Delay Claims from the Owner and Contractor’s Perspectives Annual Program of the Claims Avoidance...

Delay Claims from the Owner and Contractor’s Perspectives

Annual Program of theClaims Avoidance and Resolution Committee

of the Construction InstituteMarch 11, 2010 – Los Angeles


Claims Avoidance and Resolution CommitteeUnderstanding Claims Subcommittee

• Dennis M. Mac Bride, Chair - SEPTA

• Craig Lindquist – CCS Group, Inc.

• Patrick Watz – AECOM

• John (Jack) Chiaverini – Retired, Perini Corporation

AGENDA

• What is a Delay Claim?

• Contract Language Related to Delay

• Types of Delays

• Types of Damages

• Requirements for a Successful Claim

AGENDA

• Contractor’s Delay Claim Submission

• Owner’s Defense

• Owner’s Damages / Counterclaim

• Contractor’s Defense

• Case Study

What is a Delay Claim?

In simple terms:

Contractor: A request for compensation and/or time due to owner-caused delays

Owner: An assessment of liquidated damages or a claim for actual damages due to contractor-caused delays

Contract Language

• “Time is of the essence”

• Contract time of completion

• Contract milestones / Phasing

• Scheduling specifications (CPM or bar chart)

• Notice provisions

Contract Language• Time extension requests (time impact

analysis)

• Time extensions / change orders

• Liquidated damages

• “No damage for delay” clause

• Delays by other contractors clause

• Disputes clause

Types of DelaysExamples of Owner-Caused Delays

• Site access• Differing site conditions • Shop drawing approval• Design errors and omissions• Extra work / change orders • Failure by owner to timely provide materials• Changed conditions, e.g., working hour restrictions• Work suspension

Types of Delays

Examples of Contractor-Caused Delays

• Procurement/Submittal problems (material & equipment)

• Subcontractor delays• Lack of adequate resources (labor, material,

equipment)• Poor work sequencing• Lack of productivity• Rework• Financial difficulties

Types of Delays

Third-Party Delays

• Permit acquisition

• Utility relocations

• Adjacent contractors

• Government Actions/Inactions

Types of Delays - Analysis

• Excusable / Non-excusable delays

• Compensable / Non-compensable delays

• Force majeur (Beyond either party’s control)

• Concurrent delays

Examples of Contractor Delay DamagesRecoverable

• Field office overhead (General conditions)– Trailers, utilities, on-site supervision, etc.

• Added cost of work, e.g., winter work protection• Subcontractor pass through• Labor and material escalation• Acceleration

– Directed and constructive acceleration• Idle labor and equipment• Lost productivity (inefficiencies)• Insurance and bonding costs

Examples of Contractor Delay Damages

Not Recoverable (Depends on contract language)

• Home office overhead (G & A)– Delay vs. total suspension of work

• Lost opportunities– Lost business revenue, loss of bonding

capacity

• Legal and consultant fees

Owner DamagesLiquidated Damages• Described in contract• $ per day for each day substantial completion is

beyond the current contract completion date• Must be a reasonable estimate of damages and not a

penalty

Examples of Owner’s Actual Damages• Owner costs

– Lost revenue, interest on financing, project management, inspection, etc.

• Architect/Engineer costs/fees– Additional shop drawing reviews, rate escalation,

etc.• Construction Manager costs/fees

Requirements for a Successful Claim

The burden of proof is on the contractor


Three elements needed:

• Liability (Entitlement)

• Causation

• Damages (Quantification)


Liability• Contractual duties and obligations

– Notice provisions– Site access, accurate plans and specs– Adequate resources, workmanship

Causation• “Cause and effect”• Link between delay and damages

Damages• Substantiating documentation for extended

costs• Actual costs or daily rates

Contractor’s Delay Claim Submission

• Why the owner is responsible for delays and associated costs

• Schedule analysis

• Damages

• Substantiating documentation

• Transparency

Owner’s Defense

Determine Type of Delay:

Excusable Non-excusable

Owner-caused Force majeur Contractor-caused

CompensableNon-

compensableNon-compensable

Owner’s Defense

Identify Concurrent Delays:

Excusable

Caused by Owner and Contractor

Non-compensable

Owner’s Defense

• Liability Review - Contract terms

• Causation Review - Schedules, daily reports, shop drawing logs, meeting minutes, etc.

