Asia Pacific Projects Update
CONCURRENT DELAY
KEY CONTACTS This update considers the significance of addressing the
issue of concurrent delay in construction contracts and the
Damian McNair various approaches that may be taken.
Partner, Head of Finance and Projects, Asia Pacific
T +61 3 9274 5379 SIGNIFICANCE OF CONCURRENT DELAY
damian.mcnair@dlapiper.com Any complex project may involve a number of different
causes of delay, whether they be caused by the owner, the
Bruce Linke contractor, or a neutral event beyond the control of either
Partner party. The most obvious causes of delay that may overlap
T +61 3 9274 5850 with delay(s) caused by the contractor are the acts or
bruce.linke@dlapiper.com omissions of an owner.
An owner often has obligations to provide certain
materials, equipment or infrastructure to enable the
INTRODUCTION contractor to complete its works. The timing for the
provision of that material, equipment or infrastructure
The claiming and granting of extensions of time in large (and the consequences for failing to provide it) can be
infrastructure projects is often a complicated and fractious effected by a concurrent delay.
process. One common reason for this is the issue of
For example, on gas plant projects, an owner often has a
concurrent delay.
contractual obligation to ensure there is a pipeline
A concurrent delay occurs when two or more independent available to connect to the plant by the time the contractor
causes of delay overlap in time. Importantly, it is the is ready to commission the plant. Since the construction of
causes of the delays, rather than the delays themselves, a pipeline can be expensive, the owner is likely to want to
that must overlap. In our experience, this distinction is incur that expense as close as possible to the date that
often not made in the drafting process, resulting in a lack commissioning is due to commence (particularly where
of certainty and, in some instances, disputes. More funded through debt finance). For this reason, if the
problematic is when the contract is silent on the issue of contractor is in delay, the owner is likely to further delay
concurrent delay and the parties assume that the silence incurring the expense of building the pipeline. In the
operates to their benefit. As a result of conflicting case absence of a concurrent delay clause, this action by the
law in Australia (see below), it is difficult to determine owner in response to the contractor’s delay could entitle
who, in a particular fact scenario, is correct. This can also the contractor to an extension of time.
lead to protracted disputes and outcomes contrary to the
intention of the parties.
EXAMPLES OF CONFLICTING CASE LAW Option One – Contractor has no entitlement to an
Although a detailed consideration of the relevant case law extension of time if a concurrent delay occurs.
is beyond the scope of this article, it is worth noting at the Option Two – Contractor has an entitlement to an
outset that the law in Australia regarding the treatment of extension of time if a concurrent delay occurs.
concurrent delay remains uncertain. Option Three – Causes of delay are apportioned between
What is clear, however, is that (a) the fundamental issue the parties and the contractor receives an extension of
for consideration is usually causation and (b) concurrent time equal to the apportionment (for example, if the
delay disputes give rise to a host of complex factual concurrent causes of a 10-day delay are apportioned 60:40
determinations about the cause, nature, extent and owner:contractor, the contractor would receive a six-day
interrelationship of the overlapping causes of delays. extension of time).
In light of two conflicting Supreme Court decisions, Each of these approaches is discussed in more detail
Thiess Watkins White Construction Ltd v Commonwealth1 below.
and Armstrong Construction v Council of the Shire of Option One: Contractor not entitled to an extension
Cook2, it is difficult to confidently predict how a court
of time for concurrent delays
will resolve disputes where one of the concurrent delays is
attributable to a "neutral" event (ie one caused by a third A common, owner-friendly, concurrent delay clause for
party or an event beyond the control of either party) rather Option One is the following:
than attributable to the owner or contractor. "If more than one event causes concurrent delays and the
Having said that, the case law does indicate that a cause of at least one of those events, but not all of them, is
"common sense" approach (since the High Court decision a cause of delay which would not entitle the contractor to
of March v E and MH Stramare3) will be adopted when an extension of time under [EOT Clause], then to the
causation is in issue. In essence, this means that extent of the concurrency, the contractor will not be
"causation" is a question of fact to be answered by entitled to an extension of time."
reference to common sense and experience. Moreover, in We have bolded the most relevant words.
