Arbitral tribunals are often presented with a list of issues in dispute for determination. As regards construction arbitration, some of these issues are technical in nature which may not traditionally be within the scope of expertise of arbitrators with pure legal background. To this end, the contesting parties usually engage their respective independent experts to provide technical evidence via an expert report presented in a manner that may be of assistance to their case.

This is the first part of a series of articles which aims at providing guidance on how to navigate such expert report that may be of interest to arbitrators, counsels, experts, disputants etc. As each domain knowledge has unique characteristics of its own, these articles will be organised according to various technical subject matters. These technical matters may involve a variety of domains of knowledge such as delay issues, quantum issues, building defects issues, piling issues etc. This article in particular deals with delay issues which are essentially disputes relating to programmes, schedule overrun and associated entitlement to extension of time.

Different parties may appreciate an expert report from different perspectives. First and foremost expert reports are written to assist the tribunal to understand certain technical matters that may be relevant to issues within the scope of arbitration. Apart from providing clarity to technical issues, the tribunal may examine such report from the angle of credibility and independence so that it can decide the extent to which such expert evidence can be relied upon. Where the expert is party appointed, the counsel representing the opposing party may scrutinise such report with the view of identifying both procedural and substantive vulnerabilities for the purposes of cross examination. The expert engaged by the opposing party may dissect such report with the view of finding areas where the experts may be on common ground or have difference in opinion particularly if a joint expert statement is required subsequently. The disputants or its fact witnesses may review such report to ensure that their witness statements provide the necessary factual basis to support the relevant expert opinions. Occasionally supplemental factual witness statements are issued for such purposes, may in and of itself be procedurally problematic. Therefore, an expert report in reality targets a diverse groups of audience and should be drafted in a way that facilitates navigation. 

It cannot be over emphasised that whilst experts may provide their opinion on matters within his scope of expertise, they do not ultimately make a determination on the issues in dispute. This is because one of the primary characteristics of an arbitration is party autonomy. The parties in this regard had chosen their arbitrator(s) who will make a binding determination on the issues in dispute, or at least agree on the mechanism for the appointment of such arbitrator(s). The expert plays a separate and distinct role from the appointed arbitrator(s). This distinction can sometimes be confused intentionally or otherwise, due to the manner in which the issues are framed. This should be one of the overarching focal points when navigating any expert report. The next few sections of this article will provide some context and background on this matter which is particularly common for delay issues.

Delays Are Usually Consequential Effects of Primary Issues

When parties refer their disputes or differences to arbitration, there are usually multiple issues. Amongst these issues, some are considered root cause of the substantive dispute namely ‘primary issues’. The other remaining issues are deemed ‘secondary issues’ because these arose in consequence of the said primary issues. In this regard, delay issues are usually secondary issues. By way of example, suppose the Employer rejects the works done by the contractor over what is allegedly non compliance with specification. Although the contractor disputes such allegation of non compliance with specification, the contractor complied with instructions/ directions subsequently issued by the contract administrator setting out the follow up corrective measures. These events inevitably resulted in schedule delay due to the time taken to carry out those “corrective measures” although each party may differ on the question of culpability. In this regard, the delay issues would not have arisen but for the primary issue of disputes over acceptability of work done. Even under an alternative scenario where there was no issue over acceptability of work done, disputes over delay are still likely to remain as secondary issues. By way of a further example suppose the contractor encounters underground obstruction over the course of its construction works. Schedule delay ensued due to time taken to carry out works or efforts to overcome such obstruction. If the contractor contest whether it should be culpable over such delay, the primary issue remains whether on proper construction of the contract terms, the risk of underground obstruction lies with the contractor. 

The distinction of primary issues and secondary issues matters significantly in that the outcome of secondary issues is dependent on the tribunal’s finding on the primary issues. If the delay issue (which is usually a secondary issue) in an expert report is approached in a way that  presupposes the finding of its primary issue, the report may risk being rendered redundant. Using an earlier example, if the tribunal finds and holds that works done by the contractor was compliant with the specifications and should not have been rejected, the contractor may not be liable for the delays arising from those wrongful rejections. This is of course subject to the contractor’s usual compliance with the condition precedents in the application of extension of time, including the support of sufficient evidence. The delay expert should be alive to this distinction in drafting its expert report so that it is not of limited assistance to the tribunal. If the expert appointed by the Employer assumes or is instructed to assume that the Employer had rightly rejected the works in issue and had offered delay analysis only based on this presupposition, this can be a problem. The expert report should be sufficiently versatile and relevant regardless of the tribunal’s finding on the primary issues. Even when the tribunal does not make a favourable finding on the primary issues, there are other meaningful areas of expert analysis such as whether there were elements of concurrent delays or whether contemporaneous records support the contractor’s entitlement to extension of time etc. It is not uncommon to find that the expert is constrained way before its appointment. This will be illustrated in the next section of this article.

Instructions, Culpability Assumptions And List of Scenarios

One of the most important and notable sections in a typical expert report is the ‘Instructions’.  This section includes a list of expert issues which require the expert’s opinions. How the expert issues are framed in this section will invariably set the direction of the report. If the issues are poorly framed with implicit assumptions, the versatility of such report may be compromised. 

