Professional Documents
Culture Documents
Empirical Evidence of Extension of Time in Construction Projects
Empirical Evidence of Extension of Time in Construction Projects
Abstract: Almost all construction projects face delays resulting in extension of time (EOT) or liquidated damages, depending upon which of
Downloaded from ascelibrary.org by Hacettepe Universitesi on 03/28/17. Copyright ASCE. For personal use only; all rights reserved.
the two parties absorbs the responsibility as per terms of the contract. A number of factors influence the realistic assessment of EOT claims,
along with the level of awareness and technical support. The construction industry of Pakistan, which operates in a rather traditional and
outdated style, has never been assessed on such critical contract management aspects. It has resulted into various disputes, court cases, and
bad blood between stakeholders. To help facilitate the local practitioners, this study analyzed 29 EOT-influencing factors. Prevalent practices
in the construction industry also were investigated. On the basis of an extensive survey, it was found that delayed payment to the contractor
was the primary cause of EOT claims. Conclusions were drawn and recommendations are proposed to resolve EOT issues, float ownership,
and prolongation cost. DOI: 10.1061/(ASCE)LA.1943-4170.0000217. © 2017 American Society of Civil Engineers.
vigor, raising a need for more detailed analysis. In this regard, delay may be excusable or nonexcusable. According to the Society
Haseeb et al. (2011) provided a useful study for identifying prob- of Construction Law’s (2002) Delay and Disruption Protocol, true
lems of projects and effects of delays in the construction industry of concurrent delay is the occurrence of two or more delay events at
Pakistan. However, the reasons and events causing such delays in the same time: (1) an employer’s risk event, and (2) a contractor risk
various contractual arrangements are yet to be explored. Not only event; the effects of both are felt at the same time. The protocol
are the reasons or events causing delays such as variations, force further explains that when true concurrent delay occurs, the con-
majeure, and adverse weather conditions not well studied, methods tractor should nevertheless be entitled to an EOT for employer
for dealing with them also are not available for local practitioners. delay-to-completion. When contractor delay-to-completion occurs
The core objectives of this research are to study the importance concurrently with employer delay-to-completion, the contractor’s
of critical factors, delays, and EOT cases, and point out potential concurrent delay should not reduce any EOT due.
flaws in prevalent practices in construction industry of Pakistan. A delay may be any type among the four groups. Each group
In doing so, this research investigates the importance of delay has its own set of procedures for resolving the associated claims.
analysis in dealing with EOT claims; analyzes top factors that usu- According to Mubarak (2015), resolving delay claims is one of the
ally are not given importance in prevalent practices, such as cost of core objectives of scheduling a project. Construction schedules
prolongation and ownership of float; and formulates a framework have been used widely for resolving delay claims (Babar et al.
for realistic determination of the time extension for EOT claims. 2016; Perera et al. 2016). Review boards and courts encourage
It is expected that the findings will help construction practitioners the use of critical path method (CPM) scheduling to identify delays
have a better understanding of EOT settlement resulting in an im- and delay responsibilities (Babar et al. 2016; Bayraktar et al. 2012).
proved performance of the construction industry. Ndekugri et al. (2008) defined delay analysis as the task of inves-
tigating the events that caused project delay to assess financial li-
abilities of the contracting parties. According to Nguyen and Ibbs
Literature Review (2008), the five most commonly used methodologies for delay
analysis are: (1) as-planned versus as-built (total time) method,
Extension of time is the compensation granted to the contractor in (2) impacted as-planned (what-if) method, (3) collapsed as-built
the case of delays for which he is not responsible to prevent incur- (but-for) method, (4) windows analysis method, and (5) time im-
rence of undue liquidated damages (El-adaway et al. 2016). pact analysis (modified as-built) method.
