construction introduction contracts:...

CONSTRUCTIONCONTRACTS: POWER TOTHE PROGRAM

Andrew GarlickRobert MacDonaLd &AssociatesNowra

INTRODUCTIONTime is of fundamentalimportance to constructioncontracts.

Budgets, interest rates, cash flowrequirements, market pressuresand the interrelationships ofactivities and other projectscombine to make it so. Theprincipal wants the projectcompleted, the financiers want toknow the cost of borrowing, andthe contractor wants to planoperations within the constraintsof time, so as to maximise profitsand minimise risk.

Unlike many contracts, such asthe sale of goods, where theexchange of goods and theconsideration are virtuallysimultaneous, constructioncontracts generally occur over aprotracted time, where the goodsor services and the associatedconsideration, can be separatedconsiderably in time. Thisseparation in time, means that theworks defined by a constructioncontract, must have a beginningpart, a middle part and an endingpart, not simply an exchange date.There is a date for possession orcommencement (the beginning), arequirement to proceed with duediligence (the middle), and a datefor completion (the end).Construction contracts musttherefore be drafted to account forthis unique contract timeconsideration.

Often the requirement to monitorand manage this constructionjourney in a construction contractis accompanied by a requirementfor a Construction Program: a wayof describing, or perhapsprescribing, the construction fromthe beginning part, through themiddle part to the end part. TheConstruction Program has alsomore recently become the focusof proof for the quantum of delayclaims.

The requirement to provideconstruction programs hastherefore become fundamental forthe management of time inconstruction contracts.Inextricably linked to the benefitsoffered by Construction Programsare the responsibilities.Nonetheless the requirements forConstruction Programs have beenoften thought of as trivial andincidental to the other contractualrequirements, and have perhapsconsequently suffered from a lackof due regard and standardisation,despite the potential legalimplications.

This paper provides an overview ofimplications for the use ofConstruction Programs inconstruction contracts.

We begin the examination ofConstruction Programs byunderstanding what they are, andhow they came about. Furtherconsideration is given to thepurpose for and benefits offeredby the Construction Program fromthe perspective of both theprincipal and the contractor.

Having considered the benefits,we turn next to the reciprocalrights and obligations thatConstruction Programs imposeupon the contract parties. Notsurprisingly these will turn on theterms of the contract.Consideration will therefore begiven to some of the Australianstandard forms, and the commonlaw position with regard to someof the questions arising from theuse of programs in constructioncontracts.

Having looked to the past and thecurrent position, we consider thefuture. In particular we considerthe question, 'Should aconstruction program be acontract document?'

24 AUSTRALIAN CONSTRUCTION LAW NEWSLETTER #81 DECEMBER 2001

THE DEVELOPMENT OFCONSTRUCTION PROGRAMMETHODSBefore looking forward it might beinstructive to look back andunderstand the development ofConstruction Programs, and whythey have found widespreadinclusion in the drafting ofcontracts.

In early common law contracts, inthe absence of any contraryintention, time was considered tobe of the essence, so that failureto complete the contract by thedue date could be treated asrepudiation. Thus a party at faultwas not entitled to payment untilcompletion of the contract work.The common experience was thatit was rare for this time conditionto be met, even if only by aninsignificant margin. Thoughts ofequity, particularly where the latecompletion was the result of'prevention' by the principal,resulted in practice, however, withinterim payments. The timeobligation was often phased sothat a basic program, rather thanan obligation to proceed regularlyand diligently, was a term of thecontract. These constructionprogram conditions, in the form ofphasing, or milestones, are statedto be in contracts over 600 yearsago. 5

The use of programs thatindicated completion of phases, ormilestones continued until theearly part of the twentieth century.

This type of program did not fullydemonstrate, nor fully require, thedevelopment of a plan for themethod of the work. Nor did itrequire a plan showing theinterrelationships between workactivities. It was satisfactory forsimple work that was not unique.As projects began to get morecomplex the program requiredgreater sophistication.

A more recent development inconstruction programs was the

WHAT IS A CONSTRUCTIONPROGRAM?Construction programs, likerhinos, are difficult to describe,but you know one when you seeone. Simply, however, they showdates upon which various parts ofthe contract work are to beexecuted or completed.

Most of the programs we create inour normal lives are short induration, are developed mentally,never committed to writing, andare often trivial. They simply allowus to consider what tasks we haveto do, what time they will take andwhen we will do them. Whetherwe will read this paper first or playgolf, for example.

In construction on the other hand,the value of a well thought outprogram cannot be overemphasised. At anyone time theprogram is the basis on whichmany decisions will be made, andupon which will be gauged thereasonableness of the period andthe practicability of thecontractor's performance. It isalso the standard by whichprogress will be measured, thesource of identification ofproblems relating to theintegration of successive trades,the tool for analysing the impactsof change, the tool for replanningin the event of change, and theprincipal tool in demonstratingdelay and disruption.

Every contract starts with somesort of plan of execution. Whetherit is hand drawn, or some sort ofdetailed computer modelledcritical path analysis (described indetail later), there will be animage of how it is to progress inthe minds of those concerned withmanaging it. This is theConstruction Program. Its valuewill be directly proportional to thedegree of thought which has goneinto its production, and to thedegree which the program can besupported by logical analysis andfacts.

Standard FormsMost Australian standard forms,even if requiring a program, do notclearly define them.

One form that does attempt todefine a Construction Program,however, is AS2l24(92), whichdefines it as 'a statement inwriting showing the dates bywhich, or the times within which,the various stages or parts of thework under the Contract are to beexecuted or completed'.1 Thisdefinition could simply be astatement of the dates forcompletion of separable portionsor milestones. It does not requirethe interrelationships of the'stages or parts' to be described.Thus it does not necessarilyrequire a critical path program.

The Property Council form, PClrequires a program but is notspecific in its definition; requiringthat the program contain 'thedetails required by the Contract orwhich the Contract Administratorotherwise reasonably directs'.2

The Department of Defence HeadContract (Defence) too requires aprogram, but it is also unspecific,requiring that the program be 'inaccordance with the requirementsof the Contract'.3 Presumably,these requirements wouldtherefore need to be spelled out inthe other contract documents as aspecial condition, or specification.

The Australian experience of lackof definition does not appear to beunique. One of the UK's leadingConstruction delay claimsexperts, Keith Pickavance, statesthat that only 50% of standardforms in the UK refer to aprogram, and less than 30%actually require one to beproduced. He states that rarelyare they defined. He does,however, go on to provide his owndefinition of a program as 'merelydeciding in advance when andwhere work will be performed andhow it will be sequenced inrelation to other activities.4

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Gantt chart (or Bar chart) namedafter the famous managementconsultant Henry L Gantt. DuringWorld War 1, Gantt worked withthe US Army on a method forvisually portraying the status ofthe munitions program. Herealised that time was a commondenominator to most elements ofa program plan and that progresscou ld easily be assessed byviewing each activity's status withrespect to time. The Gantt chartthen came to be widely adopted inthe construction industry. Thechart consists of a horizontalscale divided into time units and avertical scale showing workactivities. The beginning and endof each of the activity bars indicatethe starting and completion timesof activities.

The big advantage of the Ganttchart is that it gives a clearpictorial model of the project andits activities. One reason why itwas so widely adopted was that itwas simple to construct and easyfor everyone to understand. Itdoes not, however, show theinterrelationships between theactivities or the resourcingrequirements, and there is no wayof knowing the effect of a delay toone activity upon another.

In response to this shortcoming,and with even greater complexityand interrelationships of projectactivities Critical Path Methods(CPM) were developed.

