Delay damage claims can be difficult, time consuming, complex, and expensive. Some of this is the nature of the claims themselves. But another contributing factor can be the failure to resolve delay issues promptly.
Postponing submission or resolution of delay claims can increase the time and expense required to prepare a delay claim. Forgotten facts, imperfect memories, limited documentation, and changes in personnel can all compound the complexity—and the time and expense required—to present the delay claim.
Postponing delay claims may lead to forfeiture of rights. This can happen not only through failure to act (think lack of notice) but also by inadvertent contractor actions. For example, a contractor who thinks that he might be able to overcome the delay may prepare the next project schedule to show on-time completion, perhaps achieved by stacking trades or shortening durations. If those efforts are unsuccessful, can the contractor revisit the delay claim? That contractor may find that his on-time plan is then used against him—to prove that the delay was avoidable—and the project was late because the contractor failed to meet his own schedule.
A late delay claim can also expose the contractor to the risk of accelerating to meet the “un-extended” completion date. No contractor wants to spend money to overcome delays on the gamble that costs will be recovered later in a legal action.
PROMPT RESOLUTION
Some contractors have addressed these problems by resolving project delays in real time. We recently assisted a client who suffered a 3-month delay to an interstate highway project. With prompt action, the contractor had a signed change order allowing additional time and project overhead within a few months after the delay ended. By moving quickly, the contractor minimized transaction costs, and avoided the complications, expenses, and other pitfalls described above.
PRACTICAL STEPS
Resolving delays in real time requires preparation and a commitment to prompt resolution. Consider the following steps that a contractor will take in the delay claim, and how much easier it is to accomplish each if done as soon as possible:
- Recognition: When the delay occurs, project staff must not only recognize it but be able to determine whether the delay is really on the critical path, and to document the cause of the delay, as well as its impact. This will be more persuasive to an owner if documented and discussed immediately.
- Notice: The contractor must also be prepared to give prompt notice. Some contracts assert notice as a precondition to recovery. But notice can also be used offensively to encourage owners to avoid delays altogether.
- Document project status: The essence of the delay analysis is a comparison of delayed events to the current plan. This requires documenting the status of the work—and the plan. This is accomplished most easily and efficiently if completed at the time the delay begins.
- Projecting delay: The delay analysis will include a new activity showing project delay and tying the delay to impacted activities. This is more persuasive if done at the beginning of the delay. I have participated in meetings where the contractor explains the new activity and new logic ties to the owner, securing consensus on the delayed activities.
- Evaluating the schedule: The delay analysis won’t be persuasive if the current schedule does not accurately reflect project logic. The time to evaluate the schedule—and make any required changes to the plan—is at the beginning of the delay. After the project is over, revised scheduling logic will not only be more expensive to complete, but will be viewed with suspicion by the claim recipient.
- Projecting overall delay: Inserting the delay also allows the contractor to project the possible impact of the delay. The projection may motivate the owner to take action to minimize the delay. In one case, we presented mitigation options to the project owner, including a more expensive (fast track) paving section. The owner decided that option would be cheaper than paying the delay costs. This was only possible at the beginning of the delay.
- Documenting the delay: Documentation is especially important for construction delays because the site will never be the same. In one recent project, a highway contractor client created a photographic log showing utility poles in the construction area awaiting relocation. The photographs documented the status of the utility relocation on a daily basis. This contemporaneous action avoided any later dispute about what happened.
- Documenting damages: One of our clients has adopted a practice of submitting equipment weekly reports to the project owner during the delay. This real-time reporting gives the owner the opportunity to verify project equipment. This avoids equipment issues during negotiations and speeds the resolution of the claim.
Each of the actions above will have to be considered at some point. Each can be accomplished more economically if done promptly. In addition, many will be more persuasive if done contemporaneously.
SUBMITTING THE CLAIM
If a contractor performs the steps above in real time, the claim can be submitted as soon as the delay is over. Prompt resolution will still require pressing for early negotiations. We recommend that contractors accompany the claim with a proposed schedule for resolution.
DISPUTES DON’T GET BETTER WITH AGE
If delay claims are left on the back burner, they’ll become harder to prepare and document. That in turn increases the costs of preparation, delays negotiations, and complicates resolution of the claim. Consider moving delay claims to the front burner, in order to resolve them in real time. ■
About The Author:
Curtis W. Martin is a construction attorney and shareholder at Ford Nassen (www.fordnassen.com), which is one of the largest construction law firms in Texas. His clients include general contractors and specialty trade contractors. He has taught construction law and construction management around the world. Formerly, he served as president of an ENR-400 construction company. He can be reached at cwmartin@fordnassen.com or 281.953.7700.
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Modern Contractor Solutions, June 2013
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