Tag Archives: delay

FORMAL REQUEST FOR TIME EXTENSION NOT ALWAYS REQUIRED TO SUPPORT CONSTRUCTIVE ACCELERATION

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Does a constructive acceleration claim require the contractor to always request an extension of time which is then denied by the owner?  While this is certainly the preference and the contractor should be requesting an extension of time as a matter of course for an excusable delay, the answer is NO! in certain circumstances.  This is conveyed in the factually detailed case discussed below where a formal request for an extension of time was not required for the contractor to support its constructive acceleration claim.

But first, what is constructive acceleration:

Constructive acceleration “occurs when the government demands compliance with an original contract deadline, despite excusable delay by the contractor.” The Federal Circuit in Fraser defined the elements of constructive acceleration as follows:

(1) that the contractor encountered a delay that is excusable under the contract; (2) that the contractor made a timely and sufficient request for an extension of the contract schedule; (3) that the government denied the contractor’s request for an extension or failed to act on it within a reasonable time; (4) that the government insisted on completion of the contract within a period shorter than the period to which the contractor would be entitled by taking into account the period of excusable delay, after which the contractor notified the government that it regarded the alleged order to accelerate as a constructive change in the contract; and (5) that the contractor was required to expend extra resources to compensate for the lost time and remain on schedule.

Nova Group/Tutor-Saliba v. U.S., 2022 WL 815826, *42 (Fed.Cl. 2022) quoting Fraser Constr. Co. v. U.S., 384 F.3d 1354, 1361 (Fed. Cir. 2004) (internal citations omitted).

Of importance, different formulations proving the elements of constructive acceleration can be used.  Id. (where Court discussed three essential elements to constructive acceleration: “excusable delay, an order to accelerate, and acceleration with attendant costs.”

In Nova Group/Tutor-Saliba, discussed below, the Court stated the “Fraser standard requiring the contractor to submit a time extension request would not be appropriate here since the evidence established that the Government was insisting on compliance with the original schedule despite the [known] delay caused by the global stability dispute.”  Nova Group/Tutor-Saliba, supra, at *43.  A formal request for a time extension was not required by the contractor to support and sustain its constructive acceleration claim.

In this case, a contractor was hired to demolish existing piers and design and construct a new ship wharf and other structures.  During construction, the government sent a letter (supported by its engineer) questioning the structural global stability of the contractor’s design and the design’s conformance with the government’s request for proposals AFTER the design had already been approved.  This resulted in what the contractor claims was an excusable delay because no reasonable contractor would have moved forward when the government lost confidence in the structural integrity of the design; thus, the contractor could not perform critical path activities until the issue was resolved.  When a certain redesign over a different issue (dealing with a batter pile issue) was approved, the global stability issue was put to bed by the government and the contractor implemented its acceleration plan.

The Federal Claims Court went through constructive acceleration factors recognizing different formulations of the elements can be applied to support the claim.

 

(1) Excusable Delay

The government argued its letter questioning the global stability of the design did not stop the contractor’s critical path work.  Rather, the work was stopped so the contractor could complete a batter pile redesign.  Further, the government argued that even if the letter caused a delay, it would have been concurrent with the contractor’s redesign which would have prevented the contractor from completing the work absent the global stability issue.

The Federal Claims Court, however, found that the delay was the result of the government’s letter questioning the global stability of the design and design’s conformance with the request for proposals.

Here, months after approving the design, the Government informed [the contractor] that it believed the design might be out of conformance with the RFP, an unforeseeable act given the Government’s prior approval.  Because the entire design was called into question, it was reasonable for [the contractor] to stop critical path work until the issue was resolved. [The contractor’s] reaction that the Navy’s March 8 letter questioning its design was a ‘bombshell’ and a ‘very, very scary moment’ underscored its reasonable concern about the Project’s path forward.

Nova Group/Tutor-Saliba, supra, at *44.

The Federal Claims Court also rejected the government’s concurrent delay argument.