The use of CPM for projectmanagement originated in 1957through an effort initiated at theDu Pont Company to deal withextremely complex large scalemilitary projects which defied allpre-existing methods to logicallyplan and control them. 6

Before 1965 CPM was unknown inthe construction field, and, untilthe early 1980s, unless facilities ina local university were available ora contractor had its ownmainframe computer, there was

little alternative to constructingthe program by hand. Whenwritten by hand, however, theproblems of incorporating changewere found to be so great, and sotime-consuming, that the initialCPM program, no matter how wellthought out, soon became nothingmore than a work of fiction, andtended to be treated accordingly.With the increased power andreduced cost of computers, CPMprograms can now be updatedregularly, making them moreuseful, and they are now adoptedon all but the simplest projects.

The greater use of CPMtechniques has arguably givengreater visibility into the facts thatmake up a complex constructionproject, which were previouslyveiled in other program forms. Inthis regard, CPM has createdmore factual and legal issues forthe parties to resolve, but has alsogiven the parties the tools to dealwith these issues. It is alsoperhaps because of this that CPMhas become the standardconstruction program method. Arecent survey of the top 100contractors in the United Kingdomand the top 400 contractors in theUnited States, reveal that 100percent of United States and 58percent United Kingdomrespondents used CPMtechniques for planningpurposes. 7

In addition, whilst the initial use ofCPM schedules was as a planningtechnique, this scheduling devicehas become recognised as themost common means ofsubstantiating constructioncontract delay claims beforecourts and tribunals.8

CPM can be therefore be used toplan, manage and demonstratethe effects of change onconstruction contracts.

This illustrates the strength ofCPM as a programming tool, andwhy it is commonly the adopted

method for the ConstructionProgram even where not definedby the contract.

CRITICAL PATH METHODPROGRAMSAs the most commonConstruction Program methodused, it is useful to brieflyunderstand the basic principles ofthe Critical Path Method (CPM).This will help to understand how itis used in construction contracts,and how its use affects the rightsand obligations of contractparties.

The CPM schedule is a plan,which identifies the date, on whichwork activities must commenceand the date by which each activitymust be complete if the project isto be completed on time.

Basic PrincipLes of CPMProgramsCPM breaks down the entireproject into individual tasks. Thenext step is to determine theinterrelationships between theseactivities. An analysis musttherefore be made to determinewhich activities begin beforeothers, which activities can bedone concurrently, and whichactivities must be completedbefore a separate activity can becommenced. This analysis isnormally based on both pure logicand resource constraints.

The next step in preparing CPMschedules is to determine timedurations for the various activities.This step is very important, and isalso dependent upon resourcingassumptions. For example layingbricks in a wall may take one manfive days or five men one day. Thechoice of durations based onresourcing, can often bemanipulated to suit programrequirements, and to manage thetime 'resource' of the contractor.

When all these matters areestablished the schedule can bemodelled mathematically, moving


through each 'path' established bythe interrelationships betweenactivities to determine the longestduration path. This path is knownas the 'critical path'. Any delay toan activity on the critical path will,by definition, lead to a delay to theoverall project. Working forwardsfrom the first activity to the last, inthis way, will provide the EarlyStart and Early Finish times ofeach activity. Working backwardswill give the Late Start and LateFinish times for the activities.

The Early Start of an activity is theearliest time at which it canpossibly start and still maintainthe interrelationships with otheractivities. Early Finish isdetermined by adding the activityduration to the Early Start time.The Late Finish of an activity is thelatest time at which it can possiblyfinish and still maintain theinterrelationships with otheractivities, and allow the project tobe completed by the timedetermined by the critical path.Late Start is determined bysubtracting the activity durationfrom the Late Finish time.Mathematically the differencebetween the Early Start and LateStart times equals the float. Floatis the amount of time that thecompletion of an activity canextend past its Early Finish datebefore it impacts upon the criticalpath. Critical activities have nofloat.

WHY HAVE CONSTRUCTIONPROGRAMS?The purpose of the ConstructionProgram is the key to its inclusionin the contract, the rights andresponsibilities it attracts, and thedrafting that should be included inthe contract to reflect the desiredpurpose.

Traditionally, constructionprograms have been primarily forthe purposes of the principal, andonly secondly for the purposes ofthe contractor. Hudson supportsthis view:

The purpose of contractualrequirements for a program to besupplied by the contractor is oftenmisunderstood. It is primarily toenable the principal, or hisSuperintendent, to plan their ownarrangements for givingpossession, supplying information,and working drawings, andcoordinating the work of the othercontractors or nominatedsubcontractors, and onlysecondarily for use in connectionwith the contractor's extension oftime applications or monetaryclaims, or to impose additionaltime and obligations on him.9

Consider now in turn the benefitsoffered to the Principal and thenthe Contractor from ConstructionPrograms.

Use of the ConstructionProgram by the PrincipalFinancingHaving a Construction Programenables the principal to plan thefinancing of the Contract. Itenables the principal to know thelikely progress in any particularclaim period and therefore thelikely progress claim. This isparticularly important to the cashflow of the principal, and thereforethe financing costs of the project.

Coordination of Other ActivitiesIt enables the principal to planother interrelated activities andprojects for which it may beresponsible to coordinate. TheConstruction Program enablesthe principal to know the likelytimes when areas will becompleted, or when other projectsthat link in must be completed soas not to delay this contract.Without a Construction Programthe principal cannot plan its owninterrelated activities.

Supply of MaterialsIn addition, the principal may beresponsible for the supply underthis contract of certain materialsor services. These materials forexample may have a long lead-time


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Of course, if a ConstructionProgram is not requireduntil after the contract hasalready been awarded, thenit is too late to assess themethodologies proposed bythe contractor.

for delivery, the ConstructionProgram provides an indication ofwhen they are required andtherefore when the orders mustbe placed. Again this can have aninfluence on the principal's cashflow and therefore financingcosts. The Construction Programenables him or her to plan thetimely delivery, and to prevent apotential delay claim from thecontractor against him or her.

SuppLy of InformationIt is often a requirement ofcontracts that the principal supplycertain information. For examplethe type of carpet required. Againthe Construction Programprovides information on when thisis required, and therefore whenthe principal must have theinformation established.

SuppLy of ApprovaLs or DirectionsThe principal, or his or herRepresentative, is also obliged onoccasions to approve submissionsby the contractor. For example,the submission of shop drawingsoften requires approval. Again theConstruction Program providesinformation on when this isrequired, and therefore when theprincipal must deliver the approvals.

Assess VariationsFurther, it affords the principalthe knowledge of at what points itcan make changes to aspects ofthe works without affecting thecompletion dates or indeedcompletion of certain activities. Italso enables the principal todetermine what the delay will be ifvariations are made beyond thesepoints.

Assessing DeLaysAs previously stated theConstruction Program is now themost widely adopted method forproving the extent of delays. As isdiscussed in greater detail later.

Assess Understanding of Scopeand Methods Prior to AcceptanceWhere the proposed ConstructionProgram is provided in the Tender

it allows the principal theopportunity to assess whether theTenderer, which is to become thecontractor, fully understands thescope and nature of the work. Italso enables the principal toassess possible alternativemethods which may have somecommercial advantage to theprincipal. Of course, if aConstruction Program is notrequired until after the contracthas already been awarded, then itis too late to assess themethodologies proposed by thecontractor.

Ensure Compliance with thePrincipaL's SequencingOccasionally the principal has arequirement for construction tofollow a set sequence or program.For example, the renovations to anoccupied office may need to beprogrammed around notdisturbing the accountsdepartment at the end of thefinancial year. In these cases theprincipal may actually determinethe required program, in much thesame way as they might define theworks, by reference to drawingsand specifications. This is rarelydone because it is traditionallythought to so limit thecontractor's responsibility for theconstruction method that theprincipal is highly exposed toclaims both of delay and, also, forvariations where the sequencingis shown to be impossible orunworkable. Of course this is truewhere the program issued by theprincipal is erroneous. There is noreason in some circumstances,particularly where weather orlatent conditions are likely to notbe a factor, why this should be so.It is no different to getting thedesign drawings or specificationright. It just means engagingsuitable programmers in thesame way a principal shouldengage suitable designers.