• Damage Review– Receipts, invoices, cost reports, etc.– Reasonable estimates

___________________________________________

Owner Costs that Offset Contractor Damages:• Overhead paid as part of change orders during

the extended period• Liquidated or actual damages

Owner’s Damages / Counterclaim• Why the contractor is responsible for

delays and liquidated or actual damages

• Schedule analysis

• Damage calculations

• Substantiating documentation

Contractor’s Defense

• Contract Terms / Plans & Specs– Ambiguities, conflicts, errors & omissions

• Change orders, RFI’s, etc. – Effect on schedule and costs

• Schedule Analysis– Owner-caused delays– Concurrent delays

Delay ClaimCase Study

Case Study

This is the story of a construction project that was planned to be completed in 24 months.

Unfortunately, stuff happened and it was completed much later.

Because of this, the contractor incurred extra costs and requested additional compensation from the owner.

The following describes the process that was used to resolve this delay claim.

The As-Planned Schedule

(What was supposed to happen)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24A M J J A S O N D J F M A M J J A S O N D J F M

1 Mobilize

Excavate & sheeting

Erect structural steel & pour mezzanine

Backfill & paving

Mechanical equipment

Gates & cashier booths

Elevators & escalators

Power & lighting

Finishes

Demobilize 10

9

2

Winter Winter

Case Study: Subway Station Expansion Project

7

8

3

4

5

6

Months

As-Planned

The As-Built Schedule

(What actually happened)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N

Access Delay (1 month)

1 Mobilize

Differing Site Conditions (2 months)

Excavate & sheeting

Re-design Delay (2 months)


Backfill & paving



Strike (1 month)


Power & lighting

Rework (1 month)

Finishes

Demobilize 10

Lack of Progress (1

month longer than planned)

6

9

Extended Period = 8 months

7

8

Original Contract Period

As-Built

Delays


3

4

5

2

Winter Winter

Months

The As-built Schedule shows that there were six delays that resulted in an eight month delay to the project.


P A Mobilize

Excavate

FinishesP = Planned

P Demobilize AA = Actual


As-Planned vs. As-Built


P Power & lighting

Elevators &

ANew Labor Agreement

Backfill & paving


P

P

P

A

A

P

Months

<--- 8 month delay --->

P

A

AP

A

A

Extended Period


A


P

Winter Winter

Because the project finished eight

months late, the contractor submitted

the following claim to the owner:

Cause for Added Costs MonthsMonthly

CostDamages Claimed

1Field Office Overhead (trailer, supervision, etc.)

Total delay of eight months 8 $ 50,000 $ 400,000

2Labor Escalation after May 1st Labor Agreement

Delays to finish trades 8 $ 5,000

3 Idle Equipment Re-design delay 2 $ 10,000 $ 20,000

4 Winter Work Winter concrete (blankets, heaters, etc.) $ 10,000

5 Constructive Acceleration No time extension issued / threat of LD's $ 10,000

6 Lost ProductivityAdverse weather, out-of-sequence work, etc.

$ 10,000

7 Home Office Overhead Total delay of eight months 8 $ 20,000 $ 160,000

8 Consultant Fees Claim preparation $ 50,000

9 Interest @ 5% on Delayed Payments Job financing $ 33,250

10 Bond at 1.5% Eight month delay $ 10,474

$ 708,724

Claim Item

TOTAL CLAIM

Case Study: Subway Station Expansion ProjectContractor's Claim

Before analyzing the contractor’s

costs, the owner performed a Delay

Responsibility Analysis as follows:


