Delay Analysis In Unconventional Contracts (EN)

• Published date: 06 April 2023
• Subject Matter: Corporate/Commercial Law, Real Estate and Construction, Contracts and Commercial Law, Construction & Planning
• Law Firm: HKA
• Author: Michel El Achkar

Typical contracts include milestones, which rely upon a sequence of works and prescribe the completion of a certain aspect of a project within a specified period.

The SCL¹ defines the critical path as "[...] the longest sequence of activities [...], the sum of whose durations determines the overall project duration."² Traditional delay analysis methodologies set out in the SCL a and AACE³ focus on the assessment of the contractual milestone's critical path.⁴ It evaluates the delay event's impact on the sequence of the critical activities, which would adversely affect the contractual milestone dates.

However, in some less conventional contracts, milestones are prescribed as the achievement of payment for completed works, represented by a percentage of the contract price in a fixed duration.

The achievement of milestones is measured through the IPCs,⁵ completed within a period stipulated in the contract. Therefore, the sequence of activities to achieve the milestones, in such contracts, is not a fixed logic link in the programme. Consequently, the application of traditional delay analysis methodologies would be extremely difficult.

In the absence of a resource loaded programme and fixed sequence of activities linked to milestones, this article will provide a potential solution on how to analyse and determine the delays on cost-based milestones.⁶

Critical delay in unconventional contracts

Assuming in what follows that a contractor entered into a contract for the construction of a USD 10 million project within 50 months. The table below summarises the contractual milestones, which represent a percentage of the contract price to be achieved within a fixed duration.⁷

Milestone no.	Percentage complete	Duration (in months)
I	5%	10
II	50%	25
III	80%	40
IV	100%	50

Table 1: Contract-price-based Milestones

The contractor's first instinct is generally to generate a critical path for the achievement of the milestones as per the table above, and the completion of the overall project within 50 months, as illustrated in the figure below.

Table 1: Contract-price-based Milestones

For example, Figure1 indicates that in addition to Activities A, B, and C, activities 1 to 5, 10, 11, and parts of activities 6 and 12 contributed to the achievement of Milestone I. Thus, it stands for reason that in a less conventional contracts, there is no critical path as all activities contribute to the achievement of the contractual milestones. In this case, activities would be more...