the event of a concurrent delay dispute, the courts will Nothing in the clause prevents the contractor from
favour an event-by-event approach, based on the relevant claiming an extension of time pursuant to the general
facts of each case. extension of time clause, and, from an owner's
As such, in the absence of express terms in a construction perspective, express terms addressing the "prevention
contract dealing with concurrent delay, parties face an principle" must also be included in the contract. What the
inherently uncertain legal outcome if a dispute arises. That clause does do, however, is remove the contractor’s
is one reason why international standard forms of contract entitlement to an extension of time when there are two or
have attempted to address this important issue. more causes of delay and at least one of those causes
Accordingly, it is critical, from both the owner's and the would not entitle the contractor to an extension of time
contractor's perspective, to include express terms in the under the general extension of time clause.
contract which clearly articulate who bears the risk in For example, if the contractor’s personnel were on strike
circumstances where concurrent delays arise. and, during that strike, the owner failed to approve
drawings, then, in accordance with the contractual
APPROACHES FOR DEALING WITH provisions, the contractor would not be entitled to an
CONCURRENT DELAYS extension of time for the delay caused by the owner’s
The issue of concurrent delay is dealt with differently in failure to approve the drawings.
the various international standard forms of contract. The operation of this concurrent delay clause is best
Importantly, it is not possible to argue that one approach illustrated diagrammatically using the following three
is definitely "right"; instead, the preferred approach for examples.
each project will depend on a number of factors, such as
which side of the table you are sitting and the extent to
which the project will be financed through limited or non-
recourse project financing (where lenders require greater
outcome certainty in terms of the time and price to
complete the works).
In general, there are three main approaches for dealing
with the issue of concurrent delay. They are:
2 Concurrent delay
Example 1: No overlap and contractor entitled to an extension of time for owner-caused delay
Contractor Delay Event Owner Delay Event
(2 weeks) (1 weeks)
In this example, the two-week contractor-caused delay contractor will remain in two weeks' delay (assuming the
and the one-week owner-caused delay do not overlap, so contractor has not, at its own cost and expense,
the contractor would only be entitled to a one-week accelerated the works to mitigate the impact of the delay).
extension of time for the non-concurrent, owner-caused
delay. Therefore, at the end of the Owner Delay Event, the
Example 2: Overlap but contractor not entitled to an extension of time for owner-caused delay
Owner Delay Event
(1 week)
Contractor Delay Event
(2 weeks)
In this example, the contractor would not be entitled to an result, at the end of the Contractor Delay Event, the
extension of time because of the owner-caused delay and contractor would be in two weeks' delay (again, assuming
the contractor-caused delay overlap. This is where the no action is taken by the contractor to accelerate the works
concurrent delay clause comes into operation. Under the to mitigate the delay).
example clause above, the contractor is not entitled to an
extension of time to the extent of the concurrency. As a
Example 3: Overlap and contractor entitled to an extension of time for a part of the owner-caused delay
Owner Delay Event
(2 weeks)
Contractor Delay Event
(1 week)
In this example, the contractor would be entitled to a one- contractor would be in one week's delay, again, assuming
week extension of time because the delays only overlap no action is taken by the contractor to accelerate the works
for one week. Therefore, the contractor is entitled to an to mitigate the delay).
extension of time for the period when they do not overlap From an owner’s perspective, Option One seems both
(ie when the extent of the concurrency is zero). As a logical and fair. For example, if the Owner Delay Event
result, after receiving the one week extension of time, the was a delay in the approval of drawings and the
3 Concurrent delay
Contractor Delay Event was the entire workforce being on Option Three: Responsibility for concurrent delays
strike, arguably the contractor should not receive an is apportioned between the parties
extension of time. The delay in approving drawings does
Option Three, the apportionment approach, is a middle-
not actually delay the works because the contractor could
ground position that has been adopted in some of the
not have used the drawings given that its workforce was
standard-form contracts. For example, the Australian
on strike. In this example, the contractor would suffer no
Standards construction contracts (AS4000 and AS4902)
real detriment from the owner-caused delay. Conversely,
adopt the apportionment approach. The AS4000 clause
if the contractor did receive an extension of time it would
states:
effectively receive a windfall gain.
"34.4 Assessment
However, the suitability or fairness of this option will
obviously depend on which side of the table you are When both non-qualifying and qualifying causes of delay
sitting. In the above example, a contractor may argue that overlap, the Superintendent shall apportion the resulting
it should receive an extension of time on the basis that, delay to WUC according to the respective causes’
regardless of the strike, the contractor could not have contribution.
completed the works in the specified time due to the In assessing each EOT the Superintendent shall disregard
owner's failure to approve the drawings. The opposing questions of whether:
argument that the owner would raise is that the contractor a) WUC can nevertheless reach practical completion
should not be entitled to an extension of time in these without an EOT; or
circumstances as it could not, in any event, have complied
b) the Contractor can accelerate,
with its obligation to complete the works by the specified
time. but shall have regard to what prevention and mitigation of
the delay has not been effected by the Contractor."
