The timeline of a construction project is often set out with the best intentions, but delays are sometimes unavoidable.
Unfortunately, delayed works, particularly where there is a tight deadline attached to the project, can result in lost income, additional costs, a weakened supply chain and disputes with buyers or end users.
If you are involved with a construction project, it’s important to understand how to navigate delays and how they might impact your own liabilities.
Causes of delays
The action taken to resolve the delay and mitigate losses may depend on the cause of the delay and whether fault can be assigned to one or more parties.
Projects may be delayed by a number of reasons, for example:
- Supply chain disruption, either due to internal difficulties or global events
- Rising costs or funding issues
- Staff or material shortages
- Regulatory and permission approval delays
- Design changes
- Site issues, such as protected land
- Poor project management
- Severe weather conditions
Clearly, not all of these delays could be avoided, no matter how much planning and good faith collaboration goes into a project.
For this reason, it’s important to outline responsibilities for avoiding delays in your contracts.
Contractual clauses
Construction contracts outline the rights and obligations of all parties, but they are also an opportunity to reflect on potential issues with a project before they arise.
While contractual clauses cannot predict and mitigate every delay, it can set out how parties can work around certain common challenges.
For example, consider supply chain disruptions resulting in a materials shortage.
A contract between the developer and supplier may include:
- Timelines – The supplier needs to know when materials need to be delivered to meet completion milestones and the final deadline
- Quality and quantity – How much is needed and what level of quality is expected
- Liability – Under what circumstances the supplier is financially and legally liable to deliver materials according to the contract, and the consequences of failing to do so
- Compensation – A clause may set out the circumstances under which the developer is entitled to financial recompense due to losses incurred by the delay
- Unforeseen delays – The contract needs to outline when a supplier won’t be held accountable for delays, such as if a supply chain disruption is due to global events or a national shortage.
Extension of Time (EOT) clauses may be used to allow the supplier or contractor to ask for the construction period to be extended when the delay is not their fault.
The goal of the contract is not punitive, rather it should protect the interests of each party and the completion of the project.
Disputes
As we’ve established, project delays can easily result in disputes.
Informal discussions and mediation are typically the first steps to resolving this.
Delay disputes arise most commonly out of frustration due to financial losses and the impact that one delay can have on subsequent stages of the project. Mediation allows all parties to discuss their concerns in a constructive environment with impartial input.
Beyond that, arbitration or adjudication may be used to reach a legally binding decision and move the project forward, or more serious disputes may proceed to litigation.
We try to avoid litigation as it can sour working relationships for the remainder of the project, but we’re always here to advise and represent you at litigation if necessary.
For further advice on construction delays and disputes, please contact our team today to discuss your needs.