Like it or not, responsibility for delays is one of the most common causes of disputes on construction projects. Delays often lead to claims because they will almost always result in additional costs or time, or both, for contractors of all tiers. A delay on a construction project is broadly considered to be a stretching out of the time for completion of certain key milestone scopes of work that impact the project’s completion date due to some circumstances or events that were not reasonably anticipated when the project began. While delays can be caused by any number of events, the most common include: defective plans and specifications; design changes; severe weather and other, similar unforeseeable events; unforeseen or differing site conditions; unavailability of materials or labor; labor inefficiencies or stoppage; contractor negligence; and owner influences, including construction changes or outright interference. If the project schedule is not recovered following any one of such delays, then the project schedule will likely be extended, resulting in increased performance costs. Some of these costs include: added labor, equipment or material costs; increased subcontractor costs; additional jobsite or home office overhead expenses; unnecessary workforce and equipment charges incurred during idle time; and additional insurance and bonding premiums.
A delay claim is one way a contractor can recover costs or time resulting from delays that are not the fault of the contractor or its subcontractors, but rather are the result of a force majeure event or due to actions or fault of the owner or its design team.
To fully understand delays and how to approach and submit a delay claim, it is important to understand the different types of delay claims. Delay claims can be broken down into different categories, including the following:
When considering a delay claim, critical delays must be distinguished from non-critical delays. A critical delay affects the project completion date and delays the entire project. In essence, a critical delay will necessarily extend the critical path of a project. In general, the critical path is “the longest path through the network of identified and logically sequenced construction activities that establishes the minimum overall project duration.” The United States Court of Claims has also defined the critical path as the path of certain items of work that must be performed on schedule or the entire project will be delayed.
A non-critical delay has no effect on the project’s critical path. Courts have recognized that delays to work not on the critical path will generally not delay the completion of a project. Such a non-critical delay may affect the completion of certain activities but does not affect the completion date of the entire project. A non-critical path activity on a project has more flexibility than a critical path activity, and non-critical path activities can be delayed without affecting the project’s completion date.
As a general rule, in order for a delay to provide the basis for a claim for additional time or money, the delay must impact critical path activities on the project schedule. If only non-critical activities are delayed, then the total time of the project will not be extended. Determining whether a delay is critical or non-critical is an important task, as it will determine whether a claim for additional time should be granted. To address the importance of critical versus non-critical delays, most construction contracts address the critical path concept with detailed terms and specific language on how to deal with time and compensation for critical delays that are material to the timely completion of the project.
In addition to determining if a delay is a critical or non-critical delay, non-excusable delays must be distinguished from excusable delays. A project delay can have a severe economic impact on the contractor by way of extended general conditions and home office overhead, overtime, idle labor and equipment costs, escalated labor and material costs, and other related impacts. “Delays generally fall into one of three categories: (1) excusable and compensable; (2) excusable but not compensable; and (3) not excusable.”
In general, excusable delays are unforeseeable and beyond the contractor’s control and often entitle a contractor to recover an extension of time, an increase in the contract sum, or both. Conversely, non-excusable delays are foreseeable or within the contractor’s control. Obviously, the distinction between these two is significant in that it determines which party is liable for the delay and dictates whether a contractor is entitled to a time extension and possibly compensation or exposed to paying the owner compensation for the delay. The determination of whether a delay is excusable or non-excusable is also generally governed by the terms of the contract between an owner and contractor. While the law of the jurisdiction where the project is located may provide some guidance on whether a delay is excusable or non-excusable, one should always analyze all applicable contracts because they will often address whether a delay is excusable or non-excusable.
To prove its entitlement to delay damages, the contractor is typically required to maintain some form of reliable schedules if the parties desire to hold one another accountable for delays and ultimately determine the party responsible for the delays.