According to Anuar Othman et al. (2006), EOT is a result of an As-planned versus as-built method compares two schedules and
excusable delay that occurs when a contractor is behind schedule work with the assumption that one party causes no delays, but the
because of events beyond his control. The Society of Construction other party causes all delays. It displays the net impact of all delay
Law’s (SCL) (2002) Delay and Disruption Protocol states that a events on the project completion date (Nguyen and Ibbs 2008). In
major benefit of EOT to the contractor is the relief from the liability impacted as-planned method, also known as what-if or adjusted-
of liquidated damages, whereas the client may benefit from avoid- baseline method, the analyst, after specifying the as-planned sched-
ing the situation of time-at-large. ule, inserts changes that cause delays in the schedule (Trauner
Construction delays may be categorized into four groups: 2009). These changes are considered the only identified delays re-
critical versus noncritical delays, excusable versus nonexcusable corded during the project that may have affected its duration. The
delays, compensable versus noncompensable delays, and concur- time between the date of completion presented on as-planned
rent delays. These have been explained by various authors. Accord- schedule and the one on impacted as-planned schedule is consid-
ing to Trauner (2009) and Callahan et al. (1992), the events causing ered the delay for which a contractor is entitled to an EOT. In col-
delays to project completion dates are known as critical delays, lapsed as-built method, all contemporary records and project
whereas those which do not affect the project completion date documentation are studied and a detailed as-built schedule is pre-
are considered noncritical. Further, whether a delay is excusable pared. Then, the activities that affected the project are subtracted or
or nonexcusable is decided on the basis of contractual provisions removed from as-built schedule (Golparvar-Fard et al. 2011).
(Trauner 2009). Vasilyeva-Lyulina et al. (2015) claimed that an Hence, the difference between end dates of as-built and collapsed
excusable delay is an event characterized by the fact that it was as-built schedules obtained by subtracting activities from as-built
both unforeseeable and beyond the control of the contractor. schedule is considered to be the delay.
Mubarak (2015) defines nonexcusable delays as the ones for which The windows analysis method is on the basis of a CPM sched-
the contractor is either directly responsible or should have foreseen uling technique in which the total project duration is broken down
the delay-causing event. It is further explained that in the event of a into small and manageable time periods, referred to as windows.
nonexcusable delay, the contractor is neither entitled to an EOT nor Delay events occurring in each window of time are analyzed suc-
any monetary compensation. Further, standard forms of contract cessively by concentrating on the critical paths (Hegazy and Zhang
industries, but was casually dealt with as per local practices, leading
to both EOT claims and disputes.
In the case of prolongation cost related factors, contractors,
clients, and consultants had different perceptions regarding most
of them because of p-values smaller than 0.05. When the RII of
all the three stakeholders was analyzed, it was observed that for
the factor, cost of prolongation is entitled to the contractor (Sig:
0.0434), contractors gave very high importance (0.9214) as com-
pared with the other two stakeholders (clients, 0.8545; and consul-
tants, 0.8333). For the factor, if prolongation cost is entitled, claims
and consequent disputes can be avoided (Sig.: 0.0185), again con-
Fig. 3. Perception about type of projects with respect to frequency of tractors gave very high importance (0.9214), whereas consultants
EOT claims in their projects (0.8111) and clients (0.8969) gave relatively moderate importance.
Similarly, if prolongation cost was entitled, the party that would
bear the cost of revalidation of bank guarantees and insurance
was considered highly important by contractors (0.9071), whereas
regarding this factor were analyzed, it was observed that contrac-
consultants (0.7944) did not concur. This pointed to the fact that
tors (0.6500) gave very low importance to this factor compared
clauses of liquidated damages and all risks to be borne by contrac-
with clients (0.8364) and consultants (0.8667). This points to rather
tors constrain such clauses and, as a retaliating strategy, prolonga-
casual behavior, probably on the basis of the lack of awareness
tion costs were highly sought after. This aired the adversarial
about the objections raised by clients on EOT assessment issues.
relationship that escalated disputes in local context.
