Construction Delays and Damages

By Francisco R. García-Soroeta

Construction Schedule Delays can occur for a medley of reasons, and they can be caused by any party participating in the project including the owner, design professional, prime contractor, subcontractor or material supplier.  More specifically, claims related to Construction Schedule Delays relate to a period of time for which the project has been extended or work has not been performed due to circumstances which were not anticipated when the parties to the Project (for example, the owner and the general contractor) entered into the construction contract.

Delays can force the Contractor to extend its schedule in order to complete the Work that has been stipulated in prime construction contract and to assume extra costs in order to successfully complete the Work. These costs could include such things as renting equipment for a longerer period of time while it is not being used, maintaining an otherwise idle workforce.  Without having to use too much imagination, it is obvious that costs such as these easily translate to heightened office overhead and other general condition costs attributed to a construction project.   Delay Claims can be categorized into three distinct areas in which the levels of responsibility attributed to either the Contractor (and all the lower tiers) or the Owner, or in some more extreme cases, to neither, but to occurrences that are sometimes deemed as an act of God or perhaps an act of war.

Excusable and Compensable Delay Claims:

The first type of delay claims are generally known as “Excusable and Compensable” claims.  These types of claims are those that, essentially, are without fault of the Contractor (or any other tiers under it) and the sole responsibility for such claim falls upon the Owner. An important point to note, is that there must have been no concurrent delay on behalf of the Contractor. “In order to be compensable, the claimant must always be free of fault in creating or contributing to the delay.” (“Chapter 1. Framework for Delay Analysis.” Construction Schedule Delays, by W. Stephen Dale and Robert M. D’Onofrio, Thomson Reuters, 2017, p. 5).

Excusable But Not Compensable Delay Claims:

The second  type of delay claim involves claims that are deemed “Excusable but not Compensable”. In their most simple terms, these claims can be described as those that have shared fault or no fault on either party for the delay. These delays are often categorized as “merely excusable” or “force majeur delays”.   There are many examples of this type of delay claim which occur on both private construction projects and public works projects.   The Federal Default clause 48 CFR 2.249-10 (which applies only to Federal Government projects) provides several instances where Excusable-but-not-Compensable might occurs including, but not limited to the following:

(i) acts of God or of the public enemy,

(ii) acts of the Government in either its sovereign or contractual capacity,

(iii) acts of another Contractor in the performance of a contract with the Government,

(iv) fires,

(v) floods,

(vi) epidemics,

(vii) quarantine restrictions,

(viii) strikes,

(ix) freight embargoes,

(x) unusually severe weather, or

(xi) delays of subcontractors or suppliers at any tier arising from unforeseeable causes beyond the control and without the fault or negligence of both the Contractor and the subcontractors or suppliers.

The shared burden of these events, that is to say by the Owner and Contractor (including lower tiers) is to be determined by certain requirements; such as (i) the foreseeability of such an event or (ii) the absence of control, fault or negligence of the contractor. These types of claims usually result in time compensation and both parties would assume the financial burden of the extension.

The Difference Between Excusable and Compensable Delay Claims and Excusable But Not Compensable Delay Claims:

The main difference between a claim being Excusable or Nonexcusable often comes down to the foreseeability of the actual delay itself, and this  test is frequently used to determine the actual scope of responsibility of the Contractor, if any.  If such acts that caused the delay initially could have been prevented by the Contractor, then a factor of negligence comes into play and the Claim would fall into the final and third category as those that are Nonexcusable. Thus, the Contractor would not see anything in the form of compensation, albeit in time or damages.

Non-excusable, Non-compensable Delay Claims:

The third category of delay claims include all of the delay claims that are found to be “Nonexcusable, Noncompensable,” and these types are construction delays are often described as “an act or neglect of the contractor, its subcontractors or suppliers at any tier, or is the result of a risk assumed by the contractor pursuant to contract”. In these instances the assessment of damages.  If the construction contract specifically references liquidated dames (these damages expressly agreed upon under contract) then the entity responsible for the delays to the construction schedule may face a per diam liquidated damages.  In other instances, the aggrieved party may be entitled to actual delay damages (and possible consequential damages). These delays that are found to be nonexcusable by the owner are always to be deemed noncompensable.

The types of damages which might be awarded to an Owner or a Contractor in a construction delay case are dependant upon the terms of the construction contract as well as state law.