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Delay Claims from the Owner and Contractor’s Perspectives

Delay Claims from the Owner and Contractor’s Perspectives. Annual Program of the Claims Avoidance and Resolution Committee of the Construction Institute March 11, 2010 – Los Angeles. Delay Claims from the Owner and Contractor’s Perspectives. Claims Avoidance and Resolution Committee

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Delay Claims from the Owner and Contractor’s Perspectives

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  1. Delay Claims from the Owner and Contractor’s Perspectives Annual Program of the Claims Avoidance and Resolution Committee of the Construction Institute March 11, 2010 – Los Angeles

  2. Delay Claims from the Owner and Contractor’s Perspectives Claims Avoidance and Resolution Committee Understanding Claims Subcommittee Dennis M. Mac Bride, Chair - SEPTA Craig Lindquist – CCS Group, Inc. Patrick Watz – AECOM John (Jack) Chiaverini – Retired, Perini Corporation

  3. AGENDA What is a Delay Claim? Contract Language Related to Delay Types of Delays Types of Damages Requirements for a Successful Claim

  4. AGENDA Contractor’s Delay Claim Submission Owner’s Defense Owner’s Damages / Counterclaim Contractor’s Defense Case Study

  5. 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

  6. Contract Language “Time is of the essence” Contract time of completion Contract milestones / Phasing Scheduling specifications (CPM or bar chart) Notice provisions

  7. 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

  8. Types of Delays Examples 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

  9. 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

  10. Types of Delays Third-Party Delays Permit acquisition Utility relocations Adjacent contractors Government Actions/Inactions

  11. Types of Delays - Analysis Excusable / Non-excusable delays Compensable / Non-compensable delays Force majeur (Beyond either party’s control) Concurrent delays

  12. Examples of Contractor Delay Damages Recoverable 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

  13. 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

  14. Owner Damages Liquidated 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

  15. Requirements for a Successful Claim The burden of proof is on the contractor

  16. Requirements for a Successful Claim Three elements needed: Liability (Entitlement) Causation Damages (Quantification)

  17. Requirements for a Successful Claim 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

  18. Contractor’s Delay Claim Submission Why the owner is responsible for delays and associated costs Schedule analysis Damages Substantiating documentation Transparency

  19. Owner’s Defense

  20. Owner’s Defense

  21. 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

  22. Owner’s Damages / Counterclaim Why the contractor is responsible for delays and liquidated or actual damages Schedule analysis Damage calculations Substantiating documentation

  23. 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

  24. Delay ClaimCase Study

  25. 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.

  26. The As-Planned Schedule (What was supposed to happen)

  27. The As-Built Schedule (What actually happened)

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

  29. Because the project finished eight months late, the contractor submitted the following claim to the owner:

  30. Before analyzing the contractor’s costs, the owner performed a Delay Responsibility Analysis as follows:

  31. Delay Responsibility Analysis Delay Type Access Delay Differing Site Conditions Re-design Strike Lack of Progress Re-work Responsibility Owner Owner Owner Neither Contractor Contractor

  32. 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:

  33. 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.

  34. THE END

  35. Delay Claims from the Owner and Contractor’s Perspectives Questions?

  36. Delay Claims from the Owner and Contractor’s Perspectives 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

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