The Government further contends that delays due to the Delta 12 [batter pile] redesign and global stability were concurrent, which would preclude Plaintiff from recovering. “Where both parties contribute to the delay, neither can recover damage[s], unless there is in the proof a clear apportionment of the delay and the expense attributable to each party.”  However, the record indicates that the Delta 12 redesign delay occurred after the global stability issue delay, not concurrently. This is evident from the fact that [the contractor] was able to start some critical construction work on May 7 — 20 days before the Delta 12 redesign was even approved — once it felt assured the global stability issue would be resolved based on emails from the Government. The Government approved the Delta 12 redesign on May 27, 2010, but work on the redesign was not performed until later. The Court is persuaded by Plaintiff’s expert’s opinion that there were two separate acceleration periods: Acceleration Period 1 covering June through November 2010 resulting from the global  stability issue….

Nova Group/Tutor-Saliba, supra, at *44.

 

(2) Government Knowledge of Excusable Delay

The Federal Claims Court found that the government was well aware of the delay due to the global stability design issue.  Further, government representatives were at the site daily and attended daily production meetings. The delay caused by the government’s concern over the global stability of the design was not a surprise.

 

(3) Government Statements that Can be Construed as Acceleration Orders

The contractor never formally requested an extension of time because it was understood the government required the project to be completed ahead of the contract completion date, and time extensions would not be granted.  Even after the global stability design issue was resolved which included the known work stoppage, the government still pressed the contractor to complete on time.  The government even notified the contractor its concern in the decline in the float available in the schedule and that if the float becomes negative the contractor will be required to submit a recovery plan.  “Here, the Government’s repeated warnings that [the contractor] maintain the original project schedule despite a critical path work stoppage of over two months constituted an order to accelerate.”   Nova Group/Tutor-Saliba, supra, at *48.

 

(4) Government on Notice of Constructive Change Claim

Although the government claimed it had no notice of the contractor’s constructive change claim, the Federal Claims Court found: “[t]he contracting officer had actual knowledge of the circumstances giving rise to [the contractor’s] constructive change claim, because it was the Government that issued the letters questioning [the contractor’s] previously approved design, requested KPFF [contractor’s engineer] to respond to BergerABAM’s [government engineer’s] letters, and reiterated that [the contractor] needed to adhere to the schedule, which caused [the contractor] to accelerate after the stoppage of critical path work.” Nova Group/Tutor-Saliba, supra, at *48

 

(5) Costs Incurred for Constructive Acceleration

The Federal Claims Court found that the contractor proved it incurred costs due to the constructive acceleration.

 

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.

 

STANDARD FOR EVALUATING DELAY – DIRECTLY FROM AN ARMED SERVICES BOARD OF CONTRACT APPEAL’S OPINION

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Sometimes, it is much better to hear it from the horse’s mouth.  That is the case here.  The Armed Services Board of Contract Appeal’s (ASBCA) opinion in Appeals of -GSC Construction, Inc., ASBCA No. 59402, 2020 WL 8148687 (ASBCA November 4, 2020) includes an informative discussion of a contractor’s burden when it encounters excusable delay and, of importance, the standard for evaluating delay.  It’s a long discussion but one that parties in construction need to know, appreciate, and understand.  EVERY WORD IN THIS DISCUSSION MATTERS.

Construction projects get delayed and with a delay comes money because time is money.  Many claims are predicated on delay.  These can be an owner assessing liquidated damages due to a delayed job or a contractor seeking its costs for delay.  Either way, the standard for evaluating delay and the burdens imposed on a party cannot be understated and, certainly, cannot be overlooked.  For this reason, here is the discussion on evaluating delay directly from the horse’s mouth in the Appeal of-GSC Construction, Inc.:

The critical path is the longest path in the schedule on which any delay or disruption would cause a day-for-day delay to the project itself; those activities must be performed as they are scheduled and timely in order for the project to finish on time. Wilner v. United States, 23 Cl. Ct. 241, 245 (1991). In Yates-Desbuild Joint Venture, CBCA No. 3350 et al., 17-1 BCA ¶ 36,870, our sister board compiled an excellent and very helpful synopsis of the standards for evaluating delay claims, which I adopt nearly verbatim among the discussion that follows.

