Delay Claims, Changed Conditions Claims and Extra Work Claims in California Public Contract Law


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As is the case on private construction projects or contracts, there are many events on public works projects which make it necessary for a contractor or subcontractor to file claims for extra compensation or extra time to complete a project.

Among these causes are unforeseen soil conditions unexpected site conditions, inaccurate or incomplete plans, delays in responding to Requests for Information, delays in approval of shop drawings, lengthy change order decisions, suspension of the work, interference by other contractors or agents of the public entity, terminations for convenience and the like.. Force account work can also be another type of claim.

These events can lead to labor inefficiencies, material and labor price increases, disruption or interruption of the work and delays which can both increase the cost of the work, as well as the time needed to complete the entire job, if the tasks impacted are on the Critical Path.

An increase in projected job costs often results from a change in the amount or nature of the work to be performed, decreased labor productivity or efficiency, acceleration, delay or suspension of the work, disruption to the work, lack of access, problems with the drawings, design errors, sequence changes, weather delays, changes in labor rates or material costs due the delay, idle time or stand by time, increased job site supervision or overhead costs, other delay damages and even - in some cases - increased home office overhead.

Unlike private projects, however, on public works jobs there are typically many more hoops or obstacles for a contractor to jump through to make a valid claim, and many pitfalls where you can lose your rights to any claim for extra time or extra costs.

While private contracts have some similar hoops and pitfalls, such as deadlines for providing notice of and for making a claim, on government contracts the notice and claims process is typically much more complex and your failures to strictly follow the notice and claims precedence are much more likely to be fatal to your claims.

This is because of the ancient legal doctrine of Sovereign Immunity, which disfavors or prohibits suits against the government, unless the Legislature has specifically allowed such claims, provided claims are made in a specified manner and time period.

Whatever procedure the government has adopted thus must be very strictly followed by contractors on government jobs.

Below are some steps to help you try to make valid enforceable claims against a public agency on a public works government contract in California!

Step No. 1 Read your Contract and all Provisions re “Notice of Claims”

Again, as with private construction jobs, most government contracts contain notice and claims provisions, however, because of the doctrine of Sovereign Immunity, failure to comply with these provisions is much more likely to be fatal to your claim.

Thus, read the Notice and Claims provisions of your contract before you start work, Do Not wait until a claim arises until you have performed the extra work, or until the end of the job, as that may already be too late.

These provisions may be found not in the contract itself, but may also be somewhere else in the contract Documents, such as in the Specifications, the Project Manual, the California Green Book, or local modifications to the Green Book. In some cases there may also be an applicable statute or local ordinances as well.

Sometimes interpreting or even finding these provisions can be very, very complex, and may require you to look at several documents to figure out what the claims procedures really are.

If the procedures are not clear, consult an experienced construction attorney, so you are sure how to proceed promptly when these issues arise on the job.

Step No. 2 Follow the Notice of Potential Claims Provisions in your Contract Documents

Public Contracts also typically require you to promptly notify a public agency when an event occurs which might give rise to an extra cost or extra time claim. A contractor may be required to provide notice to the public entity before you do any extra work or incur costs or any substantial delay. (Of course, before doing any force account work or other extra work or changes to the work requested by the owner you still must have received a written change order or force account directive form the owner. If you fail to obtain such a written consent to a change, you may not be entitled to payment!)

Examples of these provisions are notice requirements regarding unforeseen or changed job or site conditions, notice of when you are being delayed by the owner, the architect, or others, notice of when you believe you are being asked to perform work not required by the Contract Documents, and the like.

The idea of requiring these notices is so the owner can try to evaluate and address the situation promptly, and hopefully try avoiding a claim against it.

If you do not provide the required notice in a timely manner, the public entity may argue that it should not have to pay your claim at all, because they could have corrected the problem had you given them timely notice of the problem.

These notice periods are often very, very short, sometimes just 1 – 3 days, so be aware of them and follow them.

