In this article, Delay Expert and HKA Principal Russell Bates reflects on recent adjudicator decisions relating to NEC Contracts, which involve delay-related disputes, and what might be considered good practice for retrospectively carrying out a delay analysis, i.e., after the event.

Introduction

It is probably fair to say that the most common approach adopted by delay analysts and experts presently is to carry out a retrospective fact-based analysis, often a technique referred to as the ‘as-planned versus as-built in windows’ technique or alternatively the ‘longest path’ technique.

This does not present any concern with most standard forms of contract unless the contract provisions are prescriptive as to the methodology to be adopted. However, for the NEC suite of contracts, there is uncertainty over the approach to be taken, with some practitioners suggesting the intent of the NEC Contract was that, although undertaken after the event, a delay analysis should mirror the prospective approach taken by the Project Manager in assessing a compensation event at the time it occurred. Others make the point that given it is known what transpired, an analysis based on factual records would be more appropriate.

This article is admittedly based on a small sample reflecting personal experience of NEC related disputes which are decided upon by an adjudicator, but I have sought to distil out some common themes regarding methodology which it seems to me have met with approval.

Prospective v Retrospective

NEC3 prescribes that an assessment of delay and extension of time be carried out contemporaneously whilst the works are in progress. By way of a method of delay analysis, this approach is akin to what is described as the ‘time impact analysis.’^[1]Paragraphs 4.2 to 4.12, SCL Delay and Disruption Protocol, 2^nd Edition. Otherwise NEC3 does not identify how delay might be analysed from a wholly retrospective assessment.

There is no caselaw which addresses how delay should be analysed in NEC3. However, regarding a quantum matter, in Northern Ireland Housing Executive v Healthy Buildings (Ireland) Ltd [2017] NIQB 43, the Northern Ireland High Court held that a compensation event under an NEC3 contract should be assessed based on actual rather than forecast cost. On the assumption that this principle might apply to a delay related issue as well as a compensation, some form of analysis which considers the as built development of the project might be considered appropriate.

When NEC3 related projects are analysed retrospectively, the approach adjudicators prefer is the prospective approach.  A delay analysis should mirror as a far a possible, the incidence of compensation events arising during the project and how these affected the understanding of the parties and the ‘Project Manager’ as to when the works overall were likely to be completed.

Use of baselines for the analysis

The intent expressed by NEC3 was for Contractor to prepare its programme and for this to be accepted by the Project Engineer (the ‘accepted programme’). This then would become the basis of assessing the impact in terms of delay of any ensuing compensation events.

Furthermore, it was the intention of NEC3 that any revision to the ‘accepted programme’, typically periodic progress updates, would in turn be accepted and become the new benchmark for assessing any ensuing compensation events.

Therefore, pursuant to clause 63.3, the latest accepted programme is the benchmark for assessing a compensation event. So, if the latest accepted programme is remote in time from when the compensation event occurs, it is still to be used as the basis for assessing the compensation event notwithstanding that in the intervening period, there may have been several revisions to the accepted programme but which themselves were not accepted by the PM and therefore did not become the latest accepted programme.

In such instances the method of delay analysis has the characteristics of the impacted as-planned (IAP)  approach instead of the time impact analysis.

I have found that this has been used by an opposing expert to criticise the delay analysis, on the basis that as the IAP does not allow for a general update of progress just prior to the date on which the compensation event occurred. As in the TIA approach, it is considered a less reliable method for assessing delay.

Hence it has been suggested that the latest progress update be used, even though it has not been accepted. However, adjudicators are not sympathetic with this approach as it is inconsistent with the intent of NEC3 that it is the last accepted programme.

Similarly, the argument is run that the last accepted programme be updated with the latest set of progress information, again so that the method undertaken complies most closely with the TIA approach. However, I have found that adjudicators do not insist on such a step as such information will have been extracted from a progress update which itself has not been accepted. There are two steps when preparing a progress update:

• The accepted programme is to be updated with progress prior to the date on which a compensation event occurs; and
• A re-assessment of how long the remaining planned works will take.

Both steps require acceptance by the Project Manager, so if historically acceptance was not given, then it is not considered appropriate to use the latest programme or progress update in question.

Importance of the Notice of Compensation Event (NCE)

Delay to completion may be a consequence of any compensation event.

The expectation of the NEC3 Contract is that any compensation event will be subject of prior notice of compensation event (NCE) by the parties:

• The Project Manager will be required to issue an NCE to the Contractor, for example, if he intends to issue an instruction changing the works information (clause 61.1);
• The Contractor will be required to issue an NCE to the Project Manager within 8 weeks of it becoming aware that an event has caused or is expected to cause delay (clause 61.3).

When viewed retrospectively in adjudication proceedings, in my experience adjudicators look at the precise wording in the original NCE. It is therefore imperative that when undertaking a delay analysis, that when the analyst articulates the nature of the compensation event and how this might impact the intended planned sequence of works, that it is consistent with the description as provided within the original NCE.

