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Delays in Construction—A Common Source of Claims

By Kevin O'Beirne, PE, FCSI, CCS, CCCA, CDT posted 07-30-2021 10:44 AM

  

The most common sources of change proposals and claims in construction are likely owner-ordered changes in the work, differing site conditions, and delays. This blog post presents a general overview of delays in construction.

Types of Delays

Construction delays are typically apportioned into three principal categories:

  1. Delays within the contractor’s control.
  2. Delays within the owner’s control.
  3. Delays neither party can control.

Delays within the contractor’s control typically include delays resulting from the acts or inactions of the contractor, its subcontractors or suppliers of any tier, or anyone for whom any of them are responsible. Why the contractor has responsibility for delays by its subcontractors and suppliers is discussed in this blog post’s section on risk allocations. Other types of delays within the contractors control include delays resulting from ineffective project management, time required to remedy defective work, and other matters within the contractor’s control or responsibility.

Delays within the owner’s control include delays resulting from owner-ordered changes in the work and acts or inactions by the owner or facility manager, owner-hired design professional, construction manager as advisor (CMa), others hired by the owner (such as entities performing code-required special inspections and tests, program manager, and other owner-hired consultants), utility owners or transportation facility owners retained by the owner to perform certain work at or adjacent to the site, and other construction contractors retained by the owner for work at or adjacent to the site. On the premise of allocating contractual risk to the party best able to control that risk, the owner is responsible for delays caused by its employees, consultants, and contractors. The owner is also responsible for delays resulting from differing site conditions; the rationale for this is discussed in this post’s section on risk allocations.

Delays over which neither party has control are often termed “force majeure events” (literally, “uncontrollable force”) and often include: severe and unavoidable natural catastrophes such as fires, floods, epidemics, earthquakes, and volcanic activity; abnormal weather conditions; acts of war or terrorism; certain acts by governmental entities, such as embargoes and trade sanctions; labor disputes to which the contractor is not a direct party or a direct contributor; acts or failures to act of third-party utility owners, owners of transportation facilities, or other third-party entities (other than those hired by the owner for work at or adjacent to the site);; and perhaps others. What is considered a force majeure event often varies by contract. Perhaps the most common type of force majeure event cited in delay claims is abnormal weather, for which additional information is available here.

https://www.ejcdc.org/force-majeure-events-abnormal-weather-uncontrollable-delays-construction-project-contributed-kevin-obeirne-pe-vice-chair-ejcdc/#:~:text=Construction%20delays%20that%20are%20the,chance%20occurrence%2C%20unavoidable%20accident”.

Location within the Contract Documents

While various provisions of the construction contract documents may allocate specific risks for certain types of delays, the principal clauses allocating such risks are typically in the general conditions, including:

  • AIA A201—2017, Standard General Conditions of the Contract for Construction. Section 8.3 (“Delays and Extensions of Time”).
  • EJCDC C-700—2018, Standard General Conditions of the Construction Contract, Paragraphs 4.05 (“Delays in Contractor’s Progress”) and 11.08 (“Change of Contract Times”).
  • DBIA 535—2010, Standard Form of General Conditions of the Contract Between Owner and Design-Builder, Sections 1.2.8 (definition of “Force Majeure Event”) and 8.2 (“Delays to the Work”).
  • ConsensusDocs 200—2017, Standard Agreement and General Conditions between Owner and Constructor (Lump Sum), Section 6.3 (“Delays and Extensions of Time”).

CSI MasterFormat—2020 does not allocate any document or specification section numbers or titles for delays although, relative to the general topic of delays, it assigns “01 26 00 – Contract Modification Procedures” and “01 32 16 – Construction Progress Schedule”.

Allocation of Risk of Delays

Standard general conditions in widespread use in the United States generally allocate risk of delays as follows:

  • Delays within the Contractors Control: The contractor is typically not due any change in the contract times or additional compensation for this type of delay. In the event of delays within the contractor’s control, the contractor is liable to the owner for liquidated damages and other damages (if any) for late completion, as established by the contract.

