Preserving Your Delay Claim (Just in Case the Project Runs Long)

Nowhere does Ben Franklin's often repeated advice to a young craftsman to "remember that time is money" ring more true than on the modern construction project. Significant delays and adverse conditions encountered by a general contractor often lead to less profit and/or no profit on a job. If you start cobbling together documentation of a possible delay claim as the project slowly draws to a close, then you have probably delayed far too long.

Identifying Delay Claims

Have you ever been on a project where the project site was not immediately made available or sat idle while awaiting final mark-ups on drawings? Have you been in a position where your contract work was postponed because a co-prime contractor failed to complete its contract work on time? If your answer is yes, you have likely suffered damages as a result of delay. Delay damages can also arise out of belated payments, unapproved or ignored change order requests, and uncontemplated changes to the plans and specifications.

In Indiana, a contractor is entitled to damages, including costs resulting from inclement winter weather, for any delay caused by the owner, in the absence of any contractual provisions which limit recovery of delay damages. Indiana and Michigan Electric Co. v. Terre Haute Industries, Inc., 507 N.E.2d 588, 602 (Ind.Ct.App. 1987); Osolo Sch. Bldgs., Inc. v Thorlief Larson & Son of Ind., Inc., 473 N.E.2d 643 (Ind.Ct.App. 1978).

Do The Contract And State Law Allow Delay Claims?

Does the contract have a "no damage for delay" clause? No damage for delay clauses limiting contractors' claims for damages arising from owner caused delays are generally enforced in Indiana absent certain circumstances, such as owner interference or delays beyond the parties' reasonable contemplation. Many states, such as Ohio and Kentucky, have passed statutes declaring no damage for delay clauses unenforceable. An important first step, therefore, is determining how the law in your jurisdiction handles such clauses.

Does the contract have specific provisions controlling claims for "extra expenses?" A contractor should carefully review the contract to determine what notification requirements may apply in the event that the contractor's progress on the job is delayed.

How to Preserve Your Delay Claim

The first thing a contractor will need to do if it is delayed or disrupted is to provide appropriate notice pursuant to the contract terms. To avoid potential arguments about lack of proper notice, it is important to follow the notice requirements as strictly as possible. There are jurisdictions, such as Ohio, that mandate precise compliance to be effective. It is best, therefore, to provide more information rather than less at the outset to blunt such after the fact accusations.
To the extent the contractor has received any oral directions that impact the work and give rise to some type of delay or disruption claim, the contractor may need to immediately confirm in writing the oral directive and seek any written clarification necessary.

Second, while it is certainly possible to reconstruct delay documentation at the (later) time the final claim is prepared, the better (and often times less costly) practice is to capture evidence of the delay as the delay is unfolding. There is no substitute for contemporaneous, detailed documentation of delays in daily reports. Documents created well after the events giving rise to the delays lose credibility or may be perceived as having been created for litigation. Contemporaneous evidence of job progress can be maintained through daily log books, jobsite logs or diaries, conversation/confirmation memos, photographs, cost records, contract notices and correspondence, progress reports, job meeting minutes and payroll records. Other appropriate documentation to assemble may include documents showing increased wage rates, higher material costs, loss of efficiency, lost productivity, additional equipment rental extended general conditions and home office overhead.

It is also important for a contractor asserting delay damages to review the time-sensitive overhead costs found in general conditions, which are those overhead costs which can be directly attributable to a particular job. These extended general conditions are to be distinguished from main office overhead, which are those costs not directly attributable to a particular job but are necessary to run a business.

Many delay claims fail because of lack of contemporaneous, accurate records and because of failure to comply with notice provisions. While you cannot avoid all delays on construction projects, their effect can be minimized by careful contract preparation, detailed documentation and advance planning in the form of risk allocation.

Posted by: Dean R. Brackenridge

Categories: Claims / Dispute Resolution