March 14, 2019

Hurry Up and Wait: Dealing with Delays When the Project Still Finishes Early

Kenneth E. Rubinstein, Preti Flaherty Beliveau & Pachios, PC, Boston, MA, and Nathan Fennessy, Preti Flaherty Beliveau & Pachios, PC, Concord, NH

While most delay claims involve situations where a delay pushes the project beyond the schedule, delay can occur even where a contractor completes work early or on time.  This article addresses the legal basis supporting an early completion delay claim, the established requirements for prevailing on such a claim, and the counter arguments that contractors frequently encounter.

The Early Completion Delay

Delays cost money, regardless of whether they occur before or after the contractual completion deadline.  Where a contractor estimates that they can complete the work before the required completion date, they then carry the lower costs in their bid.  Accordingly, when the contractor is delayed by circumstances that would ordinarily give rise to a change order, they incur the same additional costs that they would incur if the delay had occurred after the contractual deadline.  In addition, some contracts include early completion bonuses that reward the contractor with additional compensation, and again, delays jeopardizing these bonuses cause real damage despite the fact that the project may still finish early or on time.  Delayed completion may also expose contractors to cost escalations that could be avoided by completing the work early.  As such, where a contractor is delayed from completing the work, they may suffer very real damage, even where the project finishes ahead of the contractual completion deadline.

In analyzing these early completion delay claims, courts have overwhelmingly held that contractors have a recognized and established right to recourse where a compensable delay impeded their progress.  See e.g. Metropolitan Paving Company v. United States, 163 Ct. Cl. 420, 325 F.2D 241 (1963); Interstate General Government Contractors v. West, 12 F.3D 1053, 1058-59 (Fed. Cir. 1993) (allowing delay claim if contractor can demonstrate that owner thwarted contractor’s ability and intent to finish early); Jackson Construction Company v. United States, 62 Fed. Cl. 84, 2004 U.S. Claims (citing Wickham Contracting Co. v. United States, 12 F.3d 1574, 1582 (Fed. Cir. 1994)); Gilchrist Constr. Co., LLC v. State of Louisiana, 2015 La. App. Lexis 483, (March 9, 2015); Rampart Waterblast, Inc., IBCA No. 3658-96 et al., 98-2 BCA p. 29,894; Montgomery-Ross-Fisher Inc., PSBCA 1033, 84-2 BCA ¶17,492; Eickhof Construction Co., ASBCA 20049, 77-1 BCA ¶12,398; Maron Construction Co. v. General Services Administration, GSBCA No. 13625, 98-1 BCA Par. 29,685; Maurice L. Bein, Inc. v. Housing Authority, 321 P.2d 753, 157 Cal. App. 2d 670 (1958).

In recognizing this right, courts generally rely on three doctrines: the duty of good faith and fair dealing, the duty to cooperate in performing contract obligations, and the implied warranty of the correctness of detailed design documents.    See e.g., Steel Tank & Pipe Co. of California v. Pacific Fire Extinguisher Co., 69 Cal.App. 225, 229, 230 P. 978 (1924); Metropolitan Paving Co. v. United States, 325 F.2d 241, 242 (Ct. Cl. 1963) (holding that while an owner may not owe “an ‘obligation’ or ‘duty’...to aid a contractor to complete prior to completion date, from this it does not follow that [the owner] may hinder and prevent a contractor’s early completion without incurring liability.”