Monitor CompLetion DateThe Construction Programenables a point of comparison as


Supply of MaterialsIn addition, the contractor may beresponsible for the supply of

and plan the contract works tosuit his or her resources andmethods. While it may seem selfevident and trite, a contractor thatfails to plan is planning to fail. Thecontractor must know whatsequence work is to be done in,what activities can be done inparallel, what activities must bedone in series, what resourcingthe activities require for thecalculated duration, and what theeffect is of altering durations,sequencing or resourcing. TheConstruction Program is simply amechanism to systematicallyensure that the contractor plansthe work.

Jon Wickwire, perhaps the leadingUS authority on ConstructionPrograms, suggests that 'afterinitial resistance, contractor'srealised that network analysistechniques serve(d) as (a) usefulproject management tool, thatassist(ed) in completing jobs ontime and within budget.' 11

FinancingHaving a Construction Programenables the contractor to plan thefinancing of the Contract. Itenables the contractor to knowthe likely progress in anyparticular period and thereforethe likely outgoings. This isparticularly important to the cashflow of the contractor, andtherefore the financing costs ofthe project.

Coordination of Other ActivitiesIt enables the contractor to planinterrelated activities and orsubcontracts for which it isresponsible. The ConstructionProgram enables the contractorto know the likely times when thiscan occur so as not to delay thehead contract, or to expose it toclaims by their subcontractors fordelays. Without a ConstructionProgram the contractor cannotplan its own interrelated activities.

Planning and ManagementThe Construction Programenables the contractor to manage


Use of the ConstructionProgram by the contractorThere are parallels between thereasons for use of ConstructionPrograms by principals andcontractors, but of course withtheir own biases.

completion obligation inconveyancing and sale of goods ormanufacturing contracts, tooeasily assumed that a preciselysimilar obligation would be asatisfactory solution to theproblem of delay in constructioncontracts, without appreciatingthe practical inadequacy of a termaimed only at the time ofcompletion where work is beingdone on an owner's land over arelatively long period of time. Thiswas compounded by the fact thatthe principal's own draftsmanship,probably of conveyancing origin,as in all the early constructioncontracts, frequently prescribed anamed date for completion, oftenwith express 'time of the essence'references still to be found insome old-fashioned contracts atthe present day, with liquidateddamages provided as the remedyfor breach of that particularobligation. 10

Even more importantly from theprincipal's point of view is thefailure of 'due diligence' which theConstruction Program canilluminate. This may demonstratethe inability or unwillingness ofcontractor's to complete theirobligations. Normally expressexpedition or due diligenceprovisions are linked to expressprovisions enabling the principalto terminate the contract, thusproviding an immediate sanction,without having to perhaps wait fora long distant completion date.

Thus a mechanism to monitor andensure progress is required. TheConstruction Program is such amechanism.

to whether the latest sta rt date ofactivities is exceeded and thelikely impact this will have on theoverall project duration. It enablesthe principal, then, to plan for thelikely outcome and to direct thecontractor to rectify the situation.

Monitoring ProgressThere may be a wider purpose forthe inclusion of the program: toensure satisfactory performanceduring the cou rse of the contract.

It is necessary to differentiatebetween the contractor'sobligations as to completion andits obligations to satisfactoryprogress during the execution ofthe contract works. Thedistinction is relevant because theprincipal's rights in respect of latecompletion can only accrue whenthe date for practical completionhas passed. In ma ny cases it wi IIbe insufficient for the principal toallow the project to overrun intime, despite the entitlement toliquidated damages whencompletion is finally achieved.Damages may accrue to theprincipal caused by delay inprogress ('IntermediateDamages') during theconstruction and long beforecompletion, and so not qualify forliquidated damages. For example,the principal may have obligationsto third parties such as othercontractors or utilities when thesite will be available for theirwork. If this window is missedthen the third party may have aclaim against the principalunrelated to late completion of theentire project.

Hudson identifies that this riskcan exist if not protected against:

It may perhaps be inferred that,because in many cases it may beevident that damage is unlikely tobe incurred by the principal untilcompletion of the constructioncontract, the Courts [and indeedearly draftsman} in common lawcountries, were used to the use ofthe concept of a time of

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Once liability for a delay isestablished, there has beengreat difficulty in accepting asuitable means forestablishing the nexusbetween the causation andan accurate measure of thedelay, or impact, sustained.It is now claimed, at leastbefore a court or tribunal,that without a good provableCPM program, it is virtuallyimpossible to make a validassessment of delay andestablish the right to anExtension of Time.

certain materials or services,which may need a long lead-timefor delivery. The ConstructionProgram provides an indication ofwhen they are required, andtherefore when the orders mustbe placed. Again, this can have aninfluence on the contractor's cashflow and therefore financing costsand overall profitability of theproject. The ConstructionProgram enables him or her toplan the timely delivery of thesame, and to prevent a potentialdelay.

Supply of InformationIt is often a requirement ofcontracts that the contractorprovide the principal with certaininformation; for example,workshop drawings for approvalby the principal or theirrepresentative. Again theConstruction Program providesinformation on when this isrequired to be approved, andtherefore when the contractormust furnish the information tothe principal for approval.

Assess Alternate Methods orSequencingFurther, it affords the contractorthe knowledge of at what points itcan make changes to methods orsequencing of the works withoutaffecting the completion dates, orindeed completion, of certainactivities. It also enable thecontractor to determine what thedelay will be if adjustments aremade beyond these points, and toassess the effect on liquidateddamages.

Assessing DelaysAs previously stated theConstruction Program is now themost widely adopted method forproving the extent of delays. As isdiscussed in greater detail later.

Monitor Completion DateThe Construction Programenables a point of comparison asto whether the latest start date ofactivities is exceeded and the

likely impact this will have on theoverall project duration. It enablesthe contractor, then to, plan forthe likely outcome or to rectify thesituation.

Using the Program for DelayAnalysisThe Construction Program has, inmore recent times, become farmore than just a planning ormanagement tool. Once liabilityfor a delay is established, therehas been great difficulty inaccepting a suitable means forestablishing the nexus betweenthe causation and an accuratemeasure of the delay, or impact,sustained. It is now claimed, atleast before a court or tribunal,that without a good provable CPMprogram, it is virtually impossibleto make a valid assessment ofdelay and establish the right to anExtension of Time. 12

Pickavance states:

Programmes have more usesthan planning and monitoringproject progress. The power andversatility of CPM programmingtechniques, coupled with highspeed computer capabilities, havemade programmes useful for avariety of purposes, and inparticular, can affect thecontractor's ability to obtainadjustments in the time and costof performing work. 13

He goes on to state, however, that:

A great number of legalcommentators in the UK havebeen quite dismissive of the role ofthe program in consideringextensions of time. The reasonsfor this appear to be that:

7. Because the program was notstated in the forms of contract tobe a contract document it couldbe no more than a statement ofbest endeavours;

2. Because, historically,construction programs havetended to be prepared as a simplebar chart, without any apparent


construction logic, the effect ofone activity upon another couldnot be predicted; and

3. Because they tended to beprepared by hand, without the usecomputers, they were rarelyupdated.

For all these reasons the use ofthe construction program as thebasis for engaging entitlement torelief from liquidated damages orentitlements compensation hasbeen dou bted .14

Despite this reluctance to adoptCPM methods for illustrating delayby some UK commentators, hecontinues:

[T}he development of techniquessuch as network analysis hasrevolutionised the wayconstruction programs areprogrammed and managed and,indeed, on the way the effect ofdelay can be predicted andcalculated. The essential logicalconnections between activities anda more scientific way of managingthe calculation and periodicplanning of activity durations has,at once, provided the structuralbasis for linking cause and effectand demonstrated the redundancyof the bar chart for such purposes.