Going back to the earlier example of rejections of works done by the contract administrator over grounds on alleged non compliance with specification, the primary issues are over works done by the contractor that is in dispute. If the expert issue is “whether the contractor had caused delay to the project completion?”, this may invite the expert appointed by the Employer to provide its opinions on matters outside his scope of expertise or make wrongful assumptions due to how general or broad the issue is framed. The expert may assume that the rejections over the scope of works were valid and consequently the time taken to carry out the corrective measures were the cause of culpable delay. Such assumption may be inconsistent with the tribunal’s finding in which case renders the report to be of limited assistance. Alternatively the expert may opined that the works in dispute were indeed non compliant with the specifications on the basis that the contract administrator had taken such position and the contractor “had not offered a viable rebuttal”. Based on such opinion, the expert then proceed to carry out its delay analysis on the premise of culpable delay. In doing so, the expert may not be aware that it had effectively usurp the power of the tribunal by making its own determination on matters outside its scope of responsibilities. Unbeknownst to the expert, the rejections of the works in dispute may be a legal issue over the interpretation of the wordings of the specification or a factual issue over whether the works indeed fell short of the specified standards. None of these issues are strictly speaking ‘delay issues’. 

One of the ways for expert to avoid the pitfalls described above is by having its report be divided based on different scenarios of culpability. By way of example, the expert issue may be framed as “assuming the rejections were wrongful, whether the contractor was responsible for any concurrent delay?”. As mentioned earlier even if the tribunal does not making a favourable finding over the primary issues, the expert report can still be of assistance by examining other matters such as whether there were issues of concurrent delays and whether the contemporaneous records is supportive of the contractor’s entitlement to extension of time. 

Based on a typical procedural time table for an arbitration, the expert issues are not determined at the time when parties’ experts commence drafting their respective reports. The expert issues are in fact determined and framed much earlier. The framing of such issues are largely influenced by the manner in which parties had pleaded their case which could be months before the experts were even appointed. It should also be noted that how parties choose to plead their case is in turn dependent on availability of documentation and records. Parties’ case is usually advanced from the most advantageous position documentation wise.

Expert Opinion Based on Factual Evidence And Documentation Discovery

Expert evidence is essentially the expert’s opinion on technical issues based on his examination of the relevant facts. Whilst an opinion is expected to be subjective, it has to be premised on objective facts that is available to both parties. According to Article 5(2) of International Bar Association (IBA) Rules on the Taking of Evidence in International Arbitration adopted in 2010, the expert report should contain a statement of the facts which the expert opinions are based on, including a description of evidence and information used in arriving at the conclusions. Therefore, an expert’s opinion is usually problematic not because it is subjective in nature but because the factual premise is in issue. The party appointed expert is not at liberty to rely on certain documents that were not previously disclosed under discovery process or unavailable to the opposing party. There should be no element of surprise in this regard since it effectively deprives the opposing party the opportunity of presenting its case by advancing its response or rebuttal. In this regard, it is considered an affront to due process. Therefore in navigating an expert report, one should pay closer attention to the process of arriving at the conclusion than the conclusion itself. After all, the conclusions in expert reports are unlikely to be critical of the party responsible for its appointment and fee payment despite the perfunctory declaration of independence. 

Expert reports usually include a list of documents provided to such expert to facilitate its technical examination and analysis. If the list of such document is not well particularised but presented in a generic fashion, it may be an indication of problem. The burden is on the opposing party’s counsel or its expert to request for an exhaustive list to ensure that both parties are on equal footing as regards documentation availability. As regards delay issues, the more such issues are framed in a precise and discrete manner, the easier it is for the expert to disclose its corresponding supporting statement of facts and contemporaneous documentation. By contrast, if the delay issues are framed generically and in an open ended fashion, the expert may be required to sieve through voluminous documents in order to search for a needle in a haystack. 

Delay analysis are ultimately an examination of a defined list of events that may be causing schedule overrun with both parties contesting the question of culpability. Some of the examples of such events are – (1) the rejection of certain construction works done at a certain point in time during the construction period, (2) the instruction issued at a certain time to vary the scope of works, (3) the delay in provision of access to the required part of the site due to works carry out by other contractors etc. Events that are well identified facilitates framing of delay issues in a precise and discrete manner. Such clarity in turn enables provision of well particularised documentation. Where the expert is instructed on the basis of a clear list of events with accurately defined set of expert issues, the expert avoids the need to embark on a ‘fishing expedition’ by spending inordinate amount of time going through voluminous documents. This has proven to be an effective strategy in not just prudently managing arbitration costs but also ascertaining upfront the methods of delay analysis available for the purposes of the expert report.