Again, having developed the expertise in traditional design-bid-
build method over the years, lower stakes in the project, and better
relationships with legal fraternity, local contractors tended to drag
Ranking of Factors by RII
the EOT disputes to litigation to pressure the clients into granting
time extensions. Ranking of all groups of factors on the basis of their combined RII
For ownership of float-related factors, contractors, clients, and values is discussed with greater details for the top 3-ranked factors.
consultants had the same perception except for the factor: float
ownership is predetermined, disputes regarding time issues can
be avoided (Sig.: 0.0256). Analyzing the RII of all three stakehold- Schedule Related Factors
ers (clients, 0.8364; consultants, 0.8222; and contractors, 0.9357) There were 10 factors identified that were related to realistic project
regarding this delay factor, it was observed that contractors consid- duration and project schedule EOT claims assessment. Importance
ered it highly important. Contractual language is required to assign ranking on the basis of the RII values calculated for all three stake-
its ownership and trade it as a commodity (De La Garza et al. 1991). holders is shown in Table 2.
Linking it to Farooqui and Azhar (2014), inadequate contractual Results from combined RII analysis showed that with a value of
practices exist in the local construction industry. Further, because 0.9526, the highest ranked factor was: if realistic project duration
of dependence on the traditional contractual systems, the use of and schedule are adopted, delay analysis techniques can be used
planning software and other ICT tools was limited (Abbas et al. to assess the actual impact of delays on the schedule. The results
2016). This hindered the critical decision making, such as float indicated that to be able to make use of delay analysis techniques
ownership, which was a serious concern in developed construction for better assessment, it was imperative to have realistic project
durations and schedules in contracts. This was important in EOT local construction industry and were further escalated in inter-
assessment because without delay analysis, it was difficult to con- national joint venture (IJV) projects. Nonavailability of resources
clusively assess the effect of delays, and without a well-developed in general and, specifically, the lack of skilled labors and techno-
schedule in place, it was difficult to perform delay analysis logically sound experts, constrained the local industry and led
(Muhamad et al. 2016). This called for using the latest managerial to unrealistic and improper resource assessment and subsequent
practices and tools in local industry, such as planning and sched- allocation.
uling software, and adoption of more reliable contractual methods
(Siddiqui et al. 2016; Abbas et al. 2016). Recent literature trends
depict the local construction industry as gradually adopting these Delay Analysis Related Factors
practices, but it is too early to see fruitful results. There were 10 factors identified that were related to delay analysis
The factor ranked as second highest was: if realistic project du- in EOT claim assessment. Importance ranking on the basis of RII
ration and schedule are adopted, project progress can be efficiently values calculated for all three stakeholders is shown in Table 3.
tracked throughout the project. It has a combined RII value of On the basis of the combined RII values calculated for all delay
0.9320. A value this high suggested that having realistic project analysis related factors, considering concurrent delays was the
durations and schedules were essential elements for tracking and highest ranked factor with a combined RII value of 0.9299. Hence,
monitoring the project’s progress to enhance project success chan- as per the opinion of stakeholders, it was very important to consider
ces. This was recently highlighted by Khamooshi and Abdi (2016) the effect of concurrency of delay events and their impacts on the
in their study. It was this unrealistic duration estimation that caused schedule. According to the Society of Construction Law (2002),
extensive delays and EOT claims in the local construction industry effects of concurrency of delays have direct influence in the entitle-
(Babar et al. 2016). The rigid clauses of all risks to be borne by ment of both EOT and prolongation cost. Therefore, it is extremely
contractors clouded their judgment of realistic estimates and di- important to consider this factor in delay analysis as highlighted by
verted their focus. Thus, monitoring and proper tracking of project Al-Gahtani et al. (2016). This usually was neglected in local prac-
durations suffered. This can be aided with the use of advanced tice because the traditional contract types did value highly the
contractual methods, such as PPP, turnkey, and other project and concurrency of events leading to disputes. Although these have
construction management approaches. Though their adoption has been incorporated in PEC price adjustment clauses for both local
started, the results are yet to be seen. and international contracts (PEC 2016), the lack of implementation
The factor, assessment of available resources for the project resulted in underperformance.