In practice, network programmingtechniques whether imposed bycontract documents or not, havemade huge practical differences tothe ways in which activities arecarried out, with quite dramatictime savings when compared withtraditional methods. They havemade it relatively easy to preparean illustration of the program, toupdate it on the basis of historicalfact and in the case of theinevitable departure from theplanned program, to redraft it,virtually at will, to simulatedifferent 'what if scenarios for thefuture conduct of the project. 15

The position in US appears to bevery different to that in the UK:

The disdain for the contractor'sprogram expressed bycommentators in the UnitedKingdom is in marked contrast tothe views of legal commentatorsand the views of the Courts andContract Boards of Appeal in theUnited States of America. Therethey have taken the view thatwithout a good provable program,any subsequent critical pathanalysis is of dubious value. Thisillustrates the strength of CPM asa planning tool and contraveneswhat has been written in severalpublications regarding thesuitability of such method forconstruction projects.

Without the use of [a} program ofsome sort it is virtually impossibleto make a valid assessment ofdelay and establish the right to anextension of time. The first step inthe line of cause and effectanalysis is to consider theprogram for the period in questionissued. This should indicate whichactivities are critical, which mayfloat in the program and to whatextent that may do so. It acts as ayardstick when it comes toassessing the effect of delay uponthe contract as planned method,the project integration of trades,and whether any changes [are}likely to have an effect oncompletion. 16

Phillip Blunden, an Australianexpert in this field, supports thatthis too is the position in theAustralian system. 17

It is not the purpose of this paperto describe in detail themethodology for proving delayclaims using the CPM.18 Suffice itto say that despite the position ofsome of these UK commentators,it is becoming increasinglyaccepted to be virtually impossibleto prove and to determine asuitable extension of time claimbefore a court or tribunal, withoutthe use of a CPM program.

RIGHTS AND OBLIGATIONSARISING FROM THECONSTRUCTION PROGRAMWe turn next to the rights andobligations that ConstructionPrograms impose upon thecontract parties. Not surprisinglythese will turn on the terms of thecontract. Consideration willtherefore be given to some of theAustralian standard forms and thecommon law position.

The contract planning provisions,and the widespread use of CPMmethods to meet these provisions,have legal implications. Moreover,programming contract clauses, aswe will see, are among the leaststandardised of contract clauses,and therefore require specialattention.

This is especially notable given thefact that programming provisionsare often neglected during thecontract preparation andperformance. Those involved inthe contracting process often failto recognise the importance andbenefits of programmingprovisions. This is surprising giventhe long list of the uses ofContract Programs listed above.Perhaps it is because ofexperience on projects where theprograms have failed to beupdated and have thereforebecome meaningless, and openlytreated this way, even by theContract Administrator. It is evenmore surprising how little therights and obligations imposed byProgram clauses have beentested in Courts and Tribunals, aswe will see later. Perhaps becausethere has been so little litigationbased on Program Clausesthemselves, all parties may notrealise their potential legalimplications.

The value of the ConstructionProgram is, however, recognisedby contractors when they have aclaim, and by ContractAdministrator's in determining a


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claim. At that point, irrespective ofhow the project was managed,programs are often resurrected asif they had been the managementtool all along.

APPLICATION OFCONSTRUCTIONPROGRAMS IN THESTANDARD FORMSThe Construction Programclauses in standard Australianforms divide into two camps:those that specifically provide forConstruction Programs and thosethat are silent. The 1994 edition ofthe JCC standard form, which iswidely regarded in the industry asfavouring the contractor, does notmention a Construction Programat all. Those that are silent rely onthe common law position todetermine the rights andresponsibilities, with regard to theConstruction Program. These willbe considered later. We turn nowto some of the standard formsthat include contract provisions.

The Programming ClausesThe obligation of the contractor isat common law, to carry out andcomplete the works in areasonable time. The majorstandard forms, however, try toprovide for specific time to beexpressed by the parties. Further,the standard forms imposeobligations in respect of the rateof progress. AS2124(92) requiresprogress to be made 'with dueexpedition and without delay'.19PC1 requires that the contractormust 'regularly and diligentlyprogress the contractor'sactivities' .20 The Defence HeadContract requires progress to beat a rate 'satisfactory to theSuperintendent' .21

Express provisions for acontractor to proceed regularlyand diligently, or for that matterwith due expedition and withoutdelay, do not make it very farwithout appropriate benchmarks.As stated previously, one of the

purposes for the principalrequiring a Construction Programis to assess the work progress, toset a benchmark. Thus wherestandard forms require aConstruction Program it isinvariably found under 'Progress'clauses.

We will examine the rights andobligations of some of theseforms in turn.

AS2124 (92)Perhaps the key point in theprogramming provision inAS2124(92) is that it specificallyprovides that a constructionprogram shall not affect the rightsor obligations to satisfactoryprogress, and further, that it shallnot relieve the contractor of anyobligations under the contract.Thus the proper interpretation ofthis clause makes it subservientto other clauses and the programcannot be used to ride roughshodover the other contract provisions.

It also provides that the contractorshall not depart from a submittedconstruction program withoutreasonable cause. Jones states:

Thus AS2724 placers} two parallelobligations upon the contractor:one to proceed at a satisfactoryrate, and the other not to departwithout reasonable cause fromthe construction program.Presumably, however, if theprogram was not facilitating asatisfactory rate of progress, thenthere would be reasonablegrounds for departing from it. It istherefore suggested that thecontractor's obligation to adhereto the construction program issubject to its obligation tomaintain a satisfactory rate ofprogress. 22

The language requiring thefurnishing of a ConstructionProgram would indicate that theConstruction Program comes intoexistence after the contract isalready in drafted. It wouldtherefore appear that the

Construction Program is not acontract document. Later howeverthe clause speaks of aConstruction Program 'includedin the Contract' ,23 which indicatesthe possibility that it is a contractdocument. It would appeartherefore, that the drafters ofAS2124(92) considered it optionalfor the Construction Program tobe a contract documentdepending upon the time it cameinto existence.

The new standard AS4000(97),which was intended to replaceAS2124(92), but which has notreceived widespread acceptance,interestingly specifically deemsthe program to be a 'contractdocument'24 presumably to getaround the confusion. However, itis rather difficult to know exactlywhat this means, because clause32 does not contemplate that theprogram is attached to thecontract at the time of execution.Rather, the Construction Programis to be submitted to theSuperintendent by the contractorwithin the time directed [which ispresumably once the Contract ison foot).

It's interesting to note what is notrequired by this program clause:the clause does not require thatthe submitted constructionprogram be 'approved' by theprincipal or Representative. Thesignificance of approving aconstruction program is discussedlater.

In addition to the directprogramming clause, AS2124(92)provides that the 'Superintendentmay direct in what order and atwhat time the various stages orparts of the work under thecontract shall be performed.' 25 Itthen goes on to provide that, ifcompliance with this directioncauses the contractor more orless costs, then this shall bevalued as a variation. ThusAS2124(92) cuts visibly against thetraditionally held view that


programming is at thecontractor's discretion. It alsoprovides some scope for acontractor to claim costs fordeparture from a program(perhaps even an unworkableprogram, if it was approved-seelater) provided the contractor candemonstrate that the departurewas directed by theSuperintendent or at least shouldhave been.

