May 8, 2023
Excusable, Compensable Delays
Excusable, compensable delays are the owner’s responsibility. When an owner causes delay, it breaches its duty not to hinder or disrupt the contractor’s performance, thus entitling the contractor to both compensatory damages and a time extension.
For example, the owner breaches the implied obligation not to hinder the contractor’s performance when it (a) fails to timely deliver materials as called for under the contract;1 (b) does not prepare the construction site on time for the contractor;2 (c) fails to timely relocate utilities;3 (d) does not provide timely and sufficient access to the construction site;4 (e) causes delays because of defective specifications;5 (f) fails to make timely payments to the contractor;6 (g) delays work by not properly coordinating the work of multiple prime contractors working in parallel;7 (h) refuses to give written orders for extra work;8 (i) does not approve shop drawings within a reasonable period of time;9 and (j) takes actions that cause labor unrest that results in delays to the contractor.10
When an owner hinders or obstructs a contractor in any of these or other ways, the owner must pay for the resulting extra time and expense necessary for completion. Whether the contractor is able to recover such damages may depend on certain additional factors. For example, a contractor may waive any right to claim such extra expenses by signing a broadly worded change order containing a waiver of any right to additional compensation for delay, disruption, or other indirect costs.11 Furthermore, a contractor must be prepared to show the effect a given delay had upon completion of the overall contract work.12 If the original contract contains a valid “no damage for delay” clause, a contractor can generally only recover damages when the delay can be shown to stem from owner conduct that fits within an exception to the general rule precluding recovery.13
Just as owners can delay contractors, prime contractors may impede their subcontractors’ work. Here, the question of responsibility for damages is between the prime and the subcontractor. However, when a subcontractor recovers against the prime for owner-caused delays, the prime may be entitled to indemnification from the owner to the extent of the subcontractor’s recovery.
Most construction contracts require that recovery of compensation or time for changes, changed conditions, and suspensions in the work be preceded by written notice to the owner, architect, or the owner’s appointed representative within a definite time period. The purpose of having the contractor notify the owner (or subcontractor notify the contractor) of any change in the work is to:
- Permit the owner (or contractor) to make its own determination as to the character and scope of the problem;
- Permit the owner (or contractor) to determine the course of action to be taken in addressing the problem;
- Permit the owner (or contractor) to exercise control over cost and effort expended in resolving the problem;
- Ensure that both parties have a record of the dates and facts that initiated the claim situation; and
- Permit resolution of the situation while the facts and circumstances are fresh.
Failing to give the owner notice prejudices the owner’s position, in that not having been made aware of the problem(s), the owner cannot take steps to prevent the additional expenditures claimed by the contractor. Notice requirements should be adhered to even if such compliance severely limits the amount of work the contractor can proceed with prior to the owner’s direction.
A contractor’s failure to give prompt notice may result in either the owner’s outright denial of the time extension request or a time-consuming arbitration or litigation effort that may not succeed due to the contractor’s failure to give proper notice.
Establishing proof of an excusable, compensable delay often requires the research and wisdom of experts in construction scheduling, work sequencing, project management, cost analysis, and schedule delay analysis methodologies. An essential element of proof requires the contractor to establish that the owner-caused delay fell on the critical path at the time that the delay occurred.14 Determination of the critical path is fundamental because only work on the critical path negatively impacts the project completion date. If critical path work is delayed, then the eventual project completion date is delayed. Delay involving work not on the critical path normally does not impact the project completion date, although it may still delay and disrupt non-critical work and cause increased direct costs that may be recoverable.
Also, the contractor must demonstrate that there were no concurrent contractor-caused delays that may preclude the recovery of its delay damages or affect the potential for a time extension to preclude the owner’s potential counterclaim of liquidated damages. A liquidated damages clause determines and limits the contractor’s exposure to the owner’s recovery of its delay damages. To be enforceable, a liquidated damages clause must provide for payment by the contractor of a reasonable estimation of damages that the owner will incur, and not an amount that may be viewed as a penalty for the delay.
1 Brown v. East Carolina R. Co., 70 S.E. 625 (N.C. 1911).
2 Roberts Constr. Co. v. State, 111 N.W.2d 767 (Neb. 1961).
3 J. A. Tobin Constr. Co. v. State Hwy. Comm. of Missouri, 680 S.W.2d 183 (Mo. Ct. App. 1984).
4 Blinderman Construction Co. v. United States, (30 CCF ¶ 70,619), 695 F.2d 552, 559 (Fed. Cir. 1982); Higgins v. City of Fillmore, 639 P.2d 192 (Utah 1981).
5 Pathman Constr. Co., ASBCA 22343, 81-1 BCA ¶ 15,010; Dewey Jordan, Inc. v. Maryland-Nat’l Capital Park and Planning Comm., 265 A.2d 892 (Md. App. 1970).
6 Seretto v. Rockland, S. T. & O. H. RY. Co., 63 A. 651 (Me. 1906).
7 Eric A. Carlstrom Constr. Co. v. Independent Sch. Dist. No. 77, 256 N.W.2d 479 (Minn. 1977). Stehlin-Miller-Henes Co. v. City of Bridgeport, 117 A. 811 (Conn. 1922).
8 Baltimore v. Clarke, 97 A. 911 (Md. App. 1916).
9 Pathman Constr. Co., ASBCA 23392, 85-2 BCA ¶ 18,096.
10 T. C. Bateson Construction Co. v. U.S., 162 Ct. Cl. 145 ¶ 72,173 (1960).
11 Vanlar Constr., Inc. v. County of Los Angeles, 217 Cal. Rptr. 53 (Cal. App. 1985).
12 Preston-Brady Co., Inc., VABCA Nos. 1892, 1991, 2555, 87-1 BCA (CCH) ¶ 19,649 (1987).
14 Morrison Knudsen Corp. v. Fireman’s Fund Insurance Co., 175 F.3d 1221, 1232 (10th Cir. 1999).
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