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01/07/22

Watch out for Sectional Completions

Watch out for Sectional Completions

It is not unusual for a project to have two or more completion dates for different parts of a project, usually called Sectional or Milestone Completions rather than a single Date for Completion. This is particularly the case with large projects where there may be a Sectional Completion for each building or for different elements of the Project. But even smaller projects may have several Sectional Completions such as for each floor of a fit-out; each Sectional Completion having delay damages rather than only the Completion Date of the entire project.


Author: Paul Whatley, Driver Trett Technical Director


This seems a logical arrangement, mutually beneficial: the Employer gets parts of its project earlier than it might do otherwise.   A Contractor no longer has responsibility for the Section taken over, the defects liability period starts earlier for the Section and retentions, costs (insurances for instance) and the risk of delay damages are reduced. A further payment may too be triggered thus aiding cashflow.  However, a Contractor can find that the advantages of Sectional Completions are not always as expected.  Similarly, an Employer can find that it cannot take over the Sections as intended and sometimes the damages regime is unworkable. There are also other more practical considerations, for example:

  1. Firstly, a typical scenario is a Section to be handed over is supplied with services from another part of the project that is not part of the Section to be handed over. This could mean a power supply or control panel of a life safety system is fed from part of the project which is not part of the Section handed over. Therefore, both need to be in commission. This begs the question does a part of the power distribution in another Section have to be part of the handover. Similarly, if a life safety panel for a handed over Section is in another Section. For both, who maintains the panel and the power supply?  Therefore, both parties need to understand what live services are required for each Sectional Completion and how they will be provided.
  2. Secondly, a Sectional Completion means that as it’s achieved and the Section is taken over, the Contractor will be sharing the site with the Employer, possibly the Employer’s Contractors, the occupier, the occupier’s contractors or all of them. In which case responsibility for keeping the Section clean, security, fire risk and insurance needs to be established.
  3. Finally, if the Section requires lift access is a lift part of the Section? Will access arrangements need to be shared? Are the lifts capable of carrying the additional personnel and materials going in and waste material going out? Will the lifts have to work over and above the usual site working hours? Do they have the capacity to deal with an emergency evacuation?

Sectional Completions also have a profound effect on a programme. Sometimes the Sectional Completions are on the same critical path but often they are not. In which case, each Sectional Completion will have its own critical path thereby reducing float that might otherwise exist if there was only one completion date. Also, Sectional Completions:

  1. Reduce the opportunity to smooth resources.
  2. Reduce the ability of a programme to absorb delays because if a Contractor is in delay it only has the remainder of the duration up to the relevant Sectional Completion to recover the delay.
  3. Usually have delay damages attached. The advantage to a Contractor is that by having a staggered handover of Sections its exposure to damages should be progressively reduced. However, delay damages clauses are often written that full damages can apply to a single Sectional Completion. In which case a Contractor could complete all Sectional Completions on time except for one and still be exposed to full delay damages. 

A project with a few Sectional Completions, such as for a complete building, may not affect the way in which it is undertaken a great deal, particularly if they on the same path of activities. A project with several Sectional Completions, with only a relatively short duration between them, constrains a Contractor and means most float is removed from a programme. Therefore, the whole project must be carried out as-planned, and there is limited latitude for Contractor or Employer delays. Office fit-outs are a typical example.

Sectional Completions become contentious when there is an Employer delay to a Sectional Completion, and it must be decided how it affects other Sectional Completions and the Completion Date. If there is a physical relationship from a Sectional Completion, possibly through others, to the Completion Date there should be little debate that both/all have been delayed and an EOT is arising. If there are not, things are less clear cut. An Employer may feel that if it delays a Sectional Completion date and there is no physical relationships there should be no impact on subsequent Sectional Completion dates and there are no costs arising. On the other hand, a Contractor will probably feel that while there is no physical relationship there is a resource link and a delay to a Sectional Completion will delay resources that would have moved to the next Sectional Completion whether it is shown on a programme or not. Therefore, delay to one Sectional Completion would delay other Sectional Completions and there probably are costs arising.

To conclude, Sectional Completions with damages generally bring greater risks for a Contractor as opposed to a single Completion date, particularly if there is a large number of them and/or the full damages can apply to any late Sectional Completion. A project with Sectional Completions requires more analysis during the planning stage to ensure they work; they require accurate resource calculations, and progress monitoring will also need to be regular and accurate to identify delay as early as possible.  

If a dispute arises it requires a delay analysis for each Sectional Completion, increasing the workload for the analysts involved.


 

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Articles  /  Digest  /  Global  /  Middle East

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