AS2124(92) also limits therequirement on the principal andthe Superintendent to furnishinformation, and other similarmatters, earlier than shouldreasonably have been anticipatedat the Date of Acceptance of theTender. 26 This limits exposure ofthe principal to a claim of delaywhen the contractor submits aProgram showing completion inadvance of the Date for PracticalCompletion, with associated earlydates for supply of informationand the like. Furthermore itrequires that the contractor notifythe principal when thisinformation will be required. Thislimits the use of the program asclaims weapon against theprincipal by disclaiming theprincipal's responsibility to providethe contractor with 'earlyinformation' to assist in a 'crashedprogram', without relieving thecontractor from its obligation toprovide notice of when principalsupplied information is required tomeet the program.

Property Council 1 (PC1)PC1 directs that the contractormust, within 14 days of the AwardDate, prepare a program of thecontractor's activities which mustcontain the details required by thecontract or which the ContractAdministrator reasonably directs.Further, the program is to beupdated periodically to reflectchanges in the program and toreflect delays. It also requires allprograms to be submitted forapproval by the ContractAdministrator.

The requirement to submit aprogram 14 days after award ofcontract indicates that thecontract is also already on foot.Thus the program could not beconsidered to be a contractdocument as such.

PC1 is biased in favour of theOwner. It is not surprising thenthat it includes a number ofexpress terms that limit the riskfor the Owner of accepting orapproving a contractor's program.Specifically it provides thatapproval, or even failure tocomment upon a constructionprogram, shall not affect theliabilities or obligations under thecontract. Nor does approvalconstitute an instruction of anysort. Nor does it affect the time forthe Owner or the ContractAdministrator's obligations.

PC1, unlike AS2124(92), does notexpressly require the contractor tocomply with the program. Primafacie the program would appear tohave no teeth. Including therequirement to regularly updatethe program to reflect changesand delays, however, means thatthe program must at least reflectthe work program historically tothis point. It does not of coursemean that the future programreflects the actual plannedsequencing and methods of work.Interestingly, the contractor mustcomply with the Programmingobligations as a conditionprecedent to the Owner'sobligation to make payment. 27 Thisalso gives weight to the need tomaintain an up to date, even if onlyhistorically accurate, program.

DefenceDefence directs that thecontractor must, within 14 days ofthe acceptance of the tender,submit a construction program.This must contain the detailsrequired by the contract, and itshall be consistent with the tenderprogram and any pre contractnegotiations.

PC1, unlike AS2124(92),does not expressly requirethe contractor to complywith the program. Primafacie the program wouldappear to have no teeth.


-------- ~~~

--~=~----- ==-~-===-~ ~---~

Nonetheless, if thesuperintendent has not onlyseen the program, but hasapproved it, and possiblyeven retained the right toorder variations to it, it maybe possible for thecontractor to turn the tablesupon the principal and use itas convincing evidence forits claims.

A significant difference in theprogramming provision in Defenceis that it specifically provides thata construction program shall notform part of the Contract andshall only be used to enable theSuperintendent to monitor thework. It goes on to confirm thatdespite approval of the programthe contractor is wholly liable forthe 'planning scheduling,sequences, methods, techniquesand otherwise for the dueperformance of ... obligationsunder the Contract.' 28

Nonetheless, if thesuperintendent has not only seenthe program, but has approved it,and possibly even retained theright to order variations to it,29 itmay be possible for the contractorto turn the tables upon theprincipal and use it as convincingevidence for its claims.

In addition, Jones comments:

Defence, unlike AS2 724, providesa scheme for the approval of aconstruction program by thesuperintendent, including ifnecessary, revision andresubmission of the program bythe contractor. 30 Further, duringthe course of the works, thesuperintendent may direct adeviation from, 37 (the contractor isnot entitled to costs for thisdeviation, unless this deviation issolely due to an act, default oromission by the principal or theSuperintendent) or revision andresubmission of, 32 theconstruction program. Thecontractor's obligation to adhereto the program is made absolute,subject to the suspension of theworks by the superintendent, andthat the rate of progress of theworks is satisfactory to thesuperintendent. 33 It appearstherefore, that the only deviationspossible from the constructionprogram are those directed by thesuperintendent, and it cannot liein the mouth of thesuperintendent that thecontractor has failed to maintain a

satisfactory rate of progress if ithas adhered to the constructionprogram as approved by thesuperintendent. The contractor isunder one obligation, and that issimply to adhere to the programas approved by thesuperintendent. 34

Defence appears to be silent onthe issue of the Superintendent'sobligations to supply informationand the like to the contractor toassist with a crash program. Itmay be argued that because theDefence clause differs fromAS2124(92) in that it is a form,which contemplates agreedconstruction programs, anddespite the disclaimer, it mayaffect the principal's obligation tocooperate:

It may be that 'bilateral'programming by the partiesplaces a greater obligation uponthe principal than does a moretraditional 'unilateral'programming by the contractor.This is because it creates evidenceof what the principal needs to doto fulfil the duty of cooperationinherent in all constructioncontracts. 35

THE COMMON LAWPOSITIONApproving the ConstructionProgramThe benefits of requiring aprogram are usually easy for mostprincipals to understand, but it isthe thought of 'approving' aConstruction Program thatcauses conceptual difficulties forsome.

The significance of approving aconstruction program arisesbecause, for example, inAS2124(92) Clause 23 a 'direction'

by the Superintendent is widelydefined to include 'agreement,approval, authorization, certificate,decision, demand, determination,explanation, instruction, notice,order, permission, rejection,request or requirement'. 36 Hence


approval can be interpreted tomean direction.

There are two basic contractualobligations placed upon thecontractor, confirmed by thecourts: firstly, to carry out thework in accordance with thecontract documents, and,secondly to comply with thedirections of the Superintendent.37

Thus if obliged to perform inaccordance with theSuperintendent's directions,which can be derived from'approval', then this could possiblybe turned around to claim avariance to the tender by theapproved program in both timeand costs.

Dorter and Sharkey disagreestating that 'the expresscontractual obligations to carryout work in accordance withinstructions will prevail over anyattempts to [imply] the program' .38

Hudson agrees:

[Un the absence of clear languagesuch provisions should not beinterpreted as altering thesubstantive rights or obligationsof the parties, though no doubt aprogramme may be some,although not conclusive, evidenceas to what is [theJ. .. obligationsunder the contract. 39

Nonetheless, where a contractoris required to satisfy a principal byidentifying the proposed methodfor the work, and once theSuperintendent has approved this,the principal may be liable for thecosts if that method later turnsout to be unworkable. Certainly inregard to a UK case based on theICE standard form, HavantBorough Council v South CoastShipping Company Ltd,4o this wasthe case. The work by South CoastShipping was expected to be noisy,and the specifications requiredthat the contractor minimise noiseto nearby residents. South CoastShipping submitted, and hadapproved, a proposed method

which was considered to be'works'; in accordance withclauses 13 and 14 of the ICEcontract. When later this methodbased on certain working hourswas restricted by a court order,South Coast Shipping successfullyapplied through the CommercialCourt a variation order to changethe 'work', as the originallyapproved method was notphysically or legally possible.

This is further illustrated in thecase of Yorkshire Water Authorityv Sir Alfred McAlpine & SonNorthern Ltd.41 This caseconcerned a contract to extend areservoir in the United Kingdom.During tender negotiations, thecontractor McAlpine, submitted tothe Engineer for the Authority,who subsequently approved, amethod statement, which wascalled for by the contractspecification and a document,which was later found to havebeen incorporated into thecontract documents by referencein the formal contract instrument.

The approved method statementindicated that work would beundertaken upstream inconstructing the outflow tunnel.However, this method provedimpossible and the contractornecessarily adopted anothersequence.

