January 23, 2023
Disruption on any major project can become a catastrophe for any contractor; increasing costs and risking liability for liquidated damages. This article series considers disruption on construction projects, contractor considerations for bringing a successful disruption claim, and the basics around quantifying the additional costs incurred due to disruption on your project.
What is disruption in construction?
“Disruption” is the loss of productivity or efficiency due to disturbance, hindrance or interruption to the normal or planned working methods.[1] In construction, disrupted work is work carried out less efficiently than it otherwise would have been, but for the cause of the disruption, and leads to an increase in direct man-hours spent (labour and/or equipment) on the disrupted work.
Delay as distinct from disruption
Disruption can be confused with a delay claim – there are important distinctions between the two and how they affect work on a construction project.
A delay relates to the late completion of works (i.e., either critical or non-critical delays), while disruption relates to the loss of productivity to specific work undertaken. Often, disruption causes sub-critical delay and inefficiencies which a critical delay analysis fails to pick up, therefore, a successful extension of time (‘EOT’) claim may not result in the recovery of the losses associated with disruption on-site.
Although disruption may cause delay (or be caused by delay), delay is not disruption nor is it a precondition of disruption. Disruption may occur when work progress is not only delayed, but when the effect of an earlier delay is being mitigated (or recovered), or work is accelerated. Therefore, disruption may not prevent the contractor from completing on time and entitle it to an EOT claim, however, it may be entitled to claim losses incurred in relation to the disruption.
It is not uncommon for disruption to fall lower down the list of priorities for contractors preparing claims. However, disruption can often be the cause of a large majority of the loss suffered, therefore, it is crucial for contractors to be familiar with disruption and entitlement to claim.
Causes and effects of disruption
Disruptive events on a project can lead to other impacts in an effort to make up time and mitigate delay. These include:
| 1. Extended working hours; | 2. excessive change; |
| 3. work in parallel rather than in a series | 4. out-of-sequence work; |
| 5. restricted access; | 6. crowded conditions; |
| 7. suspension of works; | 8. loss in productive rhythm; |
| 9. weather conditions less favourable than planned; | 10. fatigue; |
| 11. failure to receive instructions; | 12. demotivation of work force; |
| 13. intermittent working; and | 14. loss in learning curve. |
A disruptive event (whether causing only one or all of the identified impacts) can negatively impact the contractor in its performance of its planned works; such that it can impact both critical and non-critical activities, reduce productivity for labour and plant, result in additional man and plant hours, and result in additional costs incurred by the contractor (or loss).
Further, many of these impacts will frequently arise as a secondary, or intermediate cause rather than a primary cause. For example, the principal may direct the contractor to accelerate, which (although intended to result in an increase in overall production per unit-time) may decrease the contractor’s average productivity when measuring units of work per man-hour (or machine-hour). The acceleration direction is considered the primary cause of the loss, the effects of which may entitle the contractor to an EOT or to recover the additional costs incurred. These effects can include secondary impacts, for example, dilution of supervision, excess of overtime work, over-manning and fatigue.
For the purposes of demonstrating entitlement, the contractor will not only have to link lost productivity to a primary or secondary cause, but also to a contractual entitlement. In order words, the additional costs incurred by a contractor must be a result of disturbance to the regular progress of the works, caused by issues either within the principal’s control, or by the principals breach of contract. Importantly, disruptions caused by a contractor’s own actions (for example, improper scheduling, inefficient material provision, subcontractor or supplier’s failure to perform) will be non-compensable and unable to be claimed by the Contractor.
To be continued…
For a contractor to successfully claim for disruption, there are 3 elements required to be proven on the balance of probability, including:
- events which entitle it to loss and damage (liability);
- that those events caused disruption (and/or delay) (causation); and
- that the disruption caused additional costs and/or damage to be incurred (loss or expense).
The next two articles will look further into these elements, and will explore the key considerations for a successful disruption claim.
Legal Support
Lamont Project and Construction Lawyers have extensive experience working with the contractor to prepare both delay and disruption claims.
By providing clients a tailored approach to project support, we can ensure that our clients are best positioned regardless of the particular circumstances.
If you have any questions about your current or future projects, please do not hesitate to contact Lamont Project and Construction Lawyers for a discussion on how we can assist you.
Contact: Peter Lamont or Stephanie Purser
Email: [email protected] or [email protected]
Phone: (07) 3248 8500
Address: Suite 1, Level 1 349 Coronation Drive, Milton Qld 4064
Postal Address: PO Box 1133, Milton Qld 4064
[1] Society of Construction Law 2017, Society of Construction Law Delay and Disruption Protocol, 2, Society of Construction Law.