Time is essential for construction projects.
Contractor or construction companies commissioned must finish their projects on time to meet expectations of the client and to make sure they can deliver their due services. Projects need to be done on time to prevent added costs (to both the contractor and client), breach of contracts, and to avoid any replacements or turnovers happening during the construction project.
In the construction context, we can define delays as any extra time required or incurred beyond the stipulated completion date, or beyond the date that was agreed upon by the project stakeholders for completion. This article will run you through the consequences of delay in the Philippine Construction industry and some factors that may have caused it.
What Happens When a Construction Project is Delayed?
Delays in construction projects can cause a few consequences that are handled differently, depending on the sector of the construction project.
Here is a rundown of delay consequences that can happen in private and government sectors.
Private Construction Projects
Based on the Uniform General Conditions of Contract for Private Construction or CIAP Document 102 enforced by the Construction Industry Authority of the Philippines (CIAP), a contractor will be liable to pay liquidated damages of the stipulated amount in the contract and indemnity. The owner (or the employer) may deduct any sum due the Contractor the amount that has accrued as liquidated damages.
The liquidated damages accrue from the first day of delay until substantial completion (Article 20.11).
If it is the owner that caused the delay, the contractor’s work will be deemed to have achieved substantial completion under the following conditions:
- At least 95% of the work (minus the uncompleted facilities) is complete
- The contractor has accomplished the work required on the facility, but the project is directly affected by the delay, fault, or negligence of the owner.
Here, the contractor will receive the contract price minus the cost of the uncompleted portion of work.
Government Construction Projects
Delays and consequences are different with government projects. There are two Presidential Decrees that can reference any delays in Government projects, namely Presidential Decree No. 1594 and Presidential Decree No. 1870.
In Presidential Decree No. 1870, the Government can take over the administration of any delayed infrastructure project or award the project to another qualified contractor. This can happen when the contractor is behind schedule or has incurred 15% or more negative slippage based on the approved PERT/CPM.
In all instances, they shall deduct the cost of the work from the contract price. However, if the balance of the contract price does not cover the cost once the Government has taken over, the contractor will pay the difference.
Similarly, according to Presidential Decree No. 1594, the Government can takeover the project based on the following conditions:
- The contractor abandoned contract work
- Unduly delay in the contract’s prosecution work or insolvent
- Assigns his assets for the benefit of his creditors or be declared bankrupt
- Assign the contract work (without the written approval of the Government)
- Violate any condition or term stated in the contract
In these cases, the Government may end the contactor’s employment and takeover the contract work after giving notice to the contractor and their sureties.
3 Common Cause of Construction Delays
Successful completion of construction projects shows the efficiency of everyone involved in the project – contractor, clients, and stakeholders included. However, since the construction project is usually subject to many variables and unpredictable factors, which may come because of other sources.
Here are three (3) common delays in construction projects:
Complexity usually comes with mega construction projects such as skyscrapers, dams, and motorways, requiring a long implementation duration compared to simple or smaller construction projects. Depending on the complexity, this might cause changes in material prices and other increased prices.
In relation to project complexity, a design is important to any construction project. The design is a threat to the construction project’s timeline, as the execution phase may encounter design-related problems. Without an excellent design, the construction project will be more prone to delays and may warrant demolishing and rebuilding.
A big factor to delays in construction projects is changes in the environment. Especially in the Philippines, the weather changes frequently and it may cause the delays during the execution of the construction project. This is most likely the biggest factor in construction delays in the Philippines, as weather will affect the project’s critical activities.
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