March 20, 2023
Types of Delay
The contractual consequences of a given delay depend on a determination of responsibility for that delay. If the contractor seeks to avoid the imposition of liquidated or actual delay damages by obtaining a time extension, then the delay must be shown to flow from an “excusable delay.” If the contractor also seeks recovery for delay costs, then the delay must be shown to flow from an “excusable compensable delay.”
Delays in performance of contracts are usually categorized as one of three types. Each type of delay in construction or project management depends on the terms of the contract; however, the examples below are fairly typical.
The first type is known as excusable, non-compensable delay, where the contractor is entitled to a contract time extension but no compensation. Examples of excusable delays in performance of contract include force majeure events such as a strike not caused by the contractor’s actions or inactions, unusually severe weather, and acts of God—unless the contract also provides for compensation should these types of events occur. There are also, however, disputes with respect to whether the contractor is entitled to compensation for a delay that was beyond its control. The contract may address this issue, and in cases such as strikes where neither the owner nor the contractor is responsible, usually no compensation is allowed unless stated in the contract.
A sample contract provision for an excusable, non-compensable delay follows:
The Scheduled Mechanical Completion Date shall be extended, and the Contractor shall not be charged with any resulting damage, only if:
- The delay in the completion of work arises from unforeseeable causes beyond the control and without the fault or negligence of the Contractor, including but not restricted to, Force Majeure, acts of the Government in either its sovereign or contractual capacity, acts of another contractor in the performance of a contract with the Owner, freight embargoes, unusually severe weather, or delays of Subcontractors arising from unforeseeable causes beyond the control and without the fault or negligence of both the Contractor and such Subcontractors; and
- The Contractor, within 5 days from the beginning of any such delay, notifies the Owner in writing of the causes of delay.
Such delay shall be considered an excusable delay and the Owner shall extend the Scheduled Mechanical Completion Date if the delay affects the critical path of the project that exists at the time of the delay. The contractor is not entitled to delay compensation for such excusable delays. Should the Contractor disagree with the Owner’s determination regarding the extension of time, such dispute shall be subject to resolution in accordance with Article 22 of this Agreement.
The second type of delay in construction is known as excusable, compensable delay. In this case, the contractor is entitled not only to a time extension but possibly also monetary compensation because of the extended duration of the job if such delays affected the then-critical path when the delay occurred. Excusable, compensable delays are typically caused by the owner’s actions or inactions. Examples of excusable, compensable delays include, but are not limited to, the following owner-caused events:
- Late issuance of notice to proceed
- Late approval of drawings
- Late approval of shop drawings and samples
- Late approval of job tests
- Failure to timely respond to requests for information (RFIs)
- Direction to change the planned method of construction
- Variations in estimated quantities that the owner originally provided to the contractor to prepare its bid proposal
- Disruption or interference by other multi-prime contractors under the owner’s direction
- Owner-directed schedule changes
- Owner’s direction of the contractor’s manning levels
- Design changes
- Change in quality assurance requirements
- Site access
- Multiple change orders
- Limited work space due to the owner’s poor planning
- Late delivery of owner-furnished equipment
In this case, the contractor still must demonstrate that the delay affected the critical path of the project at the time that the delay occurred. The required schedule analysis to demonstrate the amount of time extension that results from the delay and the required supporting time-related cost documentation are typically identified in the contract’s change order provisions.
The third type of delay in performance of contract is referred to as a non-compensable, non-excusable delay. These are delays for which the contractor and/or its subcontractors are responsible and for which they are obliged to recover the lost time. Examples of contractor-caused non-compensable, non-excusable delays include, but are not limited to, the following:
- Late submittal of shop drawings
- Late completion of engineering if the contractor is responsible for engineering
- Late equipment and material delivery
- Insufficient personnel
- Insufficient construction equipment
- Unqualified personnel
- Lower-than-planned labor productivity not caused by excusable delays
- Lower-than-planned construction equipment utilization rates not caused by excusable delay
- Inadequate coordination with other contractors
- Rework necessary due to construction not conforming to contract documents
- Subcontractor delays
- Rejection of materials or equipment as not conforming to specifications
A common dispute arising out of a delay situation is related to acceleration. In this situation, the owner may fail to recognize the contractor’s entitlement to a time extension and still require on-time performance. The contractor has two choices: 1) accelerate and file a change order or claim to demonstrate its entitlement to a time extension and recovery of its increased costs; or 2) do not accelerate and defend against the owner’s claim for liquidated damages for late completion of the project and file a claim for recovery of the contractor’s time-related costs.
Other delay-related disputes occur when the contractor does not perform an adequate schedule delay analysis to demonstrate that the delay affected the critical path of the project at the time that the delay occurred or fails to identify and take into account concurrent contractor-caused delays that affect its ability to recover delay-related costs.
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