Non-excusable or inexcusable delays are caused by or are within the control of the contractor or its subcontractors. Contractor-caused delays typically entitle the owner to recover damages, such as any liquidated damages, and could entitle the owner to terminate the contract if the non-excusable delays constitute a material breach or default. Likewise, because the contractor is responsible for the delay, the contractor will not be entitled to either additional time or additional compensation for its own costs or damages associated with the delay. Because the owner’s actual damages are oftentimes difficult to calculate for delays, most construction contracts contain a liquidated damages clause that is designed to compensate the owner a sum certain for each day the project is not timely completed. Typically, liquidated damages are in place to account for loss of rent, loss of income, additional storage or rental costs or fees, financing costs, etc. Examples of non-excusable delays include: delayed mobilization; late performance by subcontractors or suppliers; delayed submission of submittals; late performance due to the poor supervision of subcontractors; delays caused by equipment problems or lack of proper equipment; delays caused by inadequately staffed work force; repairs and rework due to subcontractors’ faulty workmanship resulting in delay; and labor strikes caused by the contractor’s unwillingness to negotiate or unfair job practices.
A contractor’s non-excusable delays are commonly caused by subcontractors and suppliers. Generally, courts have held that a contractor assumes the risk of delays its subcontractors and suppliers may cause.
Excusable delays are usually caused by conditions that are reasonably unforeseen and not within the contractor’s control. In other words, an excusable delay is usually one not due to the contractor’s negligence. The most common examples of excusable delays usually fall under a force majeure clause. Some common examples of excusable delays include: fire; floods; earthquakes; other natural disasters; owner changes; errors or omission in the plans and specifications; differing or unforeseen site conditions; and acts of governmental bodies.
To contractually qualify as an excusable delay, it normally has to fall within one or both of the following categories: “(1) the delay resulted from interference with the contractor’s performance by the owner or those for whom the owner is responsible; or (2) the risk of the delay was not expressly or impliedly assumed by either party to the contract.” The Court of Federal Claims has found that, for a delay to be classified as an excusable delay, the cause of delay must delay the overall contract completion or it must affect the critical path of performance. To prove that an owner delay is excusable, the contractor may have to establish that the delay was caused by the intentional inaction or action of an owner or its agents.
Typical examples of owner-driven causes of delays include: material changes to or errors in the plans and specifications discovered during the course of the project’s construction; failing to timely or completely respond to submittals; requests for information or shop drawings; delaying the process of utility hookup or access; or restricting physical access to the jobsite.
Courts have taken different approaches to determining whether a delay is legally excusable or not. The Federal Court of Claims has held that in order to establish excusable delay, contractors must demonstrate that their untimely performance was attributable to unforeseeable causes beyond their control and without their fault or negligence. Thus, to carry its burden, a contractor must present sufficient evidence to demonstrate that the contractor would have completed the project but for the excusable delay in consideration of all material factors.
The Federal Acquisition Regulations (“FAR”) governing most federal contracts prohibit the government from assessing damages against a contractor for failing to timely complete the work if “the delay in completing the work arises from unforeseeable causes,” such as acts of the government or delays of third-party subcontractors and suppliers that are “beyond the control and without the fault or negligence of the Contractor.” To prove an excusable delay, the contractor must show that the unforeseeable event “delay[ed] the overall contract completion; i.e., it must affect the critical path of performance.” Moreover, if the contractor seeks the remission of liquidated damages based on excusable delay, then the contractor bears the burden of proving “the extent of the excusable delay to which it is entitled.” However, these FAR clauses, like most remedy-granting contract provisions, do not provide automatic relief without proper notice and sufficient documentation.
Courts have also classified a number of events as excusable delays. For instance, delays associated with weather events can be an excusable delay. However, courts have ruled that unusual weather conditions must have an adverse effect on the construction for the delay to be considered an excusable delay that would entitle a contractor to an extension of the contract time. The additional time granted for an excusable weather delay should include both the time of the weather event itself and any time spent repairing or addressing any damage caused by the weather event.
Certain governmental acts, such as wartime restrictions, supervening legislation, and other restrictions and regulations are excusable when performance becomes impossible. Likewise, a court order that prevents timely performance has also been deemed a governmental act that excuses any resulting delays.
As detailed below, an excusable delay will entitle the contractor to only a time extension. However, to establish an excusable and compensable delay, the contractor must generally prove that (1) the owner or its agent proximately caused the delay and (2) the contractor was not delayed for any other reason. (See Figure 1 below).
If an excusable delay exists, one must further determine if it is a non-compensable or compensable delay. One place to start such an analysis is the contract between the parties, as it will likely govern whether a delay is compensable or non-compensable.
