Delay and Disruption
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KEYWORDS: |
Delay and Disruption, Expert evidence, Critical Path Analysis, Disclosure, Windows Method, Watershed Method, Settlement, Thornton J. |
The judgment of HH Judge Toulmin in Mirant Asia-Pacific Construction (Hong Kong) Ltd v Ove Arup Partners International Ltd [2007]EWHC918(TCC) provides a useful summary of the law in relation to disclosure, the role of experts and causation in the case of a delay claim. The judgment also examines the meaning and use of critical path analysis and particularly the windows and watershed method and their limitations. There is also a consideration of the relevance of settlements to the quantum of damages and a further review of the law on "black-holes" in the web of liability between parties.
I have examine below only those parts of the judgments that are relevant to the issues of causation and delay analysis.
Mirant claimed $78,897,369 against Arup as damages for breach of contract and negligence in relation to a power station constructed at Sual in the Philippines. In April 1997 two of the main foundations of Boiler House Unit 1 failed which required extensive remedial works which Mirant claimed delayed the project.
There had been previous proceedings and the issue in the instant proceedings was causation and the measure of damages (if any). Mirant gave credit for the sum of $3.9m which it had received under the Project insurance policy.
There were many problems with the project including problems with the coalyard and coal jetty, the cooling water system, the provision of the transmission lines and the failure of the Unit 1 generator itself. There was also changes in key personnel. Significantly and crucially there was no monthly critical path analysis undertaken during the project so that the parties were unable to determine how much time was available to deal with the boiler foundation problem before it affected the project as a whole. There was no accurate way to determine how urgent it was for a solution to be agreed and implemented.
Although Toulmin J did not examine the role of disclosure in proceedings, in common law proceedings it is an important part of an adversarial process and allows the parties the fullest opportunity to investigate the case both for and against them.
Toulmin J repeated the practical consequences on the weight of evidence of a failure to give proper and full disclosure by reference to the principles set out by the Court of Appeal decision in Malhotra v Dhawan [1997] which is in the nature of a presumption in the event of uncertainty.
Toulmin J examined the steps that solicitors were required to take in relation to disclosure particularly in international disputes where a party may be represented by two different firms in different jurisdictions. That is not examined here, but what is of interest is that Toulmin J considered that the Experts also had certain obligations in relation to disclosure.
The principle that applied was that experts were required to have equality of arms as far as the documents on which their opinion was based was concerned. It followed, and Toulmin J held that the experts themselves should be careful to check that documents on which their opinions were based had been disclosed to the opposing parties.
In this case Toulmin J made his decision based on the evidence and it does not appear that the presumption needed to be applied.
Toulmin J repeated the law in relation to the operative cause of delay and in this regard the judgment is unremarkable:
Toulmin J referred to and adopted the approach of the Inner House in the Scottish courts in John Doyle Construction Limited v Laing Management Scotland Limited [2004] BLR 296 that the question of causation was to be treated by the application of common sense to the logical principles of causation. In the case of concurrent causes, if one of those causes could be identified as the proximate or dominant cause of the loss, it was to be treated as the operative cause and the person responsible for it would be responsible for the loss.
The judgment of Toulmin J is long and complicated examining all the evidence. It is clear that the evidence was uncertain and therefore any analysis was also bound to be imprecise.
The project was already in delay before the problems with the foundation were found. A revised programme was issued but there was no critical path analysis. One month after the revised programme was introduced the programme was already in serious delay. Toulmin J was unable to conclude whether or not the boiler unit works were on the critical path at that time.
Once the problems with the boiler foundations were found, Toulmin J found that if the remedial works had been carried out with the necessary urgency they would have been completed at or close to the time according to the revised programme. The delays to the civils works were greater than the time that it should have taken to agree a solution and carry out the remedial works.
Toulmin J found that the time taken to re-organise the project in order to arrest and reverse the lengthening delay to the civils works was the dominant cause of the delay and continued long after the remedial works to the boiler foundations were completed.
Toulmin J held that the movement of the boiler foundations was not the dominant or even a dominant cause of the delay to the project, nor did it contribute materially to the loss arising out of delay to the project.
On that basis Toulmin J dismissed the claim.
In reaching his decision Toulmin J made a number of comments on the difficulty of accurate analysis and particularly critical path analysis.
Toulmin J referred to the definition of critical path in BS.6079 – 2.2000 Part 2, 2.41 as the sequence of activities through a project network from start to finish, the sum of whose durations determined the overall project duration. He observed that the duration is only the shortest time if activities on the critical path are carried out in the shortest time.
He observed that "float" in a programming sense meant the length of time between when an activity was due to start and when it had to start if it was to avoid being on (or very close to) the critical path. He recognised that "float" could also be used to refer to the time assigned to an activity, which was longer than the shortest time that is reasonably necessary to undertake that activity. Although not stated in the judgment, the second type of "float" is a time risk contingency.
