A construction contract is usually paired with the mechanism of ” extension of time,” which stipulates that when the need for a construction extension arises for reasons not attributable to the contractor under the contract, the contractor should include relevant supporting materials in its application to the owner for a construction extension of time within a certain period and is exempted from the delay penalty if the owner approves the extension of time. For example, Article 7 of the Model Project Procurement Contract of the Public Construction Commission (amended on April 29, 2021) provides: “During the performance period, if the progress of a critical path operation of the schedule network diagram is affected in any of the following circumstances (not attributable to the contractor) to the extent that a extension of time is required, the contractor shall, within ____ days after the occurrence or extinguishment of the incident (which shall be specified at the time of tender by the procuring agency, or seven days if not specified), notify the procuring agency and include the evidence in its written application to the procuring agency for an extension of time within ____ days (specified at the time of tender by the procuring agency, or 45 days if not specified). The procuring agency may, after considering the circumstances, agree in writing to extend the performance period without calculating the delay penalty….” Usually, the above provisions will mostly state that an extension of time is deemed necessary only when the reasons not attributable to the contractor “affect the progress of a critical path operation of the schedule network diagram.”
The schedule network diagram described in the preceding provision is usually scheduled before commencement of work as a basis for schedule control. The paths on the schedule network diagram consisting of a series of construction items with zero float (i.e., critical path operations) are referred to as critical paths. Since there is no grace time for each critical path operation, if a critical path operation is delayed by other factors, it will affect and delay the overall construction schedule. Therefore, critical paths are used as the basis for determining an extension of time. In other words, there is no time margin (float) for any of the work items on the critical path, so any delay in any of the work items on the critical path (critical path operation) will directly delay the completion date. It is only then that an extension of time becomes necessary.
2. Approved schedule network diagrams and critical path change
Although most schedule network diagrams are approved by the owner before or shortly after the commencement of work as the basis of construction, still it is not uncommon to see a discrepancy between the actual construction situation and the planning in the schedule network diagram after construction begins. For example, changes to the design, delays by related vendors, the delay in the delivery of the land, adjustments to the order of site entry or the delivery of the land, and other adjustments to the work sequence or delays that cannot be attributed to the contractor may cause the differences between the operations and order set out in the approved schedule network diagram and the work plan before the commencement of work.
Under such circumstances, the float of previously non-critical path operations has been used up at this time, and such operations become critical path operations, which further contributes to the discrepancy between the approved schedule network diagram and the actual construction situation. In this connection, it becomes necessary to explore if the contractor may request an extension of time on the ground that “the progress of the critical path operations in the schedule network diagram is affected” once the cause of an extension of time occurs to a non-critical path operation in the scheduled network diagram.
From a factual perspective, the contractor needs to prove that the path has been changed, whereas legally this calls into question whether the contractor may assert an extension of time pursuant to the contract on the ground that a previously non-critical path operation has become a critical path operation when the critical path deviates from the schedule network diagram previously approved.
3. Opinions on the change of critical paths in court decisions
As previously stated, critical path change is a phenomenon that occurs in the management of a construction project. In court practice, the 105-Jian-Shang-93 Civil Decision of the Taiwan High Court used to affirm: “The so-called critical path is the longest time path formed by the connection of a series of operations on the construction schedule network without ample time (i.e., float) for any operation on the critical path. The so-called float is the time of delay that can be allowed for an operation without affecting the earliest start time of the next operation. However, a critical path is not a fixed path. As previously stated, if it is agreed in the contract that if a cause of an extension of time arises to the extent that it is necessary to assess if the cause will affect the critical path operations, an extension of time should be granted if they will be affected. If they are not affected, it is not true that there is absolutely no chance to extend the work period. To wit, although the cause affects a non-critical path operation, still if the duration of the impact is so long that the relevant float of such non-critical path operation is completely used up, the critical path (the path with zero float) of the project will be shifted to this path. Therefore, the schedule network diagram and the critical paths marked on it are important reference information in determining an extension of time of the project.” 」
Therefore, the above court decision also recognized that “a non-critical path operation can become a critical path operation when the float is depleted” and held the position that the critical path was changed. In addition, the 108-Jian-Shang-56 Civil Decision of the Taiwan High Court, the 101-Jian-Shang-16 Civil Decision of the Tainan Branch of the Taiwan High Court, and the 104-Jian-Shang-31 Civil Decision of the Taiwan High Court also affirmed the fact that a non-critical path operation can become a critical path operation due to factors such as a delay in the delivery of the job site or work acceleration, and that the contractor may assert an extension of time.
In conclusion, when the original non-critical path operation is delayed for reasons not attributable to the contractor, if the contractor can prove that the critical path in the approved schedule network diagram has changed after construction began to the extent that the original non-critical path operations become critical path operations, the contractor may assert an extension of time pursuant to the contract according to the opinion in the above-mentioned court decisions.
4. Internal summary
Whether the occurrence of causes for extending a construction schedule will affect the progress of the project and whether an extension of time should be granted legally pertains to the substantiation of the causal relationship. A schedule network diagram and critical paths are important tools for recognizing an extension of time as well as the most important method of substantiation for the causality of the extension of time. Therefore, when each delay occurs, the contractor should notify the owner as soon as possible and update the schedule network diagram pursuant to the contract, the owner is also required to approve the schedule network diagram as soon as possible pursuant to the contract to help confirm if the critical paths of the project are changed. Both parties should also use their best efforts to retain the temporary schedule network diagram and the data relating to the schedule network diagram update at that time to help clarify the critical path change or the reasonable extension of time, if any.
(The authors’ opinions do not represent the position of this law firm.)
The 100-Jian-Shang-96 Decision of the Taiwan High Court