Non-compensable delays, commonly referred to as excusable and non-compensable, are delays for which the contractor is entitled to a time extension but not entitled to additional monetary compensation. When a non-compensable delay exists, neither party is responsible for the other party’s damages. In such cases, both parties absorb their own additional costs arising out of the delay. For example, the contractor absorbs its delay costs for being on the project longer, and the owner absorbs its costs associated with the delay. In this case, the owner would grant an excusable/non-compensable time extension to complete the contracted work. These delays are typically addressed in the context of force majeure events and encompass such things as strikes, acts of God, and other delays that are not reasonably foreseeable.
A force majeure clause’s primary purpose is to relieve a party from certain duties when performance was prevented by some force beyond its control or when the purpose of the contract was frustrated. Force majeure clauses are typically construed in strict accordance with their terms and usually only excuse a party’s performance if the event causing the delay or nonperformance is identified in the clause. Courts typically interpret force majeure clauses in strict accordance with their terms, or at the very least, in strict accordance with what the courts determine to be the intent of the parties in drafting such clauses.
“To determine whether a certain event excuses performance, a court should look to the language that the parties specifically bargained for in the contract to determine the parties’ intent, rather than resorting to any traditional definition of the term.” “In other words, when the parties have themselves defined the contours of force majeure in their agreement, those contours dictate the application, effect, and scope of force majeure.”
Courts also generally consider the parties’ reasonable expectations and whether those expectations and the overall contract performance have been frustrated by a circumstance beyond either party’s control. In the construction context, courts specifically consider whether the contractor contributed to or caused the delay or non-performance. If the force majeure clause may be invoked, courts then look to that clause to determine the appropriate relief to be awarded to the parties.
Since 2020, courts have been forced to determine whether and to what extent the COVID-19 Pandemic and other epidemics/pandemics may qualify as a force majeure event. Many courts interpreting force majeure clauses including the words “pandemic,” “epidemic,” or “natural disaster” have recognized that the COVID-19 Pandemic constituted a force majeure event as an unanticipated “act of God” that was clearly not caused by anyone working on the jobsite and could not have been reasonably anticipated. These courts reasoned that the contractors that were unable to perform their work as a direct result of the pandemic were entitled to excusable and oftentimes compensable delays.
However, some courts concluded that claims of delay resulting from the hardships brought on by the COVID-19 Pandemic could not be relied upon to excuse performance under the parties’ contract.
Merely because an event is unforeseeable or is a triggering event listed in or reasonably contemplated by a force majeure provision does not automatically excuse a party from performing. Rather, the party seeking to excuse its performance based on force majeure must prove that the unanticipated triggering event was the direct cause of the parties’ inability to complete their contractual obligations. Some courts require proof that the triggering event rendered performance impossible, not just financially difficult or a hardship. Similarly, some courts have held that when a contract can be performed in either of two alternative ways, the impracticability of one alternative does not excuse the promisor of performance if the other alternative is still practicable.
In the future, delays caused by the COVID-19 Pandemic and other pandemics/epidemics may be deemed excusable but could be deemed non-compensable given that all contractors arguably should now anticipate that the emergence of another virus or similar force majeure event could delay a project. Contractors might have better results in focusing their arguments on changes in the law or other governmental action, such as temporary orders to stop all work for extended periods of time to slow the spread, that make the entirety of their work impossible in seeking to excuse their performance.
Weather related delays are also typically excusable but not compensable. To obtain compensation for weather related delays, the contractor must generally prove the weather was unusually severe and delayed the critical path. Unusually severe weather is typically demonstrated through historical weather data that shows the contractor could not have reasonably foreseen the nature and extent of the weather event at issue.
Nonetheless, the occurrence of unusually severe weather will not necessarily warrant a time extension. Indeed, even if the weather is proven to be severe, unusual, and/or unforeseeable, the contractor will likely not be entitled to compensation for weather related delays if it cannot prove the event delayed the critical path. For example, if the building is enclosed and the unusually severe weather had no effect on the contractor’s ability to perform its interior work, then there would be no critical path delay and a time extension would not be warranted.
