November 14, 2023
This post discusses the definition of disruption in construction projects, three general principals associated with disruption, and how disruption is different from delay.
This is the first post in a three-part series on disruption. The second post discusses noncompensable and compensable disruption, and the third post discusses the effects of disruption.
Disruption can be defined as a change that prevents a contractor from using the method of performance or planned work sequence it contemplated at the time the job was bid. In other words, disruption is a material alteration in the performance conditions that were expected at the time of bid from those encountered, resulting in increased difficulty and cost of performance. Disruption claims can be asserted by contractors against owners, subcontractors against contractors, contractors against subcontractors, and contractors against design professionals, construction managers, or project managers.
With respect to contract performance, disruption encompasses three general principles. First, when a contractor bids on a contract, it is entitled to schedule its performance in a series of economical operations, with each stage of performance dependent on a previous stage. Therefore, any disruption to one stage may have a disruptive impact on the subsequent stages. Second, parties to a contract are expected to cooperate with one another and not hinder each other’s performance. A contractor plans to perform its work in a certain manner and sequence, and the owner has an implied duty not to hinder, interfere with, or disrupt the contractor’s planned performance. Third, when a contractor plans its contract performance, it must do so reasonably. A contractor may not make unrealistic assumptions about contract performance. For example, a contractor cannot make a valid disruption claim against an owner or design professional if it has assumed that it would have all design documents by contract award when the contract documents indicate that the design documents will be available over a period of time with the civil and structural design documents available first, followed by the equipment design installation documents, piping spools and piling layout documents, and electrical and instrumentation design documents at a later date.
Delay vs. Disruption
It is important to distinguish between claims for delay vs. disruption to contract performance. Delay involves the extension of contract performance because an event delayed the completion date or a required milestone date. A claim for disruption, however, does not require proof that the completion date was delayed. The impacts of disruption are often a loss of labor or construction equipment productivity and increased costs, and not necessarily an extended time of performance. For example, a subcontractor’s failure to timely perform its duties may cause a contractor to experience disruption. The subcontractor may argue that it cannot be held liable if the overall project does not experience delay. However, the trier of fact may find that the contractor is entitled to recover unanticipated costs attributed to the disruption regardless of whether the contractor completed its performance on time.
If a contractor experiences disruption, it may still meet its completion date by revising its original performance plan: resequencing its work, increasing its labor force, adding shifts, or working overtime to compensate for the disruption’s effect. These actions demonstrate the contractor’s attempt to mitigate disruption.
To illustrate the impact of disruption in the absence of delay, consider a contractor that experiences a disruption to its piping installation work because of a design change to the plans and specifications that requires the removal and replacement of existing pipe work. This change requires the piping subcontractor to increase welder hours and use more welding materials and scaffolding.
Under the original sequencing schedule, the electrical subcontractor’s work would have preceded that of the heating/ventilation/air conditioning (HVAC) subcontractor, but now the electrical and HVAC subcontractors must work together in the affected space during the pipe’s removal. If the trade subcontractors increase craft labor on the job and add shifts and overtime to comply with the original completion schedule, the costs of performance increase, but the mitigation actions may avert exceeding contractually specified deadlines. Moreover, the craft labor would likely experience a loss of productivity caused by stacking of trades, congested workspace, diluted supervision on the night shift, and overtime.
This example illustrates a crucial distinction between the damages recoverable for disruption vs. delay. In the example, the subcontractors face costs generally connected with a disruption claim. Typical damages associated with disruption claims involve increased labor costs for additional workers used to perform additional and changed work; increased costs for productivity loss caused by altered work sequences, conditions, and overtime; and increased equipment and material costs. In contrast, delay damages encompass costs associated with an extended performance period, typically including increased home office overhead and jobsite costs, extended equipment costs, and financing costs. One other important distinction between disruption and delay claims is the impact of “no damages for delay” clauses, which could foreclose recovery for delay damages but normally do not preclude recovery for disruption damages.
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