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FIDIC /IChemE contracts: who owns the float?

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Gary Whitehead
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It has always been my understanding that under these contracts, float is owned by the project -i.e. both client & contractor can use it to absorb impact of delays on a first come, first served basis.

Recently, a respected colleague advised me that recent UK cases had eroded this position towards the NEC way of looking at things -i.e. terminal float (difference between planned & contractual completion dates) is owned solely by the contractor.

What’s the PP view? This was news to me, but then I freely admit to an almost total ignorance of case law. Should (UK) clients noawadays just assume they don’t own the float, and adjust contractual milestones accordingly?
Also, does the use of terms like ’terminal float’, ’time risk allowance’ , ’schedule buffer’, or ’unpriced float’ to describe float at the end of the project carry any contractual/legal weight when assessing EOTs & LDs?

Thanks and regards,

Gary

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Rafael Davila
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Samer

Yes here is not unusual for lawyers to charge 30% of the award. To me it is a “sting” and should be illegal. I don’t have much appreciation for lawyers.

We use AAA the American Arbitration Association, when under AIA (American Association of Architects) Standard form of agreement. It seems is not so mandatory judging from the following link. No wonder the contractor’s I know do not use arbitration even under AIA. As a general rule the Contractors I know do not like Arbitration and believe mediation is not effective.

http://lawprofessors.typepad.com/contractsprof_blog/2005/08/cases_narrow...

I read the following article from ICCWBO and yes it seems like Adjudication in the UK, it is like Mediation but a third party makes a determination instead of a mutual agreement as per Mediation, is not binding, unless mutually agreed, and the fact someone else makes a determination is a step ahead when the parties by themselves cannot reach an agreement.

http://www.iccwbo.org/uploadedFiles/Court/Arbitration/other/adr_rules.pdf

Well I will do some research to see how available this is under our jurisdiction. Good to know.

Best regards,
Rafael
Samer Zawaydeh
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Dear Rafael,

Appointing a Dispute Adjudication Board at the start of the project can be useful. I have recently attended a seminar about the subject and the lecturer stated that 30% of the projects costs in the USA are going to lawyers.

You can get more information about DAB from http://www.iccwbo.org/

I was on the Contractor’s side of Construction until 2006. Since then I am working on the Engineer side.

The effective way to solve a dispute is to find a solution to the problem and at the same time satisfy the requirements of the parties. That is what I tend to practice. The DAB is an effective way to solve disputes because it is time bound and it is run by a selected panel from both sides with experience in similar projects.

With kind regards,

Samer
Rafael Davila
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Samer

Although I am a registered professional engineer in my practice I never do design work, As a P.E. I have many friends that do their practice as design engineers, my brother Miguel is a Chemical Engineer who worked on a design firm, therefore I believe in a balanced contract.

Because the hat I use the most is that of a Construction Contractor rep. I learned to have some suspicion as to the Standardized Form of Contract developed by Design Professionals like the AIA (American Institute of Architects); I find them biased in favor of the design professional. Maybe the UK experience is better, why not. My perception is that NEC can be more impartial, as an Association of Civil Engineers they must have members that are on either side, the Owner/Designer or the Contractor, here I would expect a better balance. I do not know af an American Association of Civil Engineers contract form, if it exists in our jurisdiction we do not use it.

Regarding Adjudication it is a concept new to me that seem somewhat interesting. Yes going to court is expensive, there got to be a better way. One thing is theory the other is practice, that is why I ask to those who have experience with Adjudication. Is it really good, or more of the same thing?

Samer I believe you work on the Contractor’s side, your opinion would be very welcomed.

Note that in the original posting there is also a reference to NEC although the title reads FIDIC/IChem

Best regards,
Rafael
Samer Zawaydeh
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Dear Rafael,

FIDIC issues an updated standard about every 10 years. Next year, they are expected to issue the updated RED Book, which is related to works designed by the Owner and built by the Contractor.

Until now, I have not heard that they will be elaborating on the Program of Work chapter.

This issue is dealt with in the Supplimentary Conditions of Contract. The Owner specifies the procedure that the Contractor should follow in presenting the Program of Works and how the durations are set, information presented periodically, and if they agree before hand, how to calculate the float.

In case a dispute arises during the Contract duration, then the following is followed:

1. The Engineer can be called for a determination.
2. In case this was not helpful, then they would use the Adjudication Board, if they have appointed on at the start of the Contract.
3. They can go for Arbitration. They have a time limit to solve the dispute.
4. They can go to court, which takes more time and money and open ended.

With kind regards,

Samer
Rafael Davila
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Samer

I would like to highlight that the discussion on the article of reference is with exclusive regard to float as applied to the Contractor’s right to finish early. This thread started with the issue on Terminal Float, a portion of total available float that exists only when the schedule predicts early completion.

Precisely because of the many definitions and interpretations of float that I agree with the way it is spelled, based on the difference between Contractual Finish Date and Expected Finish Date, terms not ambiguous and understandable by non schedulers. Use of float as a definition for delay might be misleading.

I still wonder about the remaining available float to finish on the schedule projected finish date. This is another issue. In this regard I agree with leaving it out, otherwise it should belong to the Contractor, never to the Owner or whoever reaches it first, the reasoning of this is and will continue to be a matter of never-ending debates.

Seems like only retrospective delay analysis applies here, I hate to admit. Mike Testro is right, there is not a magic bullet and the different delay analysis techniques have a place depending on the particular conditions. Use of float might hinder the contractor to finish early or even delay him by denying him to keep available float as a buffer, this only can be determined retrospectively (ughh).

