UK: Importance Of Reliable Critical Path Analysis In Delay Claims

A recent case before the TCC underlines the importance of reliable critical path analysis in assessing, among other things, the cause and extent of delay to a project's completion date and whether any compensation is due for those delays.

The TCC assessed the level of damages owed to Mirant (Contractor) by Arup (Consultant) for breach of contract and negligence arising out of defective boiler foundations at a power station in the Philippines. In previous hearings the TCC and Court of Appeal had held that Arup owed Mirant's predecessor a duty in contract and tort not to cause economic loss and that it had failed to fulfil this duty in respect of the boiler foundations. Arup faced a potential liability of $100 million.

A key issue before the TCC in assessing the level of damages due was whether the boiler foundations were on the critical path and therefore whether the delays arising out of the associated remedial works delayed completion of the project. The Judge held that the boiler foundation problems did not cause a critical delay to the project as they were not a dominant or operative cause of delay. The dominant cause of delay was the need for acceleration of the programmes for the civils. The Judge went on to dismiss all of Mirant's damages claims against Arup. In short, the Judge held that while Arup had breached its contract and been negligent, it had not caused Mirant to suffer loss and therefore no damages were payable.

The Judge provided useful guidance on the use of critical path analysis on construction projects:

• A critical path, of which there may be more than one, is "the sequence of activities through a project network from start to finish, the sum of whose durations determines the overall project duration."

• Critical path analysis is a tool for managing change on construction projects in order to prevent delay and for determining which periods of time give rise to compensation. Without such analysis the parties may be mistaken as to what is on the critical path.

• Windows analysis is an excellent method of critical delay analysis. It involves plotting activities on or near the critical path on to a programme, typically every month, to provide a snapshot of progress and potential causes of delay on the project at that point. This snapshot allows parties to take measures to prevent delay.

• The watershed analysis is less reliable. This method of analysis involves taking snapshots of the project at a small number of critical benchmarks (as opposed to more frequent intervals) to assess progress on the project. It fails to show, for example, the pattern of events between the watersheds.

• Any delay analysis is only valid if it is comprehensive, takes into account all project activities and is considered alongside other evidence.

• The question of whether an event has delayed the project is a question of fact.

This case reinforces the need for claimants to prove that a breach of contract or breach of a duty of care caused its loss and shows that a breach of contract or negligence claim does not always sound in damages. It highlights the dangers of losing sight of the real cause of delay by assuming, without carrying out adequate delay analysis, that one delay in particular is the cause (here, the boiler issue). It therefore underlines the need for reliable critical delay analysis throughout the project, particularly where there are several works elements, to reveal the real cause of delay - which is not always what the parties expect.

Case reference: Mirant Asia-Pacific Construction (Hong-Kong) Limited ("Mirant") v Ove Arup and Partners International Limited and Ove Arup and Partners Hong Kong Limited ("Arup") [2007]

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

The original publication date for this article was 10/05/2007.