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Extension of time – Who owns the float?

Who owns the float?

Here we are not talking about transportation for Carnival Queens or even milk, but a feature of programming a project. Float in its simplest form is the amount of time by which an activity’s finish1 can be delayed without affecting the start or finish of another activity. We are not attempting here to discuss the concept of float. That is for another time, but you will hear float described as ‘free float’ i.e. the spare or unallocated time after which a delayed activity completion affects its immediately successive activity or activities and ‘total float’ i.e. the spare or unallocated time after which the project completion is delayed. An activity’s total float is obviously of greatest interest. There is also something called ‘terminal float’. That arises when the Contractor programmes to complete earlier than the completion date stated in or determined under the Contract. Whichever type, the question is who can use the benefit of it, simply ‘who owns it?’

This is a question of some importance. When assessing the effect of an event (one of a type that gives grounds for an extension of time for the Contractor to complete) the effect often changes if the presence of float can be taken into account. But that depends upon who ‘owns’ it. It therefore has a consequential effect upon claims for reimbursement of loss and expense and liability for damages for delay. Float therefore has a potential financial value.

So who owns the float? Although as always it depends upon the contract, there is a common theme.

A common response you may hear is ‘the project’ i.e. all parties involved in the construction including subcontractors. In support they will point to the judgment in the 1999 case of Ascon Contracting Ltd v Alfred McAlpine Construction Isle of Man Limited. What Judge Hicks decided was the float belonged to whoever made first use of it, in effect that everybody or ‘the project’ owns the float. In this particular case the action was between a subcontractor and main contractor over the subcontractor’s culpability for delays. The delayed subcontract works used up float in the Contractor’s programme. That was OK said the Judge. The float is there for everyone’s benefit. The Contractor’s claim fell away. The inclusion of subcontractors in the ownership is why the answer is better expressed as ‘the project’ rather than ‘the parties’.

That principle was followed by Judge Humphrey Lloyd in one of the Brompton Hospital cases2. What he said was;

‘Under the JCT conditions, as used here, there can be no doubt that if an architect is required to form an opinion then, if there is then unused float for the benefit of the contractor (and not for another reason such as to deal with p.c. or provisional sums or items), then the architect is bound to take it into account since an extension is only to be granted if completion would otherwise be delayed beyond the then current completion date. This may seem hard to a contractor but the objects of an extension of time clause are to avoid the contractor being liable for liquidated damages where there has been delay for which it is not responsible, and still to establish a new completion date to which the contractor should work so that both the employer and the contractor know where they stand.’

Therefore, where a contract requires an extension of time to be ascertained against what affect the event has on the anticipated actual completion date (as opposed to the contract completion date or extended contract completion date) then any float is for whoever gets there first. Judge Lloyd did however go on to suggest that if the Employer caused a delay, thereby using the float, if the Contractor then had culpable delay the Employer should in some way refund that float to the Contractor. Possibly he had in mind difficulties in levying pre-ascertained damages (known as liquidated and ascertained damages or LAD’s) in the situation of an Employer delay with no extension3.

In both those judgments, the judges considered the position under the JCT standard forms. But what of that ‘panacea of contractual strife’, the NEC Contract. Whilst the JCT forms are silent on the matter of float you would expect the NEC with its emphasis on project planning to be more prescriptive. But it’s not. It certainly has a stricter regime of continual updating of programmes (the Accepted Programme) than many standard forms, and it requires those programmes to show any float and ‘time risk allowances’4. But when the effect of an event (termed compensation events by this suite of contracts) is calculated by reference to the latest Accepted Programme, then to quote verbatim from Clause 63.3 of the ECC – ‘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’. That differs from the JCT provisions as discussed by Judge Lloyd above. Therefore the situation applying there cannot be automatically applied here. One difference that clearly exists is that under the NEC, because of that wording, any terminal float belongs to the Contractor5. But what of the other float and what of time risk allowances? Well as to float, the conclusion we think is likely to be the same – whoever gets there first – but we must await guidance from the Courts. And who owns the time risk allowances (which frankly are float by another name) and are they available to offset or mitigate a delay other than that for which they were included? Again we must wait and see.

So who owns the float? Well it’s probably everybody and nobody but check the contract and if you need our assistance we would be please to assist. Give us a call on 01480 426555 to discuss this further.

1. Of course it is also possible for an activity’s start rather than its finish to have an effect on other activities but for this purpose we shall just talk of its finish.

2. Royal Brompton Hospital National Health Service Trust v Hammond & Ors [2002] EWHC 2037 (TCC) (11 October 2002) at paragraph 246.

3. “It is well settled that in building contracts – and in other contracts too – when there is a stipulation for work to be done in a limited time, if one party by his conduct – it may be quite legitimate conduct, such as ordering extra work – renders it impossible or impracticable for the other party to do his work within the stipulated time, then the one whose conduct caused the trouble can no longer insist upon strict adherence to the time stated. He cannot claim any penalties or liquidated damages for non-completion in that time.” Lord Denning MR in Trollope & Colls Ltd v North West Metropolitan Regional Hospital Board [1973].

4. Time risk allowances here are not float. The Guidance Notes to Clause 31.2 of the ECC defines float as any spare time after the time risk allowances have been included. The ECC is the Engineering and Construction Contract which is the main Contract form of the NEC suite.

5. Any doubt as to that interpretation is resolved by the Guidance Note to Clause 31.1 (although not a Contract Document).

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