The SCL Protocol: time for change?

The Society of Construction Law’s (SCL) Delay and Disruption Protocol1 was first published in 2002. It provides, in short, a scheme whereby delay may be much better controlled and managed during the construction process. The SCL says that overall, the Protocol aims to set out good practice (rather than best practice). Although the Protocol has no force of law (unless it is adopted into a contract) what it does provide is a previously absent consensus of expertise as to what is sound and what is unsound in the area of delay analysis.

The stated aim of the Protocol is that: “in time, most contracts will adopt the Protocol’s guidance as the best way to deal with delay and disruption issues”. Despite this, it is probably fair to say that whilst its suggestions are frequently adopted in debate about the best or right way to record and present delay, the Protocol has not been widely adopted or implemented by way of contract drafting and contract procedure. This may be one reason why the Protocol is currently being revised.

The origins of the review can be found in a SCL meeting held in April 2013, chaired by Lord Justice Jackson, to mark the 10th anniversary of the Protocol. The consensus at that meeting was that it was time for a review of the Protocol and the SCL set up a committee to do just that.

The SCL has noted that the review was held against a background of:

(i)   developments in the law and construction industry practices since 2002;

(ii)  feedback on the uptake of the Protocol since that time;

(iii) developments in technology since 2002;

(iv) an increase in the scale of large projects, leading to a wider divergence between small-scale and large-scale projects;

(v)  anecdotal evidence that the Protocol is being used for international projects as well as domestic UK projects.

There were eight specific terms of reference:

(i)    whether the expressed preference should remain for time impact analysis as a programming methodology where the effects of delay events are known;

(ii)   the menu and descriptions of delay methodologies for after the event analysis;

(iii)  whether the Protocol should identify case law (UK and international) that has referenced the Protocol;

(iv)  record keeping;

(v)   global claims and concurrent delay;

(vi)  approach to consideration of claims (prolongation/disruption – time and money) during currency of project;

(vii) model clauses; and

(viii) disruption.

On 1 July 2015, the SCL issued the first fruits of the review, Rider 1, which covers the first two items set out above.

What has not changed?

The original approach of the Protocol was that extensions of time should be dealt with at or soon after the time of the delaying event, so that the parties know where they stand. The prevailing rationale was that having clarity was of greater value for all parties than a wait and see approach. This approach has been maintained. The authors of Rider 1 say this:

“the contemporaneous submission and assessment of EOT claims2 is elevated to a core principle. This allows appropriate mitigation measures to be considered by the project participants so as to limit the impact of the delay event. It also provides the Employer and the Contractor with clarity around the completion date so that they can understand their risks and obligations and act accordingly. These objectives cannot be met if the Contractor does not submit timely notices, particulars and appropriate substantiation for its EOT claims, or if the CA does not assess those claims contemporaneously. These are key issues for minimising time related disputes.”

This is undoubtedly a sensible starting point from the point of view of good commercial practice. It does mean that extensions would have to be granted, not on the test of what actually caused delay, but on the test of what looked likely to cause delay at the time of the delaying event. This can sometimes mean that:

(i)   delay is inevitably to be analysed on a “first cause” basis, not an “ultimately critical” basis;

(ii)  the programme in currency at the time of the delaying event will take precedence over the actuality; and

(iii) any subsequent forensic examination of what extensions of time ought to have been granted should properly look at, not what actually happened, but the much more subjective question of what the parties ought to have expected would happen.

What has changed?

The original Protocol recommended that one particular form of delay analysis, namely the time-impact form of delay analysis methodology, be used wherever the circumstances permitted “both for prospective and (where the necessary information is available) retrospective delay analysis”. The time-impact form of analysis involves introducing delay events into the most contemporaneous programme and then updating the programme by impacting onto it the assumed effect of the delay event in question. By doing this, you take account of the status of the works at the time and then introduce the delay event into the programme and establish the likely effect or impact on the completion date.

This was not universally supported and was one of the main reasons why the meeting in 2013 had pressed for a review. One particular issue with the time-impact analysis can be its reliance upon theoretical modelling and not the actual sequence of events. This was recognised by the Review Committee who noted in Rider 1 that “there was a strong argument” put forward that contemporaneously submitting and assessing an EOT application and awarding an EOT on a prospective basis (i.e. the use of a time-impact analysis):

“can sometimes lead to unrealistic results if it subsequently transpires that the EOT claimed is significantly more than the delay attributable to the Employer Risk Event”.

At the same time, the original Protocol made no mention of the “windows” form of delay analysis which, over the past 10 years, has certainly become one of the most used forms of delay analysis, arguably because it is considered to be one of the most reliable.

Whilst Rider 1 still favours the time-impact approach, where there is a prompt evaluation of the delay during the project. Now, no one form of delay analysis is preferred, where that analysis is carried out some time after the delay event or its effect. Instead Rider 1 sets out the factors that need to be taken into account in selecting the most appropriate form of delay analysis as well as providing a helpful explanation of many of the delay analysis methodologies currently in common use.