Delays by subcontractors and suppliers are a frequent source of disagreement between owners and contractors. For example, when a supplier delivers materials or equipment late, perhaps caused by delays at the manufacturer’s production facility or delays in shipping, the contractor may not have much actual control over the matter. Similarly, a contractor may have little control over whether a subcontractor shows up onsite to perform as scheduled. However, based on the principle of allocating risk to the party best able to control that risk, the contractor has greater ability to control its subcontractors and suppliers than does the owner.

Furthermore, occasionally, delays in delivering materials or equipment to the site or delays by a subcontractor arise from the contractor’s action or inaction, such as late authorization of subcontracts or purchase orders, insufficient communications or ineffective management of subcontractors or suppliers, or delayed payment to subcontractors and suppliers. For these reasons, the risk of delay by subcontractors and suppliers is, unless a “force majeure event,” the contractor’s responsibility..

  • Delays within the Owner’s Control: For delays within the owner’s control, the contractor is typically due additional time (when the delay has adversely affected the contractor’s ability to comply with the contract times) and additional compensation for the costs of the delay. Common delay costs include extended costs for rental and use of construction equipment and machinery, even when idled), and extended “field overhead” (such as costs for maintaining field offices and storage facilities at the site, costs for site maintenance, and related costs).

Differing site conditions is a common cause of delay for which the owner is typically responsible. While some owners may perhaps believe they have no control over unforeseen conditions discovered during construction, such as differing subsurface conditions or the discovery of hazardous materials at the site, for most project delivery methods, such risk is allocated to the owner because the owner selected the site and furnished the contractor the construction drawings and specifications (i.e., the Spearin Doctrine). In design-build projects, there is usually increased risk for differing site conditions (and their associated delays) allocated to the design-builder, because the design-builder is responsible for appropriately investigating the site and preparing the design accordingly.

A basic concept in allocating the risk of delays is that the contractor is entitled to additional time only when the delay has adversely affected the contractor’s ability to comply with the contract times. When the delayed work is not on the construction progress schedule’s critical path and the delay is less than the available float in the schedule, the contractor is not entitled to additional contract time. However, even when delayed work is not on the construction progress schedule’s critical path, there may be potential for the delay to result in additional compensation to the contractor. For example, where work not on the critical path is delayed for reasons within the owner’s control and requires continuation onsite of a $500-per-hour crane that would otherwise have been demobilized from the site, the contractor may be entitled to additional compensation for the extended rental.

  • Force Majeure Delays: Different standard general conditions take different approaches to allocating the risk of delays over which neither party has control. AIA A201 and ConsensusDocs 200 allow the contractor both additional time and additional compensation for force majeure delays, whereas EJCDC C-700 and DBIA 535 split the risk between the parties by allowing the contractor additional time (when the delay has adversely affected the contractor’s ability to comply with the contract times) but no additional compensation.

 

Because the types of delays and their associated risk allocations discussed above are so fundamental and widely-accepted in the design, construction, and legal communities, drafters of construction contracts are well-advised to reconsider the wisdom of attempting to modify them. Because contractual risk cannot be transferred without an associated cost, any such change is likely to affect the prices bid or proposed to the project owner.

Concurrent Delays

A common source of disagreement concerning construction delays is concurrent delays, where two or more separate delays overlap. Causes of concurrent delays are often attributable to each party. An example of a concurrent delay is where part of the contractor’s work was behind schedule, perhaps due to a subcontractor or supplier, or inefficient project management, and the owner orders a change in another part of the work (which was not behind schedule) that also adversely affects the contractor’s ability to comply with the contract times. Impartially determining rights to additional time and compensation in concurrent delays is often challenging. Each party typically asserts the other party was the primary cause of the delay and should be responsible for the risk.

