How are delay damages treated when two subcontractors cause a mutual or concurrent delay to the project?
Assume multiple subcontractors concurrently contributed to an impact to the critical path resulting in a delay to the project. The delay caused the prime contractor to: (1) be assessed liquidated damages from the owner and (2) incur extended general conditions. The prime contractor will be looking to the subcontractors for reimbursement for any liquidated damages it is assessed along with its extended general conditions costs.
There is really no great case that addresses this point when two (or more) subcontractors mutually or concurrently delay the project. It is also not uncommon, and frankly expected, that a subcontractor will point the finger at another subcontractor for the cause of the delay or that another subcontractor was concurrently delaying the project.
The prime contractor should absolutely, without any exception, undertake efforts with a scheduling consultant to allocate the delay caused by subcontractors. Taking an approach that joint and several liability applies between multiple subcontractors and/or not trying to apportion delay because the subcontractors concurrently delayed the critical path at the same time is probably not the best approach. The prime contractor should have an expert render an opinion as to the allocation of the delay period amongst responsible subcontractors that delayed the critical path. Not doing so, in my opinion, is a mistake.
For example, in the unpublished decision in Alcan Electrical & Engineering Co., Inc. v. Samaritan Hosp., 109 Wash.App. 1072 (Wash. 2002), a dispute arose between a general contractor and its electrical subcontractor on a hospital project. The general contractor looked to recoup assessed liquidated damages caused by the electrical subcontractor. The project was 201 days late attributable to the electrical subcontractor and, largely, the mechanical subcontractor. The trial court determined that the electrical subcontractor was only liable for 31 days of delay.
An appeal arose because the general contractor wanted to hold both subcontractors jointly and severally liable for the 201 days of delay. The Washington Court of Appeals was not accepting this argument. Instead, it held that that the amount of delay attributable to the two subcontractors is a question to be resolved by the trier of fact. This is exactly what the trial court did by finding that of the 201 days of delay, 31 days of delay was caused by the electrical subcontractor while the remaining 170 day of delay was caused by the mechanical subcontractor.
But, in another example from an unpublished decision, U.S. el rel. Belt Con Const., Inc. v. Metric Const. Co., Inc., 314 Fed.Appx. 151 (10th Cir. 2009), a general contractor looked to allocate liquidated damages to its masonry subcontractor due to delays to the construction of a federal training center. The subcontract allowed the general contractor to equitably allocate delay damages among subcontractors as long as its decision was made in good faith. The trial court, affirmed by the appellate court, found that the general contractor did not allocate the damages in good faith because the initial delay analysis it performed was submitted to the owner and allocated ALL of the delay to the owner. Then, for purposes of trial, it simply adopted its trial expert’s analysis that allocated delay to subcontractors. This issue alone hurt the contractor and, importantly, its expert’s credibility at trial. (This is a reminder that there should be ONE delay analysis for the project and what is presented to the owner should not be conflicted with by delay analysis separately presented to subcontractors.)
Moreover, the court, applying California law, found that there was no law that supported the apportionment of a true concurrent delay. But, in my opinion, this did not make much sense because at trial both the general contractor and subcontractor’s experts rendered opinions allocating the delay caused by the culpable subcontractors.
Irrespective of the Court’s decision in this case, the best approach, mentioned above, is to allocate the delay period. Thus, if two subcontractors mutually contributed to a 30-day window of time, an expert should be used to analyze that 30-day window of time to allocate the days to the two subcontractors. Again, taking the approach that joint and several liability should apply or that an allocation is not necessary is a mistake.
Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.