Delay claims (Republished with a pandemic update)

  

Delay Claims (Republished with a pandemic Update)

By Bill Schmalz, FAIA

Construction delays will almost always result in change order requests, and as architects, on most projects we may be obligated to review them not only for the requested additional time or money (or both) but also for whether the claim is justified. To determine justification, we need to understand the two categories of delay: inexcusable and excusable. 

An inexcusable delay is caused by the contractor’s team, which includes subcontractors and vendors. For an inexcusable delay, the contractor receives neither additional time nor additional money. 

Excusable delays are caused by forces outside the reasonable control of the contractor, and fall into one of two subcategories: compensable and non-compensable. A compensable excusable delay is caused by, and is the responsibility of, the owner’s team, and can include owner-generated changes and architect’s errors and omissions. For a compensable delay, the contractor can legitimately claim additional time and money. Non-compensable excusable delays are caused by neither the contractor nor the owner; examples include unseasonable bad weather, unforeseeable site conditions, and unanticipated labor strikes. 

For a non-compensable excusable delay, the contractor can receive a time extension, but no additional money. See the table below for a graphic summary of this. 

 table1.jpg

With all that in mind, let’s look at these three scenarios:

  1. After most of the interior framing is complete, the client directs you to redesign the executive suite, resulting in a two-week project delay.
  2. Three days of torrential summer rain have flooded the excavation of your project and delayed the pouring of foundations by two weeks.
  3. A week before the Italian stone specified for the lobby is scheduled to be installed, the contractor tells you that the ship has not yet left Italy, so the project will be delayed by two weeks. 

Because of these delays[1], the contractor submits change order requests for additional time and money. How do we, as architects, respond to them?

  1. The first case is a compensable excusable delay, since it was caused by the owner’s changes while the work was underway. 
  2. The second case is a non-compensable excusable delay; the rainstorm occurred in a normally dry season, so neither the contractor nor the owner caused it or could have anticipated it. The construction contract schedule should be extended by two weeks, but without a change in the contract amount. 
  3. In the third case, the delay was caused by a member of the subcontractor’s team—in this case, the stone supplier—so the delay is inexcusable, and there is no change to the construction contract.

While all of the above may sound straightforward, things are seldom so simple during construction. Now consider these more complicated scenarios:

  1. After most of the interior framing is complete, the client directs you to redesign the executive suite, resulting in a two-week project delay. Then, on the day the revised drawings are given to the contractor, the drywall union unexpectedly strikes, halting construction activities for two weeks.
  2. Three days of torrential summer rain have flooded the excavation of your project and delayed the pouring of foundations by two weeks. At the same time, the contractor informs you that the reinforcing steel, which was scheduled to be installed on the day the rain began, won’t be on site for another two weeks.
  3. A week before the Italian stone specified for the lobby is scheduled to be installed, the contractor tells you that the ship has not yet left Italy, so the project will be delayed by two weeks. This coincides with a two-week delay caused by an owner-directed change to the lobby design.  

In each of these examples, two events are simultaneously causing two-week delays: 

  1. In the first, we have a compensable excusable delay (the owner’s changes) and a non-compensable excusable delay (a labor strike).
  2. The second example combines a non-compensable excusable delay (bad weather) with an inexcusable delay (late material delivery).
  3. In the third, we have an inexcusable delay (late material delivery) and a compensable excusable delay (owner changes). 

For each of these change order requests, our response is based on the delay for which the owner is least responsible. In other words:

  • a delay claim that combines a compensable excusable delay with a non-compensable excusable delay will be treated as a non-compensable excusable delay (additional time, but no additional money).
  • a delay claim that combines a non-compensable excusable delay with an inexcusable delay will be treated as an inexcusable delay (no additional time or money).
  • a delay claim that combines a compensable excusable delay with an inexcusable delay will be treated as an inexcusable delay (no additional time or money). 

See the following table for a graphic depiction of these combinations.

table2.jpg

Even these examples are simplified, since each involves two delays that, through a remarkable coincidence, start on the same day and end on the same day. In the real world, we’re far more likely to encounter two or more overlapping delays of each type, so determining if the contractor is owed additional time, additional money, or both, or neither requires considerable analysis. But no matter how complex the actual situation, the basic (and simple) principles apply.
   

Update for Delays Caused by a Pandemic

In 2020, the design and construction industry faced new scenarios as a result of the global COVID 19 pandemic. Before we look at some scenarios, let’s see what the A201 “General Conditions of the Contract for Construction” offers:

Section 8.3.1: “If the Contractor is delayed at any time in the commencement or progress of the Work by (1) an act or neglect of the Owner or Architect,  . . . (3) . . .  or other causes beyond the Contractor’s control, . . . then the Contract Time shall be extended for such reasonable time that the Architect may determine.”

Section 10.2.1: “The Contractor shall take reasonable precautions for safety of, and shall provide reasonable protection to prevent damage, injury, or loss to, employees of the Work and other persons who may be affected thereby….” 

Section 10.2.2: “The Contractor shall comply with and give notices required by applicable laws, statutes, ordinances, codes, rules and regulations, and lawful orders of public authorities, bearing on safety of persons . . . .”

Section 10.2.7: “The Contractor shall not permit any part of the construction or site to be loaded so as to cause damage or create an unsafe condition.”


Now let’s look at five scenarios (which, you’ll notice, are longer and more complex than the previous scenarios):

1. The early signs of a serious infectious disease appear in other countries and, to a much lesser extent, in the U.S. In your state, no government agency has established any restrictions on commerce or construction, other than advisory notices to avoid physical contact with other people. The contractor informs the owner that construction on the owner’s office building will be suspended because the contractor has a “gut feeling” that conditions are much worse than the government is admitting. The contractor requests a schedule extension.

