Delaying project completion has serious financial implications for the contractor, either through liquidated damages or the need for additional resources beyond what was originally planned. However, the Extension of Time (EOT) provision in a contract document can be a game changer when a project is delayed. Before understanding what EOT is and how it is claimed, it is necessary to understand excusable vs. non-excusable delays, compensable vs. non-compensable delays, and concurrent delays.
- Excusable delays are events that are beyond both the contractor's and the employer's control, and neither party would be able to prevent them through any action. Examples include natural disasters, war, labor shortages in the market, fuel shortages, and unavailability of materials. Nowadays, the most common excusable event is a positive variation.
- Non-excusable delay include events caused by the contractor's negligence or lack of administrative control. Examples include delayed drawing submissions, insufficient manpower at the site, and delays in permit submissions.
- Compensable delays are those that are excusable and for which the employer is required to provide financial compensation to the contractor. These include excusable delays caused by the owner's fault or, in some cases, events beyond anyone's control. For example, the contract was signed, but the owner did not provide access to begin construction, or construction was paused for a month due to an ongoing war.
- Non-compensable delays include events for which the owner does not provide any financial support. All non-excusable delays are non-compensable, while some excusable delays that do not impose financial liability on the owner are also considered non-compensable. Examples include a labor strike because the contractor did not pay workers' salaries or a material shortage because the contractor failed to take timely action.
- Concurrent delays are a series of events in which both the employer and the contractor are at fault. These require an assessment of each party's responsibility. For example, the contractor failed to procure materials while the owner delayed site access, resulting in construction not starting.
EOT provides a contractual provision for a contractor to claim additional time for project completion if the expected completion date, based on the Critical Path Method (CPM), extends beyond the contract completion date. To submit an EOT claim, there must be an occurrence of an excusable delay during the project duration, and the event must be reported to the owner within 21 days of its occurrence, or as specified in the contract. The FIDIC Red Book 2017 – General Conditions of Contract, Sub-Clause 8.5, provides guidance regarding the submission of EOT claims.
An EOT submission must include a Time Impact Analysis (TIA), showing the critical path details, how the excusable delay affected the project, and how much additional time is required to complete the work. Based on the number of days impacted by the event and the contractor's mitigation plan, the Construction Manager (CM) reviews the submission and recommends that the employer approve, reject, or return the claim for resubmission with comments.
In the above paragraphs, we discussed the different types of delays. Excusable and compensable delays entitle the contractor not only to additional time but also to additional payment. The employer must compensate the contractor for the extra costs required to maintain both direct and indirect project costs while the project continues beyond the original completion date. Direct costs include additional workers required to complete tasks due to idleness during delays, project staff whose employment must be extended beyond the project timeline, head office overhead costs, and the cost of extending bonds and guarantees.
Overall, EOT significantly reduces the burden on contractors caused by unforeseen conditions. However, these events must be tracked properly, and it is the responsibility of the project planning engineer to report these events and submit claims on time. Contract administrators should also ensure that the contract includes provisions for EOT before it is signed.
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