An issue arose as to whether thecontractor was entitled to avariation order with consequententitlement to payment of costsfor having to adopt an alternatesequence of work. The courtfound that the issue turned solelyon the question of whether themethod statement, which hadbeen incorporated into thecontract, was a specifiedsequence or method ofconstruction within the terms ofthe contract conditions. If it werethen the contractor was entitled toa variation. The Authoritycontended that the methodstatement was no more than a

pre-contractual performance bythe contractor of its obligation toprovide the engineer with aprogram indicating anticipatedprogress, and thus used asnothing more than a guide.

The contractor however,contended that by specificallyincorporating the methodstatement into the contract, bothparties made it clear that it was aspecified sequence and methodwithin the contract conditions andnot a program showing the orderof procedure. It was furthercontended that as a result,McAlpine became not only boundto follow the method statement,but also entitled to do so. Therequirement to adopt an alternatesequence therefore became acompensable variation.

The court held that it would bewholly artificial and unrealistic toregard the method statement asmerely a program showing theorder of procedure in which thecontractor proposed to carry outthe works. The court reasonedthat:

[Uf the parties had intended themethod statement to be regardedas this type of program they wouldhave said so, but in a valuable andimportant contract like this theAuthority wanted to tie thecontractor to a particular programand method of working before thecontract was signed and as acontractual obligation.42

If the Authority had wanted toleave the program and method asthe sole responsibility of McAlpinethey could have done so.