while making schedule, was placed in the third position by stake- The second highest ranked factor ranked was: performing delay
holders, with a combined RII value of 0.9258. Again, a value analysis for assessment of EOT, with a combined RII value of
greater than 0.9 indicates that stakeholders give high importance 0.9031. It was indicative of the fact that for realistic assessment
to assessment of resources available with the contractor. This of EOT, it is extremely important to use delay analysis techniques
was because the party who schedules and executes the work should on the construction schedules rather than manually calculating the
have a good assessment of resources available to perform the tasks number of days to be extended; this also was indicated by Aziz and
(Siu et al. 2016). This would result in a realistic schedule. As re- Abdel-Hakam (2016). The third factor with the same combined RII
ported by Razzaq et al. (2016), resource constraints existed in the of 0.9031 was: if delay analysis is performed, critical or most
be identified
17 Client’s objections on the time of extension 0.836 0.866 0.650 0.783 9
granted can be satisfied
18 Contractors objections on the time of 0.812 0.883 0.821 0.833 8
extension granted can be satisfied
19 Claims and disputes can be minimized 0.909 0.905 0.914 0.899 5
20 Time and cost overruns can be avoided 0.890 0.861 0.835 0.863 6
damaging delay events can be identified. The stakeholders strongly of contention at any time during the project; this also is highlighted
believed that by making use of suitable delay analysis techniques, by Al-Gahtani et al. (2016).
e.g., time impact analysis, in which the effect of each delay event The second factor with same combined RII value was: if owner-
can be analyzed separately, the events causing the most damaging ship of float is predetermined, disputes regarding time issues can
delays can be identified (Perera et al. 2016). This also will help in be avoided. It has been observed in construction industries all over
avoiding such events in future projects and mitigating their effects the world that contractors vehemently contest float ownership,
if they occur. Because of a lack of proper management practices in stressing that because the schedules are prepared by them, any time
the local construction industry, the delay analysis, which is a core cushion in noncritical activities belongs to them. Although clients
EOT assessment method, was not followed. Moreover, even PEC conversely hold the opinion that because they own all project as-
does not go into the required level of details for EOT assessment, sets, such as the schedule, they own the float. Therefore, if float
and it superficially deals with it by just mentioning that delay analy- ownership is determined at the beginning of the project, such dis-
sis is to be performed, instead of a thorough and holistic mecha- putes can be avoided. When such disputes are avoided, consider-
nism. The answer to what, how, and how much was not provided, able time and cost that would otherwise be wasted on the disputes
which escalated the deteriorating situation of EOT assessment in and litigation, also will be saved. The third factor, if ownership of
local context. float is predetermined, time and cost overrun can be avoided, had a
combined RII of 0.8412. This also was highlighted in a recent study
by El-Sayegh and Rabie (2016).
Ownership of Float Related Factors As previously mentioned, float ownership and determination
There were four factors identified that related to ownership of float were critical issues faced by the local construction industry. Razzaq
in EOT claims assessment. Importance ranking on the basis of the et al. (2016) highlighted critical factors for IJVs in Pakistan leading
RII values calculated for all three stakeholders is shown in Table 4. to both cost and time overruns, which easily can be managed if the
Results showed that the factor, determining ownership of float in float is properly allocated. Unfortunately, in local context, PEC
the start of project, was placed first by the respondents with a com- documents or existing practices do not necessarily assign it to a
bined RII value of 0.8515. Hence, almost all stakeholders believed party at the start of the project. As a result, it becomes a point
that inclusion of a float ownership clause in the contract was a of conflict between the parties. This float ownership, if properly
must, so that the float ownership issue would not become a bone allocated, can answer many of the EOT issues locally because
the otherwise demanded extension of time easily can be compen- sure to strongly disagree when asked about realistic assessments of
sated by the available floats. EOT in their projects. Furthermore, an extremely small portion of
clients and consultants strongly agreed with the EOT assessment
Prolongation Cost Related Factors being realistic. The consultants were the only stakeholders that
seemed positive about the realistic assessments of EOT, and most
There were four factors identified that were related to prolongation of them assigned the value of slightly to strongly agree. This
cost in EOT claims assessment. Importance ranking on the basis pointed to a clear lack of understanding and to the presence of
of the RII values calculated for all three stakeholders is shown an adversarial air between the stakeholders. This can be associated
in Table 5. partially with the lack of EOT assessment clauses in local contrac-
Results show that the factor, if prolongation cost is entitled, tual practices and documents. Also, sticking to the traditional con-
claims and disputes can be avoided, was assigned the highest rank tract systems and not exploring innovative and latest techniques
by clients, consultants, and contractors with a combined RII value bars the local practitioners from exposure to updated and reliable
of 0.8722. This indicated that in the case of compensable delays methods for such assessment.
