NEC Post-Completion Delay Analysis: Prospective vs Retrospective
David Bunn, Planner, Driver Trett UK asks whether prospective or retrospective delay analysis should be used when the facts are known?
Introduction
With a dollop of enthusiasm and more than a pinch of optimism, I recently considered post-completion/time distant delay analysis under an NEC type contract as the subject of my Construction Law MSc dissertation. To mis-quote a meerkat ‘not so simples’.
The NEC suite of contracts promote the use of prospective delay analysis to demonstrate an extension of time entitlement. However, when assessing delay after the effects of an event are known, such a prospective approach fails to consider what occurred as a matter of fact and is arguably in conflict with longstanding common law principles. The intention for my research was to finally clarify whether a prospective or retrospective delay analysis should be used when the facts are known. My name would then become a thing of folklore and I would be celebrated up and down the land. Close…not by a long shot!
Background
The basics are that the intentions of the NEC3 (and NEC4) require the settlement of variations, employer risk events and minor breaches, known as compensation events, as and when they occur. The contract specifies contemporaneous prospective analysis of delay to establish an EOT entitlement. The key word being “intentions” as the NEC does not offer an alternative method of assessment after the effects of the event are known or when the contract is complete.
Livingstone v Rawyards Coal Co (1880) 5 App Cas 25 found that an injured party should be placed “…in the same position as he would have been in if he had not sustained the wrong for which he is now getting compensation or reparation” (not a better position). This presupposes knowledge of the actual loss or actual delay. A prospective delay analysis produces a forecast of the likely effect of an event that may not be consistent with what occurs.
The method of delay analysis described by NEC is consistent with a time impact analysis which requires updating the programme to the point in time at which a delay event occurs but does not address what happens for the remainder of the Project.
The Protocol - Prospective vs Retrospective Methods of Analysis
The Prospective time impact analysis was championed by the 1st Edition of the Society of Construction Law Delay and Disruption Protocol. With the footwork of Fred Astaire, the 2nd Edition has now adjusted its stance to say that a prospective analysis after the events are concluded may no longer be appropriate.
The Protocol sets out that a prospective delay analysis identifies the likely impact of historical progress or delay events of a completion date and it recognises that the conclusions of a prospective delay analysis may not match the as-built programme. Therefore, is such an analysis valid after the actual effects are known when viewed under the microscope of putting a party back to the same position had the wrong not occurred?
The Protocol recognises that post-completion effect and cause methods of analysis (retrospective methods) are generally considered to be more forensically reliable because they consider “any and all” potential causes of the delay incurred. Though it is arguable that a retrospective analysis conflicts with the terms of NEC; the bargain into which the Parties entered.
Northern Ireland Housing Executive
However, with respect to my dissertation help was on hand. The Northern Irish courts did consider a quantum case in 2017, Northern Ireland Housing Executive v Healthy Buildings (Ireland) Limited considering whether cost compensation events should be assessed on a retrospective or prospective basis after the effect is known. In short, the Consultant argued that its actual records and costs were irrelevant to the case as the contract requires that any assessment should be carried out on a prospective basis.
The court ruled in favour of an actual assessment of costs incurred, in making his judgement, Deeny J asked, “why should I shut my eyes and grope in the dark when the material is available to show what work they actually did and how much it cost them?” Job done, dissertation put to bed, the pub beckons. I then considered that I should cast a bit further for views.
What the Textbooks Say
Pickavance quotes the case of Blackhawk Heating & Plumbing Co (1975), stating that “...extensions of time must be granted on the best evidence available.” As Lord Robertson put it, “...estimate and conjecture are superseded by facts...” Again, pretty conclusive, retrospective it is.
The nagging doubts as to certainty however kept pushing me on. The Protocol could be interpreted differently noting the text “Where the Contractor has complied with its contractual obligations regarding delay events and EOT applications, the Contractor should not be prejudiced in any dispute with the Employer as a result of the CA failing to assess EOT applications.”
Keating states that “...in cases where the contract clearly requires a prospective approach during the progress of the works, where there is no provision permitting a retrospective post completion review of entitlement and where the contractor had complied with all the steps required of it to obtain an award contemporaneously, it is possible that such a dispute should be resolved upon the basis of a wholly prospective analysis.” Though Keating also quotes the Protocol’s statement that “Irrespective of which method of delay analysis is deployed, there is an overriding objective of ensuring that the conclusions derived from that analysis are sound from a common sense perspective.”
“Common sense”, “what the contract requires” and “refraining from groping in the dark”. All sensible but potentially inconsistent approaches.
What the Experts Say
Then it struck me. Ask an Expert! Several experts (from many areas and different companies) were consulted as part of my research, all boasted excellent CVs and are highly regarded within their field. In relation to the Northern Ireland Housing Executive case all experts agreed that the decision was potentially applicable in relation to the assessment of delay, although the experts consulted were split on whether the decision in Northern Ireland Housing Executive is correct. Some experts felt that a fact based assessment is the correct approach, whereas others felt the decision conflicted with the provisions of the contract. This was not going as planned.
It gets worse, in relation to post completion assessment of delay under NEC3, the experts were very much divided in their opinions as to how delay should be assessed. Some felt that whether the results of a prospective analysis under NEC calculates an EOT entitlement that differs from what actually occurred is irrelevant, the agreement between the parties prescribes a specific method for analysing delay (prospectively) and the agreement should not be interfered with. However, some felt that once the facts are known they cannot be ignored and because NEC is silent on post-completion assessment some scope exists to adopt a different approach to delay analysis after the effects of an event are known.
Most of the experts consulted consider the absence of provision for post-completion analysis under NEC to be by design as the opportunity arose to clarify the position in NEC4 and was not taken. Some experts considered that the inclusion of a provision for post-completion assessment of delay (or costs) would introduce the opportunity for the Employer to adopt a ‘wait and see’ approach conflicting with the ethos of the contract.
Conclusion
There is a clear breadth of opinion within the industry as to the correct approach to post-completion delay analysis under an NEC form of contract. This is most certainly not a case of “one size fits all”.
It is arguable that it is quite possible for a delay assessment to be undertaken both prospectively and retrospectively on the same project with differing results of which neither can be said to be wrong. This may seem counter-intuitive but the key seems to be the point at which the analysis is undertaken. During the project, for the purposes of agreeing a way forward, a prospective analysis is required but if the dispute ends up in court it is a brave delay analyst who tries to persuade a judge that the facts should be ignored.
More importantly though can I ask that the next student who prepares their dissertation on this subject gives me a ring, I will advise them that there are quicker and easier routes to the pub!