Unless the contract expressly allocates risk for concurrent delays, courts and arbitrators typically rule the owner-caused delay governs, resulting in the contractor being entitled to additional time and compensation for the owner-caused delay, even when the work was already behind schedule. For this reason, to preserve the owner’s rights to recover damages for late completion, owners and their consultants should take appropriate steps to reduce the potential for concurrent, owner-caused delays.

To continue the above hypothetical example, assume the work was 30 days beyond schedule on June 1 and further schedule slippage was anticipated, so the work will be completed 45 days beyond the contract times. The contract includes liquidated damages for late completion. On June 1, the owner ordered changes in other work that was otherwise on schedule. The owner-ordered changes would cause the changed work to be completed 28 days beyond the current contract times. Many owners and design professionals may assume, because the contractor was already going to complete the work 45 days late anyway, no extension of the contract times or additional compensation for delay costs is necessary for the changed work. The owner and design professional assume the changed work will require a change in price only for the value of the changed work itself.

In our example, absent a contract clause to the contrary, the contractor will likely contend, and a court or an arbitrator would likely agree, the contractor is due a 28-day time extension plus 28 days’ delay costs, and the value of the changed work itself. The contractor would likely be responsible for the remaining 17 days of delay until all the work is completed. Thus, the contractor is likely to not only be compensated for 28 days of delay costs, but the owner will also be entitled to only 17, rather than 45, days of liquidated damages. This is perhaps an over-simplified example and various facts and contract clauses would influence the outcome of a similar situation on an actual project.

To this writer’s knowledge, among the standard construction contracts in widespread use in the United States, only EJCDC C-700—2018, Paragraph 4.05.D.2, expressly addresses concurrent delays, as follows:

“2.  Contractor shall not be entitled to an adjustment in Contract Price for any delay, disruption, or interference if such delay is concurrent with a delay, disruption, or interference caused by or within the control of Contractor. Such a concurrent delay by Contractor shall not preclude an adjustment of Contract Times to which Contractor is otherwise entitled.”

Thus, EJCDC splits the risk of concurrent delays by denying the contractor compensation for the cost of concurrent delays, but providing for additional time for the concurrent delay attributable to the owner. The latter relieves the contractor from liability for liquidated and other damages for late completion for the concurrent delay attributable to the owner.

Contractually precluding the contractor’s right to additional compensation (as indicated in EJCDC C-700—2018 Paragraph 4.05.D.2), or additional contract time, for concurrent delays is a fundamental risk allocation that will likely result in higher prices bid to the owner.

Entitlement in Delay Claims

When submitting a delay claim, the claimant must clearly assert the type of delay and demonstrate how and to the extent that the delay was the opposing party’s responsibility. Such claims must clearly indicate the time extent of the delay and the added costs incurred. The project record and facts surrounding the delay must clearly demonstrate that the delay was outside of the claimant’s contractual responsibility and was, therefore, outside of the claimant’s control.

Delay claims are often contentious and difficult to evaluate, especially when insufficient documentation is available in the project record. As discussed more fully in prior posts on this blog, the claimant must support its claim with clear language and appropriate documentation, submitted in accordance with the contract’s requirements for change proposals and claims, and the entity determining entitlement should be ethical and impartial.

https://www.csiresources.org/blogs/kevin-obeirne-pe-fcsi-ccs-ccca-cdt1/2020/06/16/claims-preparation-claims-should-be-clear-complete?CommunityKey=80c3b4dd-0d3f-4d4e-90f2-3bc6e4135dc2

https://www.csiresources.org/blogs/kevin-obeirne-pe-fcsi-ccs-ccca-cdt1/2020/07/31/partisan-professionals-contractors-deserve-ethical?CommunityKey=80c3b4dd-0d3f-4d4e-90f2-3bc6e4135dc2

In evaluating delay claims, it is essential to identify the cause(s) of the delay and correlate them with the facts surrounding the delay and the contract’s allocation of the risk of delays. When the claimant is contractually entitled to relief, the next step is to determine the appropriate changes in the contract times and compensation, if any. A discussion of the details of evaluating delay claims is, however, beyond the scope of this blog post.

