How to Get Paid for Construction Delay Claims
Provided by HG.org
The single most common cause of construction litigation for non-private, residential projects is delay. Delays may cascade from one contractor or trade to another, causing a domino effect that can lead to a very expensive conclusion. After all, time is money, and delays on commercial projects can mean thousands or even millions in lost revenues to the property owner.
When the magnitude of a few small, seemingly insignificant delays are measured across an entire project, they can become very significant, as can their ultimate cost to the project. Unfortunately, there is little that can be done to prevent the actual delays from occurring. Even an iron clad contract cannot prevent the delay, only attempt to shift the harm caused by the delay to a party more capable of preventing that delay.
In order to establish a claim for damages flowing from a construction delay, one needs more than simply original plans and as-built drawings. Knowledge and experience are required in areas such as accounting, project management, scheduling, estimating, methods, and efficiency analysis, and often a hired professional expert is needed to assist with the analysis. This means hiring an attorney before work has started who will be able to help you to mitigate the harm caused by any delays and to manage any potential risks of delay by shifting burdens as described above.
You should also remain hyper-vigilant about keeping aware of potential causes for delays. Sometimes, the delay can be as a result of poor weather, but many are the result or poor planning. Many potential delays can be anticipated early through the use of well-planned, detailed schedules. Failure to address scheduling issues at the beginning is a major mistake, unreasonable time requirements will not work themselves out during construction. Indeed, expecting delays and accounting for them in any schedule may be the best way to mitigate any potential harm and, if the project completes without delay, your project should finish ahead of schedule.
After a project begins, once a delay is suspected, you should maintain complete documentation of all activities that may be affected and continue to update the schedule. Also, keep detailed information of the impact of the delays on other tasks and labor costs and efficiencies. Generally, the party who keeps better records will also be the party to prevail in a construction delay claim.
You should also be aware of the typical types of damages you may face as a result of construction delays. Construction contracts increasingly utilize liquidated damages provisions. These are used when actual damages will be difficult or impossible to ascertain and, thus, a specific sum of money is listed in the contract for each day the project is extended past the promised completion date. Liquidated damages are not considered a penalty, which is illegal in many states, though many try to use them as such.
Other forms of damages are much more complicated and require various methods of analysis, such as critical path method (CPM). Actual, compensatory damages are used when liquidated damages are either not provided for in the contract or available for some reason. Actual damages for owner delay claims can include:
(1) The owner’s project management and supervisory expenses
(3) Loss of use
(4) Lost rents
(5) Lost profits
(6) Insurance costs
(7) Construction loan interest.
Actual damages claims for contractor delay cases may include:
(1) Supervision costs
(2) Extended general conditions
(3) Jobsite trailer rental
(4) Temporary facilities such as toilets, fencing telephone, site power and water
(5) Liability insurance
(6) Equipment rental costs
(7) Equipment maintenance
(8) Field labor if the scope of work is increased by the delay
(9) Increased material costs
(10) Lost productivity caused by the delay due to disruption and inefficient task sequencing
(11) Hourly labor rate increases due to longer duration of project
(12) Demobilization and re-mobilization expenses for extended delays
As noted above, often delays are unavoidable. The best defense to a delay claim is to anticipate problems, document the impact, and look for ways to adjust the schedule to possibly make up the time if the delay is on the critical path. On the other hand, the best way to create the claim is to prepare for it in advance, document the cause of the delay, and try to shift the burden for any resulting expenses or loss of profits to the other party by carefully drafting your contract. In either case, you should contact an experienced attorney in your area familiar with construction delay claims and contract preparation to assist you with these matters. A small investment in legal services now will likely save you a huge investment fighting delay claims later.
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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.