Delay in construction progress is a common problem for construction works and projects. The delay in the construction schedule in many cases will affect the overall progress of the project, thereby causing economic losses to the project and the investor. Therefore, according to the provisions of the construction law, the investor will not allow or be allowed to approve the extension of the schedule except for some force majeure cases or when the contractor has a plausible reason or the delay in progress comes from the investor himself. For works and projects using state capital, the regulations on extension of construction progress are even stricter and bind the responsibility of investors in the issue of efficiency of investment management and use of state capital.
However, as mentioned, delays in construction progress are a common and sometimes unavoidable problem. Therefore, the investor must pre-determine the options to be able to handle these cases of delay to ensure their legitimate rights and interests as well as improve the responsibility of the contractor.
1. The basis for solving the problem of delay in construction schedule when it is not eligible for extension as prescribed by law
The problem of delayed construction is considered a breach of contract, so it will have to be anticipated and handled in accordance with the provisions of the contract and current laws.
The grounds for resolving the contractor's delay in construction progress are as follows:
(i) Legal basis: A contract/construction of a work/work item is a form of civil contract but has terms and conditions that are governed by the provisions of specialized laws on construction. Accordingly, contracts that violate schedules/deadlines will be settled on the basis of considering the following legal provisions:
- Article 352 of the Civil Code 2015 stipulates that when the obligor improperly performs its obligations, the obligor has the right to request the obligor to continue performing the obligation.
- Clause 1, Article 358 of the Civil Code 2015 stipulates that in case the obligor fails to perform a job that he or she must perform, the party with the right may request the obligor to continue to perform or perform it by himself or assign another person to perform that job and request the obligor to pay reasonable costs. compensation for damages.
- Article 360 of the Civil Code 2015 stipulates that in case of damage caused by breach of obligation, the obligor must compensate for all damages, unless otherwise agreed upon or otherwise provided for by law.
- Point a, Clause 1, Article 145 of the Law on Construction 2014 stipulates that the principal has the right to suspend the performance of the construction contract when the contractor fails to meet the requirements on schedule according to the signed contract.
- Point b, Clause 2, Article 145 of the Law on Construction 2014 stipulates that the principal has the right to terminate the performance of the contract in case the contractor continuously fails to perform the work under the contract, leading to a violation of the implementation schedule as agreed in the contract.
- Point a, Clause 3, Article 146 of the Law on Construction 2014 stipulates that the contractor must compensate the principal for damage in case of extension of the completion time limit caused by the contractor's fault.
- Clause 5, Article 146 of the Law on Construction 2014 stipulates that in case a party fails to perform contractual obligations or performs contractual obligations in contravention of regulations, after performing obligations or applying corrective measures, they must also be responsible for compensating for damages if the other party also suffers other damages...
- Point a, Clause 2, Article 40 of Decree 37/2015/ND-CP stipulates that the principal has the right to suspend the performance of the construction contract when the contractor fails to meet the requirements on quality, labor safety and progress according to the signed contract.
- Clause 3, Article 40 of Decree 37/2015/ND-CP stipulates that before one party suspends the performance of work in a contract, it must notify the other party in writing 28 days in advance, clearly stating the reason for the suspension of performance.
- Clause 3, Article 41 of Decree No. 37/2015/ND-CP stipulates that in case the performance of the contract has been suspended but the breaching party fails to remedy its fault within a period of fifty-six (56) days from the date of commencement of the suspension according to the notice, unless otherwise agreed by the parties and there is no plausible reason, the suspending party has the right to terminate the contract.
- Point b, Clause 7, Article 41 of Decree No. 37/2015/ND-CP stipulates that the principal has the right to terminate the contract in case the contractor refuses to perform the work under the contract or fails to perform the work under the contract for fifty-six (56) consecutive days, leading to a violation of the performance schedule as agreed upon in the contract. except for the permitted case of the principal contractor.
(ii) Practical basis: besides the legal basis, the consideration and selection of the plan to settle the breach of contract must be placed in the correlation of the following practical factors:
- The overall progress of the approved project;
- The practical situation of the contractor's construction implementation;
- Capacity and attitude of contractors in overcoming shortcomings and delays;
On the basis of legal regulations and contract implementation practices, the investor will evaluate the advantages and limitations of each option to solve the problem of delay in construction progress and make decisions to ensure the ultimate goal of minimizing economic losses for the investor.
2. Solutions for addressing the problem of delay in construction schedule when not eligible for contract extension as prescribed by law
Based on the practice of consulting and supporting the investor in the process of building and implementing the construction contract and construction of the work, ATA will synthesize and evaluate options to solve the problem of delay in the construction schedule of the work when it is not eligible for extension according to the law. Specifically, as follows:
2.1. Option 1: Allow the construction contractor to extend the construction progress according to the cases predicted in the contract ("Extension Plan")
In fact, this option usually only applies to projects that do not use state capital. Accordingly, right at the time of signing the contract, the investor can anticipate terms to handle the contractor's delay in construction progress and stipulate the separation of construction progress/completion schedule/construction from the contract's schedule/duration. Thus, when the schedule is delayed but still within the overall term of the contract, the contractor will be entitled to an extension of the construction duration but will be accompanied by conditions for the contractor such as increasing the number of working hours or increasing the number of workers or materials and equipment to ensure that the extension of the construction schedule achieves the goal of completing the work within the time limit of contract. In addition, the contractor will be responsible for paying all costs incurred for the application of the above-mentioned schedule extension plan.
Thus, it should be noted that this extension plan can only be applied when the following conditions are met:
- Only applicable to projects not using state capital;
- Only applicable to cases where the extension period is within the overall term of the contract;
- Only applicable when the contractor meets the conditions predetermined in the construction/construction contract.