To the extent that the government that delays a contractor’s work and increases its costs, the contractor may seek compensation for its damages. Yet, the mere fact that there is some delay to some aspect of planned contract work is not enough to establish that the contractor’s ultimate contract performance costs or time increased. In evaluating the effect of government-caused delays on the contractor’s ultimate performance time and cost, tribunals generally look to the critical path of contract performance, a method of delay analysis that the United States Court of Claims explained as follows:

Essentially, the critical path method is an efficient way of organizing and scheduling a complex project which consists of numerous interrelated separate small projects. Each subproject is identified and classified as to the duration and precedence of the work. (E.g., one could not carpet an area until the flooring is down and the flooring cannot be completed until the underlying electrical and telephone conduits are installed.) The data is then analyzed, usually by computer, to determine the most efficient schedule for the entire project. Many subprojects may be performed at any time within a given period without any effect on the completion of the entire project. However, some items of work are given no leeway and must be performed on schedule; otherwise, the entire project will be delayed.

Yates-Desbuild, 17-1 BCA ¶ 36870 at 179,684-85 (quoting Haney v. United States, 676 F.2d 584, 595 (Ct. Cl. 1982)).

Where the time frame for performance of an activity, set by the earliest possible start time and the latest possible finish time, establishes a time interval equal to the expected activity duration, the activity is termed ““critical,” and no discretion or flexibility exists in the scheduling of that activity. Items of work for which there is no timing leeway are on the critical path, and a delay, or acceleration, of work along the critical path will affect the entire project. Specifically, then, to prevail on its claims for the additional costs incurred because of the late completion of a fixed-price government construction contract, a contractor must show that the government’s actions affected activities on the critical path. Typically, if work on the critical path is delayed, then the eventual completion date of the project is delayed. Conversely, a government delay that affects only those activities not on the critical path does not delay the completion of the project. As a result, the determination of the critical path is crucial to the calculation of delay damages. Id. at 179,685.

To satisfy its burden, the contractor must establish what the critical path of the project actually was and then demonstrate how excusable delays, by affecting activities on the contract’s critical path, actually impacted the contractor’s ability to finish the contract on time. This is done through an analysis to show the interdependence of any one or more of the work items with any other work items as the project progressed. One established way to document delay is through the use of contemporaneous Critical Path Method (CPM) schedules and an analysis of the effects, if any, of government-caused events. In fact, in situations where the contractor utilized Primavera scheduling software to create schedules throughout the life of the project, it would be folly to utilize some other method of critical path analysis. Id.

Because the critical path of construction can change as a project progresses, activities that were not on the original critical path subsequently may be added, and, to preclude post hoc rationalization and speculation, it is important that the contemporaneous schedules that the contractor uses to show critical path delay are updated throughout contract performance to reflect changes as they happened. Accurate, informed assessments of the effect of delays upon critical path activities are possible only if up-to-date CPM schedules are faithfully maintained throughout the course of construction. Id.

Nevertheless, the existence of contemporaneous schedules does not permit a tribunal to ignore, or fail to consider, logic errors in those schedules. A CPM schedule, even if maintained contemporaneously with events occurring during contract performance, is only as good as the logic and information upon which it is based. CPM is not a “magic wand,” and not every schedule presented will or should be automatically accepted merely because CPM technique is employed. To be a reliable basis for determining delay damages, a CPM schedule must reflect actual performance and must comport with the events actually occurring on the job. Tribunals may need to inquire into the accuracy and reliability of the data and logic underlying the CPM evaluation in appropriate circumstances and reject CPM analyses if the logic was not credible or was suspect. Id. at 179,685-86.

Even if the contractor shows delay by the government that affects the critical path, the contractor must also establish that it was not concurrently responsible for delays. Tribunals will deny recovery where the delays of the government and the contractor are concurrent and the contractor has not established its delay apart from that attributable to the government. Nevertheless, any contractor-caused delays must affect the critical path of contract performance to be considered “concurrent” — contractor delays that, absent the Government-caused delay, would have had no negative impact upon the ultimate contract completion date do not affect the government’s monetary liability. For the same reasons discussed above, because concurrent delays that do not affect the critical path of contract work do not delay project completion, an accurate critical path analysis is essential to determine whether concurrent delays have caused delay damages related to the delayed completion of a complex construction project. Id. at 179,686.

