This article was originally published in the September 24, 2021 issue of the Daily Journal of Commerce Oregon.
Delay, disruption and acceleration of construction projects are nothing new and most seasoned contractors have experienced one or all of them. However, the pandemic and environmental events, such as last year’s historic wildfires and this summer’s record heat wave, might point to a future in which contractors may be affected more frequently.
Following is a discussion of three distinct legal theories, which are often hopelessly intertwined factually. That is, disruption of work, through trade stacking and direction to perform work out of sequence, can lead to delay – and that may then lead to acceleration as the contractual completion date approaches. However, each of these legal theories has its own elements of proof, which a contractor will need to keep in mind should it anticipate bringing a claim.
Delay is inexcusable, excusable or compensable – and the distinctions are based on which party has “control” of the occurrence that caused the delay in a critical path activity.
An inexcusable delay is one caused by an occurrence that was within the control of a contractor or its subcontractors and/or suppliers and not in the owner’s control. For these delays, the contractor is not entitled to compensation or an extension of time. Examples include delays caused by the contractor’s defective work, normal weather conditions, and failure to coordinate subcontractors.
An excusable delay is one caused by an occurrence that is within neither the contractor’s nor the owner’s control. For these delays, the contractor is not entitled to compensation, but is entitled to an extension of time. Examples include delays caused by abnormal weather conditions, labor strikes, and governmental action.
A compensable delay is one caused by an occurrence that is in the owner’s control, but not within the contractor’s control. For these delays, the contractor is entitled to compensation and an extension of contract time. Examples include delays caused by defective plans and specifications, the owner’s failure to provide timely access to the project site, and untimely approval of shop drawings and submittals.
A concurrent delay is when, for example, an excusable delay and an inexcusable delay occur concurrently. In that case, the delay is treated as excusable (i.e., contractor only entitled to extension of time). Further, an excusable delay can be compensable when it would not have occurred but for a compensable delay. For example, delays caused by defective plans and specifications unforeseeably push a contractor’s work into abnormal weather, which further delays the contractor’s work. While the delay resulting from the abnormal weather would normally be a non-compensable delay, it is rendered compensable by the fact that the contractor would not have experienced the abnormal weather had the plans and specifications not been defective. A contractor that wishes to obtain compensation or an extension of time due to a delay must prove the key element that the event was outside of its control.
Disruption occurs when a contractor experiences a reduction in its expected productivity of labor and equipment on both critical and noncritical work. In order to recover on a claim of disruption a contractor must prove that the disruption was: 1, outside of the “normal” type disruption inherent in construction projects, and 2, caused solely by a compensable event that was within the other party’s control. In determining whether a compensable event was within control of the other party, courts examine whether the event: 1, was foreseeable at the time the parties entered into the contract; 2, was within the contractor’s express or implied legal duty to control; 3, was within the contractor’s actual physical control; 4, was caused by the contractor’s negligent acts or omissions; or 5, could have been avoided or mitigated by the contractor.
Among the disruptive acts and omissions that can lead to loss of productivity are: improper scheduling of work activities of subcontractors and suppliers; improper coordination of construction activities; directing out-of-sequence work; causing trade stacking; preventing access to work areas; making work available on a piecemeal basis; and mismanaging the change order process. The preferred method for proving time impacts is use of the critical path method (CPM) analysis. However, the reality is that most construction projects do not lend themselves to a tidy CPM analysis. If one cannot be employed, because of failure to make contemporaneous updates to the schedule, an “as-built” schedule can be compared to the contractor’s “as-planned” schedule to provide a reasonable analysis of the project’s critical path and the effects on it of time-impacting events.
Acceleration is compression of the time allowed for a contractor to complete its work on the project and can be directed or constructive. Directed acceleration can take the form of a unilateral change order or a more informal demand to “pick up the pace” of work, and under either scenario the contractor may recover its increased costs incurred in achieving the accelerated schedule.
Constructive acceleration typically arises out of a dispute between the parties regarding whether a contractor is entitled to an extension of time or compensation for a compressed schedule. To prevail on a claim for constructive acceleration, the contractor must prove that: 1, it encountered an excusable or compensable delay to the critical path that justified an extension of contract time; 2, it requested an extension of time in accordance with the contract; 3, the other party denied or ignored the request for an extension of time; 4, the other party expressly or impliedly directed the contractor to finish its work by the original completion date; 5, the contractor provided timely notice of an acceleration claim; and 6, the contractor actually accelerated performance and suffered damages as a result. A contractor that brings a successful acceleration claim may recover costs that include overtime, loss of productivity due to working out of sequence and the inefficiencies resulting therefrom, loss of productivity due to working longer hours, and increased administration due to additional supervision.
The legal theories of delay, disruption and acceleration are distinct legal theories with their own elements of proof. The reality of most construction projects is almost always less clean cut, and these issues become almost inextricably intertwined. However, a prudent contractor can make the web a little less tangled by becoming aware of the claim elements and doing its best to document and preserve these distinct claims through directives and other communications, keeping track of the costs resulting from any delays and impacts, and providing notice of a claim as soon as possible.
Brent Carpenter is a Jordan Ramis PC shareholder. He focuses his practice on construction law. Contact him at 503-598-5524 or email@example.com.
Tags: Construction, Construction and Development