Liquidated Damages Mitigation — £28m Commercial Refurbishment

The situation

The project had passed its contractual Completion Date and remained incomplete. Under the contract, the Contractor was liable for liquidated damages for the period of culpable delay beyond the applicable Completion Date — a financial exposure increasing daily and representing significant commercial risk. The project team had accepted the reported position, but there was uncertainty over whether the Completion Date being used to calculate the damages was actually correct.

The contract

The project was procured under JCT Design & Build 2016. Liquidated damages under this form are only properly due for the period following the correct, contractually adjusted Completion Date — which meant the entitlement position needed re-testing before the damages assessment could be accepted.

What needed examining

• Contractual Completion Date and subsequent adjustments
• Extension of Time entitlement
• Employer instructions and variations
• Delay events occurring after the original Completion Date
• Critical path and actual causes of continued delay
• Concurrent delay
• Progress records and contemporaneous correspondence
• Calculation of the Contractor's potential damages exposure

The analysis

A number of instructions and design changes had been implemented during the period of overrun. Although these hadn't initially been recognised as affecting the contractual completion position, the contemporaneous records showed they had affected critical activities and continued to consume programme time. We reconstructed the programme and assessed the cause and effect of the relevant events, establishing additional Extension of Time entitlement that had not previously been reflected in the project records — changing the basis on which the liquidated damages exposure was calculated.

The intervention

We undertook a forensic review of the delay position from the original Completion Date through to actual completion. Rather than simply challenging the application of liquidated damages, we established the contractual position by analysing the events that occurred after the original Completion Date and identifying where Employer-risk events had continued to affect the critical path.

The outcome

The Contractor's liability for liquidated damages was substantially reduced following recognition of the additional Extension of Time entitlement. The exercise did not seek to avoid a legitimate contractual liability — it established the correct contractual completion position, ensuring damages were applied only to the period the Contractor remained genuinely responsible for. The result was a significant reduction in the Contractor's financial exposure and a materially improved commercial outcome.

ELLIS Insight

The exercise demonstrated the importance of reviewing the entire delay and entitlement position before accepting a liquidated damages assessment. What initially appeared to be a straightforward period of Contractor culpable delay proved considerably more complex once the contemporaneous project records and contractual events were properly analysed.