In establishing excusable delay, the contractor may point to causes outside the Government’s control. FAR 52.249-10(b)(1), Default, provides a non-exhaustive list of excusable delays that includes acts of God, acts of a host country government in its sovereign capacity, fires, floods, epidemics, strikes, and unusually severe weather. Obviously, a contractor has no control over whether it rains, whether there is a flash flood, or whether there are forest fires. Nevertheless, the mere fact that a delay is caused by a type of activity listed in the contract as generally excusable does not give the contractor carte blanche to rely upon such excuses. The purpose of the proviso, which is to protect the contractor against the unexpected, and its grammatical sense both militate against holding that the listed events are always to be regarded as unforeseeable, no matter what the attendant circumstances are. A quarantine, or freight embargo, may have been in effect for many years as a permanent policy of the controlling government and, if so, may not meet the definition of a cause “unforeseeable” at the time of contract award, even if quarantines and freight embargoes are listed in the contract as examples of possible excusable causes of delay. Id. at 179,686-87.

Further, even if an unforeseeable cause of delay occurs, the contractor cannot sit back and fail to take reasonable steps in response to it — once such an unforeseeable event occurs, the contractor affected by it has an obligation to attempt to mitigate the resulting damage to the extent that it can. If the contractor fails to do so, it may not recover those damages which could have been avoided by reasonable precautionary action on its part. Id. at 179,687.

To establish entitlement to an extension based on excusable delay, a contractor must show that the delay resulted from “unforeseeable causes beyond the control and without the fault or negligence of the Contractor,” and the unforeseeable cause must delay the overall contract completion; i.e., it must affect the critical path of performance. Sauer Inc. v. Danzig, 224 F.3d 1340, 1345 (Fed. Cir. 2000). Similarly, a contractor’s default is excused only to the extent that there were no additional delays for which the contractor was responsible (beyond those caused by the government) and that “there is in the proof a clear apportionment of the delay and the expense attributable to each party.” See Blinderman Constr. Co. v. United States, 695 F.2d 552, 559 (Fed. Cir. 1982) (quoting Coath & Goss, Inc., 101 Ct.Cl. 702, 714-15 (1944).

However, in order to prove that it is entitled to delay damages in the form of time or money, a contractor must prove that the government was responsible for specific delays, overall project completion was delayed as a result of the government-caused delays, and any government-caused delays were not concurrent with delays within the contractor’s control. L.C. Gaskins Constr. Co., ASBCA No. 58550 et al., 18-1 BCA ¶ 36,978 at 180,121-22. If an event that would constitute an excusable cause of delay in fact occurs, and if that event in fact delays the progress of the work as a whole, the contractor is entitled to an extension of time for so much of the ultimate delay in completion as was the result or consequence of that event, notwithstanding that the progress of the work may also have been slowed down or halted by a want of diligence, lack of planning, or some other inexcusable omission on the part of the contractor. Chas. I. Cunningham Co., IBCA No. 60, 57-2 BCA ¶ 1,541 at 5,843.

A contractor is entitled to time extensions for government-caused delays and excusable delays, even when they are concurrent with contractor-caused delay. When a contractor is seeking extensions of contract time, for changes and excusable delay, which will relieve it from the consequences of having failed to complete the work within the time allowed for performance, it has the burden of establishing by a preponderance of the evidence not only the existence of an excusable cause of delay but also the extent to which completion of the contract work as a whole was delayed thereby. The contractor must prove that the excusable event proximately caused a delay to the overall completion of the contract, i.e., that the delay affected activities on the critical path. And it must also establish the extent to which completion of the work was delayed—it is entitled to only so much time extension as the excusable cause actually delayed performance. R.P. Wallace, Inc. v. United States, 63 Fed. Cl. 402, 409-10 (2004).

Thornier issues are posed by concurrent or sequential delays—the first occurring where both parties are responsible for the same period of delay, the second, where one party and then the other cause different delays seriatim or intermittently. Concurrent delay is not fatal to a contractor’s claim for additional time due to excusable delay, but precludes the recovery of delay damages. If a period of delay can be attributed simultaneously to the actions of both the Government and the contractor, there are said to be concurrent delays, and the result is an excusable but not a compensable delay. A contractor generally cannot recover for concurrent delays for the simple reason that no causal link can be shown: A government act that delays part of the contract performance does not delay the general progress of the work when the prosecution of the work as a whole would have been delayed regardless of the government’s act. Id.

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.

