Time & Cost Claims under GCC 2010

Time & Cost Claims under GCC 2010

 

As a reviewer of both the first and second editions of the General Conditions of Contract for Construction Works (GCC 2004 and GCC 2010) revisiting these documents several years after they were published often leads to the realisation that some aspects of the drafting could have been done differently or perhaps improved upon.  This of course is one of the motivations for updates to General Conditions of Contract particularly where feedback from the market place has also indicated the need to re-visit certain aspects of those General Conditions.  Recently, whilst investigating a claim by a Contractor, it became obvious to me that the Engineer had misinterpreted the provisions of the contract dealing with delay.  In particular delay to Practical Completion as well as delays to non-critical activities which do not involve delayed Practical Completion and the cost consequences to the Employer where such delays were attributable to acts for which the Employer was responsible.  Whilst I do not believe that there is an ambiguity in the current drafting of GCC 2010, there are certainly a number of complex issues which arise and I therefore considered it appropriate to deal with those issues in the form of this article.

GCC 2004 used to have a particularly longwinded definition of a “Day” in clause 1.6.  In the corresponding definition clause 1.1.1.12, GCC 2010 makes it clear that a “Day” is a calendar day.  However, this needs to be read in conjunction with clause 5.1 which makes it clear that special non-working days are excluded from the calculation of any specific time-span stipulated in the contract.  Thus for example notice under the claims and disputes clause, 10 and in particular 10.1.1.1 requiring notice within 28 days, would be extended by any special non-working days arising within the period specified.

Time and related matters are dealt with in GCC 2010 under clause 5.  Clause 5.4.1 creates an obligation on the Employer to give access to the site which, absent any further restrictions set out in the Site Information, means access to the entire site on the Commencement Date.  Where this access is initially given but subsequently portions of the site become unavailable to the Contractor, the Contractor’s claim entitlement no longer lies under clause 5.4.1 read together with clause 5.4.3 but under general delays attributable to the Employer in terms of clause 5.10.  Contractors frequently appear to misunderstand this distinction and claim under the incorrect clause.

Where initial access is not granted in accordance with the contract and as a result a delay to Practical Completion occurs or, where access to a portion of the site is not given initially but work on that portion is not on the critical path and hence no delay to Practical Completion occurs, clause 5.4.3 opens up the door to a claim for proven additional cost irrespective of the fact that a delay to Practical Completion will not arise.  Since the failure to grant access is a breach of contract there is a common law duty on the Contractor to mitigate such proven costs and to try and work around the access problem to the best of their ability.  If the Contractor has not mitigated its costs then an Adjudicator or an Arbitrator would reduce any disputed cost claim.

It should be noted that there are specific clauses of the contract which open the door to a proven cost claim.  However, unlike the FIDIC forms of Contract where the entitlement to compensation for extensions of time is cost based, this is not the case in GCC 2010 as I shall highlight below.

A further important aspect of clause 5.4.3, regarding delays to Practical Completion and this also applies of course wherever else the contract refers to delayed Practical Completion, is the fact that it is referring to a potentially artificial date which has no contractual significance at the time of award of the contract since the date for Practical Completion will only be established by the Contractor in his initial programme issued in terms of clause 5.6 and subsequently revised in updated programmes.  The initial contractual date for completion and the date from which penalties for delay in terms of clause 5.13, would be applicable, is the “Due Completion Date” being the date stipulated in the Contract Data as being the latest date for achieving Practical Completion of the Works at the time of entering into the contract.  The due Completion Date would however be the date which is extended where the Engineer accepts a claim for delay to Practical Completion.  I have dealt with this situation in previous articles where I have addressed the issue of terminal float.  GCC 2010 is clear that where the Contractor establishes, in his initial or any subsequent programme, a date for Practical Completion which is earlier than the Due Completion Date, then the terminal float thereby created is for the sole benefit of the Contractor as is evidenced by those clauses which refer to an entitlement to extensions of time due to delay to Practical Completion. (Clause 5.4.3 and 5.10.1 by way of examples).  There is of course no obligation to create terminal float (unlike under the NEC forms of Contract) and Contractors are reluctant to show terminal float on their programmes for fear that the Employer will make use of this time contingency period.  This is simply ignorance on the part of Contractors where the contract, as is the case in GCC 2010, protects the Contractor from the Employer’s use of this period without compensation.

