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27
BY
BRIAN
SEYMOUR
in the UTS ePress article
Essence of Time in
Construction Contracts.
Abstract: The building industry has in
recent years seen huge costs incurred due
to disputes arising on notice requirement
clauses. These claims could have been
averted if the parties had been diligent
in providing the necessary notices.
This article sets out to explore the law
briefly as interpreted by the courts in
common law and equity and to discuss the
possibility of defence under the principle
of promissory estoppel.
More important, it also shares the
author’s view on how such pitfalls could
have been prevented by giving the proper
notices within the timeline required by the
contract conditions.
Numerous contractors have suffered
losses due to the head contractor’s
mismanagement of the project, including
delay, disruption, acceleration, out-of-
sequence work, stacked trades and
interference between trades.
This is a difficult issue for many
estimators, and before signing a contract
it is wise to have a qualified person review
it. It is good practice to do this before
starting an estimate, including allowances
for uncertain language used or contract
clauses that contain illegal requirements –
and to be careful about clauses that make
it impossible to profit from variations.
At common law, there is no automatic
right to delay damages. As with all
damages claims, delay damages can
be recovered only if they can be proved
to be damages resulting from a breach
of contract.
As regards a construction project,
the contractor must show that the
loss suffered arose naturally from the
principal’s breach, or may ‘reasonably
be supposed to have been in the
contemplation of both parties’ at the
time the contract was entered into. Delay
damages can be recovered automatically
only when a contract specifically allows.
Clause 34.9 of AS 4000-1997 and
AS 4902-2000 provide that, where an
extension of time has been granted, the
contractor is entitled to ‘delay damages’
for every day falling within an extension of
time for a ‘compensable cause’.
In the recent case of Adapt
Constructions Pty Ltd v Whittaker [2015]
ACTSC 188, the ACT Supreme Court found
that a construction contract based on
a standard form, which left blank the
amount for liquidated damages to be
paid for delays to completion, did not
prevent the principal to the contract
from recovering unliquidated damages at
common law for that delay.
It is difficult to prove damages. To
calculate labour losses from start-and-
stop work, double-handling of materials
and shifting of labour, such losses
are commonly categorised as loss of
efficiency, but in many ways this heading
is misleading.
It is not so much that the electricians are
inefficient while they are working, it is that
they cannot get to the work. Time is lost
waiting, being reassigned to other areas,
gaining access to work areas, and other
mobilisation and demobilisation cycles.
Also, there are real costs associated with a
loss of ‘learning curve’ and morale.
There are many factors to consider in
the selection of labour units to be used
in a competitive tender. Understanding
the effects of a particular project or
installation, and adjusting the labour units,
will determine whether you win or lose the
tender. Once you win the tender, it will also
determine whether you will be profitable.
Consider the different elements of the
project to be sure you have selected the
best labour units for the material and
application to enter in the estimate. Do
not use the same level of units for every
estimate: different parts of a project may
require different labour unit levels.
For instance, if you are installing
runs of 25mm conduit in a concrete pour
and also in a false ceiling, this would
require different labour units for the
same material.
You also have to look at repetitiveness.
Installing one run of 25mm conduit in the
concrete pour will take longer per 100m
than four parallel runs of the same conduit.
The same labour discounts apply when
installing two 600 x 600 flush lighting
fixtures in one room versus 300 of them in
an open office. You gain productivity.
Issues to consider when applying
labour units:
>
Higher ceilings increase labour.
>
Increased quantities increase productivity
and decrease labour units.
>
More parallel runs will decrease the
labour unit per 100m.
>
Equipment choices can affect labour units
– scissor lift, scaffold, cherry pickers, etc.
>
Multiple floors of a building will increase
the labour for that installation.
>
The further the material storage is from
the workface, the more walking time
must be allowed.
Other considerations include
the following:
What is the condition of the worksite,
and will there be clear access to installation
areas? Is it likely that mechanical services,
materials and equipment, or stacked
ceiling tiles will inhibit access?
How good is the head contractor at
keeping the project clean and tidy? Will
there be stacked trades at the workface?
This is why it is important to know the
head contractor you are tendering to.
How good is a particular head
contractor at keeping the project on
schedule? A project that stays on schedule
usually results in lower labour cost.
Weather has an effect on the project.
Extreme temperatures can have a
demoralising effect on productivity. When
is the site or slab work scheduled on the
project? Is it in the exhausting heat of
summer or the extreme cold of winter?
The project location will be the guide.
As one can see from the above, the
application of labour to any project cannot
be merely entered straight from the labour
units without intelligent consideration of
the contract conditions, project conditions,
and labour and material availability.