Time to phase out time bars in Construction Contracts?

All commercial and legal professionals deal with the issue of time bars regularly. In Australia, time bars have been found to be enforceable (mostly, subject to the exact drafting of the clause), hence they are often called as the first line of defense, should someone lob a commercial grenade (claim) at you.

What was the motive for time bar? Such provisions (like most things) were well intentioned -

• To give the client ample notice and opportunity to mitigate the impacts of the event that is being notified under such notices
• To allow for better and progressive cost control and reporting; and
• To ensure that sufficient information is available to assess any event, within a reasonable time of such events arising, when information is available

While time bar clauses are a given in almost all contracts, there are several examples where these have been strictly enforced by Head Contractors/Clients downstream i.e. against subcontractors, suppliers, consultants. This is not a legal/commercial commentary on time bars and their implications, success and defenses. The key questions that are being posed here are more practical - how often does it get used, who is it likely to be enforced by and against and what purpose does it serve?

In my experience, Contractors have time bar provisions in their contract with clients (mostly governments), and in their zest to make it "back-to-back", they include such provisions into all downstream contracts (read subcontracts). Usually, such pass through shaves off the days the number of days for providing the notice and states a well-defined form that such notice should take. Thus, if the Principal and the Contractor have a time bar with a 14 day regime, the subcontractor may have an exactly similar regime albeit with 7 days. It is fairly common to see such notice time frames also described in hours, but, 2 days is commonplace in Australian contracting.

Terms intended to ensure that the Contractor is not left holding the proverbial "can of worms" have now metamorphosed into an extremely popular means of denying any entitlements to subcontractors. It is a weapon of mass destruction - or of mas self-destruction should I say. Ask any successful project delivery person and they will vouch for the fact that a successful contractor is as good or successful as its subcontractors. I know of large international conglomerates, who realized it and often upskilled subcontractors and provided financial assistance in return for exclusivity and committed service levels.

This isn't an attempt to bash head contractors either, more a bit of navel gazing as an industry, so one can course correct. I have asked this question a fair bit in the last 5 years, how many government clients have enforced (or attempted to enforce) time bars? You will find that government clients perpetually include a time bar provisions, but seldom enforce it.

The position put forward by FIDIC and NEC Contracts is not to ignore it but is far more reasonable (28 days) and nuanced. As it dwells into the root cause of any notice and looks away from the 8-week timeline (under NEC) in certain circumstances.

There are several other templates (unamended) AS 4000 which take a different view, which is does not invalidate a late claim, but makes the party which is late - liable for breach. Unsurprisingly - this is amongst the first few clauses that clients often amend.

The view that I take is (unsurprisingly) aligned with either the FIDIC, NEC or AS 4000 contract - which is - understand the realities of projects and put time frames which are realistic. There is no one size fits all answer - but a time bar provision of 2 day is just not practical. If this has to be genuinely complied with, there should be significant increases in contract administration costs - which will again lead to reduction in industry wide productivity

I think this is where one expects thought leadership from government clients, and not take the path of least resistance. There are often clauses that clients nominate as mandatory pass throughs. These clauses reflect the issues that the clients believe are important to them. It is time to give a head contractor a reasonable time frame (take 28 days as an example) and include in a mandatory pass through which gives the Subcontractor 21 days (in this context). This is a very simple fix. Clients need to realize that not fixing this issue, contributes to:

• High project costs - as taxpayers, we fund this additional cost
• disputes (read costs again)
• if the disputes are significant in value (compared to the Subcontractor revenue), this will eventually lead to organizations moving away from the sector. Less players = Higher cost

Let's go back to the basics, and consider if the time bar provisions are serving the purpose that they were originally intended to serve, or they have evolved to become a completely different beast?