October 2008

IN THIS EDITION OF THE MDA REPORT:

More on ownership of the float

The ownership of float has been hotly debated for a long time – probably for as long as critical-path programming has become common practice in construction contracts.
Float in the context of a critical-path programme may be defined as the time available for an activity in addition to its planned duration. Float is used to help to identify critical and non-critical activities in a programme, which may or may not be allowed to slip without risking delays to the programme. It is used to assist with the efficient allocation of resources and, by monitoring unexpired float, rate of production and probability of completion on time can be monitored. Activities that have float are not on the critical path until all the float is used up.
Float is a very dangerous element in construction programmes. It is frequently misunderstood and widely abused by all parties usually along the lines of assuming it to be “spare time” and, therefore, unimportant. As the amount of float decreases, so does the probability of completion on time.
UK courts have not yet decided how the issue of how float in a programme should be treated – Who owns the float?. It is recognised under US law as an expiring resource available to all parties. Identification of float in a programme is necessary so the contractor can shift resources from a non-critical to a critical activity if it should need to make up time in the critical-path activity.

The project owns the float
In earlier years, cases followed the rule the float was for exclusive use of the contractor; reasoning the contractor is entitled to programme the work and the float is the resource used in programming.
However, since 1975, this rule has been reassessed and it has been decided the party uses the float first and receives its benefit until it is used up – Dawson Construction Company, GSBCA 399875 to 2BCA paragraph 11,563 (1975), Patent Specific Corporation, ASBCA 27, 148, 87-1 BCA paragraph 19,626 (1987) and Waiver Bailey Contractors Incorporated v United States, 19CtCl 474 (1990).
These cases all reason it is not necessary to determine which party may use the float but rather which party is responsible for delays to activities on the critical path or for delays to activities that then become critical and, thereby, delay contract completion.
While not yet authoritatively decided on, the prevalent argument in UK and Australian courts is that the float belongs to the first party to take the benefit of it. This argument may also be expressed by saying the party that extends the period of an activity without float is liable for the result of that extended activity. The concept of usage of float until it is exhausted, without any effect on time, penalties or extensions of time, seems to be a practical and realistic approach, which allows the delays to be analysed in chronological order without continually looking back to determine if, when and where portions of the total float were previously used (C Townslow, London Borough v Twickenham Garden Development Limited (1970) 7BLR 89 and Glen Lean Construction Limited v the Genes Trust (1988) 39DLR 89 and The Australian Courts Commissioners of State Bank of Victoria v Costain Australia (1982) 5DCLRS 193). This approach has also been advocated through the British Society of Construction Law in its protocol in determining the extensions of time and compensations for delay and disruption.
Expressed in terms of ownership, the prevailing view in the industry, internationally, is that the project owns the float.

Legalese at the coalface
This somewhat legalese discussion is all very well but how does this affect the man on the ground in a contract? Let’s take an example.
In circumstances where an admissible delay to a non-critical activity takes place, the contractor is not entitled to an extension of time although he may be able to claim financial compensation for any resources affected by the delay (plant and labour standing, and staff underutilised, for example). Once the delay exceeds the float and the activity becomes critical to the completion of the contract, the contractor is entitled to an extension of time together with all the normal financial compensation. In these circumstances therefore, the float belongs to the project.
A second type of float is where a project manager allows for some “slack” between the activities of different disciplines/contractors to a project, for example between the completion of work by a piling contractor and the start of civil construction. Clearly this float belongs to the project and the piling contractor, for example, would have no claim to this float. His entitlements, if any, would simply flow from the terms of the contract although he may be able to argue, if penalties were levied for the full duration of his overrun and the civil contractor was not delayed owing to the planned delayed start (the slack), that the penalty was out of proportion to the prejudice suffered. But this is another topic entirely.
A third type of float is where a contractor allows a duration at the end of his construction programme after the completion of his planned activities up to the date of the required contract completion (it is the difference between programme duration and contract duration).
It must be appreciated the time for completion stipulated by a contract, unless stated otherwise, is the minimum time for completion. So, for example, if a contract called for a certain number of rain days to be allowed in the contractors programme and these rain days did not materialise, the employer would not be entitled to call for a reduction in the contract duration.
Conversely, the contractor can finish as early as he likes and will still be entitled, under normal circumstances, to his full time-related P&G payments as well as any delays to be added to the full contract period rather than the reduced period he had programmed.
The exception to this rule appears to be the case of Ovcon (Pty) Ltd v Administrator, Natal 1991 (4) SA 71 (D) *(1). In this case, the contractor, Ovcon offered, in its tender, to construct some work in an 11-month period instead of the 15 months stipulated by the contract document as being the maximum time for completion. When delays were incurred, they did not extend the construction period beyond the original 15-month period and the contractors claim for expenses and losses incurred owing to the delays suffered was disallowed by the court.