It should be negotiated on a case by case basis, usually the contractor will have no other option to admit there is no impact. The Owner should not be free to interfere at will, specially under the cover of surprise. If the Contractor is uncooperative then the Owner still have the option to issue a Directive to use float and the Contractor will still have the burden of proof that this action in efect delayed the job.

Maybe the FIDIC should spell it out loud and clear that this in not an omission but on purpose, and also include the reasoning of this.

Best regards,
Rafael
Samer Zawaydeh
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Dear Rafael,

Thank you for the article. It is appreciated.

Best Regards,

Samer
Samer Zawaydeh
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Dear Gary,

The Programme in FIDIC Red Book is discussed under clause 8.3.

The Engineer has to do the following:
.. "Unless the Engineer, within 21 days after receiving a programme, gives notice to the Contractor stating the exent to which it does not comply with the Contract, the Contractor shall proceed in accordance with the Programme, subject to his other obligations under the Contract..."

Ownership of the float is not discussed. The Contractor has to complete the scope within the overall time.

If a delay occurs, giving entitlement to an extention of time, then it will be dealt with under:

Clause 8.4: Extension of Time for Completion
Clause 13.3: Variation procedure
Clause 20.1: Contractor’s claims

With kind regards,

Samer
Gary Whitehead
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Intersting discussion gents -thanks all for your input.

...But I’m still none the wiser on who really owns the float on FIDIC contracts?!

Rafael Davila
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Samer

From:
http://www.contractjournal.com/Articles/2007/07/11/55553/legal-q.html

Who owns the float under NEC 3?

Under NEC 3, the contractor must show on his programme the contractual completion date, the planned completion date and any provisions for float.

There is no reason why the contractor should not show the planned completion date as being earlier than the contractual completion date, thus including terminal float. A delay to the completion date is assessed as: "the length of time that, due to the compensation event, planned completion is later than planned completion as shown on the accepted programme".

NEC 3’s guidance notes state that this method of assessment means that any terminal float resulting from an early planned completion date will be preserved. In other words it would appear that it is the contractor that owns the float under NEC 3 - although there is no court decision to confirm that this is indeed the case.

Seems is not under the contract per se but under the guidance notes the term float is used. Under the Contract documents it might be implicit by recognizing the Contractor’s right to finish early, but not a direct reference to float is written.

Best regards
Rafael
Samer Zawaydeh
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Hi,

The term "float" is not mentioned in FIDIC to the extent of my reading. If someone would like to point out where it is mentioned, I would appreciate that.

I ran a seach on the net for FIDIC and Float, and came up with the following article.

http://www.arabianbusiness.com/13073?tmpl=component&page=

it has few good points that are worth reading.

With kind regards,

Samer
Rafael Davila
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Mike

100%: Float is an important concept because although it does not identify all possible delaying activities it will certainly identify the majority.

I believe, us, the regular or action scheduler should be able to work the simple delay analysis methods, the forward looking methods and use these to determine and quantify delay.

For a case in court or a substantial claim the use of a forensic expert is in order, especially when there is no CPM schedule at all or where the validity of the existing is questioned. These are deep waters better handled by a specialist who is to be challenged by another at the other side of the table.

Best regards,
Rafael
Mike Testro
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Hi Rafael

There will always be float in a properly prepared construction programme.

As a delay analyst I have to take account of the float when assessing the delay effect of an event.

I do not use float as a measure for delay analysis but it is an important factor that cannot be ignored.

Best regards

Mike Testro
Rafael Davila
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Perhaps the following:

Terminal float - JCT SBC05 and NEC3 compared

Note that terminal float refers to early completion; I believe it is about time to stop using float as a measure for delay analysis, it is misleading, and delay analysis should be based on project end date. Maybe this is from the old days, the ENIAC computer days, when CPM started and PC’s were not available, before Commodore 64.

Use of float by the owner creates a burden on the Contractor, especially when you consider resource constraining as traditional float definition does not take it into account.

Why not Phantom Float

Unfortunately the true impact determination would require a forensic analysis that in most cases will prove no impact but in a few might show that the use of float by the Owner delayed the finish date by preventing the Contractor of this as a buffer he created in his planning. Although forensic analysis is something many of us do not like I still prefer contracts not to allocate ownership of float. The idea that "float" is something saleable to me is non-sense.

Be Cautious on Who Controls the “Float”?

Best regards,
Rafael
Gary Whitehead
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Hi Mike,

Unfortunately he didn’t specify which cases had lead him to this conclusion.

Cheers,

G
Mike Testro
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Hi Gary

Can you recall the case?

My understanding of the NEC position is that there should be two types of time risk buffers.

1. Project Contingency - to be used up by events other than Contractor’s Risk.

2. Contractor’s Contingency - to be used up by Contractor’s Time Risk.

Powerproject has built in buffers that reduce when events are impacted but they do not differenciate between Project or Contractor’s contingency.

I solve this problem by:

1. Creating 3 milstones - Planned Completion - Project Risk - Completion date.
2. Then putting a fixed FS lead lag in calendar days between Planned Completion and Project Risk for the Contractor’s time risk.
3. Then a flexible buffer for the Project Risk and Completion

This means that the Project Buffer is used up automatically but the Contractor’s contingency has to be reduced manually ("in other words - once a year" according to Peter Sellers in Balham Gateway to the South).

Best regards.

Mike Testro

Mike Testro