By Jacob A. Zahniser, AttorneyThis article was originally published in the August 27, 2018 edition of the Daily Journal of Commerce Oregon.
Productivity is critical to a profitable construction project. Changes to scope, site conditions, and the manner in which the work must be performed, all impact productivity in real time and reduce profits. Compensation for lost productivity depends on proper documentation.
During the bidding phase, the means and methods to be used to build the project, including resource scheduling and sequencing, are determined. Based on the means, methods, resources, and sequencing, the contractor will estimate the duration of each activity. This not only is used to establish the schedule but is also the baseline upon which productivity is anticipated. Unless the contractor can defensibly state his or her expected productivity on any given task, it cannot later prove forces beyond its control pushed it off the mark.
Once the anticipated productivity rate is established, and construction is underway, countless circumstances can derail the efficient prosecution of the work: weather events; changes in crew size; poorly trained or supervised workers; shortages of workers; erratic workflow; working in reduced spaces; trade stacking; unavailability of materials; design modifications; access restrictions; and excessive change orders are just some of the countless ways productivity is impacted resulting in additional time, and therefore additional labor hours to accomplish the work, increasing unit costs and decreasing profitability. Some of these circumstances are internal, contractor-driven circumstances and some of them are external, owner-driven circumstances.
If a contractor suffers a loss in productivity caused by a circumstance beyond its control, the first step is to document from day one the cause and effect relationship. Accurate documentation is critical for multiple reasons. First, the contract likely requires documentation and notice contemporaneous with the event giving rise to the claim. Contract compliance is critical to securing the lost productivity claim.
Second, contemporaneous documents have much more credibility with a fact finder than after-the-fact recreations. They will feel more authentic and accurate to any decision maker.
Third, contemporaneous documents show the cause and effect relationship between the event and the claimed delay. For example, a properly documented inclement weather event demonstrates the time lost due to the event. However, it is rare on a complex construction project for there to only be one cause of delay. Rather, there is often a combination of events occurring over a period of time giving rise to numerous overlapping delays. Proper documentation allows the parties to unravel the potential Gordian knot of overlapping delays, with each delay’s respective cause and effect. With proper documentation, one can isolate the “impacted” productivity to measure the delay by comparing it to the productivity of the un-impacted portions of the work of a similar nature as well as the anticipated productivity rate established during the estimating phase. This is especially important when seeking both compensable and uncompensable time.
Finally, owners and contractors alike should bring in experienced counsel from the first inkling of a potential delay claim. Experienced counsel can make sure events are captured accurately and contemporaneously. Experienced counsel can assist in guiding the parties to resolution, where possible, before the litigation battle lines are drawn. Even if the parties disagree, experienced counsel can make sure the owner’s and contractor’s rights are preserved while the project continues to completion.
Disruption undermines profits. Owner-caused disruptions are compensable when properly documented. Proper documentation starts from the beginning of the project, during the estimating phase, and continues through the end of the project. Proving the delay claim depends on accurate contemporaneous documents. In short, you have a delay claim and can prove it.
Jacob Zahniser is a shareholder in Jordan Ramis PC’s Dirt Law practice group. His practice focuses on construction and real estate litigation. Contact him at 503-598-7070 or firstname.lastname@example.org.