Tips & Tools: Recovering Delay Damages

Project delays are a common occurrence during the performance of many construction contracts. These delays can arise for any number of reasons, and are often caused by the owner, general contractor, and/or subcontractors. This newsletter focuses on how contractors can obtain delay damages from project owners.[1]

Consider the following scenario: if an owner fails to secure the proper easements, and you have already mobilized your equipment and crews to the project site, every day that you are waiting for the owner to secure the easements costs you time and dollars. While you are certainly aware that most contracts require written notice of your intent to seek additional time and/or compensation as a result of the delay, you may not know how to actually recoup these additional days and dollars once you have provided the requisite notice.

The first step to recover additional time and dollars is to determine whether the delay is compensable or non-compensable. Compensable delays are delays that are not contemplated by the contract and are the result of some action or inaction by the owner, such as delayed site access, unmarked utilities, furnishing defective plans, etc. Compensable delays allow contractors to recover both time and dollars for the extra costs they incur as the result of the delay. Non-compensable delays, on the other hand, are expressly noted in the contract and are outside the control of any party. Examples of non-compensable delays include adverse weather, natural disasters, etc. Non-compensable delays entitle contractors to an extension of time, but no additional compensation for the extra costs incurred.[2]

If your delay is compensable and caused by an owner’s act or omission, then you should immediately begin to document your extra costs related to this delay. These costs can include:

Idle equipment costs;
Unexpected mobilization costs;
Acceleration costs;
Winter protection for your project site;
Labor increases;
Loss of productivity;
Extra overhead costs; and
Supplemental costs including transportation, travel, hotel, per diem, etc.

Common and effective ways to document these costs include: (a) equipment lists with daily ownership costs for idle equipment; (b) detailed timecards showing which employees were on site and when; (c) payroll records; (d) invoices for heaters or other equipment necessary to maintain the integrity of the work you have completed; (e) detailed daily reports indicating who was on site, what work they completed, and when the crews were idle; and (f) other invoices including hotel, transportation, and per diem costs.

Furthermore, and regardless of whether your delay is compensable or non-compensable, you should also document the days spent working on a particular task, as well as the days your crews are idle, by keeping very detailed daily reports. Even though a delay is non-compensable, it is vital to seek a time extension in order to avoid the assessment of liquidated damages upon project completion.

In addition to documenting the costs and time associated with the delay, you should also create an as-built schedule. This schedule should depict the timing and duration for each critical path task item on the original project schedule.[3] The best sources of reliable information to develop the as-built schedule are daily reports, logs, and diaries. Developing an as-built schedule will allow you to compare the as-built schedule to the as-planned schedule to determine the number of days that each task was delayed.

After you have determined the number of days that have resulted from the delay, you are now ready to submit a request for a change order. If your delay is non-compensable, you should request a time extension. If your delay is compensable, you should request both a time extension and additional compensation for the extra costs associated with the delay.

In sum, any time your project is delayed for reasons outside your control, it is important to immediately examine what contract requirements must be met in order to preserve your rights to additional time and dollars (including the required notice and change order procedures). Thereafter, it is imperative that you keep detailed documentation of your associated costs and delays because the amount of time and/or dollars you recover for delays generally depends on the records you keep. Finally, if you encounter project delays, we encourage you to use OLSON CONSTRUCTION LAW, P.C.’s “first call free” service. We can assess the specifics of your particular situation and contract, and help you develop a strategy that allows you to maximize your recovery from project delays.

[1] As we have discussed in previous newsletters, if an owner delays a project, contractors are typically entitled to additional time and/or dollars as a result of the delay.

[2] The remedies for project delays will depend on the facts, specific contract language, and location of the project. Remedies for delays may also be limited due to a “no damages for delay” clause in the contract. As a consequence, you should contact an attorney to discuss your specific situation and determine whether you have a valid basis to recover delay-related costs.

[3] You should also create an initial project schedule prior to beginning work. These “as-planned” schedules are generally required at the start of projects so general contractors and subcontractors can plan for and sequence their work. As-planned schedules set expectations between the parties, are the basis for as-planned bids, and will be one of the most effective tools for determining the impact of your delay. The importance of project schedules will be discussed in a subsequent newsletter.

Tips & Tools to Improve Your Bottom Line: Recovering Delay Damages