Construction delay is the bane of the industry.
Sometimes the schedule just doesn’t cooperate, other times it seems like the owner or the contractor is just making excuses. How do you determine who is responsible and when is a delay excusable? What damages are available and what types of defense might the contractor use to refute them?
When your construction project runs past deadlines, you must establish a solid claim to receive compensation.
Construction Contracts and Determining General Responsibility
Your construction contract contains the details of situations where a delay is excusable and when it is not. An excusable delay is typically unavoidable or due to unforeseen circumstances.
No one should expect to receive damages due to delays from extreme weather, unexpected site conditions, or the lack of available labor. The contractor should be compensated, however, for the additional time and costs incurred.
If the delay is caused by an avoidable situation and sufficient safeguards exist in the contract, you can prove a delay claim and win damages to offset the expense added to the project. The party responsible for the delay takes on the liability for damages.
Insufficient staffing (when labor is plentiful) or poor performance by a subcontractor are two examples where the contractor should provide damages for the additional time required to correct mistakes or complete the project. An owner should expect to pay damages for delays when a designer has made an error in the drawings creating rework for the contractor.
The Relationship between the Critical Path and Delay Claims
The critical path of any project is the longest continuous chain of activities through the project that establishes the minimum overall project duration.1 Work on the critical path is the only activity that impacts completion time. Any other activity cannot be used in a claim for delay.
Critical path activities should have no float time; they are to be performed exactly on schedule with no leeway for a delay. A critical path activity must be performed at a specific time because it is integral to the next step in the project. For example, wallpapering and painting cannot begin until the drywall is installed. If the drywall installation is delayed, then wallpapering and painting will be delayed.
To establish your claim, you must be able to prove the delay was caused by a problem with an activity in the critical path.
Types of Delays
Delays come in three categories:
Excusable delays are those for which there is justification. The delay can come from the contractor or the owner. Very rarely, the contractor may still be entitled to damages from the owner.
Excusable delays include:
- Circumstances beyond the contractor’s control
- Circumstances unforeseen by either party at the time of contracting
Inexcusable delays are the fault of one of the parties: the owner, the contractor, or third parties such as subs and suppliers. A sub may produce work that must be redone, or a supplier is late; the contractor assumes liability for these delays.
Courts and arbitrators take several factors into consideration when handling delay disputes including:
- Causes of delay
- Express or implied obligations under contract of all parties
- Whether the parties have allocated risk of delay amongst themselves and if so, how
There are several types of inexcusable delays you may experience.
- Compensable delays are inexcusable delays caused by an owner from which the contractor may recover damages for the extra costs incurred as a result of the delay.
- Non-compensable delays are an inexcusable delay for which the contractor may be entitled to more time but no monetary damages.
A third type of delay, a concurrent delay, occurs when two or more unrelated delays impact the work at the same time. The delays may be due to a variety of issues and can be caused by the same party, different parties, or no party at all - weather, ground conditions, etc.
Often the delays are of different types and may confound the ability to claim damages. A contractor cannot claim a delay if the plans arrive late from the owner when a tornado has torn through the jobsite, delaying the project.
Document, Document, Document
Anytime a delay occurs, you need to document it at the time it occurs. Include the details of what caused the delay, which contract stipulations govern the issue, and the length of the delay, and how much the delay cost in additional time and materials.
Even if the delay is due to unforeseen circumstances or weather, document it for future reference and to have a record of the issue. If the project experiences other delays, you want to be able to show the types and causes of each issue to establish the category and type of delay as well as whom, if anyone is liable at each juncture.
In a perfect world, every construction project would be planned down to the minute, all materials and labor would be available with no detriments to create problems. The project would start and finish exactly on time and on budget (or better yet, under budget).
But it is not a perfect world, and you are responsible for your own defense when it comes to delays. Develop a detailed contract, document every delay, and understand which types of delay can be compensated and by whom.