Difficulties may arise when reviewed retrospectively as the delay analyst or expert may establish a clear understanding of a particular event which was having an adverse impact on progress, but that the NCE issued at the time was not drafted accurately to reflect the problems being experienced.

Adjudicators expect the experts to adhere to the definition of an event as described within the NCE whether or not flawed. They are not sympathetic to experts seeking to make good deficiencies within the document however well intentioned.

Modelling the fragnet by reference to actual events

As discussed above, a prospective method of delay analysis is required:

• If the date on which a compensation events arises is proximate to the latest accepted programme, then a time impact analysis is carried out; or
• If the date on which a compensation events arises is remote from the latest accepted programme, then an impacted as planned analysis is required.

Clause 65.2 provides that when the Project Manager decides in respect of the extension of time due concerning a specific compensation event, that his assessment is not revised if a forecast is shown by later recorded information to have been wrong.

The intention of this would seem to be that NEC3 seeks to encourage the parties to resolve any problems at the time they materialise and whilst the project is still live, and to discourage the ‘wait and see’ approach which is a common feature for projects where the JCT standard form has been used.

Therefore, the delay analyst or delay expert is expected to follow the same process as undertaken by the parties and Project Manager contemporaneously, and to agree a model of the likely  effect of a compensation event as would be envisaged to occur in the near future.

However, it is my experience that adjudicators do not expect the delay analysis to replicate this process slavishly, but rather having the benefit of hindsight and access to contemporaneous factual records to use this information to model the compensation event in question.

For example, an item of design information is due to be issued to a Contractor by a certain deadline. That deadline is missed and because the design information is required for its works on site, the Contractor will issue an NCE as the lack of information is now preventing the progress of the works on site. However, it may not be known to the Contractor when the outstanding  information is likely to be delivered, so when issuing the NCE he can only speculate. The delay analyst has the benefit of hindsight as to when the design information was issued, so by way of a ‘sense check’, can model the compensation event to give a more precise assessment of its impact.

This approach has been accepted by adjudicators.

Sourcing as built data from accepted programmes

When modelling compensation events by reference to factual records, adjudicators are agreeable to using as a source of information, the as built start and finish dates of activities as recorded in accepted programmes.

Sequential analysis of compensation events avoiding duplication

It is likely that on any project there will be a significant number of NCEs issued over the duration of the project.

I find adjudicators prefer that the impact of compensation events be assessed sequentially and in the chronological order in which they occur. The impact in terms of a change to the forecast date in the accepted programme is the incremental change to the forecast generated by the preceding event in the sequence.

This is preferred as it avoids the risk of double counting if events are analysed concurrently.

The figure below illustrates this; an accepted programme with a duration of 10  weeks is impacted progressively with three compensation events CE01, CE02 and CE03 which have durations of 5, 6 and 5 weeks respectively. In this scenario, the overall forecast completion of the works is delayed by 12 weeks:

• CE01 causes a delay of 5 weeks;
• CE02 causes an additional delay 3 weeks; and
• CE03 causes a further delay of 4 weeks.

Diagram by author

Summary

The purpose of this article is to share personal experiences of delay related disputes when using the NEC contract, reflecting on how adjudicators decide such matters. The sample is admittedly small, but the following issues receive general approval:

• the approach adjudicators prefer is the prospective approach, given a delay analysis should mirror as a far a possible the incidence of compensation events arising during the project and how these affected the understanding of the parties and the Project Manager as to when the works overall were likely to be completed.
• There is an expectation that in selecting a baseline, that the delay expert or analyst uses the accepted programmes.
• Care should be taken when defining the causes of delay and ensue that any event to be modelled, is consistent with the wording in the Notice of Compensation Event (NCE) to which it relates.
• Notwithstanding the prospective nature of the delay analysis, adjudicators prefer that the modelling of delay events to be impacted into the accepted programme are consistent with actual events.
• Accepted programmes may be used for sourcing as-built data.
• Adjudicators prefer that the impact of compensation events be assessed sequentially and in the chronological order in which they occur. 

About the author

Russell Bates is a project planner and forensic delay analyst with over 30 years of experience in the construction and engineering industries. He has acted as a delay expert on more than 25 occasions.

Russell is a renowned delay expert specialising in project planning, critical path methods of delay analysis and delay and disruption. He has been cross-examined in ICC and UK domestic arbitrations concerning petrochemical, infrastructure and building project disputes in Europe, Africa and the UK; he has acted as a delay expert for matters in adjudication, arbitration, litigation and mediation around the world. He has significant experience in oil and gas, as well as buildings, energy, industrial and infrastructure projects. He utilises electronic programme management tools, such Primavera, MS Project and Asta Power Project, and employs a wide range of analysis techniques including time impact/windows, collapsed as-built, impacted as-planned, and as-planned versus as-built.

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