(employer risk events), it was very important that the contractor In response to another question about the project schedule to be
was paid the cost incurred on account of any time related resources, realistic, 62% of the overall respondents answered negatively, 34%
otherwise claims and disputes might arise with repercussions. This in affirmation, whereas 4% were not sure. This shows that the ma-
is evident from the case of Kulekhani, Nepal, as highlighted by jority of the parties did not trust the schedules to be realistic and
Dahal and Rai (2016). achievable in the allotted time. This finding correlated with the
The factors that were ranked second and third were: if prolon- demographics of respondents; almost 63% respondents belonged
gation cost is entitled, time and cost overrun can be avoided; and
to government and semigovernment organizations in which politi-
that the cost of prolongation is entitled to the contractor; these had
cal influences dictated the decision making. This is valid because
combined RII values of 0.8722 and 0.8660, respectively. This
politicians in general want to deliver the projects during their ten-
showed that prolongation costs should be paid to the contractors
ures to gain political mileage resulting into unrealistic planned du-
when applicable, and that doing so would save time and cost over-
rations (Iyer and Jha 2006). Influencing major project decisions by
runs, as also highlighted by Alwee et al. (2016). Locally this was a
these political officials, who were not well-versed with engineering
serious matter of concern because many of the disputes were asso-
concepts, resulted in EOT and delay claims. This lack of trust on
ciated with the prolongation costs and their entitlements. Because
realistic duration estimations resulted in disputes and EOT claims,
of the lack of specific clauses, the owners intended to withhold
raising serious concerns for decision and policy makers. This lack
these costs and, conversely, contractors wanted to be paid for costs
of trust can be avoided by promoting trust among the parties by
that were not incurred due their faults. Thus a stress tended to exist
between these two key stakeholders, leading to disputes and claims. introduction of clauses in local contracts that compel stakeholders
to use the latest software, monitoring tools, and innovative contrac-
tual methods. It can also be integrated into PEC’s policy guidelines,
Other Findings in the long run, for the betterment of local industry.
As previously discussed, some questions were included to ask Similarly, when asked about project tracking and related fea-
about prevalent practices in the respondents’ projects regarding fac- tures of management, almost 70% of the respondents replied neg-
tors relating to project schedules and assessment of EOT claims. atively to its use in the construction industry of Pakistan. This
The responses are shown graphically in Figs. 1–3 and conclusions primarily was because of reliance on outdated tools and techniques
are drawn accordingly. in local industry and lack of awareness of the latest and up-to-
Fig. 1 shows that most of the contractors strongly disagreed date software, such as MicroSoft Project, Primavera, and other
about the realistic assessment of EOT in their projects. The contrac- building information modeling (BIM) tools such as Autodesk Revit.
tor’s representatives reported that clients did not asses the EOT real- Although recently observed by the authors and highlighted by the
istically and assigned lower extension than demanded. They had respondents, these software are increasingly adopted by construc-
the perception that contractors demanded overly high durations tion professionals, yet their effects are yet to be seen. Further, 25%
for EOT and, in doing so, the approved EOT was way behind of respondents replying in the affirmative, confirmed the recent
the realistic one. Hence, there were no contractors that strongly adoption of project tracking initiatives. The remaining 5% of re-
agreed about realistic estimations of EOT. Further, the authenticity spondents had no idea about project tracking. This primarily
of the EOT assessment was questionable because among the 33% was because of the absence of clauses in local contracts regarding
representatives of clients, 20% assigned values in the range of not use of software for project tracking and monitoring. Pakistan
of size and international experience.” J. Financial Manage. Property industry in Pakistan”. Int. J. Civ. Eng., 1–17.