 

DIFFICULT TASK FOR COURT TO ANALYZE DELAY AND DISORDER ON CONSTRUCTION PROJECT

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One of my favorites quotes from a case, and I am sure others in the construction industry feel the same way or can relate, is from the District of Columbia Court of Appeals in Blake Construction Co., Inc. v. C.J. Coakley Co., Inc., 431 A.2d 569, 575 (D.C. 1981):

We note parenthetically and at the outset that, except in the middle of a battlefield, nowhere must men coordinate the movement of other men and all materials in the midst of such chaos and with such limited certainty of present facts and future occurrences as in a huge construction project such as the building of this 100 million dollar hospital. Even the most painstaking planning frequently turns out to be mere conjecture and accommodation to changes must necessarily be of the rough, quick and ad hoc sort, analogous to ever-changing commands on the battlefield. Further, it is a difficult task for a court to be able to examine testimony and evidence in the quiet of a courtroom several years later concerning such confusion and then extract from them a determination of precisely when the disorder and constant readjustment, which is to be expected by any subcontractor on a job site, become so extreme, so debilitating and so unreasonable as to constitute a breach of contract between a contractor and a subcontractor. 

Do you agree with this sentiment?  The reality is that retrospectively analyzing delay on a complicated construction project with numerous moving parts on a day-by-day, hour-by-hour, basis is no easy feat.  It is not easy for the parties and certainly not easy for courts to unravel. With every party claiming delay based on a retrospective analysis there will be another party with either a different delay analysis or providing credible cross examination as to flaws with the delay analysis.  The same bodes true with loss of productivity / inefficiency claims and the particular case-specific facts are important, preferably with evidence such as photos, videos, notifications, daily reports, manpower reports, etc., supporting the facts. But the facts are complicated, and the delay analysis is complicated, and it is a difficult task for a trier of fact to unravel these facts.

This case dealt with a dispute between a prime contractor and a fireproofing subcontractor. The subcontractor claimed its work was hindered for a variety of reasons.  In other words, the subcontractor was impeded from working efficiently and it was incurring unanticipated costs – the hallmark of a lost productivity or inefficiency claim.  The subcontractor sent notice to the prime contractor that it would be suspending its operations and did exactly that resulting in the prime contractor completing the subcontractor’s scope of fireproofing work.  A lawsuit arose and the trial court found the prime contractor liable to the subcontractor.   The trial court found the prime contractor breached implicit obligations in the subcontract as it (i) did not provide the subcontractor a clear and convenient work area that impeded the subcontractor’s work causing the subcontractor to incur additional sums, (ii) failed to reasonably sequence the work, and (iii) provided bad supervision as other trades damaged in-place fireproofing due to poor scheduling and certain space heaters belonging to the subcontractor were stolen.  See Blake Construction, supra, at 576-77 (“We are persuaded therefore that the trial judge properly concluded upon this record that these acts collectively and individually constituted a breach of implicit conditions for performance by [the prime contractor] under the subcontract.”).

The appellate court also agreed with the trial court as to the inapplicability of the no-damage-for-delay provision in the subcontract finding delays resulted from active interference “largely due to [the prime contractor’s] improper work sequencing.”  Blake Construction, supra, at 579.

The appellate court also found that the measure of damages to be awarded to the subcontractor from the prime contractor “is properly calculated by taking the cost of partial performance incurred [by the subcontractor], which was $598,666.75, and subcontracting therefrom the payment received to date by [the subcontractor] from [the prime contractor], which totaled $242,100. The difference between these two figures is $356,566.75, and constitutes the damages for which [the prime contractor is] liable to [the subcontractor].”  Blake Construction, supra, at 579.

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.

 

CONSTRUCTION DELAYS: WHICH METHOD SHOULD BE USED TO CALCULATE DELAY?

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If you need to prove and allocate construction project delays, you should engage a scheduling consultant qualified with CPM (critical path method) analysis.  You should also engage counsel to assist in preserving your rights, as well as presenting and maximing your arguments for delay.

