Australia: Construction Law Update: Programming And Critical Path Analysis

Last Updated: 11 January 2008
Article by David Goldstein and Bree Miechel
Mirant Asia-Pacific Construction (Hong Kong) Limited v Ove Arup and Partners International Limited v Ove Arup International Limited and Ove Arup Partners Hong Kong Limited [2007] EWHC 918
Mirant v Ove Arup

concerned claims by Mirant Asia-Pacific Construction (Hong Kong) Limited against various Ove Arup companies for breach of contract and negligence in relation to the construction of a power station in the Philippines.

The case illustrates the difficulties that are often encountered when it becomes necessary for parties to complex building or engineering projects to establish the real cause of delay to the project.

Mirant's claims arose out of the failure of two of the main foundation's of boiler unit 1 of the power station.

These foundations settled by 46mm and 66mm respectively when steelwork which they were designed to support was being erected. Remedial work was required to the foundations and that involved dismantling partially erected steelwork, carrying out remedial work to the foundations and re-erecting steelwork.

Mirant's claim for damages for delay hinged upon whether remedial works required to Boiler Unit 1's foundations were on the critical path.

After hearing the parties' evidence, and in particular that of the parties' respective programming experts, his honour Judge Toulmin CMG, QC, found that the critical path of the civil works under the contract went through other parts of the civil works. Accordingly the 'consequences of the boiler foundation failure were not the proximate or dominate cause and not therefore the operative cause (or one of the operative causes) of the delay' to the project and damages for delay were not recoverable.

The court's decision was a major setback for Mirant. Aside from damages for remedial works, which were offset against insurance monies Mirant had already received, the court found Mirant was unable to recover damages claimed in the proceedings.

In his judgment, his honour Judge Toulmin CMG, QC made some useful remarks in respect of the programming of construction projects and critical path analysis. He considered academics' views on the Critical Path Method frequently used to plan construction projects and analyse causes of delay. His honour noted that such analysis did not occur on the power station project, though a number of witnesses were convinced that they knew where the critical path lay.

He noted the following:

  • there may be more than one critical path;
  • the critical path is 'the sequence of activities through a project network from start to finish, the sum of whose durations determine the overall Project duration';
  • critical path analysis is not an end in itself, it is merely a tool which requires detailed and sophisticated analysis;
  • critical path analysis may be conducted on a 'Windows' or 'Watershed' basis;
  • Windows analysis is an excellent and the most accepted method of critical path analysis - it involves regular reviews and updates on the progress of a project for set intervals of time, usually a month. A programmer, using sophisticated software, plots activities that are on or close to the critical path for the duration of each 'window' of time to discover the effect between events within a particular window and on the total contract period. This enables the employer and contractor quickly to identify and deal with delays.
  • Watersheds analysis is a less reliable form of analysis - critical path analysis is only undertaken at critical benchmarks in a project, usually months apart. It provides only a 'snapshot' of the time at which it is undertaken and does not take account of the events between the watersheds. The 'longer the interval between windows, the more likely it is that the review will be inaccurate (particularly if the records are poor)'. If something goes wrong on a project there is more likely be a dispute over apportionment of blame under a watershed analysis.

In Mirant v Ove Arup both parties' programming experts used a watershed analysis to re-create the critical path on the project.

As agreed by both parties, none of the programmes used during construction of the power station were reliable.

While Mirant's expert analysis reviewed the project at three benchmarks over the course of an 18 month period, Ove Arup's expert analysed four benchmarks over the much longer period of 30 months. Despite the longer periods of time between Ove Arup's benchmarks, Judge Toulmin CMG, QC held that it was Mirant's analysis that was seriously flawed as, unlike Ove Arup's evidence, it failed to show what, if any, the effect the remedial works had on the overall project duration.

Had Mirant regularly carried out programming analysis over the duration of the project it would have been in a far better position to analyse project delay and to manage it. In the absence of this analysis, and the assistance it would have provided Mirant, the resolution of this dispute was achieved by what appears to have been protracted litigation in the Queen's Bench Division over 37 hearing days.

In summary, the absence of regular programming reviews makes it far more difficult for expert witnesses to conduct a retrospective analysis of delay events and their effect on a project's critical path. Effective programming on the other hand will generally lead to fewer disputes and much swifter resolution of disputes which do arise.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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