The risks inherent in such aprogram or method would thenhave been the respondentsthroughout. Instead they decidedthey wanted more control over themethods and program [than aprogram for information clauseprovided). Hence clause 107 of theSpecifications; hence the methodstatement; hence incorporation of


~~~

-~

-==-~ ~

Thus in Australia the burdenfor programming within thecontract period, even theimpossible, lies squarely onthe shoulder of thecontractor, whereas in theUS it must be partly borneby the principal.

the method statement into thecontract imposing the obligationon the respondents to follow it,save insofar as it was legally orphysically impossible. It thereforebecame a specified method ofconstruction by agreementbetween the parties.43

The court found that, as a result ofthe contractual force of theapproved method statement,McAlpine were entitled to avariation and associated costs dueto the changed work order.

Some principals may wish tosurvive this possible liability ofapproval, and maintain the abilityto monitor performance byrequiring a Construction Programbut without approval or rejection.However, at least as far as theprincipal's requirement to performobligations within the time statedin the program, failure to approveor reject programs may be foundto constitute implied acceptance44

In any case.

However, a principal, whobecause of the fear of becomingliable for approval of acontractor's program, does notrequire a program or does notclearly indicate the requiredperformance intentions limitstheir ability to monitorperformance and to share in theother benefits describedpreviously to the principal ofrequiring a Construction Program.

Contract PeriodsConsider now where a contractrequires work to be programmedto be completed within a specifictimeframe.

In Australia, and in the UK, itwould seem that the contractor isresponsible for the method andsequencing of works to achievecompletion of the works, even it isimpossible.45 Whereas in the US,at least, it has been held as animplied term that where drawingsand specifications have been

supplied to a contractor, thatwhere a contract period isspecified, then the contractorshould be able to complete thework in this period.46 Thus inAustralia the burden forprogramming within the contractperiod, even the impossible, liessquarely on the shoulder of thecontractor, whereas in the US itmust be partly borne by theprincipal.

Directing a ChangedProgramCases such as Wells v Army andNavy Cooperative Society 47

demonstrate that except wherethere is an express agreement tothe contrary, a principal is notable to require a contractor toattack the works in any specificmanner or sequence. Theabovenoted standard forms haveresponded by reserving forthemselves just such power,however. In using this power doesthe direction to alter the programgive rise to a compensable claimby the contractor?

Brown submits that:

[Un the absence of express andexhaustive provision for theconsequences of an enforceabledirection to alter the manner orsequence of work, the question ofwhether the contractor will becompensated for compliance withthe direction [of the principaU willdepend on whether thecontractor's program has anyrecognised contractual status. Ifthe program is not binding on the[principaU, then a directeddeparture from that, will in mostcases not give rise tocompensation.48

To illustrate consider two cases,one where the program was notconsidered binding, and onewhere the program, or moreprecisely the method statement,was found to be binding.


- - - = -=--

Where the Program is NotIncLuded as a Contract DocumentIn the English case of KitsonsSheet Metal Ltd v Matthew HallMechanical and ElectricalEngineers Ltd 49 the plaintiffsKitsons, brought an action againstthe defendant contractor,Matthew Hall, for allegedvariations under the contract. Atpoint was whether certain ordersby Matthew Hall were variationsby way of alteration to the mannerof the sequencing of work, whichwould entitle Kitsons to payment.In essence, the issue raised thequestion of whether Kitsons wereentitled under the contract towork to a program and whetherany written order requiringdeparture from it constituted avariation as defined under thegeneral conditions of contract.

The defendants relied on thespecific terms of the contract,which stated that the plaintiffsshould perform work 'inaccordance with the dictates' ofthe defendant's site managementteam and with an overallcompletion date stated.Paraphrasing: do what themanagement team ordered.

The court found that thesurrounding circumstances madeit impossible for either the plaintiffor the defendants to plan ahead indetail; they had an overallobjective in the date for handover,but in achieving it there had to bethe utmost flexibility. 'Programscould be prepared as a step[towards] forward planning but itwas certain that they would haveto be changed as eventsrequired.' 50

Judge Newey QC, concluded thatif the plaintiffs were entitled tocarry out their work in accordancewith the program and if thedefendants then instructed themto depart from it in some respectsor substitute a later program foran earlier one, an alteration of

sequence, and possibly of mannerwould occur. However, as thedefendants had the right toinstruct the plaintiffs on an 'asrequired' basis, the programscould only be used as guides,without contractual effect, itfollowed that any alteration ofmanner or sequence could notconstitute a variation. 51

Simply, the specific contractconditions and the nature of thecontract implied that the generalconditions requiring a programwere for the purposes of a guideonly and without contractualeffect. In this case the programwas considered not to be acontract document, but only anaid to forward planning, and soalteration of the sequencing of theworks did not requirecompensation by way of grantinga variation.

Where the Program is incLudedas a Contract DocumentThe Australian Construction LawNewsletter (Issue #9) reports52 anAustralian decision supporting theview that where a ConstructionProgram is specificallyincorporated into a contract, anydirection to deviate from it, subjectto the terms of the contract, willattract compensation: GrahamEvans & Co Pty Ltd v SPFormwork Pty Ltd. 53

In the Evans decision, based onSCNPWC2, a constructionprogram had been agreedbetween the parties and had beenbound into the contract as acontractual document.

The contract provided thatAnnexure D of the contract wasthe initial construction programand the head contractor had theright to vary either or both thetimes and logic shown on theoriginal program as may becomenecessary to better facilitate theprogress of the works.

The power to alter the programwas not questioned, simply

whether the right to do so had anaccompanying burden forcompensation. The court held thatthe deviations from the originalprogram enabled thesubcontractor to recover costsincurred as a result of thatvariation, including delay costs.

It would seem that these casessuggest that, in the absence ofexhaustive descriptions in thecontract, it is the contractualstatus of the program or methodstatement and in particular, theirrelevance to the agreedperformance obligations of thecontractor, that determinewhether or not a program ormethod statement will give rise tocompensation to the contractorfor any program changes.

Obligation to Cooperate(Crash Program)Some contractors believe thatafter they have entered into acontract fixing the Date forPractical Completion, they canmanipulate that date by thereaftersubmitting a crashed programwith an earlier completion date. Ifthis program is approved, theythen argue that the latter datereplaces the original date forcompletion. Furthermore it maybe used to justify claims of lateperformance by the principal intheir obligations and to increasethe period of delay upon which adelay claim is calculated.

Disregarding the fact that it is acommon and respectabletechnique to plan for an earlycompletion, thus allowing thecontractor some 'float', it issubmitted that unless the contractprovisions allow this, or there issome bilateral agreementsubstituting the program dates forthe original contract dates, thenthere could be little force in suchcontentions.

Dorter and Sharkey agreesuggesting that:


~

~-=~ ~

If the contractor owns thefloat, then the program, themethods, and thesequencing are theirs. If thisis the case, it may well beargued whether thecontractor can be directed toalter the program withoutfair compensation, unlessexpressly conditioned in thecontract, such as in theDefence form.

[T}he better view is that this is notthe consequence. Rather, the trueresult is that the contractual datefor practical completion remainsas it is until validly altered by thesuperintendent or the principal inaccordance with the contract andthe contractor has validly givenhimself or herself float betweenthe program date for practicalcompletion and the contractualdate. It is the contractor's choice,not an obligation. Accordingly thePerini...54 implied term does notapply; there is no impliedobligation on the principal tocooperate so as to achieve theearlier completion date. 55

Nonetheless, we have seen thatsome of the standard forms stillconsider there to be real risk here,expressly drafting a limit on theimplication of approval of theprogram to exclude the approvedprogram superceding previouscontractual dates, and ensuringthat the principal is not obliged tocooperate.

FloatNo discussion of contractprogramming clauses would becomplete without some attentionto 'float' as defined earlier. Theownership of float has been hotlydebated for as many years asCPM programs have been used.This is because it has implicationswith regard to delay claims. Thetopic is worthy of a much deeperstudy, and has been covered wellby many others. 56 Suffice it to saythat it is now fairly wellestablished, in Australia at anyrate, that the contractor owns thefloat. In short this stems fromWells vArmy and NavyCooperative Society 57 decisionwhich contains the well knownaphorism to the effect that if acontractor has to complete workwithin a given time, then they areentitled to that amount of time inwhich to complete it.

If the contractor owns the float,then the program, the methods,

and the sequencing are theirs. Ifthis is the case, it may well beargued whether the contractorcan be directed to alter theprogram without faircompensation, unless expresslyconditioned in the contract, suchas in the Defence form.

SHOULD THECONSTRUCTION PROGRAMBE INCLUDED IN THECONTRACT?It is useful finally, to look to thefuture. Should the ConstructionProgram be included in theContract? Who benefits from it?And how should this be done?

Whose Perspective?No examination of whether theConstruction Program should beincluded in the Contract can beginwithout establishing from whoseperspective the question is asked.As the principal most often writesthe contracts, we are likely toanswer the question by referenceto the principal's desires.

BaLancing the LedgerThe answer to the question musttherefore be found in what rightsand obligations the principalhopes to derive from theConstruction Program. We havealready seen that there are bothbenefits and disbenefits from theprincipal's point of view of theinclusion of constructionprograms in contracts.

On the positive side of the ledger,construction programs provideinformation:

• Which will help establish cashflow and financing costs;

• Allowing coordination of otheractivities:

• Of when principal suppliedinformation, materials, approvalsand directions are required so asto avoid delays to construction andadditional costs,

• Of whether variations have anyeffect on the construction works,


• Of whether delays have anyeffect on the construction works,and then proving what is a fairdetermination of extensions oftime without being overlyfavourable to the contractor;

• Which will allow assessment ofthe understanding of thecontractor of the project based onthe proposed methods andsequencing;

• Which will allow the principal todictate the required sequencingfor their own reasons;

• Which will allow the principal tomonitor both the completion dateand progress.

Clearly the program can be usedfor the benefit of the principal, aswe have seen. The concern for theprincipal is where the contractoruses 'programsmanship'strategies to enforce claims basedon changes to the approvedprogram or method. Furthermore,the fact that a document is acontract document as distinctfrom a non-contract documentused for information only,apparently gives it more force inprogramsmanship strategies.