If you are being delayed on a Critical Path item, promptly notify the owner in writing as required.

If you are being ordered to do extra work outside your contract, notify the owner in writing Now, and request written instructions.

Keep proof that you notified the owner and when, such as fax receipts, certified mail receipts, etc.

Step No. 3 Start Gathering Documentation to Support your Claim Immediately.

If you have promptly notified the public entity of the problem and the potential claim, and there has not been a timely response, or if the owner denies the existence of the problem, or if you have been ordered in writing to proceed on a Force Account, Time and Materials over time or other basis, make sure to Immediately start keeping track of the extra cost you are incurring and how this work has been, is, or may affect the Critical Path and the completion date / contract time.

This may require you to code time and costs for the extra work as it is being done (e.g. claim #1, ________ , hrs, etc) and also assign material and subcontractor costs to that claim.

Subcontractors should be required to do likewise.

The labor and materials costs for the claim should also be completed and segregated out on your accounting system while the work is being done.

If you wait until the end of the work on the claim item or delay until the end of the job to assign and compile these costs, the Government may be able to challenge you after the fact calculations as being inaccurate or not properly documented.

When the potential claim item may impact the Critical Path or the completion date, update your Critical Path Method or other schedules on a weekly or bi-weekly basis to reflect changes to the schedule.

Keep all copies of all of your CPM or other schedules, even old ones.

Also maintain accurate job logs or diaries to show what work was being done on each day, who was working (crew, subs, etc.), and what items of work were being delayed by what on each day.

It is also a good practice, where the extra costs and delays are still within the owner’s control (e.g., continued slow responses to RFI’s, lack of decisions from owner or design professional etc) to send the owner or construction managers reminders of the ongoing delays and extra costs.

Step No. 4 File a Claim within the Time and in the Manner Required by your Contract and
Any Applicable Statute Or Ordinance.

For local government contracts (e.g. Cities, Counties, Special Districts) Public Contract Code section §20104.4 provides a required all often advantageous claims process for claims of less than $375,000, including extra time claims.

Where you have a contract with one of these local entities and an Individual Claim of less than $375,000, the general contractor must file its claim (together with documentation to back up the claim, including possibly a CPM analysis), before the date of final payment by the agency (Typically under a California Public Contract, receipt of final payment typically waives all claims by the Contractor, but not the public agency).

There is, however, no requirement to wait until the end of the job to file your claim, and to so wait is usually not to your advantage, as you want to get paid sooner, rather than later.

Once you have most of the information gathered to prove your claims, your claim can – and maybe should – be filed, even through completion of the job is still far off.

Under this Code section, the agency has a fixed number of days to either accept or deny your claim in whole or in part, or to ask for more backup for the claim

If the claim is denied in whole or in part, the contractor can ask for a “meet and confer conference” with the agency to try to settle the dispute.

If the conference fails to settle the claim, the contractor then may (must) file a Government Code claim, usually with the City/County attorney or Clerk, or other appropriate officer, and within a fixed time after that file suit on the claim in court.

You will usually need on attorney to pursue the claim after the “meet and confer” conference, if not earlier, as it is at this part where there are many legal technicalities and pit falls. The deadline to file such claims are very short

As discussed later, there are a number of advantages to using this 20104.2 claims process. When claims on the job can logically be broken down into claims of $375,000 a contractor usually should – and may be required to - use the claims filing procedures of this statute.

If the claim cannot logically be broken down into individual claims of less then $375,000 on such a Local Agency contract, the contract itself may provide a separate claims process for those langer Claims.

For example, the City of Oakland Supplement to the Green Book provides for an “expedited” claims process for such claims, with a claims presentation and hearing, and then an “appeal” to the same Department and person who oversaw the project from the beginning of the design phase.

Once the claim has passed through this process, a Government Code claim must also be filed, followed by a lawsuit.

Some other local agencies may have a different claims process established by a local ordinance, rather then contained in the Project Manual.

