Conrad Bromley, HKA
Does the second edition of the SCL Delay and Disruption Protocol clarify the measure of disruption?
When the Society of Construction Law (SCL) first published its Delay and Disruption Protocol in 2002 (the 2002 Protocol), it was received with enthusiasm by construction professionals around the globe, before gaining judicial approval in multiple jurisdictions worldwide – most notably Australia.
It may be trite advice that any dispute arising out of a contract must be resolved in the manner prescribed by the contract, but the complexities of the construction process often exceed the drafting abilities of even the most skilled and experienced contract drafters. It is this combination of complexity and inadequacy in standard form contacts, as acknowledged by the 2002 Protocol, that provided the fertile ground in which the 2002 Protocol blossomed into a go-to guide for any contractor seeking to prosecute a claim for delay or disruption.
The objective of the 2002 Protocol was to provide guidance on the resolution of disputes that commonly arise between parties to construction contracts, where one party sought an extension to the contract period and/or compensation for additional time or resources expended. The largest part of the 2002 Protocol was devoted to the resolution of delay-related claims; the first 18 of its 21 core principles focus on best practice or principles concerning the assessment or valuation of delay.
Core principle 21, the final core principle of the 2002 Protocol, is succinctly titled “Disruption”, which it defines as being a “disturbance, hindrance or interruption to a Contractor’s normal working methods, resulting in lower efficiency”. The subsequent accompanying guidance is also rather brief when it comes to the assessment of disruption, and provides that:
The most appropriate way to establish disruption is to apply a technique known as “the Measured Mile”. This compares the productivity on an unimpacted part of the contract with that achieved on the impacted part. Such comparison factors out issues concerning unrealistic programmes and inefficient working. The comparison can be made on the man-hours expended or the units of work performed.
The 2002 Protocol is not prescriptive as to how the measured-mile comparison ought to work in practice. Beyond asserting that the objective of the measured mile (or any other method of measuring disruption) is to assess the compensation necessary to place the contractor in the same financial position it would have been had the event complained of not occurred, the 2002 Protocol is absent of detail.
While few construction professionals would argue against the merits of the measured mile as a method for assessing disruption, the 2002 Protocol did not go far enough to achieve its stated aim of being adopted by “most contracts … as the best way to deal with delay and disruption issues”. Focusing on disruption, to compare the productivity on an unimpacted part of the contract with that achieved on the impacted part is not a simple task, and the 2002 Protocol left too many questions unanswered, not least: what is an unimpacted part of the contract?
In 2017, the SCL issued an updated version of its Delay and Disruption Protocol (the 2017 Protocol), to bring the guidance up to date and reflect the evolution of the industry best practices that had developed during the 15 years since its first publication.
Much like the 2002 Protocol, the 2017 Protocol quickly gained judicial approval (before the second anniversary of its publication in Australia) and continued in the vein of its predecessor to provide construction industry practitioners with a helpful solution to the many lacunae in standard form construction contracts.
While the headline-grabbing differences between the 2002 Protocol and the 2017 Protocol focused on the move from retrospective to prospective methods of delay analysis, the disruption guidance was also furnished with some much-needed detail.
Core principle 18 – replacing the original core principle 21 – is now titled “Disruption Claims”, and provides that:
Compensation may be recovered for disruption only to the extent that the contract permits or there is an available cause of action at law. The objective of a disruption analysis is to demonstrate the loss of productivity and hence additional loss and expense over and above that which would have been incurred were it not for the disruption events for which the Employer is responsible.
Before marching headlong into what a disruption assessment ought to look like, it is probably time to pause and first consider: what is disruption? Among the numerous hurdles placed between a disrupted contractor and its compensation is the void of a consensus as to what is really meant by disruption. Most standard form contracts are silent when it comes to disruption – a fact that was acknowledged in the 2002 Protocol. Some standard form contracts do anticipate disruption in the form of an effect of an instruction to vary the works, or by the failure to provide a document that is necessary to proceed with the works, but none of the more commonly used standard form contracts provide a framework for a disruption-based claim or its concomitant relief.
In broad terms, a claim for disruption exists as a breach of an implied term in any construction contract that the employer, and/or those for whom it is responsible, will not prevent or hinder the contactor from performing the works in a regular and orderly manner.
Core principle 21 of the 2002 Protocol was, rather neatly, the SCL’s definition of disruption. The 2017 Protocol, with the equivalent core principle 18, provides a more comprehensive look at disruption to consider the circumstances under which disruption may be recoverable as a head of claim; the objective to be achieved by a disruption analysis, and the outcome if the objective is successful.
The 2017 Protocol still provides a definition of disruption in the following guidance from section 18:
Disruption (as distinct from delay) is a disturbance, hinderance or interruption to a Contractor’s normal working methods, resulting in lower efficiency.
Keating on Construction Contracts (the Honorable Sir Vivian Ramsay and Stephen Furst, Sweet and Maxwell, 2016) similarly defines disruption as a “disturbance of the contractor’s regular and economic progress and/or delay to a non-critical activity”. AACE International defines disruption “as an action or event which hinders a party from proceeding with the work or some portion of the work as planned or as scheduled”.