Practical Completion as defined in clause 1.1.1.24 is effectively when the Works can be used beneficially.  It is therefore not linked to any contractual completion date as specified in the Contract Data.

The Contractor has the obligation to complete the Works and achieve Practical Completion within “the Due Completion Date”.  Clause 5.5.1  This wording is somewhat unfortunate and might be improved by substituting the obligation to complete “on or before the Due Completion Date subject to any extension of time awarded by the Engineer in terms of clause 10.1.5”.

Clause 5.6 regulates the issue of the programme and as mentioned above this document will establish the Contractor’s intended date for Practical Completion as is evident from clause 5.6.2.1 which refers to “the planned completion date”.

The Engineer’s approval of the programme is required within 7 days after submission of any programme in terms of clause 5.6.3.  Approval will become automatic after the lapse of such period of 7 days unless the Engineer gives reasons why it is not approved.  Since the programme is the single most important tool for the purposes of the Contractor’s own planning and his entitlement to any extension of time, it is vitally important that appropriate attention should be paid to the programme and the regular updates to the programme whenever the approved programme no longer reflects the time related state of construction of the Works.

Clause 5.7 also provides the Engineer with an authority to order acceleration at the Contractor’s cost where the Contractor is behind the approved programme due to his own default.  An entitlement to request acceleration, not due to the Contractor’s default, is contained within clause 5.7.3.  There is however no obligation on the Contractor to provide such a proposal and the Engineer has no authority to instruct acceleration purely for the benefit of the Employer irrespective of whether it is the Employer’s intention to compensate the Contractor therefor.

The use of the term “proven additional costs”, is also present in clause 5.1.6 which provides an entitlement to an extension of time where Practical Completion is delayed by the Engineer’s failure to provide documentation.  Where there is no delay due to this failure in other words the work is not on the critical path for which the documents are required but the Contractor is delayed beyond his planned start date as a result, the Contractor is once again entitled to claim proven additional cost subject to the same duty to mitigate as has been discussed earlier in this article.

Clause 5.10 deals with delays caused generally by the Employer opening up the door to a claim for an extension of time due to delayed Practical Completion and/or proven cost claims where delays occur for which the Employer is responsible which would also extend to delays caused by other Contractors on or off the site employed by the Employer.

It is within clause 5.12.3 that we see the potential for confusion due to misinterpretation of this clause in regard to the compensation which is paid to Contractors where an extension of time due to delay to Practical Completion, is ordered by the Engineer.  Under these circumstances the Contractor is entitled to be paid such “additional time-related General Items” as are appropriate.  Note that this is not a proven cost basis but is a bill of quantities based compensation in respect of those General Items which are affected by the delay.  The only time when proven cost is of application is where an Employer risk event arises which does not delay Practical Completion.

To Summarise

  1. The contract recognises an entitlement to an extension of time to the Due Completion Date where Practical Completion is delayed by an act for which the Employer is responsible.
  2. In these circumstances the Contractor will be paid the additional time related General Items during the period of delay.
  3. Any other delays which arise, presumably on non-critical activities, could result in a proven cost claim where Practical Completion is not delayed.
  4. All claims are subject to compliance with the provisions of the claims clause, 10.1.

 

Engineers are therefore not entitled to require the Contractor to prove the costs of delay to Practical Completion.  The only time a proven cost claim would arise would be under those circumstances where claims arise which do not give rise to an extension of time claim.

 

C D Binnington Pr Eng

Managing Director

Binnington Copeland & Associates (Pty) Ltd

A Hill International Company

08 January 2015