We have a situation on a current project where the project is split into 2 phases. Phase 1 was SI and Design, with Phase 2 being the construction of the designed work. At all stages of the phase 1 works we have had 9 weeks float to a sectional completion date in phase 2 works. In essence we need to be complete an element of works for another contractor to come in and carry out their works. This float to the sectional completion has now been reduced to 3 weeks, and this is as a result of a 3rd party access delay which means we wont have the works area until 6 weeks later than originally expected. Our client are accepting of the situation, however they do not want to move the sectional completion out by the 6 weeks to achieve the original float we had. We expect that this wont be an issue for us, but as the delay damages associated are extravagant we are looking to propose a mechanism that would offer us some form of protection. We consider a bonus for early completion, or a delay damages holiday may be the best option. The client have asked us to make our proposals to them for acceptance. Other than the options mentioned, is there another mechanism you would consider appropriate in this situation?
James, I assume this is a contract you are about to agree.
If I understand correctly, the risk is the Employer levying “extravagant” delay damages if you delay Completion of the section; I don’t see how this risk is mitigated by a bonus for early completion, unless you plan to accelerate from the very start.
The delay damages holiday is a good option - however, if the Employer is prepared to accept that, then why does it not accept moving the sectional Completion Date and give you the float you originally asked for.
Another solution is to negotiate the level of the delay damages; if they are disproportionate and not a genuine pre-estimate, the Employer could face difficulties anyway should this end up in a dispute whereas you could have a case that they consisted a penalty - not easy as it sounds though.
Further, you could propose that no delay damages apply but rather general damages; in such a case the Employer would have to prove incurred costs due to your delay but could also leave your business exposed to disproportionate financial risk; you would have to assess such risk carefully and put safety provisions in place, such as limit of liability as regards to damages.
Lastly, you could propose a cap to the delay damages total sum or a limit of liability as above (NB. in the standard NEC3 ECC form, delay damages are “excluded matters” from the limitation of liability - secondary Option X18 - in such a case you would need a Z-clause to amend it).
Best of luck!
Thanks for the informative response.
Yes this is correct we are in the process of agreeing the contract now. I agree with the bonus for early completion assertion, as we are not accelerating and the programme has in essence been time shifted with the sectional completion date remaining the same. Which has meant simply our float to this date has reduced in line with the time shift.
The difficulty is that i understand why the client would not want to push out the sectional completion date as they still need this element of work complete for the follow on contractors use. So it would end up being a pointless exercise from their perspective to move the date out. At the moment the only problem arises if we are slower to complete the works now as our float is significantly reduced to this section completion date.
The last two paragraphs of your reply is where i think we need to get to with the client. And helpfully they are a very open minded and collaborative client, so i will offer these up as potential resolutions.
Thanks for the response again it is much appreciated
No worries at all James, I hope you work something out with your client.