltd [2012] CSOH 66 at 97

This is equivalent to a “global claim” or “total cost claim” in building law; in such a case, the contractor must eliminate from the causes of his loss and expense all matters that are not the responsibility of the employer – John Doyle Construction Limited v Laing Management (Scotland) Limited 2004 SC 713 at [12] to [14]. In other words, if there is just one possible cause that is not the responsibility of the employers, the contractor's claim must fail. The onus rests on the pursuers to eliminate an alternative.


Quinn v Burch Bros (Builders) Ltd [1966] 2 QB 370; Bonnington Castings Ltd v Wardlaw [1956] AC 613

In a common law jurisdiction, the principles of causation are generally applied in an “all-or-nothing” manner. In the absence of any statutory obligation to apportion, common law courts have generally been inclined not to apportion damages between competing causes.


Adyard Abu Dhabi v SD Marine Services [2011] BLR 384 [Bailii linked];


Walter Lilly & Co Ltd v Mackay [2012] BLR 503

In England and Wales, case law provides that apportionment is not an option in relation to concurrent causes of delay.


John Doyle Construciton Ltd v Laing Management (Scotland) Ltd [2004] Scot CS 141;

and

Ipex ITG Pty Ltd v Melbourne Water Corporation (No3) [2006] VSC 83 [AustLII linked]

John Doyle was cited by the Supreme Court of Victoria in Ipex, but was not in support of apportionment.


McGrath Corporation Pty Ltd v Global Construction Management (Qld) Pty Ltd [2011] QSC 178 at [129]-[132]

However, in McGrath Corporation v Global Construction Management (Qld), the Supreme Court of Queensland referred to the same passage of John Doyle with approval.


Astley v Austrust (1999) 197 CLR 1 at [85]

The Australian High Court said:

“Rarely do contracts apportion responsibility for damage on the basis of the respective fault of the parties. Commercial people in particular prefer the certainty of fixed rules to the vagueness of concepts such as “just and equitable”.


 

Resources

Resources: 

Robert Gemmell, Quantification of Delay and Disruption in Construction and Engineering Projects, Second edition, 2021, Thomson Reuters

This book is a practical guide to the quantification of loss caused by delay and disruption. It is relevant to construction professionals in Australia and internationally, and provides a review and analysis of:

  • The planning and programming of a construction project;

  • The primary methods of delay analysis; and

  • The methods to quantify financial loss caused by delay and by disruption.


“The new additions in this Second Edition will … cement this book as a leading ‘go to’ text in this complex and all-important area of construction and engineering. (He is) is to be congratulated on the substantial additions to his first edition.” – From the Foreword, Hon. Peter Vickery QC

The University of Melbourne's Construction Law guide [Linked]

This is The University of Melbourne's Construction Law Guide. Please note that although some of the material on this website is available to the public, some is only available to university students and staff only.

AACE International Recommended Practice No 25r-03: Estimating Lost Labor Productivity in Construction Claims [Linked to sample document]

This Recommended Practice focuses on identification of various methods for estimating lost labour productivity in construction claims.

Australasian Legal Information Institute ("AustLII") [Linked]

AustLII is Australia's online free-access resource for Australian legal information. AustLII is a joint facility of the UTS and UNSW Faculties of Law.

British and Irish Legal Information Institute ("Bailii") [Linked]

Access to freely available British and Irish public legal information. 

Based at the Institute of Advanced Legal Studies, you can find British and Irish case law and legislation, European Union case law, Law Commission reports, and other law-related British and Irish material. 

Delay and Disruption Protocol (2nd ed, Society of Construction Law, 2017) [Linked]

The object of the Protocol is to provide useful guidance on some of the common delay and disruption issues that arise on construction projects, where one party wishes to recover from the other an extension of time (EOT) and/or compesnation for the additional time spent and the resources used to complete the project. 

The purpose of the Protocol is to provide a means by which the parties can resolve these matters and avoid unnecessary disputes. 

RICS Construction and Infrastructure Training: Australia

Designed for construction, infrastructure, quantity surveying, commercial management and project management professionals to build technical and commercial expertise, reduce risk and maximise opportunity, RICS' range of courses are available both as a public training for individuals and as in-house solutions for companies and their teams.

The courses are delivered by leading local and international industry practitioners (Chartered Surveyors) from contracting and consultancy backgrounds.

The course content is locally developed and built on the back of global best practice and RICS global standards.