In the next four scenarios, the U.S. government has declared that the country is experiencing a pandemic. The governor of your state has mandated that all construction, other than of “essential infrastructure,” including healthcare projects, must be suspended.

2. The contractor informs the owner that construction on the owner’s office building will be suspended until government agencies allow construction to resume. The contractor also requests a schedule extension.

3. The contractor voluntarily suspends construction of a hospital because, even though the state government allows hospital construction (and the federal government is silent on the matter), subcontractors are refusing to work on the site due to what they claim to be “unsafe conditions.” The contractor requests a schedule extension.

4. Construction on the hospital project you designed is proceeding. The contractor has assured you that the proper safety measures have been taken, and has further provided a written confirmation of those measures. You, the architect, have been requested to visit the site to assist in helping resolve a troublesome unforeseen condition that affects the critical path and, if not immediately resolved, could hold up construction. You arrive at the site and find that government-mandated protections, such as hand sanitizers and social distancing, are not being maintained by the contractor. You inform the contractor that the site is unsafe and leave. The contractor immediately submits a delay claim.

5. The contractor has adopted protective measures as mandated by the authorities. The owner then directs the contractor to enforce more stringent requirements, such as maintaining ten feet between people throughout the site. The contractor complies with this direction and submits a change order request for additional time and money.

Once again, as the architect, you have to make an initial assessment of these delay claims. Using the A201 as the basis of your decision making, the following are reasonable evaluations:

  1. The contractor must have an objective basis for a delay claim. In this case, no government agency has determined that construction activities pose a risk to workers. Whether the contractor’s gut feeling ultimately proves to be correct is irrelevant. It would be only slightly different from the contractor having a “feeling” that the site would experience a major earthquake within a few days. Even though a major earthquake could happen the next day, the contractor isn’t basing this feeling on objective criteria. Section 10.2.2 states that contractors must follow “lawful orders of public authorities bearing on safety of persons.” If the public authorities don’t order construction activities to stop, then the delay is inexcusable and the claim cannot be approved.
  2. In this case, an office building is not “essential infrastructure,” so the contractor is stopping work to comply with the “lawful orders of public authorities.” The pandemic is also “beyond the Contractor’s control,” as stipulated in Section 8.3.1. As an excusable but noncompensable delay, with additional time but no additional money, is justified.
  3. With a hospital being “essential infrastructure,” there is no government mandate to stop construction. There is also no reason that safe conditions, as determined by the public authorities, cannot be maintained on the site. If construction is stopped because subcontractors claim unsafe conditions, that is not the owner’s problem; it’s within the contractor’s control to provide safe conditions. Therefore, the delay claim is inexcusable and should not be approved.
  4. As with Scenario 3, there is also no reason that safe conditions, as determined by the public authorities, cannot be maintained on the site. Architects are not required to put themselves in physical danger when visiting sites. If the contractor is not maintaining conditions deemed as safe by the public authorities or in accordance with the contractor’s own written procedures, then the architect is not obligated to enter or remain on the site. The delay caused by the architect leaving the site before solving the problem is the result of the contractor’s actions, and is inexcusable. (Related article: Architect standard of care relative to site visits during the COVID-19 pandemic)
  5. The contractor is responsible only for complying with the safety measures established by the authorities. If the owner requires additional, more stringent measures, then some part of the delay may be compensable. To evaluate how the incremental differences between what the authorities and the owner require affect the schedule, the architect will need detailed documentation from the contractor to justify and quantify this claim. 

Other even more complex scenarios can be imagined. (For example, what if an outbreak among the construction crew can be provably traced to an owner’s representative, who unknowingly brought the virus to a crowded conference room before government-imposed protective measures were announced?) But the resolution of pandemic delay claims can be summarized with the following points:

  • If the contractor can legally continue with the construction (and that’s for the owner and contractor to determine), reasonable precautions—by the contractor, the owner, and the architect—must be established and followed by everyone on the site.
    Per A201, site safety is the contractor’s responsibility. Typically, this refers to such things as fall protection, but it covers all aspects of safety. Therefore, at a minimum, contractors must follow protective measures according to what the authorities have publicly announced as safe (e.g., frequent hand washing, six feet between people, no face touching). If these measures are not maintained, then any resulting delays can be considered as caused by the contractor’s actions. This also means that the contractor has the responsibility to have anyone—including subcontractors, owners, and architects—who doesn’t follow the safety rules removed from the site.
    A201 Section 10.2.7 was probably written with structural loading in mind, but it doesn’t specify that, so it could be extended to include density of people in a room or part of the site. Thus, if the authorities say that six feet is a safe distance between people, that must apply to everywhere on the site.

In general, a pandemic must be treated as something beyond the contractor’s control. However, whether the delay is excusable/compensable, excusable/noncompensable, or inexcusable depends on the action the contractor takes in response to the pandemic. 


[1]: To keep things simple, let’s assume that all three delays are on the critical path, meaning that a two-week delay for each particular activity will result in a two-week delay for the overall project.

Disclaimer: The viewpoints expressed in this article are solely those of the author(s) and have not been approved by, reflective of or edited by other individuals, groups, or institutions. This article is an expression by the author(s) to generate discussion and interest in a particular topic. Though the article may cover specific legal and professional practice concepts, it should not be construed as professional advice. Always seek the advice of a professional licensed in your state for questions pertaining to the interpretation of laws and regulations.

    

About the author

Bill Schmalz, FAIA, CSI, is a principal with the Los Angeles office of Perkins+Will. He is the author of The Architect’s Guide to Writing, published by Images Publishing. Follow him on Twitter @bill_schmwil

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