Tips & Tools to Improve Your Bottom Line: Owner Caused Delays
By Mary L. Matthews, Esq.
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In part four of OLSON CONSTRUCTION LAW, P.C.’s series—Tips & Tools to Improve Your Bottom Line—we examine the issue of owner-caused delays. We continue to encourage you to share these e-mails with the project managers and superintendents in your company.
Owner Caused Delays
Owner-caused delays result from any number of reasons, including failure to timely secure easements and permits, design defects, and/or differing site conditions that impair your ability to continue work. What contractors often fail to recognize, however, is that owner-caused delays also include waiting for owners to issue a change order. For example, if you bid the project based on the assumption that you could use the excavated material as backfill and the material ends up being unsuitable for this purpose, you could be delayed weeks while you wait for the engineer to decide which alternative material they will allow you to use and to issue a change order for it.
Reflecting on projects where this has happened, you should ask yourself the following questions:
1. How often are you delayed waiting for a change order?
2. How often and for how long does your equipment sit idle?
3. How often do you get paid for this delay?
4. How often do you ask to get paid for this delay?
5. Do you know the contractual basis for your entitlement to payment?
If you are like most contractors, you often experience delays in waiting for the issuance of a change order and incur additional expenses without compensation.
As a general rule, contractors are entitled to additional time and dollars for any owner-caused delays, including delays attributable to the issuance of change orders. When owners make changes to the work, they are obligated to not only pay for the costs of the changes ordered, but also for the costs of delays in issuing change orders.
To meaningfully improve your bottom line when experiencing owner-caused delays in issuing change orders, it is vital that you review the contract documents to determine what steps must be taken to preserve your rights. Nearly all contracts require that some type of written notice be provided to the owner or engineer at the start of the owner-caused delay. Failure to provide such notice typically waives a contractor’s right to additional dollars and time.
In addition to notifying the owner/engineer of the delay, your notice should also include your intent to seek reimbursement for any extra time and dollars you experience while waiting for the change order or design directive to be issued. We would additionally encourage you to include with your notice an estimate of your daily idle resources costs. One of the simplest ways to do this is to attach a standard rate sheet to your notice that shows your daily resources costs. Having these costs readily available to share will clearly inform the owner of the additional daily costs it will be responsible for if it delays the project by not timely issuing a change order.
Finally, before executing the change order, and as part of your change order price negotiations with the owner, it is necessary to include any additional costs and time you incur—including idle resources and lost production—while waiting for the owner’s decision. These costs will be in addition to any extra costs and time you incurred as a result of the changed work itself.
In sum, any time an owner causes delay, it is important to examine what contract requirements must be met to preserve your rights to additional time and dollars. Each day of delay you experience waiting for a change order to be issued may leave you scrambling to accelerate work, force changes in the schedule that makes work more expensive and less efficient, threaten contract mandated completion dates, and cause you to incur additional costs due to idle labor and equipment. If you encounter an owner-caused delay, 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 owner-caused delays.
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