Conclusions

Because delays are one of the most common types of construction change proposals and claims, it is very important for owners, contractors, and construction contract administrators to understand the basic types of delays and the contractual risk allocations of each, and to properly enforce the contract relative to change proposals and claims for delays.

Copyright 2021 by Kevin O’Beirne

The content of this blog post is by the author alone and should not be attributed to any other individual or entity.

Kevin O’Beirne, PE, FCSI, CCS, CCCA is a professional engineer licensed in NY and PA with over 30 years of experience designing and constructing water and wastewater infrastructure for public and private clients.  He is the engineering specifications manager for a global engineering and architecture design firm.  He is a member of various CSI national committees and is the certification chair of CSI’s Buffalo-Western New York Chapter.  He is an ACEC voting delegate in the Engineers Joint Contract Documents Committee (EJCDC) and lives and works in the Buffalo NY area.  Kevin O’Beirne’s LinkedIn page

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Dave--Thanks for reading the blog post and commenting. You are absolutely correct that, in the event of a delay by a sub or supplier, the contractor should have remedy under the associated subcontract or purchase order and that pursuing such remedy would not involve the owner or design professional.

While a study of standard construction subcontract forms was not part of the scope of this blog post, I have been recently working on a separate project, for ACEC, regarding managing risk posed by engineers' subconsultants and ("non-professional") subcontractors, during which I was reviewing the standard AIA and EJCDC professional services subcontract forms and, in EJCDC's case, non-professional subcontract form.

Relative to construction subcontracts, however, EJCDC's standard forms are EJCDC C-523--2018 and EJCDC D-523--2016 (the latter for construction subcontracts under design-build). While both have terms similar to the AIA provisions you quoted, and incorporate other apprpriate flow-down clauses, the EJCDC construction subcontracts also recognize that the contractor or a higher-tier sub often decide to accept a certain extent of risk by NOT flowing down certain terms to their subs. Thus, EJCDC C-523 and D-523 include provisions that recognize the subcontract takes precedence over the prime contract when there is a discrepancy between them. 

Still, as worded, the model language of EJCDC C-523 and D-523 would, relative to delays, bind the sub "back-to-back" with the prime and thus allow full flow-down of the prime contract's provisions on delays, unless the parties modified the model language.

Kevin:

This was an interesting and informative article.

For delays caused by a subcontractor or supplier, as in the examples you noted, a contractor could claim against the subcontractor for recovery. That would be a private matter between the contractor and their subcontractor, and there would be no reason for the owner or A/E to be involved with such a claim.

The following provisions are from AIA A421 – 2018 Standard Form of Master Agreement Between Contractor and Subcontractor where Work is provided under multiple Work Orders. I haven’t checked, but I’d expect that the corresponding agreement forms from EJCDC, DBIA, and ConsensusDocs have similar provisions.

ARTICLE 8 CLAIMS AND DISPUTES § 8.1 Subject to Sections 8.2 and 8.3, any claim, dispute, or other matter in question arising out of or related to the Subcontract shall be subject to the same dispute resolution provisions as set forth in the Prime Contract.

 

Article 4 MUTUAL RIGHTS AND RESPONSIBILITIES

The Contractor and Subcontractor shall be mutually bound by the terms of this Master Agreement and, to the extent that the provisions of the Prime Contract apply to this Master Agreement and to the Work of the Subcontractor, the Contractor shall assume toward the Subcontractor all obligations and responsibilities that the Owner, under the Prime Contract, assumes toward the Contractor, and the Subcontractor shall assume toward the Contractor all obligations and responsibilities that the Contractor, under the Prime Contract, assumes toward the Owner and the Architect. The Contractor shall have the benefit of all rights, remedies, and redress against the Subcontractor that the Owner, under the Prime Contract, has against the Contractor, and the Subcontractor shall have the benefit of all rights, remedies, and redress against the Contractor that the Contractor, under the Prime Contract, has against the Owner, insofar as applicable to this Master Agreement.