In in our experience, the greater the number of obligations
the owner has under the contract, the greater the risk of We appreciate the intention behind the clause and the
concurrent delays and the more reluctant the contractor desire for both parties to share responsibility for the
will likely be to accept Option One. Therefore, it may not delays they cause. However, we have some concerns
be appropriate for all projects. about this clause and the practicality of the apportionment
approach in general. It is easiest to demonstrate our
It is also worth noting that the selection of Option One
concerns with an extreme example: what if the
may ultimately be influenced by project finance
"qualifying" cause of delay was the owner’s inability to
considerations, such as the lender's requirements for time
provide access to the site and the "non-qualifying" cause
and price certainty.
of delay was the contractor’s inability to commence the
Option Two: Contractor entitled to an extension of works because it had been black-banned by the unions?
time for concurrent delays How should the causes be apportioned between the
Essentially, Option Two is the opposite of Option One and owner- and contractor-caused delays? In this example, it
is the position in many contractor-friendly standard and is easy to conceive either cause as 100% responsible for
bespoke forms of contract. These contracts also the delay.
commonly include extension of time provisions to the In our view, such an example (where both parties are at
effect that the contractor is entitled to an extension of time fault) has two possible outcomes. Either:
for any cause beyond its reasonable control (including
(a) The delay is split down the middle and the contractor
force majeure events), which, in effect, means there is no
receives 50% of the delay as an extension of time; or
need for a concurrent delay clause.
(b) The delay is apportioned 100% to the owner and the
As with Option One, the suitability of this option depends
contractor therefore receives 100% of the time claimed as
on which side of the table you are sitting. This option is
an extension of time.
less common than Option One, particularly on project
finance transactions, but is nonetheless sometimes The delay is unlikely to be apportioned 100% to the
adopted (when the contractor has a superior bargaining contractor because a judge or arbitrator will likely feel
position vis-à-vis the owner or when the owner has that such an apportionment is "unfair", especially where
extensive obligations under the contract and is not there is a potential for significant liquidated damages
prepared to pay the risk premiums sought by the liability. We appreciate that the above is not particularly
contractor to take the corresponding concurrent delay rigorous legal reasoning; however, the apportionment
risk). Where an owner agrees to adopt this option, it is approach does not lend itself to rigorous analysis. The
often on the basis that the contractor will not be entitled to inherent difficulty with Option Three lies in an attempt to
receive delay costs for the concurrent delay. find a commercial, "common sense" solution to the
4 Concurrent delay
apportionment approach in general. Without additional
express terms in the contract which clearly articulate who
bears the risk of particular foreseeable delays, Option
Three may fail to provide necessary certainty to either
contracting party. Where the project is funded through
limited or non-recourse project financing, the lenders are
also unlikely to accept the apportionment approach due to
their desire for time and price certainty.
In addition, Option Three is only likely to be suitable if
the party undertaking the apportionment is independent
from both the owner and the contractor. Increasingly, this
is not the case on large-scale infrastructure projects. Each
party also needs to ensure it has the necessary technical
and programming expertise and records throughout the
performance of the works to support its position in terms
of arguing how the "respective causes contribution"
should be apportioned under Option Three.
CONCLUSION
A concurrent delay clause should be included in all
construction contracts. Remaining silent on the issue may
lead to disputes. Which option is adopted will depend on a
number of factors including (a) the size and nature of the
project, (b) the extent of the owner's involvement in
delivery of the works and its corresponding obligations
under the contract, (c) the requirements of lenders for
project finance transactions and (d) the relative bargaining
positions of the contracting parties.
Consideration should also be given to the contractor's
entitlement (if any) to delay costs or whether the parties
should bear their own costs, in circumstances where the
parties agree the contractor will be entitled to an extension
of time for concurrent delays.
FOOTNOTES
1
Thiess Watkins White Construction Ltd v Commonwealth (unreported,
Giles J, Supreme Court of New South Wales, 23 April 1992)
2
Armstrong Construction v Council of the Shire of Cook (unreported,
White J, Supreme Court of Queensland, 25 February 1994)
3
March v E and MH Stramare (1991) 171 CLR 605
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5 Concurrent delay
