If you are slow in notifying a claim for an Extension of Time,[1] it’s potentially a bad situation, but all is not lost.
A Contractor is fairly entitled to an Extension of Time if a Delay to the achievement of the Due Date for completion is due to any one of the grounds described in 10.3.1(a)-(g), including the net effect of a Variation;
The basis of entitlement is determined on the facts surrounding the delay. Q. Did the building burn down? If yes, then Entitlement is determined on grounds of loss or damage to the contract works. 10.3.1(d) does not entitle recovery of time-related cost, but insurance accepting a claim has arisen, is proof of grounds for entitlement to an Extension of time, whether one is granted or not.
When the Engineer exercises discretion[2] not to grant an extension of time, they must still determine if the Contractor is fairly entitled an extension of time, before either granting or not granting an extension of time in a specific number of working days, that are to be added to the Due Date for Completion.
9.3.11 says “Where the Contractor is entitled to an extension of time by reason of the net effect of any Variation, the Contractor shall be entitled to compensation for the time-related cost incurred in relation to that extension (entitlement) together with an allowance for profit[3]. 9.3.11 doe NOT say “Where the Contractor is granted an extension of time…”.
Determining Entitlement[4] and being bound to grant[5] an extension are separate matters. Entitlement equals grounds for an extension of time and the right to recovery of Time-related costs for grounds of net effect of Variation. Granting of an extension of time equals relief from damages for delayed completion. Factual grounds for entitlement are determined, so additional time for completion can be granted, or possibly not granted, if unbound to do so.
The entitlement to time-related costs starts with the Variation valuation assessment process in 9.3.3, that reviews the mutually shared evidence to quantify the Variation including the “effects on programme”. Did the effect on programme assessment[6] establish a critical path delay to the due date for completion? The length of critical path delay is the quantum to be used in valuing Time-related costs with a Working Day Rate. The Contractors compensation shall be the greater of Time-related Costs captured by the Base Value inclusion’s[7] or additions[8], compared to the amount determined by the Working Day Rate method.[9]
A Variation with critical path delay effects, can be valued inclusive of Time-related Cost, irrespective and independent of the granting or awarding of an extension of time.
References
[1] NZS3910:2013 clause 10.3.2(a)
[2] NZS3910:2013 10.3.2 the Engineer shall not be bound…
[3] NZS3910:2013 clause 9.3.11 For time-related cost…
[4] NZS3910:2013 clause 10.3.4 determine fair entitlement
[5] NZS3910:2013 clause 10.3.5 Period of extension
[6] NZS3910:2013 clause 9.3.3 mutual exchange of evidence to establish the effect on programme
[7] NZS3910:2013 clauses 9.3.5 Schedule of Prices or 9.3.6 rates derived from Schedule of Prices
[8] NZS3910:2013 % applied to Base Value per clauses 9.3.9 On-site Overheads and 9.3.10 Off-site Overheads and Profit.
[9] NZS3910:2013 clauses 9.3.11(c) assessment for compensation of overhead cost and profit
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“Celebrating 50 years of New Zealand Building Economist 1972 to 2021”
By Matthew Ensoll
Life Member NZIQS. Reg.QS.
Editor New Zealand Building Economist.
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