Balancing these benefits to theprincipal then, are the addedconsiderations:

• Approval of the ConstructionProgram may give rights to acompensable claim by thecontractor for variations wherethe approved method or sequenceis either impossible to do orsimply changed.

• Whether by giving a specifiedperiod for construction, theprincipal warrants that the workcan be done within this period,and, if not, whether the contractoris compensated.

• Whether directing a change tothe contractor's sequence willexpose the principal to acompensable claim if the programis bound into the contract.

• Whether approval of a crashedprogram submitted by acontractor may expose theprincipal to obligations tocooperate. If the principal isunable to do so then they may beexposed to a compensable claim.

• Taking away the commonlyaccepted position that thecontractor owns the float within aprogram, if the sequencing isdirected by the principal.

It should also be noted that, aspreviously stated, theseconsiderations are not universallyaccepted as an absoluteconsequence of the constructionprogram, or its inclusion. Indeedthere is much conjecture overtheir acceptance. Nonethelessthey do throw a cloud over theapproval and inclusion of theprogram into the contract. Jonesstates:

[It} may be unconvincing if theoriginal program was created bythe Contractor for its own benefit,and not submitted to thesuperintendent. It will be slightlymore convincing if the programwas submitted to thesuperintendent for the purpose ofenabling him or her to monitorthe progress of the work.However, if the superintendenthas not only seen the program,but has approved it, and possiblyeven retained the right to ordervariations to it, it may be possiblefor the Contractor to turn thetables upon the principal and useit as convincing evidence for its...claim. 58

On balance however, it wouldappear that the program shouldbe included in the contract as thebenefits to the principal outweighthe possible disbenefits.

What does Inclusion Mean?Next we must clarify what ismeant when it is said that theConstruction Program becomes acontract document. The term'Construction Program' as a

contract document is ambiguous.It could mean a number of things,for example:

1. That the ConstructionProgram is part of the contractdocumentat'ion i.e. it has a similarstatus to that of the specificationsand drawings. For this meaning toapply the program would likelyhave to be developed by the ownerand issued to the tenderers in asimilar way to the specificationsand drawings. This is quite rarebecause, as noted previously, itexposes the principal to claims inthe event that the program is inany way in error. It can be used ifexpertly prepared and particularlywhere the principal is responsiblefor the coordination of manyinterrelated activities or Projects;

2. It may be the anticipatedprogram that sometimesaccompanies a tender then,provided that it is only information,including it or otherwise in thecontract is irrelevant. In eitherevent, the document isinformation that, if misleading,can give rights e.g. under s.52 ofthe Trade Practices Act; or

3. The Construction Program isnot actually part of the contract,but the contract refers to theConstruction Program andimposes certain rights andobligations on the parties inrelation to it; or

4. The contract requires thecontractor to develop theConstruction Program and thusthe Construction Program isbrought into existence after thecontract has been signed.

No one meaning is taken here tobe more correct. Each has theirapplication.

Drafting Considerations forincluding the ConstructionProgramIf the Construction Program is tobe included, but inclusion canmean any number of things, then,


-_ .... - =- == ~ ~~--~

-~ ~ ~= - - ~---==--~~

If however, the principalwants a ConstructionProgram to be part of theContract, in the sense thatthe contractor must complywith it, then that has to be anexpress provision in theContract. To give it teeth,there would have to beprovisions covering failure tocomply, and the equivalentof extensions of time fordelays by the principal.

it is suggested that the real issuefor consideration is the rights andobligations which the contractimposes upon the Contractparties by reference to theConstruction Program. As wehave already seen this will turn onthe terms of the contract and theform used.

None of the considered standardforms appear to adequatelyprovide for the principal's needs,and to protect them from claims.So how can these be improved?

It would appear that aprogramming clause made up inpart with conditions similar to PClinforming and protecting theprincipal, with AS2124(92)requirements ensuringcompliance by the contractor, iswhat is required.

If however, the principal wants aConstruction Program to be partof the Contract, in the sense thatthe contractor must comply withit, then that has to be an expressprovision in the Contract. To give itteeth, there would have to beprovisions covering failure tocomply, and the equivalent ofextensions of time for delays bythe principal. The clause wouldhave to cover 'prevention', i.e.where, without default of thecontractor, the contractor isprevented from complying withthe program.

To develop such a clause, whichpurports to bind the contractor tothe construction program, it isnecessary to ask these questions:

1. What happens to thecontractor's obligation if theprincipal delays the contractor?

2. What happens when thecontractor fails to comply with theprogram?

3. What happens when theprogram is unrealistic, outdatedor impossible to achieve?

4. How is it to be updated?

5. What happens when a newprogram replaces the existingprogram?

6. How is the program adjustedfor extensions of time?

7. How is the program adjusted forother events such as inclementweather, strikes, variations, latentconditions, and discrepancies in thecontract documents or directions byauthorities?

8. Is the program consistent withother contract documents?

9. Is it understandable by thoseon site that have to use it?

For the construction program tobe successfully included as acontract document, from theprincipal's point of view, it musthave express provisions, whichaddress the above questions andmaintain the desired rights andobligations of the respective parties.

CONCLUDING REMARKSA well thought out and updatedConstruction Program is critical tothe planning, and management ofmodern construction projects.They have grown from the need tomonitor and manage projects,from the beginning part, throughthe extended middle part, to theend part.

The type of program method usedhas developed along with theincreasing complexities of modernprojects. CPM program methodsare now being increasinglyadopted because of the insightinto the complex constructionprocedure that they offer.

Despite this need for a program inconstruction contracts, there issurprisingly little standardisationin construction program clauses,each having their ownimplications, benefits anddisbenefits.

Programs offer both the principaland the contractor many significantbenefits. Primarily the provision ofinformation which will enable:


• Informed decisions which willhelp establish cash flow andfinancing costs;

• Allow coordination of otheractivities, give notice of whenmaterials, approvals anddirections are required so as toavoid delays to construction andadditional costs;

• Indicate whether variations oractivity delays have any effect onthe construction works;

• Help determine a fair extensionof time;

• Help ensure an understandingof the project, based on theappropriate methods andsequencing;

• Allow the principal to dictate therequired sequencing for their ownreasons;

• Allow monitoring of both thecompletion date and the projectprogress.

There are some correspondingrights and obligations however,which may provide disbenefits tothe contract parties. When weconsider that the principalnormally writes the contract, weconsider these disbenefitsprimarily from the point of view ofthe principal. The primaryconcern from the principal'sperspective is that approval, orincorporation, of the ConstructionProgram into the contract, maygive rights to a compensableclaim by the contractor forvariations, where the approvedmethod or sequence is eitherimpossible to do, or simplychanged. Drafting ofprogramming requirements musttherefore secure the benefits forthe principal; whilst minimisingthe potential exposure byprogramsmanship claims.

The benefits of ConstructionPrograms outweigh the potentialdisbenefits and so should beincluded in contracts.

REFERENCES1. AS2124 (92) Subclause 33.2.

2. PC1 Subclause 10.2 [a).

3. Defence Subclause 33.1.

4. Keith Pickavance, Delay andDisruption in ConstructionContracts, (1997), p113.

5. Contract Policy for Time by SirPatrick Garland; ConstructionContract Policy-ImprovedProcedures and Practice 1989.

6. John Nicholas, ManagingBusiness & Engineering Projects[1st Ed, 1990), p313.

7. Ghassen Aouad and AndrewPrice, 'Construction Planning andInformation Technology in the UKand US Construction Industries: AComparitive Study' (1994) 12Construction Management andEconomics p97.

8. Wickwire, Hurlbut andLerman, 'Use of Critical PathTechniques in Contract Claims:Issues and Developments, 1974 to1988' (1988) Public Contract LawJournal.

9. Hudson's Building andEngineering Contracts, [11th Ed,1994) para 9-040.

10. Ibid para 9-034.

11. Wickwire, Hurlbut andLerman, 'Use of Critical PathTechniques in Contract Claims:Issues and Developments, 1974 to1988' (1988) Public Contract LawJournal.

12. Pickavance, Keith, Delay andDisruption in ConstructionContracts (1997) p115.

13. Ibid p117.

14. Ibidp114.

15. Ibid.

16. Ibid p115.

17. For further discussion onproving delay claims see PhillipBlunden's paper 'Aspects of Delayand Disruption in Engineering and

Building Contracts' (May 2000)University of Melbourne.

18. Ibid.

19. AS2124 (92) Subclause 33.1.

20. PC1 Subclause 10.1.


22. Doug Jones, Claims &Disputes [1 st Ed, 1996) p86.

23. AS2124 (92) Subclause 33.2line 10.

24. AS4000 (97) Subclause 32p26 line 3.

25. AS2124 (92) Subclause 33.1.

26. Ibid Subclause 33.1.

27. PC1 Subclause 12.12 (c).


29. As under Defence Subclause33.1.

30. Ibid.

31. Ibid 33.3.

32. Ibid 33.4.

33. Ibid 33.1 and 34.

34. Doug Jones, Claims &Disputes [1 st Ed, 1996) p86.

35. Ibid p1 04.

36. AS2124 (92) Subclause 23.

37. Dorter and Sharkey, Buildingand Construction Contracts inAustralia: Law and Practice, para9.60, p4533.

38. Ibid para 9.70, p4535.

39. Hudson's Building andEngineering Contracts [11th Ed,1994) p1129.

40. (1966) CILL 1146.

41. (1985) 32 BLR 114.

42. Ibid 126.

43. Ibid.

44. Mackay v Dick (1881) 6A.C.251 per Lord Blackburn at 263.

45. Hudsons Building andEngineering Contracts (11th Ed,1994) p99.


46. Laburnam ConstructionCorporation v The United States(1964) 163 Ct Cl 339.

47. (1902)86lT764.

48. Brown, N, 'legal andContractual Aspects of WorkProgramming: Part 2 Compensation for Changes to theSequence or Manner of Work'(1999) 15 BCl p12-17.

49. (1989) 47 BlR 90.

50. Ibid 110.

51. Brown, N, 'legal andContractual Aspects of WorkProgramming: Part 2Compensation for Changes to theSequence or Manner of Work'(1999) BCl p14.

52. Pilley, John l , 'Delay Costsdue to Changes of Programme'AClN Issue #9 p15.

53. Unreported, Court of Appealof the Supreme Court of NSW,Priestley, McHugh And Clarke JJAAppeal No 363 August 1987.

54. Perini Corporation vCommonwealth of Australia(1969) 2 NSWR 530.

55. Dorter and Sharkey, Buildingand Construction Contracts inAustralia: Law and Practice, para9.60 p4534.

56. See Brown, N, 'legal andContractual Aspects of WorkProgramming: Part 1- AnExamination of the Ownership ofFloat' (1998) 14 BCl p354-365.

57. (1902)86lT764.

58. Doug Jones, Claims &Disputes (1st Ed 1996) pl14.

CONTRACT CONDITIONSAustralian Standard AS2124 (92)

Property Council PCl (1998)

Australian Department of Defence-Head Contract for theConstruction of Facilities (2000)

CASESHavant Borough Council v SouthCoast Shipping Company Ltd(1966) Cill 1146.

Laburnam ConstructionCorporation v The United States(1964) 163 Ct Cl339.

Kitsons Sheet Metal Ltd vMatthew Hall Mechanical andElectrical Engineers Ltd (1989) 47BlR 90.

Mackay v Dick (1881) 6 AC 251.

Perini Corporation vCommonwealth of Australia(1969) 2 NSWR 530.

Wells v Army and NavyCooperative Society (1902)86 IT 764.

Yorkshire Water Authority v SirAlfred McAlpine & Son NorthernLtd(1985) 32 BlR 114.


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