How contracts shape delay analysis (and why it matters for project controls)

Why contracts struggle with delay analysis

Despite the implications of delays, most contracts treat delay analysis vaguely — if they address it at all — leaving project teams to interpret requirements differently and spar over methodology. This confusion in turn necessitates extensive mitigation to bring the parties to a contract into alignment on how delay analysis should be conducted.

For example, some contracts mandate the use of a time impact analysis (TIA) for each delay without including guidance on how to execute that TIA. In this situation, the contractor’s project team and the owner’s team may interpret and execute this in several ways. One party may use the AACE Recommended Practice 29R-03 Forensic Schedule Analysis, while another may opt for the Society of Construction Law Delay and Disruption Protocol. Regardless of which methods are selected, if both parties cannot agree on a methodology, the problem remains.

As much as these may seem like trivial misalignments, many of these disagreements escalate into contractual spats. This is because behind every unclear clause is a deeper problem: the parties’ interests aren’t aligned.

The core of the issue: misaligned incentives

The core underlying issue is that the parties to a contract have conflicting incentives. Contractors are incentivized to inflate risks and costs while reporting conservative values for dates, all to avoid being penalized. Conversely, the owner is incentivized to reject all schedule updates as non-compliant in order to deny the contractor a solid base from which to apply a simple delay analysis.

Traditional contracting structures, like FIDIC, work off this same adversarial framework. By placing a heavy emphasis on claims, notices, and determinations, delay analysis automatically becomes a semi-legal process. This means that contractors are required to justify entitlements to extension of time and increased costs while owners hold the sole power to reject claims. Under these conditions, contractors act to protect their interests by ‘gaming’ their updates to protect entitlements, while owners challenge compliance to preserve their defenses.

In short: the contract’s structure shapes the parties’ behavior. The contract not only defines rights; it defines how people update schedules, log costs, and document delays — and that behavior determines how easy or hard a delay analysis will be.

Efforts to align incentives

If traditional contract types reinforce adversity, more modern frameworks (like NEC4) attempt to introduce measures focused on promoting cooperation and aligning incentives. NEC4 has introduced some mechanisms with strict timeframes and procedures to avoid traditional claims-based approaches:

• The owner’s ability to reject updates is better regulated in specific clauses.

• The contractors are dissuaded from inflating dates by introducing terminal float, which is only available to the contractor. Contractors who finish early, and create terminal float, have a buffer against future risks. This motivates good planning and proactive risk management rather than “just-in-time” delivery.

• Shared risk management fosters cooperation rather than confrontation, meaning that the contractor must regularly maintain and submit a schedule update that foresees and mitigates potential delays early.

• Early warnings from both parties that encourages open dialogue and joint problem-solving before an issue becomes a formal claim

• Predefined circumstances that may justify time and/or cost adjustments (compensation events)

These mechanisms intend to reduce the likelihood of entrenched adversarial relationships between the parties, however, our experience shows that most of the same behaviors are present in FIDIC-based projects. With that being said the intention to align the parties’ incentives is a step in the right direction.

While NEC4 is not perfect, and certainly not feasible for every project, the modular approach taken by NEC4 is an example of taking concrete action towards establishing a future with less conflicts, simpler resolutions and higher project success rates.

What does this mean for project controls?

In practice, project controls is the core of delay analysis. When done correctly, it provides a solid, factual basis for understanding delay, even when the contract itself lacks clarity or vision. A well-built baseline, structured updates, and consistent record-keeping allow for insight rather than interpretation. This builds a bridge between delays and impacts to entitlements and remedies.

But the opposite is equally true. Without rigorous project controls practices from kickoff until project closure, lack of standardization and disciplined procedures will cause many issues. Without proper project controls, even the best analysis will collapse under the weight of uncertainty.

Contracts are the legal framework in which the rest of the project’s work is completed, but those who are most affected by their wordings are almost never in the room when they get written or signed. This means that it is incumbent on the project team members to work within the bounds of the signed contract, whether it is helpful to them or not. We propose that regardless of the contractual language, Project Controls is integral to creating, managing and executing compliant and data-driven projects. However, project controls alone cannot fix a bad contract (see our upcoming article for how to deal with this situation), but it can help prepare for delay analysis and give the best possible path to project success.