While using different terminology, the definitions provided above reach a general accord around loss of productivity: disruption occurs when a contracting party performs an element of its work less efficiently, because of an external factor. Put another way, the output from a fixed body of resources (the input) is reduced, which logically increases the input cost per unit of output.
How one begins to demonstrate and assess the impact of the disruption event(s) will have a material effect on the outcome of the compensation claimed as arising from the disruption event.
While there exist a multitude of ways in which a disrupted contractor can attempt to demonstrate a loss of productivity, there is a general consensus in the construction industry that the measured-mile approach provides the best approximation of the actual loss of productivity suffered. Demonstrating actual loss that can be attributed to the matter relied on will also go some way to satisfying the requirements for cause and effect that have long existed in the UK courts.
Both the 2002 Protocol and the 2017 Protocol advocate the use of the measured mile as the most appropriate means to quantify the loss of productivity suffered.
The 2002 Protocol opts for a simple approach: a recommendation to use the measured-mile technique to compare the productivity achieved on an unimpacted part of the contract with that achieved on the impacted part, and a cautionary note to ensure one compares like with like. This approach is demonstrated, in a practical sense, in Whittal Builder Company Ltd v Chester-le-Street DC, where a clear delineation could be made between “impacted” and “unimpacted” periods of productivity to establish the relative increase in cost per unit of output.
Sadly, if somewhat predictably, the identification of clear periods of impacted and unimpacted periods of work are rarely possible in complex construction projects. An inherent trait of disruption and loss of productivity is that it is often identified after the event, when the opportunity to record such loss of productivity contemporaneously has been lost. Beyond suggesting alternative, less preferable methods of assessing lost productivity, the 2002 Protocol offered no further guidance.
The 2017 Protocol provides a more comprehensive body of guidance when compared to its predecessor. While retaining the measured mile as the primary or preferred method for assessing loss of productivity, the 2017 Protocol also provides additional guidance to address some of the areas left void by the 2002 Protocol, including:
The above is just a small sample of the ways in which the 2017 Protocol differs from and improves upon the guidance provided in the 2002 Protocol. While it would be wrong to claim the 2017 Protocol is a panacea to the disruption conundrum – because it is not, nor does it pretend to be – it does undoubtedly move the Protocol closer to achieving its 2002 aim of being adopted by “most contracts …as the best way to deal with delay and disruption issues”. Disruption is, and likely will forever be, among the most complex and difficult parts of a claim to identify, demonstrate and quantify.
However, where the 2017 Protocol has created a clear and tangible distinction from the 2002 Protocol is, in my opinion, the inclusion of criteria that baseline productivity must be “realistic and achievable”.
Realistic and achievable progress, coupled with the requirement for the baseline period to be “sufficiently long to serve as a reliable sample of non-impacted performance”, remedies a key shortcoming of the 2002 Protocol.
The importance of these criteria is perhaps best explained in the context of their nemesis: best possible productivity. Best possible productivity cannot, by definition, be “realistic and achievable”. To be the best is to be peerless; without equal; and unsurpassable. Best productivity cannot, therefore, be “realistic and achievable”.
Without the 2017 Protocol criteria of realistic and achievable productivity over a sufficiently representative sample period, it would be possible to cherry-pick abstract periods of time or areas of the works where “best possible” productivity was achieved, and use these to create a composite measured-mile benchmark – the “best possible” benchmark. While this might be an attractive proposition to a contractor that is trying to maximise the recovery under its disruption claim, it is undoubtedly an artificial construction that unfairly penalises the employer for events that it may only be partly responsible for – and certainly does not follow the guidance of the 2017 Protocol. To be realistic, the benchmark must be achieved, demonstrably, over a consistent and sufficiently representative period.
“Realistic and achievable” productivity is productivity that is regularly and consistently achieved, and is achievable. It recognises and embraces the ordinary ups and downs and the complexities of construction process to derive what will be the average productivity that can be achieved consistently.
It is not the one day, or odd few days, when the heavens align and you achieve your absolute best productivity; that is not realistic and achievable. And when one relates this back to the aim of a disruption analysis and core principle 18 of the 2017 Protocol, to place the contractor in the same financial position it would have been were it not for the disruptive event, it becomes plainly clear that “best possible” productivity should not be the central pillar of a measured-mile analysis.
A claim for disruption is a claim for a breach of an implied term of a construction contract, and the remedy is damages – loss actually incurred as a direct result of that breach. To base a measured-mile analysis on a “best” productivity benchmark would almost certainly place the contractor in a better position than it would have been, but for the disruptive event.
The 2017 Protocol creates a new, more robust set of guidelines against which disruption and loss of productivity can be assessed. It is not a silver bullet to the perpetual problem of disruption, but it undoubtedly improves upon the foundations laid by the 2002 Protocol and brings the construction industry closer to a unified approach to the assessment of disruption.