Unless there is an express provision to the contrary in your contract, the approach in English law is that where there is remaining float in the programme at the time of an Employer risk event, an EOT should only be granted to the extent that the Employer’s delay is critical to the contract completion date (as opposed to the Contractor’s planned completion date).
The ‘float’ is the amount of time that non-critical activities can absorb, in excess of their original intended duration, without impacting on the critical path of the works as a whole.
A Contractor may argue that it ‘owns’ the float because, in planning how it proposes to carry out the works, it has allowed additional or ‘float’ time to give itself some flexibility in the event that it isn’t able to carry out the works as quickly as it planned. If there is a delay to the Contractor’s progress for which the Contractor is not responsible, it may contend that it is entitled to an EOT, even if the delay to progress will not result in the contract completion date being missed but merely in an erosion of its float. In addition, the Contractor may want to accelerate the works in order to keep the float in full and claim its costs of doing so.
On the other hand, an Employer may say that the Contractor has no contractual remedy for being prevented from completing the works at any time prior to the contract completion date, and is therefore not entitled to an EOT unless the delay to progress will result in the contract completion date being missed. So, the Employer would say that it ‘owns’ the float.
What does the Contract say?
The issue of who ‘owns’ the float is often the cause of disputes between parties to a construction contract over entitlement to EOTs. The first port of call in the event of a dispute arising on this issue will be to review the terms of the contract. In the UK, the express issue of ‘float’ rarely appears in standard form contract conditions. However, the answer may appear in the EOT provisions. Where the EOT clause states that an EOT is only to be granted if the Employer delays completion beyond the contract completion date, then the likely effect of that wording is that the total float has to be used up before an EOT will be due (i.e. the Employer would ‘own’ the float). If, on the other hand, the EOT clause states that an EOT will be due whenever the Employer’s delay makes the Contractor’s planned completion date later than it would have been if it were not for that delay, then the total float will probably be available for the benefit of the Contractor.
However, most contracts give no indication as to whether an Employer delay has to affect the contract completion date or merely the Contractor’s planned completion date before an EOT is due. That is why parties should ensure that this issue is properly addressed at contract negotiation stage.
If the Contract is silent, does the Contractor own the float?
Prior to the 1999 case of Ascon Contracting Limited v Alfred McAlpine Construction Isle of Man ltd., if the contract was silent on the issue of float, the general approach adopted in the UK was that the Contractor would own the float because it was the Contractor who had built the float into the programme to provide a cushion for unforeseen problems. However, the current approach as established in the McAlpine case and supported by the Society of Construction Law Delay and Disruption Protocol, is that an Employer delay has to be critical before an EOT will be due. This has the effect that float is not time for the exclusive use or benefit of either the Employer or the Contractor but, rather, exists for the benefit of all parties to the contract. So, even if an Employer delay causes a delay to a Contractor’s planned completion date, an EOT will not be due unless that delay resulted in a delay to the overall contract completion date.
In terms of what that means for acceleration costs, in the event that a Contractor sought to accelerate the works in order to keep the float, the current position is that, unless the contract states otherwise, such costs would not be recoverable as the float would belong to the project rather than to one of the parties.
This position can lead to unfairness and ambiguity. For instance, under contracts where Employer delay has to affect the critical path before the Contractor is entitled to an EOT; if an Employer delay occurs first and uses up all the float, then the Contractor can find itself in delay and paying LADs as a result of a subsequent Contractor delay which would not have been critical if the Employer Delay had not occurred first. However, on the other hand, under contracts where the Employer delay only has to affect the Contractor’s planned completion date, the Contractor is potentially entitled to an EOT every time the Employer delays any of the Contractor’s planned activities, irrespective of their criticality to meeting the contract completion date.
The position established in the English courts is that neither party owns the float if the contract is silent on the issue and the Contractor will only be entitled to an EOT for an Employer delay which impacts on the critical path i.e. the courts have elected not to confer a benefit on either party in the event of the parties’ failure to deal with the issue in their contracts.
Given the position taken by the Courts, it’s important to deal with the issue of float during the contract negotiation stage. However, if that’s not possible, you should at least price for the risk of losing the float for reasons that are outside of your control.
For more information on this issue please contact one of the team below.
James Driver, Partner – firstname.lastname@example.org
Jennie Jones, Senior Associate – email@example.com
Mark Christie, Solicitor – firstname.lastname@example.org
Harriet Atkin, Solicitor – email@example.com