Importantly he accepted that there may be more than one critical path as recognised in The Society of Construction Law Delay and Disruption Protocol page 54.
In apparent recognition of the possible inaccuracy of any analysis based as it is on uncertain data, Toulmin J considered that it was important to look at activities at or near the critical path to understand their potential impact on the project. In this particular case a number of witnesses were convinced, without the benefit of any critical path analysis, that they knew where the critical path lay. That in fact influenced the decisions made during the project.
Toulmin J accepted that the critical path analysis was a tool or technique to assist in the management of construction projects and not an end in itself. He recognised that the critical path analysis has become an invaluable tool which enables a complex construction project to be managed with better available information. The analysis identifies at a given date which important aspects of the project are falling behind the programme, particularly if they are on or close to the critical path, what if any is the impact on other aspects of the programme and where additional resources need to be placed. It also demonstrates where activities are ahead of what is planned and enable a decision to be taken on whether planned activities need to be rescheduled.
Toulmin J agreed with the Core Principle No.1 in the Society of Construction Law Paper that a properly prepared and regularly updated programme would reduce the number of disputes relating to delay.
He did however observe that it was possible to affect the critical path by giving some activities a longer time than was necessary, thus keeping them on the critical path and having the effect of keeping other activities from being on the critical path. This was an implicit recognition of the potential inaccuracy of any programme depending as it does on an estimate of duration of activities.
Toulmin J observed that "Windows" and "Watersheds" are not methods of analysis in themselves.
"Windows Analysis" is the review and update of a programme at regular intervals such as monthly. It divides the overall construction period into smaller periods for analyse and provides a snapshot at the point at which the analysis takes place. The updates take into account those activities which had started early or had been delayed and the progress of those activities which had started since the previous window. The employer and the contractor can then analyse over the window period what changes had occurred and the problems.
It identifies the effect between a particular event or series of events within the time window and the effect of one or more events on the total contract period. The method provides an excellent form of analysis to inform those controlling the project what action they need to take to prevent delay to the project. Without such analysis those controlling the project may be mistaken as to the critical path at that time.
Toulmin J observed that "Watershed Analysis" chooses the window period on the basis of critical benchmarks in the project He considered that it was a less reliable form of critical path analysis than "Windows Analysis". This appears to be based on the premise that the periods are less frequent than the windows analysis. When used for managing projects this may indeed give less control and uncertainty since it will be necessary to retain and review detailed records in order to provide reliable data. The longer the interval between windows, the more likely it is that the review will be inaccurate, particularly if the records are poor.
Toulmin J observed that window and watershed analysis are used as a tool for analysing at the given date, what had caused any delay that had occurred and what was the extent of that delay. The analysis was only valid if it was comprehensive and took account of all activities.
Toulmin J considered that the retrospective delay analysis must include the time to the end of the Project, otherwise activities may occur which will take them on to the (or a) critical path after the date of the final window or watershed. That indeed was a criticism of one of the experts in the case, and his analysis was held to be seriously flawed.
In the instant case watershed analysis was used by the experts to attempt to re-create the critical path using benchmarks. Toulmin J considered that the fact that the benchmarks covered extended periods of time reduced the overall reliability of the analysis. The value of the analysis was also considered to be seriously diminished by the fact that no critical path analysis was undertaken as the project progressed.
Toulmin J recognised that the programming Experts had a difficult task. In common with many cases in construction, in this case the experts had to consider many variables and even the early agreed programmes which was used as a first benchmark was regarded as unreliable.
Toulmin J held that the analysis was merely a tool to be considered with the other evidence. The question of the delay caused by the failure of the Boiler foundation was a question of fact. The evidence of programming Experts might be of persuasive assistance.
Toulmin J accepted the criticisms of the Mirant expert that his analysis was not a critical path analysis but a snapshot analysis of progress at the beginning/end of his chosen windows. It was flawed because it did not attempt to address the position at the critical date of start of the reliability trials. In addition the expert's analysis did not consider the effect of potential delays caused by events close to the critical path.
The proper management of large projects using critical path analysis is common in construction. If properly prepared their adoption will allow more informed decisions. The uncertainty of the model of the project needs to be recognised. The examination of near critical activities has been recognised for some time as the appropriate way to deal with such uncertainties which are rooted in the inaccuracy of both durations and the construction logic in any programme.
If regularly updated programmes are used during construction then they are an invaluable source of evidence and may even be sufficient to adopt the more straightforward method of planned impact analysis. As recognised by Toulmin J the programmes are only as good as the data on which they are based. The result of any analysis still has to be verified against the available evidence. The opinions of experts are only persuasive evidence; they are not determinative of the issues. It is however important for experts to have a good detailed grasp of the project, to consider all the available evidence and to carry out sufficient analysis to consider the main possible causes of delay.