Delays are sometimes unavoidable on construction projects. When delays occur, they can often result in increased costs to contractors and subcontractors, and may bring exposure to owner claims for liquidated damages for delay. Certain types of delays, such as those caused by circumstances beyond the contractor’s control, may be deemed excusable delays and entitle the contractor to time extensions, thereby avoiding liquidated damages. Certain types of excusable delays, such as those caused by some action or inaction of the owner for example, may also be considered compensable delays that entitle the contractor to compensation for the additional costs of the delay, as well as a time extension for the delay.
However, successfully establishing and proving that delay is excusable and compensable can be a complex endeavor, filled with traps for the unwary. This blog is designed to provide five key practical tips to assist contractors and subcontractors to best position themselves to successfully assert claims for additional time or compensation in the event that they experience construction project delays.
1. Negotiate Contract Language Prior to Commencing Work
The importance of the contract language on the ultimate ability to successfully recover additional time and compensation for construction project delays cannot be overstated. At the end of the day, the contract will largely control what types of delays entitle the contractor to relief, and the requirements the contractor must establish to receive such relief. Therefore, it is important to carefully review the delay and claims provisions of the contract on the front end, and where there is an ability to do so, negotiate to obtain contract language that will permit reasonable relief for delays.
For example, contractors should carefully review the list of events that may entitle them to relief for delays to try to ensure that it is sufficiently broad and not overly restrictive. Ideally, the list of excusable delay events should include catch-all language such as “or any other event or occurrence outside of the contractor’s control,” to make it more likely that an unforeseen delay event will entitle the contractor to relief. No damages for delay contract language should be avoided if possible. If not, the contractor should try to limit the application of such language to only certain types of delays, such as delays caused by others, leaving the owner responsible to the contractor for delays caused by the owner.
Similarly, the contractor should try to remove contract language providing that claims are waived if not made within a certain time period. If such waiver language cannot be avoided, the contractor should try to obtain a reasonable time period to provide notice of a claim, such as 21 or 30 days after the event causing the delay, so as to best provide a fair opportunity to be able to recognize and provide notice of a delay.
2. Use the Schedule
In order to successfully establish a delay claim, the contractor must be able to recognize that there is an event that will cause the project to be delayed. Only delays that affect activities on the critical path will delay the completion of the work, and the project schedule identifies which activities are on the critical path. Accordingly, it is important for contractors to actively update and use the schedule to determine when an event may cause critical path delay and to provide timely notice of the delay. The schedule is also important for identifying and demonstrating the impact of the delay through a comparison of the original as-planned critical path to the then current as-built critical path due to the delay. Inaccurate or out of date schedules can seriously hinder the ability of a contractor to identify, establish and ultimately recover on delay claims. Further, it may be beneficial to engage an outside scheduling consultant to assist with development of the delay claim early on in order to try to best position the claim for success by allowing the consultant the ability to provide contemporaneous input and analysis of the schedule and the delay, versus having to reconstruct what occurred after the fact.
3. Know and Comply With Contract Notice and Claim Requirements
It is critical that contractors, and in particular, their project management staff, understand and comply with what the contract requires regarding notice and delay claim requirements. Specifically, they must comply with contract requirements regarding the timing of notice, the proper manner of providing notice, to whom notice must be provided, and what must be contained in the delay claim notice. The timing requirements for substantiation of the delay claim must also be carefully reviewed and complied with in order to successfully establish the claim.
The failure to provide proper and timely notice can be highly detrimental and even fatal to otherwise meritorious delay claim. Courts in many states, including Florida, have rejected claims entirely due to the lack of proper notice. Do not rely solely on verbal discussions with the owner or architect, as there is significant risk that such discussions will not be enough to save a claim for which timely and proper written notice was not provided. See Marriott Corp. v. Dasta Construction Co., 26 F.3d 1057 (11th Cir. 1994) (upholding reversal of jury’s $2.2 million verdict in favor of contractor on delay and lost productivity claims where contractor had failed to comply with notice of claim requirement in contract and ruling that “none of Dasta’s verbal communications to Marriott was sufficient” to comply with the contract’s written notice requirement).
4. Document the Effects of Delay During the Project
In addition to timely and proper notice of the delay claim, documentation of the delay and costs during the course of the project is critical to successfully recovering on the claim. This means documenting not only the delay events giving rise to the claim, but the communications regarding the claim, the effects of the delay and efforts to mitigate the delay, as well as the damages incurred due to the delay. It is important to document such items in writing via letters, meeting minutes, and daily reports, and where appropriate, to take pictures or video of events.
Similarly, it is important to document the ongoing effect of delays through schedule analysis, and to document damages by segregating out and separately tracking specific additional costs due to the delay. This should be done at the time during the project when events are occurring, rather than at the end of the project, as contemporaneous documentation made and tracked around the time of the events is always going to be more powerful and effective proof than attempts to remember or recreate what occurred after project has concluded.
5. Don’t Let Delay Claims Linger
In the pressure to keep the project on track, contractors may be tempted to provide notice of the delay claim, and then just deal with it at the end of the project. This can be detrimental to the success of the claim for several reasons. First, as noted above, if the contractor fails to contemporaneously document the effects of the delay and the damages due to the delay, it will be more difficult, and likely less effective, to try to reconstruct and prove the claim at the end of the project. Second, the contractor may have significantly more bargaining power to be able to successfully resolve the delay claim when the owner is also feeling pressure to complete the project, which leverage may be lost if the contractor puts off pursuit of the claim until after project completion. Finally, there is risk that the contractor may inadvertently waive the claim if it fails to timely pursue the claim depending on the specific facts and circumstances, and the contract language at issue.
These are just a few of the key tips for maximizing the chances for a successful recovery on a construction project delay claim. There are, of course, many other important things to consider and actions to take in connection with a delay claim, and the specific circumstances of a particular project and the delay at issue must be taken into account. Accordingly, an attorney experienced in construction law should be consulted for specific questions and legal advice regarding any particular construction project delay claim.