The Legal Requirements of the Early Completion Delay Claim

While there is no universally accepted standard, most courts require that a contractor seeking early completion delay damages must “demonstrate from the outset an intent to complete the work early, a capacity to do so, and a likelihood of early completion but for the [applicable] delay.” Howard Contracting, Inc, v. G.A. MacDonald Constr. Co., 71 Cal.App.4th 39, 54, 83 Cal. Rptr. 2d 590 (1999); also see Interstate Gen. Gov’t Contractors, Inc. v. West, 12 F.3d 1053, 1060 (Fed. Cir. 1993); Preventive Maint. Servs., Inc., ASBCA No 44661, 94-3 BCA Par. 27,115; P.J. Dick , Inc. v. Principi, 324 F.3d 1364, 1373 (Fed. Cir. 2003); West v. All-State Boiler, Inc., 146 F.3d 1368, 1379 (Fed. Cir. 1998).  The purpose of these requirements is to ensure that the contractor cannot receive compensation for every delay, but rather only those delays that actually impeded its progress and prevented the contractor from achieving its intended objective.

Commonly Raised Defenses (Both Valid and Invalid) to Early Completion Delay Claims

Importantly, however, early completion delay claims may be barred where the contract specifically excludes such damages. Such clauses would be most likely found in projects where the owner would receive no benefit from an early finish.  For example, where a university dormitory project carries a scheduled completion date in March, and the university plans to put the dormitory to use in the following fall semester, the university may exclude early completion delay claims as it will not receive additional benefit from an early completion and does not want any additional risk.  Importantly, however, such clauses must be specific in order to be enforceable. 

By contrast, general clauses, that a contractor “use available total float before requesting an extension of Contract Time,” do not preclude a claim for early completion.  By way of example, in Maron Construction Co. v. General Services Administration, GSBCA No. 13625, 98-1 BCA Par. 29,685, the General Services Administration (the “GSA”) made an identical argument, claiming that the GSA could not be liable for lost opportunity to earn an early completion bonus because of a contractual provision stating that the owner would be responsible only for delays that exceeded the total float in the project schedule. 

According to GSA, sections 01311-1.3C and 01311-108F precluded early completion delay damages because they required Maron to prepare and to update a CPM schedule using April 20, 1995 as the contract completion date, and if Maron had anticipated finishing the contract work before that date, the CPM scheduler would have simply built in more float, which would have been available to absorb any GSA-caused delays.  In other words, GSA says there was no such thing as early completion of this contract.  Either Maron would finish work on April 20, 1995, or Maron’s CPM scheduler would build in float time before that date which would absorb any GSA-caused delays until that date. Id.  

The Maron board rejected the GSA’s argument, holding that the provision relied upon by the GSA did not demonstrate a clear intent to preclude early completion benefits, and that any clause precluding early completion delay damages must specifically and expressly state that such damages are not recoverable under the contract. 

Indeed, many owners conflate the concepts of “early completion” and “float,” which are similar, but unrelated concepts.    Early completion is the condition of completing the work ahead of the contractual deadline.  The calculation of “float,” on the other hand, represents the “number of days by which an activity can be delayed without affecting the project’s critical path and forecasted completion date.”  See e.g., Construction Law, William Russell Allensworth, Ross J. Altman, Allen Overcash, and Carol J. Patterson; see also Maron, supra. (“the amount of delay that a path or an activity can experience without delaying completion of the project is called ‘float’”). Float is measured off of the project schedule’s anticipated completion date, not the contractual deadlineMaurice L. Bein, Inc. v. Housing Authority, 321 P.2d 753, 157 Cal. App. 2d 670 (1958) (ruling that the contractor’s damages should be computed from the date the contractor reasonably planned to complete its work rather than the contractually specified completion date).  Stated simply, early completion measures the time between actual completion and the contractual deadline, while float represents the amount of unused time in between individual schedule components that can be adjusted without affecting the actual completion time.  Contrary to what many owners’ representatives believe, “float” does not include the time between the scheduled completion time and the contractual deadline.  This position fundamentally misunderstands the concept of “float,” and has been rejected by courts as noted above.

Common law recognizes that contractors have an established right to complete work early and to receive the attendant benefits, including reduced overhead costs and any early completion bonus where provided by contract.  As a result, contractors who demonstrate that they intended to finish early, had the ability to do so, and were precluded by a valid delay event will be entitled to appropriate compensation absent a specific contractual clause to the contrary.