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Is Project Delay necessary bad?

December 2, 2018

Project delay is defined as project completion beyond the contractual completion date. However, is delay necessary bad? I think it depends on whether if the added economic value to the company due to this delay outweighs the penalty from the delay.

One of the causes of project delay is variation orders. Priors to the issuance of variation order, the followings should be taken into considerations:

  • What is the cost saving or economic value that can be derived from this Variation Order?
  • Is there any time impact on the project completion. If there is, what is the quantum of EOT and prolongation cost?
  • What is the impact of this Variation Order to the third party such as downstream contractor? Is it favorable or unfavorable?

In one of my past projects, a Variation Order was being issued way before I took over the project. This Variation Order was along the critical path, which means it would definitely lead to an extension of time and prolongation cost to the project.

At that critical point in time when the project was struggling to complete, I could have recommended the suspension of this Variation Order so that the delay to the project could be mitigated. However, I reckoned that the omission of this VO would have a serious repercussion to the downstream cable pulling contractor.

Without the installation of necessary steel structure for downstream cable installation work by another nominated contractor, a separate contract would still have to be called to fulfill the above-mentioned work, which would, in turn, lead to a further delay to the downstream third-party contractor.

After much deliberation, I decide to proceed with the Variation Order as overall it would benefit the company. Of course, it did not look good that the project under my charge would be further delayed. Still, I believe this is the right thing to do.

In another instance, another project was already being delayed beyond the contractual date. However, the contractor chose to pay Liquid Damage for the delay which he reckoned was lesser than if he had chosen to accelerate and catch up with the delay.

In other cases, where the delay is a contractor excusable delay such as delays due to the client or his agents, it is definitely music to the ears of the contractor. While delays by the contractor will lead to Liquidated Damages, an establishment of contractor excusable delay will mean the contractor will be entitled EOT with or without prolongation cost.

About the Author:

Stanley Tey has more than two decades of project management experience after graduating from the National University of Singapore in Civil Engineering. He also obtained a Master Degree in Software Engineering from Institute of Systems Science, NUS where he specialized in Project Management and Systems Integration.

He has worked as a Consulting Engineer, Project Planner, and Project Manager. Some of the projects he had handled are:

  • North East Line
  • Singapore 1st Desalination Water Plant at Tuas
  • Integrated Resort Project at Sentosa
  • Lonza Cell Therapy Plant at Tuas (Phase 2)
  • Merck Junumet plant at Tuas
  • Singapore Special Cable Tunnel Project