Terminal float: JCT SBC05 and NEC3 compared

The case: The Royal Brompton Hospital NHS Trust -vs- Frederick Alexander Hammond and Others (No 11) [2002].

The issue: Whether a contractor is entitled to an extension of time for an event that uses up terminal float in an early completion programme - JCT SBC05 and NEC3 contrasted.

The implication: Under JCT SBC05, where a relevant event uses up float in a programme that the contractor later requires for events for which it is responsible, it is fair and reasonable for the architect to later award an extension of time for the relevant event. Under NEC3, any terminal float in an early completion programme should be preserved through the ordinary operation of the contract.

Terminal float: JCT SBC05 and NEC3 compared

This article addresses the question of whether a contractor is entitled to an extension of time, for an event that causes delay, in circumstances where its programme for the works is an early completion programme showing a planned date for completion in advance of the date for completion in the contract. Such a programme is said to contain total or terminal float.

Under SBC05, the architect is obliged to grant such extensions of time as it considers to be fair and reasonable. An extension of time is granted for a relevant event that affects, or is likely to affect, the completion date in the contract, not planned completion.

Planned completion is not a term recognised by this form of contract. So, under this form, the obvious answer would seem to be that where a relevant event causes delay to a programme with terminal float, the contractor will not be entitled to an extension of time if the duration of the event is less than, or equal to, the period of terminal float, since the event has not actually caused a delay to the completion date.

JCT SBC05

This suggests that under SBC05, float is used on a first come, first served basis. If the employer causes a delay first, then it gets the benefit of the use of that float, and if the contractor slips against its programme, then it will use up the float. But this situation is potentially unfair to the contractor, since it may be that later it suffers delay of its own and incurs liquidated damages it might not have incurred had it not been for the employer's earlier delay.

The case of Glenlion Construction Ltd -vs- The Guiness Trust (1987) considered the effect of an early completion programme in the context of a contract based on JCT 63.

His Honour Judge Fox Andrews found that the contractor was entitled to complete on an earlier date, whether or not it produced a programme with an earlier date. However, there was no corresponding obligation on the architect to issue information in accordance with an early completion programme, since its obligation was to provide information with regard to the contract completion date.

This position is thought to prevail under SBC05. Thus the contractor is entitled to work to an early completion programme and may be entitled to some recompense for delay to that programme for events such as variations.

The later TCC case of The Royal Brompton Hospital NHS Trust -vs- Frederick Alexander Hammond and Others (No 11) [2002] dealt more specifically with float. This case concerned a dispute about work carried out in accordance with JCT80. At paragraph 264, His Honour Judge Humphrey Lloyd confirmed that, if at the time of a relevant event there was unused float for the benefit of the contractor, then the architect was bound to take that into account in determining the extent to which an event is likely to delay the completion of the work beyond the completion date.

However, he went on to say that: "The architect should, in such circumstances, inform the contractor that if thereafter events occur, for which an extension of time cannot be granted, and if, as a result, the contractor would be liable for liquidated damages, then an appropriate extension, not exceeding the float, would be given. In that way, the purposes of the clause can be met: the date for completion is always known the position on liquidated damages is clear yet the contractor is not deprived permanently of 'its' float."

This is only a first instance authority for this proposition, but it is a fair and reasonable approach. Clearly it is not fair or reasonable for the employer to seek liquidated damages that arise as a result of an earlier event for which it is responsible.

NEC3

Under NEC3, the programme is a much more important tool for the administration of progress and delay. Core clause 31.2 sets out the requirements of each programme that the contractor submits, including the requirement to show the completion date (as stated in the contract data or as extended by the contract), planned completion (which may be a different date), and any provisions for float.

The intention, in accordance with core clause 3, is that the programme is revised monthly, or otherwise when the contractor chooses or the project manager instructs. The programme is required to reflect the state of affairs at that time, including the effect of any compensation events for which an allowance for delay has been determined, as well as other delays to date.

There is no reason why the contractor cannot show on its programme a date for planned completion earlier than the completion date, thus including some terminal float in its programme.

The intention is that each such updated programme should be accepted by the project manager, with this accepted programme becoming the new baseline against which progress, delay and subsequent compensation events are monitored.

Core clause 6 sets out the basis upon which the contractor is entitled to additional money or time through the assessment of compensation events. In contrast to the operation of SBC05, NEC3 core clause 63.3 provides that: "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."

Therefore, as stated in the guidance notes to the contract, any terminal float resulting from an early planned completion date is preserved. The period of delay to the planned programme is then added to the completion date to determine the revised completion date from which delay damages will be applicable, where option X7 is used.

Problems arise where the contractor has not submitted an updated programme or where the project manager does not accept the latest programme, in which case the project manager assesses the compensation event using his own assessment of the remaining programme.

[Contract Journal, 30 August 2006, p 21]