Access Delay (1 month)

1 Mobilize

Differing Site Conditions (2 months)

Excavate & sheeting

Re-design Delay (2 months)

Erect structural steel & pour platforms & mezzanine

Backfill & paving



Strike (1 month)


Power & lighting

Rework (1 month)

Finishes

Demobilize 10

Lack of Progress (1

month longer than planned)

6

9

Extended Period = 8 months

7

8


As-Built

Delays


3

4

5

2

Winter Winter

Months

Delay Responsibility Analysis

Delay TypeAccess Delay

Differing Site Conditions

Re-design

Strike

Lack of Progress

Re-work

ResponsibilityOwner

Owner

Owner

Neither

Contractor

Contractor


Access Delay

1 Mobilize

Differing Site Conditions

Excavate & sheeting

Re-design Delay

Erect structural steel & pour platforms & mezzanine

Backfill & paving


Months Gates & cashier booths

Owner 5Strike

Contractor 2Elevators & escalators

Neither 18 Power & lighting

Rework

Finishes

Demobilize 10

8

2

Lack of Progress


3

4

5

Months

Delay Responsibility

Analysis

Delay Responsibility

9

Extended Period = 8 monthsOriginal Contract Period

Winter Winter

6

7

New Labor Agreement

Based on its Delay Responsibility

Analysis, the owner apportioned the

contractor’s claimed costs and

estimated the contractor’s entitlement

to additional compensation as follows:

MonthsMonthly

CostDamages Claimed

MonthsMonthly

CostEstimate Reason

1Field Office Overhead (trailer, supervision, etc.)

8 $ 50,000 $ 400,000 5 $ 50,000 $ 250,000 Owner delay = 5 months

2Labor Escalation after May 1st Labor Agreement

8 $ 5,000 5 $ 3,125 Apportioned owner delay = 5/8

3 Idle Equipment 2 $ 10,000 $ 20,000 2 $ 10,000 $ 20,000 All costs substantiated

4 Winter Work $ 10,000 $ 10,000 All costs substantiated

5 Constructive Acceleration $ 10,000 $ 7,500 Some costs substantiated

6 Lost Productivity $ 10,000 $ - Causation not shown

7 Home Office Overhead 8 $ 20,000 $ 160,000 $ - Delay, not a work suspension

8 Consultant Fees $ 50,000 $ - Not part of the Work

9 Interest @ 5% on Delayed Payments $ 33,250 $ - Not substantiated

10 Bond at 1.5% $ 10,474 $ 4,359 Cost substantiated

Subtotal $ 294,984

$ (30,500)Contractor delay = 2 months

$ 708,724 $ 264,484

Owner's Estimate of EntitlementCase Study: Subway Station Expansion Project

Liquidated Damages @ $500 per day x 61

TOTAL ENTITLEMENT

Contractor's Claim

Claim Item

TOTAL CLAIM

The contractor requested more than $700,000 in additional compensation due to project delays.

The owner estimated that the contractor was entitled to approximately $260,000.

They negotiated a settlement somewhere in between . . .

. . . and everyone lived happily ever after.

THE END


Questions?


Additional Information

Construction Delay Claims, Third Edition, Barry B. Bramble & Michael T. Callahan, 1999

Construction Delays: Documenting Causes, Winning Claims, Recovering Costs, Theodore J. Trauner, 1990

Construction Scheduling: Preparation, Liability, and Claims, John M. Wickshire, Thomas J. Driscoll, Stephen B. Hurlbut, 2008

CPM in Construction Management, Seventh Edition, Fredric Plotnick & James O’Brien, 2009

Proving and Pricing Construction Claims, Robert F. Cushman, 2000

Recommended Practice No. 29R-03, Forensic Schedule Analysis, AACE International, 2007

Delay Claims from the Owner and Contractor’s Perspectives Annual Program of the Claims Avoidance...

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