Who owns the float?

Who owns the float?

Ownership of float determines the contractor’s extension of time (EoT) entitlement under change. Even though discussions may at times be complicated, best practices supported by sound contract interpretations and case law provide guidance in navigating such situations.

This blogpost equips you with the required understanding to manage schedule impacts and protect contractor’s entitlements in a legally sound manner. For sake of simplicity, we concentrate solely on the entitlement to an extension of time. Still unsure? Don’t hesitate to contact our experts for tailored advice.

Note: This is a blogpost in a long series of posts on float. A good starting point on the subject is this one, making the crucial distinction between buffer and float.

Total float, terminal total float, free float

What exactly is 'float'? Float refers to the amount of time that a project activity can be delayed without causing a delay to subsequent tasks (referred to as= free float) or a constrained, usually contractual, milestone (=referred to as total float).

In our context, we're interested in terminal total float and total float elsewhere in the network. Terminal total float refers to the float available on the critical path leading to a contractual milestone (or the longest path if you don't subscribe to the notion that a critical path can have total float). Float elsewhere in the network is the total float not directly on the longest path towards a contractual milestone. Ownership of float – and consequently the contractor’s entitlements – is often treated differently for both cases, that’s why we make the distinction.

If you want to understand the basics, have a look at this blogpost.

Determining entitlement for EoT

Rule number one is compliance with contractual provisions. Ideally, the contract clearly outlines provisions for float ownership. However, in practice, contracts including well-known standards such as FIDIC are vague on this subject leaving room for interpretations and discussions. You can read more about how different contracts deal with float ownership in our blogpost “FIDIC, NEC4, and float”.

We have mentioned already that float ownership is crucial to determine contractor’s EoT entitlement. A second crucial element is responsibility for a delay. Thus, we will differentiate between ‘contractor delays,’ ‘owner delays’ and ‘third party and force majeure delays’.

In absence of clear contractual interpretations and relevant case law on float ownership, we consistently recommend treating float ownership as outlined below.

To illustrate our approach, let’s consider a practical scenario: Activities 1 and 2 are the longest path towards the milestone. On this path there is float available (A) which we call the terminal total float. Activity 3 has total float B.

Contractor delay

We consider a ‘contractor delay’ as a delay for which the contractor is contractually responsible. We also say that it is the effect of the occurrence of a risk for which the contractor is responsible. Consider the example of a 14 days delay due to breakdown of critical equipment.

Impact on total float

The contractor can consume the available total float ‘B’. If because of the delay this path ends up on the longest path, we’ll start treating it as terminal float.

Impact on terminal float

As long as terminal float ‘A’ is available, the contractor can consume this float.

If float is no longer available and a milestone is pushed beyond its contractual constraint, the contractor is not entitled to an EoT and is liable for potential liquidated damages.

Owner delay

We consider an ‘owner delay’ as a delay for which the owner is contractually responsible.

Impact on total float

The employer can consume the available total float ‘B’.

Impact on terminal float

Now this is one of the situations that triggers debate. A contract stipulates that the contractor has time until the contractual deadline to deliver the works. Unless treated differently in the contract, this means that the owner can not consume the terminal float towards those milestones. The contractor is entitled to an EoT equal to the impact of the owner delay, even when there is still terminal float ‘A’ available. After all, the owner had the chance to set a deadline that suits his plans at the signature of the contract.

Third party and force majeure delay

Third party and force majeure delays result from factors beyond the control of both the contractor and the owner.

Impact on total float

The contractor can freely consume the available free float ‘B’.

Impact on terminal float

Because it is not contractor’s fault, he is entitled to an EoT, even if there is terminal float ‘A’ available.

Note: Since the delay is also beyond the owner’s control, the contractor should not be compensated for overheads during this EoT in case of a lump-sum contract. Both parties take part of the hit. In the context of a cost-plus contract, the contractor is typically reimbursed for actual costs without margin.

Summary

Even though the mere question of ‘Who owns the float’ sparks a great deal of discussion, a profound comprehension of the entitlements of the contracting parties establishes a logical framework that facilitates the correct assignment of extensions of time.

Below is a summarizing table that should be valid in almost all situations:

The columns indicate who or what caused the delay. This is not the same as contractual responsibility, but the distinction is required to determine Contractor’s EoT entitlement. A second criterium to determine this entitlement is if a delay occurred on the critical path or not. This is indicated in the rows. This gives you the required the information to determine if a Contractor is eligible for an EoT. F.e., the table shows that if a critical delay was caused by the Employer, a force majeure or a 3rd party and was on the critical path, the Contractor should receive an EoT for the relevant milestone dates.