Concurrent Delay, Liquidated Damages and an Instruction to Withhold Certification
You are the Engineer's representative on an S$18 million PSSCOC contract for the ACMV upgrade of an operating hospital. Completion is 30 June, liquidated damages S$30,000/day. Three events have occurred: (i) the 22 kV substation energisation by the utility slipped 5 weeks because a third-party cable diversion was needed - the contractor gave notice 2 days afterwards; (ii) the contractor's chiller shipment arrived 3 weeks late; (iii) the client issued 14 design changes between March and May, which the contractor says disrupted commissioning. The contractor claims 8 weeks extension of time and S$1.2 million prolongation. Your programme analysis shows the energisation was critical for the whole 5 weeks; the chiller delay had 1 week of float and was on a non-critical path; and the design changes were concurrent with 3 weeks of the energisation delay. The client's project manager asks you to hold the interim payment certificate until the claim is withdrawn.
1. Assess the extension of time due and the liquidated damages exposure, showing how you allocate the concurrent period.
Read the worked answer
Event (i) - energisation, 5 weeks. A delay by a utility or statutory authority is ordinarily a neutral event under the PSSCOC: excusable for time, not compensable in money, provided notice was given within the stated period. Notice at 2 days is timely. 5 weeks EOT, no prolongation cost.
Event (ii) - late chiller, 3 weeks. Contractor's own supply chain and therefore contractor risk, and in any event the path had 1 week of float. If the activity still finished before its late finish it causes no delay at all; at most it consumes float. 0 weeks EOT.
Event (iii) - design changes. Employer risk and normally compensable. Their effect is 3 weeks, but those 3 weeks fall entirely inside the 5 weeks during which the contractor was already delayed by the neutral energisation event. The contractor is entitled to time for both, but the two entitlements overlap - it cannot be extended twice for the same week.
Result: total EOT = 5 weeks, new completion date 4 August. Assessment is done event by event and then the effects are combined on the programme, not by adding the claims.
LADs: nil if completion is achieved by 4 August. If actual completion is, say, 8 weeks after 30 June (21 days late against the extended date), LDs accrue on 21 days = S$630,000, subject to the LAD being a genuine pre-estimate of loss rather than a penalty, and subject to the prevention principle - no LDs where the employer has caused the delay.
2. How would you value the prolongation claim, and what part of the S$1.2 million would you certify?
Read the worked answer
The claim is S$1.2 million for 8 weeks, i.e. an implied S$150,000/week. Two separate questions: is the rate right, and is the period right?
Period. The contractor was going to be on site for the 5 weeks of the neutral event regardless. The design changes caused 3 weeks of delay, but that 3 weeks did not extend the contractor's time on site beyond what the energisation delay already imposed. On a 'but for' analysis the compensable prolongation period is therefore nil to very limited, not 5 weeks and certainly not 8. The strict position can be softened where the changes caused additional site costs in their own right.
What is recoverable:
- Direct costs of the 14 changes - redesign, re-sequencing, abortive work, re-testing. These are valued under the variation mechanism, not as prolongation.
- Disruption / loss of productivity on the affected trades, if evidenced (measured mile or a recognised disruption method). A global claim is not evidence.
- Time-related preliminaries only for any period where a compensable event was the operative cause of delay.
What is not recoverable: prolongation for the utility delay (neutral), and prolongation for the weeks during which the contractor was already delayed by its own chiller or by the neutral event. The quoted S$150,000/week also needs testing against the actual preliminaries build-up; head-office overhead formulas are a fallback, not a substitute for records.
I would certify the direct change costs and any evidenced disruption, and reject the global prolongation sum.
3. The client instructs you in writing to hold the interim payment certificate. What do you do?
Read the worked answer
I decline to withhold the certificate as instructed.
The certification function is not a lever for commercial negotiation. Under the contract the Engineer must issue the interim payment certificate within the stipulated period, valuing the work executed and any amounts properly due. Suspending it to pressure a contractor to drop a claim:
- breaches the contract and triggers interest, and potentially suspension of work or a dispute;
- exposes the certificate to being challenged as invalid, which damages everyone including the client;
- is a professional-conduct failure - a professional engineer must act honestly and impartially in a certifying role, and must not allow a client's commercial objective to determine a professional determination.
What I would do:
- Reply in writing, respectfully, setting out the contractual obligation and the consequence of non-issue.
- Issue the certificate on its merits, deducting or setting off only what the contract expressly permits.
- Deal with the claim through the assessment process already described, and give a reasoned determination with the supporting programme analysis.
- Copy the advice to the client's authorised representative so the instruction and my response are on the record.
If the client persists, I escalate within my firm and to the client's senior management, and I do not sign a certificate I believe to be wrong. If the pressure continues, the appropriate step is to consider my position on the project rather than to certify something I do not believe.