Further, Rider 1 recognises that crucial factors in determining the most appropriate methodology (namely, the Contract terms, the circumstances of the project, nature of the relevant or causative events, the claim or dispute, the value of the project, the time available and the available project records) will vary between projects. As Rider 1 notes:

“fundamentally the conclusions of the delay analysis must be sound from a common sense perspective in light of the facts that actually transpired on the project. This is because a theoretical delay analysis which is divorced from the facts and common sense is unhelpful in ascertaining whether in fact the relevant delay event caused critical delay to the completion date and the amount of that delay.”

This application of sound common sense is encouraging. Indeed, it is backed up by noting that critical path analysis is not necessarily limited to the use of specialist programming software. Rider 1 notes that such software can be “a powerful analytical tool” but also reminds those preparing an extension of time claim that sometimes the critical path to completion can be more reliably established through a:

“practical analysis of the relevant facts or by analysis of production and/or resource data”.

A view from the TCC

This is an approach which has been endorsed by the English courts.

For example Mr Justice Akenhead, in 2012 in the case of Walter Lilly v Giles Patrick MacKay,3 carried out a comprehensive review of the authorities and provided guidance on a number of important issues including the correct approach for a court of tribunal in calculating extensions of time. Indeed, the Judge noted that the approach of both experts:

“involved in reality doing the exercise that the Court must do which is essentially a factual analysis as to what probably delayed the Works overall”.

Mr Justice Akenhead’s view can be summarised as follows:

(i)   It is first necessary to consider what the contract between the parties requires in relation to the fixing of an appropriate extension of time.

(ii)  Whilst the architect prior to the actual practical completion can grant a prospective extension of time, which is effectively a best assessment of what the likely future delay will be as a result of the relevant events in question, a court or arbitrator has the advantage, when reviewing what extensions were due, of knowing what actually happened.

(iii) The court or arbitrator must decide on a balance of probabilities what delay has actually been caused by such relevant events as have been found to exist. How the court or arbitrator makes that decision must be based on the evidence, both actual and expert.

(iv) The extension must relate to the extent to which “completion of the works is likely to be delayed” by the relevant event or events.

(v)  Mr Justice Akenhead endorsed the view of Mr Justice Colman in the Chestermount case, where he said: “Fundamental to this exercise is an assessment of whether the relevant event occurring during a period of culpable delay has caused delay to the completion of the Works and, if so, how much delay.”

(vi) In the context of this contractual-based approach to extensions of time, one cannot therefore carry out a purely retrospective exercise. What one cannot do is to identify the last of a number of events which delayed completion and then say that it was that last event at the end which caused the overall delay to the works.

(vii) In the assessment of what events caused what overall or critical delay, one needs also to bear in mind that it is not necessarily the item or area of work that is finished last which causes delay. It is what delays that final operation, which in itself takes no longer than it was always going to take, that must be assessed.

(viii) If there is an excessive amount of snagging and therefore more time has to be expended than would otherwise have been reasonably necessary to perform the de-snagging exercise, it can potentially be a cause of delay in itself.

(ix) The court should be very cautious about giving significant weight to the supposedly contemporaneous views of persons who did not give evidence.

Mr Justice Akenhead’s judgement also referred to concurrency which he thought only come into play where at least one of the causes of delay is a relevant event and the other is not. It will be interesting to see the extent to which the next stage of the review agrees with his conclusions that where delay is caused by two or more effective causes, one of which entitles the contractor to an extension of time, the contractor is entitled to a full extension not a reasonably apportioned part of the concurrently caused delay.

The approach to notices

We have written elsewhere in this Review about the importance of complying with project notice procedures and time bars. This is, unsurprisingly, endorsed by Rider 1 which stresses that:

“The parties and the CA should comply with the contractual procedural requirements relating to notices, particulars, substantiation and assessment in relation to delay events. Applications for EOT should be made and dealt with as close in time as possible to the delay event that gives rise to the application.”

Conclusion

The review on the remaining six issues is ongoing and it is understood that a draft second edition of the Protocol, which will incorporate Rider 1, will be available for consultation towards the end of 2015.

Rider 1 notes that the expressed aim of the second edition of the Protocol will be to provide :

“Practical and principled guidance on proportionate measures that can be applied in relation to all projects, regardless of complexity or scale, to avoid disputes and, where disputes are unavoidable, to limit the costs of those disputes”.

This is a wholly laudable aim, and it is to be hoped that the final second edition builds on the common sense approach adopted in Rider 1 as it seeks to achieve this. Whether or not that will lead parties to expressly incorporate the revised Protocol into their contracts remains to be seen.

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• 1. Further details can be found on the SCL website: www.scl.org.uk
• 2. As Rider 1 also notes, when it comes to financial losses the opposite approach is considered to be usually correct, with compensation being usually awarded only from a retrospective perspective, based on the actual costs incurred.
• 3. [2012] EWHC 1773 (TCC).