Choice of Method of Delay Analysis

During the course of construction, various documents are produced by the parties in relation to progress of works e.g. baseline programme, contemporaneous programme, interim progress reports, site diaries, instructions from the architects, resource charts, construction method statements, progress payment certificates etc. Each type of documentation offers a unique snapshot of the actual conditions on site at the material time. As a general rule, the more documentations are disclosed and made available to the parties, the more options are available to the experts in selecting the most appropriate method of delay analysis. Whilst there are no specific  restrictions under the law on the type of method that is “legally recognised”, some industry guidelines, norms and common practices may be of assistance. By way of example, the second edition of Society of Construction Law Delay and Disruption Protocol dated 2017 offers at least six credible options in respect of delay analysis. These methods include (1) Impacted As-Planned Analysis, (2) Time Impact Analysis, (3) Time Slice Windows Analysis, (4) As-Planned vs As-Built Windows Analysis, (5) Retrospective Longest Path Analysis and (6) Collapsed As-Built Analysis.

Whilst there is no intention to expand on the merits and characteristics of each and every delay analysis option in this article, it is suffice to say that the richer the documentation details, the more persuasive and credible the analysis can potentially be. A persuasive delay analysis is usually one where the critical path of the project schedule is consistent with the details reflected in various contemporaneous project records. This in turn enables a logical depiction of the delay impact of the events identified. By contrast if the claimant that shoulders the burden of proof is constrained by inadequate documentation, the expert can at best embark on a desktop modelling of a theoretical critical path and thereafter apply such “impact” on the modelled critical path with the events identified. It is likely that such theoretical approach will give rise to various inconsistencies with contemporaneous project records. 

Some critics however may differ with the perspective above and take the position that just because certain analysis method is considered theoretical, it does not necessarily mean it is less credible. As alluded to earlier in this article, the expert evidence is ultimately an evaluative opinion that is inherently subjective. Most standard conditions of construction contract do not include an agreement of the specific method to analyse any given delay. The project records such as site diaries, interim progress reports, correspondence etc are not entirely immune to human errors. Inconsistency in and of itself is not fundamentally fatal to the reliability of an expert report. Taking this argument to its logical conclusion, the expert opinion comes into play when the factual evidence is not entirely complete and the technical assessment connects the factual dots via a complementary analysis. In other words, an expert’s opinion is particularly valuable when there are gaps in the factual matrix. The expert evidence works hand in hand with factual evidence.

Main Contract Delay vs Subcontract Delay

Whether the delay issues arise out of a main contract or subcontract can fundamentally influence the line of enquiry and direction of technical analysis of an expert report. Whilst most typical construction projects are undertaken by a single main contractor, most if not all of the actual works are outsourced to subcontractors. The main contractor’s unique value proposition is in relation to an overarching management, coordination and supervision of multiple subcontractors working concurrently and sequentially on site. In order for a main contractor to be effective, it consistently and regularly produces multiple types of reports, programmes and other similar types of documentation. This is part and parcel of main contractor’s risk management approach which is not necessarily adopted by the subcontractors. 

In this regard the main contractor is typically in possession of wider array of documents that may be relevant to both main contract delay disputes and subcontract delay disputes. This can be illustrated by the following examples. A main contractor may have a delay issue with its brick work  subcontractor over the latter’s inability to complete its brick works according to the subcontract programme. However even if such brick works are purportedly on the main contract’s critical path, the subsequent screeding and painting subcontractor may not be ready to take over the completed brick work as planned over issues unrelated to the brick work subcontractor. In other words, the overall project completion is likely to be delayed even if the brick work subcontractor had no delay issues. The brick work subcontract is arguably inconsequential to the project completion in so far as the subcontract adopts a general damages approach. However as subcontractors do not maintain and control the project’s master programme, these important details could be suppressed. In other words, there could be an asymmetrical information relationship between main contractor and its subcontractor. Likewise, if the Employer is making design changes that have ripple effect over the master programme, the main contractor could be making an application for its extension of time without necessarily updating the subcontractors of these dynamic realities. Once again, the subcontractor may not be in the position produce all relevant documentation if and when the subcontractor refers its dispute to arbitration. Whilst the subcontractor’s counsel may request for the relevant documentation during ‘discovery’ phase of the arbitral proceedings, there is a chance that it may not be successful on the basis that it “lacks relevance” to the subcontract issue in hand. All the above can directly impact the delay expert’s ability to examine and analyse the actual contemporaneous circumstances relating to the delay issues.

The information asymmetry between contesting parties are less obvious in the case of main contract dispute between the Employer and the main contractor. This is because, the project master programme is regularly monitored by the project consultants engaged by the Employer and all subcontract level disputes are not relevant to the Employer on account of contract privity. Therefore, any expert engaged by the Employer for main contract arbitration may face less constraint than those disputes at subcontract level. In summary, when one is navigating expert reports on subcontract delay disputes, it will be advisable to examine the extent to which master programme and project wide reports are included in documentary discovery. There is a distinct difference between known unknowns and unknown unknowns.

Conclusion

Navigating an expert report on delay issues is a classic case where it demands a good understanding of principles of substantive law, procedural law, technical knowledge of construction works and sharp commercial acumen. The more such report is examined from different perspectives, the more insights can be uncovered.




Koon Tak Hong Consulting Private Limited