Depending on the attitudes and proclivities of the local agency personnel involved, these claims processes may or may not appear to be very fair or objective from the contractor’s perspective, but their provisions must be followed or the local agency might argue that your later lawsuit cannot proceed, since you did not comply with the exact requirements of the perfectos claims process involved.

When you are about to file a claim with the local public entity, the best practice is to at least consult with an experienced Government Contract attorney, to make sure you comply with these claims processes to the letter, to avoid any later argument or ruling that you waived or failed to properly perfect your claim(s), and thus cannot pursue a suit.

On contracts with The State of California and its Departments (e.g. CALTRANS, Department of Water Resources, etc.), a different claims process applies.

Step No. 5 Consider and Evaluate Possible Subcontractor Pass-Through Claims

Whenever there are delays, interruptions disruptions, extra work and the like on a job, the efficiencies, time-lines and costs of one or more subcontractors are also often affected, whether those events were caused by the owner, prime contractor, or others.

Because subcontractors have no direct contract with the owner, they usually cannot directly make a claim against the owner or public entity when those persons or their representatives are the cause of the subcontractor’s delay or extra costs. (There may be some exceptions to this situation where a third party’s negligence has caused damage to the subcontractor).

Therefore, in the absence of an ability by a subcontractor to make direct claims against the owner of the job, and in the absence of a viable tort or negligence claims against such third parties, Subcontractors must present their delay and extra work claims to the party that they have contracted with, typically the prime contractor.

Because the prime contractor may not have been the total cause or had any role in causing damages to the subcontractor, the law gives prime contractors the right to “pass-through” or make a claim for the subcontractor’s damages to the owner or public entity, where the owner, its representatives, project management, or design professional team were sole or partial cause for those damages.

Subcontracts often contain provisions as to how such claims are to be handled, and who pays for the costs of pursuing the subcontractor pass-through claims against the owner. In most cases, the subcontractor is required to pay those costs.

If there is no such pass-through provision in your subcontractor, it may be advisable to have an attorney draft up a pass-through claim prosecution agreement to clarify everyone’s responsibilities, minimize costs, and avoid disputes.

A general contractor, of course, is not required, absent some agreement, to attempt to pass on its subcontractor’s claims to the public entity, but in that case a subcontractor could pursue the prime contractor for damages, even though the owner or its design professionals may have been the ones who caused the subcontractors damages.

In that case, the prime contractor could end up paying the subcontractor for its damages without any ability to recover reimbursement from the true responsible parties!!

Step 6- Evaluate Your Possible Exposure to False Claims Act Damages

Federal, State, and local public agencies have a powerful club to beat back or recover for fraudulent or exaggerated contractor and subcontractor claims against them in the form of State and Federal false claims costs.

Those laws allow government agencies to recovery statutory penalties, trouble damages, and attorney’s fees from persons who file or cause the filing of false claims. Sometimes a False Claims suit may be filed as a counter suit to a contractor’s suit on its claims.

Examples of False Claims:

o Billing or payment for work that was not performing per the terms of the contract plans and specifications
o Billing for defective work
o Making exaggerated claims for which you have no backup support
o Billing for excessive quantities of work
o Billing on a contract that was obtained through false representations or collusion
o Falsely claiming to be an SBE, DBE, LBE, or DUBE contractor or subcontractor
o Overstatement of overhead labor or material costs in a claim
o Double billing prevailing wage or Davis Bacon get violations
o Improper subcontractor substitutions
o Bay America violations and billing for work done in violation of any material term of the contact

Subcontractors who do no directly submit any claims to the Government can still be liable for submitting false claims if they submit an exaggerated claim to the prime contractor with the knowledge the prime contractor will likely attempt to pass-through that claim to the Government.

Even if all work is done properly and even if the Government does not pay the claim, some liability for at least penalties - or more- still could possibly be imposed.