Constr., 19(2), 138–151. Shash, A. A., and Abdul-Hadi, N. H. (1993). “The effect of contractor
Mehany, M. S. H. M., and Grigg, N. (2016). “Delay claims in road size on mark-up size decision in Saudi Arabia.” Constr. Manage. Econ.,
construction: Best practices for a standard delay claims management 11(6), 421–429.
system.” J. Leg. Aff. Dispute Resolut. Eng. Constr., 02516001. Siddiqui, S. Q., Ullah, F., Thaheem, M. J., and Gabriel, H. F. (2016). “Six
Microsoft Project 2013 [Computer software]. Microsoft Corporation, Sigma in construction: A review of critical success factors.” Int. J. Lean
Redmond, WA. Six Sigma, 7(2), 171–186.
Mubarak, S. A. (2015). Construction project scheduling and control, Siu, M. F. F., Lu, M., AbouRizk, S., and Tidder, V. (2016). “Quantitative
3rd Ed., John Wiley & Sons, Hoboken, NJ. assessment of budget sufficiency and resource utilization for resource-
Muhamad, N. H., Mohammad, M. F., Ahmad, A. C., and Ibrahim, I. H. constrained project schedules.” J. Constr. Eng. Manage., 10.1061
(2016). “Delay analysis methodologies (DAMs) in delivering quality /(ASCE)CO.1943-7862.0001106, 04016003.
projects: Contractors and consultants’ perceptions.” Procedia-Social Society of Construction Law. (2002). “The Society of construction law de-
Behav. Sci., 222, 121–131. lay and disruption protocol.” 〈https://www.scl.org.uk/〉 (Sep. 12, 2016).
Ndekugri, I., Braimah, N., and Gameson, R. (2008). “Delay analysis within SPSS v8 [Computer software]. IBM, Armonk, NY.
construction contracting organizations.” J. Constr. Eng. Manage., Tibaut, A., Rebolj, D., and Perc, M. N. (2016). “Interoperability require-
10.1061/(ASCE)0733-9364(2008)134:9(692), 692–700. ments for automated manufacturing systems in construction.” J. Intell.
Nguyen, L., and Ibbs, W. (2008). “FLORA: New forensic schedule analysis Manuf., 27(1), 251–262.
technique.” J. Constr. Eng. Manage., 10.1061/(ASCE)0733-9364 Trauner, T. J. (2009). Construction delays: Understanding them
(2008)134:7(483), 483–491. clearly, analyzing them correctly, Butterworth-Heinemann, Oxford,
Noor, M. A., Khalfan, M. M., and Maqsood, T. (2012). “Methods used U.K.
to procure infrastructure projects in Pakistan: An overview.” Int. J. Ullah, F., Ayub, B., Siddiqui, S. Q., and Thaheem, M. J. (2016). “A review
Procurement Manage., 5(6), 733–752. of public-private partnership: critical factors of concession period.”
Odeh, A. M., and Battaineh, H. T. (2002). “Causes of construction delay: J. Financial Manage. Property Constr., 21(3), 269–300.
Traditional contracts.” Int. J. Project Manage., 20(1), 67–73. Vasilyeva-Lyulina, A., Onishi, M., and Kobayashi, K. (2015). “Delay
PEC (Pakistan Engineering Council). (2007). “Standard form of bidding analysis methods for construction projects: Mathematical modelling.”
documents (civil works).” 〈http://www.pec.org.pk/downloads/PEC Int. J. Transp., 3(1), 27–36.
_Bidding_Docs/4mPICC/(1)%20Std%20Form%20of%20Bidding%20 Williams, T. (2003). “Assessing extension of time delays on major
Docs%20(Civil%20%20Work).doc〉 (Sep. 12, 2016). projects.” Int. J. Project Manage., 21(1), 19–26.