In case the time limit is delayed beyond the contract performance time limit or is not eligible to apply the above-mentioned extension plan, the contractor will only be allowed to extend the construction schedule after being approved by the investor/agency competent to decide on investment and the parties signing the Contract Appendix adjust the implementation schedule.
2.2. Option 2: Do not extend the construction schedule but allow the contractor a period of time to remedy the violation ("Remedial Plan")
In this case, the investor and the contractor will not sign an Appendix to extend the construction schedule/construction term/contract term, but will sign a working record (this working record will also have the participation of the supervision consultant, project management consultancy) to record the following contents:
- Specific parts of work that the contractor is behind schedule (as of the date of making the working record).
- A reasonable period of time for the contractor to remedy the violation.
- During the time of remedying the violation, the contractor must still fully perform other construction obligations.
- Penalties for violations and compensation for damage (if any).
- Handling measures in case the contractor still fails to fulfill its obligations at the end of the time limit for remedying violations.
The investor and the contractor need to clearly determine that the extension of the contractor's extension to the contractor in this case cannot be understood as adjusting the contract performance schedule, but should be understood as the investor giving a reasonable period of time for the contractor to perform the contractual obligations as a measure to force the proper performance of the contract and measures remedy breach of contract. Accordingly, the contractor is still responsible for imposing penalties for breach of contract and compensating for damages in this case.
It should be noted that, at the end of the time for remedying violations but the contractor still fails to fulfill its obligations, the investor will not be allowed to continue to extend the remedy-time period and will take measures according to the contents envisaged in the Working Minutes.
2.3. Option 3: Carry out the procedures for terminating the signed construction contract ("Contract termination plan")
According to this plan, the investor will not allow the contractor to extend the schedule or have time to remedy the consequences of the violation. The contractor will have to stop the construction and the investor has the right to find another construction contractor to implement the work that is behind schedule. The violating construction contractor will be obliged to pay all costs arising from the process of the investor searching for and appointing another construction contractor; at the same time, the contractor must bear the contract penalty and compensate the investor for other damages.
When implementing this plan, investors should pay attention to the following issues:
- It is necessary to have clear and complete documents and documents recording the contractor's violations (working minutes between the investor, contractor and construction consultants and supervisors).
- The investor notes the obligation when suspending and terminating the contract according to the provisions of Decree 37/2015/ND-CP.
3. Recommendations and warnings about some common mistakes of the investor when adjusting the construction schedule/extension of the construction contract/construction of the work
A construction contract is a civil contract, but that does not mean that the investor and the construction contractor are "completely free" in agreeing to adjust/sign the contract annex that the parties need to comply with specialized legal regulations. The Construction Law has strictly stipulated the cases in which the contract is adjusted and the legal consequences due to the adjustment of the contract in contravention of the law. However, in practice, many investors have wrong views and have adjusted the construction schedule/extension of the construction contract/construction work without ensuring compliance with regulations. This may cause the investor and related units and individuals to face heavy legal consequences such as being fined for violations or being held responsible for causing damage to the state budget (for works using state budget capital).
From the practice of advising investors, especially investors of works/projects using state capital, below, ATA would like to summarize and warn about some mistakes that investors often make when adjusting the construction schedule/extension of the construction/construction contract as follows:
Firstly: extending the construction progress when there are not enough grounds for extension
In fact, some investors consider the contractor's financial difficulties or human resources after covid/epidemic or internal changes affecting the management and administration of the contractor's work as a force majeure case and determine it as the basis for extending the construction schedule. However, these cases are usually not identified as force majeure cases and in essence, the contractor can hardly prove that they have applied all necessary measures within their permissible capacity, in accordance with the nature of the contract to overcome the difficulties from that situation.
Secondly: sign an appendix to record the extension of the construction schedule at the same time as recording the act of delaying the schedule and a penalty for breach of contract
The investor believes that the signing of the appendix in this case is not an adjustment of the construction schedule because the act of delaying the schedule is still recorded and the violating contractor is still fined. The extension of schedule here has the same meaning as the case we described in the Remedial Plan in section 2.2 above.
In our opinion, in principle, when the investor and the construction contractor sign an addendum to the contract to record the extension of the schedule - this means that the investor has "approved" the extension of the schedule - which means that the construction progress is extended "including" the slow deadline. Thus, with the signing of the extension appendix, there will be no basis to identify contractors who are behind schedule.
Third: extension without approval from the competent authority
According to regulations, the adjustment of the schedule in case of exceeding the contract performance time limit will need to be approved by the competent authority to decide on investment. However, at present, many investors have confusion about the fact that as long as the adjusted progress does not exceed the investment term approved by the competent authority, the investor has the right to decide on his own, without consulting for approval.
In addition, there are cases where the investor has solicited opinions but the agency competent to decide on investment does not give an official approval but only considers and "approves in principle" and requires the investor himself to study and make a decision. implement and take responsibility before law. Many investors believe that as long as there is such an opinion from the competent authority, it means that the investor has enough grounds to decide and implement the extension of the contract/construction schedule. However, from a cautious point of view, we believe that the opinion of "approval in principle" is not considered that the competent authority has "considered and decided" in accordance with the provisions of Clause 3, Article 39 of Decree 37/2015/ND-CP detailing construction contracts.
In general, delay is a condition that often arises in construction and construction activities. In order to limit this situation, the law strictly regulates the issue of extension of progress and extension of construction contracts, but at the same time it also clearly binds the responsibilities of the investor in the relationship with the contractor when wanting to suspend or terminate the construction/construction contract. Therefore, in order not to be in a passive position, minimize damage and avoid conflicts and disputes arising or prolonging with the contractor, the investor needs to proactively determine all conditions and grounds to select and implement an appropriate handling plan and proceed with the following procedures, procedures for handling each option strictly, in accordance with current legal provisions.
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