Companies found guilty of submitting false claims can be debarred from doing future business with the Government agency, and you may be required to report such debarment to other agencies you bid to.

False claims actions can also be private whistleblowers such as your own employees seeking to recover a percentage of the Government’s recovery.

Therefore, it is quite important if the claim is of any significant size, or if there are any questions as to whether you have complied with the material terms of the contract, plans, or specifications, that you consult with a competent claims analyst and/or an experienced Government contract attorney to avoid or minimize your exposure to potential false claims, get liability, and to maximize your chances of success on your claims.

Step No. 7 Initiate a Court Action to Pursue Your Claim(s)

Once your Government Code Claim on a local agency contract is denied or not acted upon for at least 45 days, you must file suit to preserve and enforce your claim.

On local public agency contracts where you filed a claim pursuant to Public Contract Code §20104.2, and then timely also filed a Government Code Claim, you also must bring a lawsuit if you wish to perfect and collect on your claim.

This Public Code Provision provides a very unique – and usually advantageous – procedure after the lawsuit is filed.

Within 60 days of when the local agency answers your lawsuit, the Court ( on a motion by your attorney) must order the parties to mediate the dispute before a neutral mediator. If the matter is not settled at the mediation, the Court can (on a motion) and must order the case to a non-binding judicial arbitration before an arbitrator or experienced in construction matters, who issues a non-binding decision.

Either party may elect not to be bound by that decision, but if no party makes such an election then the arbitrator’s decision is binding on the parties, and becomes a judgment to be entered by the judge in the case.

If one party elects not to be bound by the arbitrator’s decision, and the case then proceeds to trial, if the party who elected not to be bound does not do at least as good at trial as it did in the arbitration, then that party must pay the attorneys fees and costs against the other party.

This is one of the few occasions when the court can award attorneys fees to a contractor in a California Public Contract dispute, as most public contracts do not provide for an award of attorneys fees.

In local government contract cases not subject to section §20104.2, after the filing of the Government Code Claim (which is typically denied by the public entity) a suit is filed and the case proceeds to trial like any other lawsuit. However, the parties may both still agree to have the suit arbitrated or mediated.

Under the Public Contract Code some public agencies are allowed to include a provision in their contracts for binding arbitration, instead of a lawsuit, after the claims process has been completed. Most California agencies have not elected to use this statute, but make sure you or your construction attorney check your contract to see if there is any such provision, and that you comply with all required procedures.

On State of California Public Construction Contracts there is a separate statutory procedure which establishes a special arbitration procedure for binding arbitration before construction arbitrators.

Unlike most contractual arbitration provisions, where the arbitration awards cannot be challenged or appealed unless a party can show bias or procedural unfairness, these State Public Works arbitrator awards can be challenged in Superior Court for lack of sufficient evidence to support the award, or for legal error.
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The above does not constitute legal advice or a substitute for consulting with a competent Construction Attorney regarding your particular situation. You may not use this discussion as a substitute for obtaining legal advice from a competent Construction Lawyer. Each case has its own unique contract and circumstances which make general advice impossible to provide, and statutory laws and case law precedents and developments are constantly changing.

The above discussion does not constitute legal advice, and you may not rely on it. Individual Contracts, situations and claims very greatly, and laws and case precedents are constantly changing.

For advice regarding your particular contract, claims or situation, please consult with on experienced competent construction lawyer before making any decision or taking any action.

ABOUT THE AUTHOR: George W. Wolff, Wolff Law Office
At the law office of George W. Wolff & Associates, in San Francisco, we offer over 25 years of experience to clients throughout the Bay Area and Northern California, handling a wide range of construction and real estate claims and cases, including construction defect cases, and disputes involving private and public works contracts. George W: Wolff has bachelor's and master's degrees in Civil Engineering and Construction Management worked in the construction industry before attending law school and brings a thorough understanding of the technical and legal issues related to construction real estate disputes to our clients, helping you avoid or resolve disputes quickly and efficiently.

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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.



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