Business in the construction industry can be a complicated business. Sometimes, even the most well throughout and planned projects can run into unforeseen delays. Such delays can be brought about by several reasons or even key parties- like the architect, engineer, client, or contractor. As a way to account for the possibility of delays, a detailed construction contract should include a clause called the Extension of Time.

The EOT clause allows for the construction period to be extended should a delay become apparent and is due to a reasonable cause. An extension is granted when the cause is not that of the contractors and they have taken all necessary measures to prevent it from occurring. Additionally, the clause protects the contractor from liability in paying liquidated damages during said setbacks.

A prolongation in construction refers to the request for compensation of damages by the contractor for any additional costs a delay will incur.. Such costs can include additional labour costs, loss of profits, off-site overheads, and costs of using machinery. Claims for using machinery and profits are not for actual loss, but more of compensation for a loss of opportunity to engage in new work. Usually, such claims are rejected because they are too vague.

In order for a prolongation claim to be successful, the delay must have been caused by an act or omission on the part of the employer or third-party. Such delays can be in the form of failure to allow access to the building site within the agreed timeframe, failure to gain the required permits, last minute changes to instructions, or adding in extra work not originally agreed upon.

Usually, the prolongation costs will only accumulate over time due to the additional expenses incurred after the original completion date has passed. This means that claims are dependent on the completion date being delayed from that which was agreed in the contract. Most construction contracts require the parties involved to expressly state the time of completion. If there is no time set, a contractor’s request for prolonged costs will be uncertain and unlikely to be claimed.

Should the timeline of the construction project be acceptable and adjusted, the contractors must then make a plan to overcome the delay. Doing so requires close communication with all those involved including the employer, engineers, and sub-contractors. The goal here is to mitigate and damage caused by delays through a well-planned course of action.

The moment it is evident that there is a need to give notice for an EOT, acknowledge it right away. When a problem fist appears quick action must be taken to avoid the situation from getting out of control. As soon as there is an apparent issue, accept the facts as they are and be prepared to respond through proper procedures.

Managing a project’s EOT requires that all necessary resources and parties to the contract are brought together to analyze the situation and make appropriate decisions in terms of the plan of action moving forwards. Depending on the reasons for the EOT and which aspect of the project is behind, it would also be best to loop in relevant technical specialists, vendors, and other key decision makers. Doing so will alot them the opportunity to make adjustments on their ends as necessary.

Aside from a reasonable cause for a project’s set-back, EOT can also be granted provided that the value of the project remains higher than the consequences of the delay. Consequences in this sense refers to project costs, resource availability, related business, and customer relationships.

Depending on the circumstances, alternative solutions can be realized and reviewed so that there are multiple solutions to the issue. Having back-up plans will reduce the likelihood of a delay occurring again should the first plan of action not go according to plan. At this point it is also a good idea to modify any deliverables, outline additional resources necessary, and redefine the intended plan and scope.

Having accomplished steps 1-4, step 5 focuses on putting the new plan of action into motion. As a way to ensure this is successful, all key stakeholders must clearly communicate their thoughts and final approvals. These verbal agreements should then be stipulated in an addendum to the contract outlining in detail the new agreement and deadline.

Once all plans have been set and the contract revised and agreed upon all involved must continue to maintain constant communication and detailed documentation of all activities and processes. All this is to ensure that there are no misunderstandings which may cause further issues to arise.

The terms and conditions of an EOT clause will vary depending on what the employers contracts require. In most cases construction contracts have three broad requirements that must be met for in order to be eligible for an EOT.

In order to set the clause into motion, the contractor must submit a written notice and applications to the contract administrator detailing the relevant events that have caused the delay. Should the contract administrator accept the notification and acknowledge the cause and a relevant event, then an extension may be granted and the completion date adjusted.

The requirement for the submission of written notice as stipulated by the Malaysian Institute of Architects (Pertubuhan Arkitek Malaysia – PAM). PAM conditions state that the contractor must make their intention for a request of an extension within 28 from the date of the architect’s completion date.

Here are two samples that outline the letter for extension of time application to be submitted to the contract administrator.

In the submission to the contract administrator, the document must include information on the delay itself. The contract will usually contain a list of possible causes for delay in which the contractor may be entitled to request an EOT. Such causes are under two categories: events caused by or within the control of the employer, stakeholders, or principal and events outside the control of either party in which case the contractor cannot assume the risk.

Stating that there is or will be a delay is not enough to grant an EOT. The contractor must also provide and establish plausible reasons as to why it occurred in the first palace. Such detailed documentation includes the sequences of activities towards the critical path and where within that sequence the cause for delay arose. This will determine if the cause is eligible for an EOT request.Contractors can also be prevented from claiming an EOT if they have failed to take responsible and reasonable steps to prevent the delay from happening in the first place.

Following the onset of the covid 19 outbreak the Malyasian Government has implemented a Conditional Movement Control Order (CMCO) in order to mitigate the spread of the pandemic. As a result of the response to covid 19, Bursa Malaysia Berhad announced on April 16, 2020 that it would grant further extensions of time for listed issuers to gather and submit their financial statements.

Such actions by the government extentends to the construction industry as the covid 19 pandemic has given them eligible reasons for extension on ongoing projects. This is due to the inability to fully accomplish tasks due to the CMCO, which limits their movement. As such it is difficult to work on site while maintaining required protocol.

Preparing an extension of time report must be as detailed as possible when it comes the the delay and the sequences of events that lead to that delay. In order for a submission to be successful and lead to the entitled claim, it will go through rigorous scrutiny to ensure it does not breach the original signed contract in any way. While there are several ways to prepare an extension claim report here is a general outline of what the contents should include:

Extensions in construction projects do not just affect the employers, but also those who invest in the project such as homebuyers who pre-purchased a unit in a condominium that has a set date for completion. These homebuyers are likely to have made financial plans based on the expected move-in date and therefore are directly impacted by the new completion date set by developers.

That is why the extension clause also contains a mechanism to protect homebuyers through the Sales and Purchase Agreement (SPA) which outlines the terms for the completion of the property by the developer. The SPA states that landed properties need to be done, ready for delivery within 24 months, while stratified properties must be ready for delivery within 36 months. Inability to meet this timeline means that the developer must pay a penalty fee to the homeowners equivalent to 10% per annum of the purchase price.

Previously, Malaysia’s Housing Controller allowed for the possibility for a developer to apply for an extension that overtook the requirement to pay damages, but the Federal Court ruled this power as invalid in 2019 resulting in full protection of rights for purchasers.