Some federal agencies, particularly the United States Army Corps of Engineers, have contractually specified the precipitation that is anticipated in a particular area. Like most commercial construction contracts, the Corps of Engineers’ contracts will identify the number of days a specified amount of rain is expected each month for each year in that part of the country. The contractor is expected to account for the “expected” number of rain days in its project schedule. Oftentimes, the excusable/compensable days of delay are limited to only the number of rain days that occur over and beyond the contractually agreed upon number of rain days. For example, the Corps of Engineers will consider unusually severe weather only if the contractor can prove that the amount of rain over a certain number of days exceeded the amount of rain and the number of days specified in the contract. However, a careful reading of the contract is required to ensure what is exactly specified concerning weather and if the contractor could be entitled to compensation.
In short, even if the contractor can successfully prove that it was delayed by an unanticipated, unforeseeable, or uncontrollable event such as a flood, weather, or a strike, the delay may warrant a time extension but typically the contractor is not entitled to compensation for the delay; but neither is the owner. Concurrent delays, discussed in detail below, are another example of excusable/non-compensable delays.
Compensable delays are unforeseeable delays to the critical path that are beyond the contractor’s control or fault and entitle the contractor to both a time extension and additional compensation. Determination of the critical path is necessary for determining if a delay is compensable because only work on the critical path has an impact upon the time in which the project is to be completed.
Courts have held that a critical path delay is compensable if it was entirely caused by events within the other party’s control. However, if a contractor is unable to prove that the owner was responsible for the event(s) that caused the delay, then the delay is excusable but non-compensable. Normally, a compensable delay is caused by the owner or its agent, but one could also be caused by “no fault” events such as acts of God and the like. Common causes of compensable delays include: material changes in the design or the contract terms; suspensions of work; the owner’s refusal or inability to provide site access; untimely review of submittals, shop drawings, or responses to requests for information by the owner’s design team; delayed issuance of the notice to proceed; defective plans and specifications; and differing site conditions.
There are many instances where various courts have found that certain actions of a party, such as that of an owner, have resulted in compensable delays. Examples include: (1) directing the contractor to perform its operations in sequences that differ from those set forth in the contract documents; (2) requiring the contractor to meet stricter tolerances than those set forth in the specifications; (3) providing a contractor with defective plans and specifications; and (4) failing to timely issue written change orders for changes or additional work.
A contractor may also seek compensation for delays from downstream subcontractors resulting from late delivery of materials, lack of labor, and other issues arising from the subcontractors’ failures to timely commence or complete their own work. In such cases, courts have required the contractor to prove that its subcontractor was the sole or primary cause for the delay period for which the contractor seeks damages.
In analyzing delays, it is also important to determine whether a concurrent delay exists. In general, a concurrent delay refers to the situation when the critical path of a construction project is delayed by two or more events at the same time, for only one of which the contractor bears responsibility. Usually, the two or more independent delay events may overlap and delay the critical path for a similar or the same period of time. This results in concurrent or sequential delays to the project’s critical path. Concurrent delays occur “where both parties are responsible for the same period of delay.” Concurrent delays have been defined by some courts as delays to the critical path caused concurrently by multiple events not exclusively within the “control of one party.” When concurrent delays exist, neither party may benefit monetarily from the delay. Thus, concurrent delays are typically excusable/non-compensable delays from the contractor’s perspective.
To establish concurrency, the delay must be involuntary and the delayed work must be substantial and not readily curable. The party claiming concurrency must also establish two major functional requirements relating to the relationship between the delays: (1) the delays occurred during or impacted the same time analysis period; and (2) each event/condition would have independently delayed the critical path absent the other event/condition.
Project schedules, which are typically presented in some form of network, are intended to identify both project activities and their interdependencies. A project network functions as a basis and an essential input to the process of assessing concurrent delays. For example, a concurrent delay can arise from the concurrence of both a non-excusable and excusable delay or a compensable and non-excusable delay. Generally, a concurrent delay is treated as an “excusable delay” entitling a contractor to an extension of contract time, but not entitling the contractor to additional costs or exposing the contractor to liability for liquidated damages or the owner’s delay damages. Thus, an owner’s compensable delay that concurs with a contractor’s inexcusable delay would offset each other; neither party would be entitled to monetary compensation, and the only remedy available would be an extension of the contract time.