There are numerous methodologies used to quantify and allocate delay. You want to discuss the most effective analysis for your case and facts including whether you want/should use a forward-looking prospective analysis or a backward-looking retrospective analysis that factors in as-built data.  In doing so, you want to make sure you understand the pros and cons of each methodology including the bases to attack the methodology that will be subject to cross-examination.  The five primary CPM methodologies are as follows:

 

 

 

 

  1. As-Planned Versus As-Built. This methodology compares the as-planned baseline schedule to an as-built schedule reflecting progress to assign delay.  An as-built schedule that reflects progress includes actual start dates, finish dates, and durations.  The actual dates and durations are compared with the as-planned dates and durations on the baseline schedule to determine delay.  Under this methodology, the delay impact is determined retrospectively.

 

  1. Windows Analysis. This methodology divides the project into windows of period of time and focuses on an as-built critical path analysis that relies on progress schedule updates and as-built data.  The as-built critical path is then quantified for each of the periods (or windows).   The methodology compares the as-planned baseline schedule’s critical path to the as-built schedule (and as-built conditions) during the window to quantify delay. Under this methodology, the delay impact is determined retrospectively.

 

  1. Collapsed As-Built. This methodology is the “but for” methodology as it analyzes the earliest date the project would have been completed “but for” identified delays.  This methodology removes delay events from the as-built schedule to determine when the project would have been completed “but for” the delay event(s).  Under this methodology, the delay impact is determined retrospectively.

 

  1. Impacted As-Planned. This methodology inserts potential delay events/activities into the as-planned baseline schedule to determine impacts.  By inputting new delay activities into the baseline as-planned schedule, new logic and a new critical path is created to result in a new completion date (i.e., an impacted, as-planned schedule).  The difference between the completion date in the impacted, as-planned schedule and the (unimpacted) as-planned baseline schedule represents the delay.  This methodology does not rely on as-built data and prospectively determines delay.

 

  1. Time Impact Analysis. This methodology analyzes delay events individually based on the schedule update immediately prior to the delay event.  The difference between the project’s completion date before and after the delay event quantifies the delay.  Under this methodology, the delay event is added into the updated schedule closest to the event to see if the project completion date changes based on the event’s impact to the completion date.  This methodology does not rely on as-built data and prospectively determines delay based on when the event occurred.

 

It is not uncommon for parties to use different methodologies to quantify and assign delay.  It is also not uncommon for the parties to attack the other methodology as unreliable– whether not focusing on what actually occurred or not focusing on an event the moment it occurred based on the schedule or plan in-place as of the delaying event(s).  As an example only, in K-Con Building Systems, Inc. v. U.S., 131 Fed.Cl. 275 (Fed.Cl. 2017), a contractor asserted claims relative to the government’s delay. The contractor claimed the critical path should be analyzed with a prospective analysis predicated on its as-planned performance.  The government disagreed claiming the critical path should be analyzed based on a retrospective as-built analysis.  The Court of Federal Claims agreed with the government “that the proper way to determine what activities were on the critical path of performance in this case is to examine what actually occurred during contract performance.”  K-Con Building Systems, supra, at 329.  The Court reached this conclusion because: (1) “a critical path schedule that relies solely on the [baseline] schedule set forth in the contract specifications does not account for subsequent changes to the schedule authorized by the contracting agency” and (2) “the use of a contractually based critical path schedule does not reflect that the [contractor] did not actually perform in accordance with the [baseline] schedule set forth in the contract specifications.”  Id. at 329-330.  Stated differently, the as-planned approach that the contractor employed did not “fully reflect the reality of what occurred on the project.”  Id.

 

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.

 

HOW THE CUMULATIVE IMPACT THEORY HAS BEEN DEFINED

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Largely in the federal contract arena, there is a theory referred to as “cumulative impacts” used by a contractor to recover unforeseeable costs associated with a multitude of changes that have an overwhelming ripple effect on its efficiency, particularly efficiency dealing with its original, base contract work.  In other words, by dealing with extensive changes, there is an unforeseeable impact imposed on the contractor relative to its unchanged or base contract work.  Under this theory, the contractor oftentimes prices its cumulative impact under a total cost approach with an examination on its cost overrun. However, this is not an easy theory to prevail on because there needs to be a focus on the sheer number of changes, causation supporting the impact, and whether there were concurrent impacts or delays that played a role in the ripple effect.  See, e.g., Appeals of J.A. Jones Const. Co., ENGBCA No. 6348, 00-2 BCA P 31000 (July 7, 2000) (“However, in the vast majority of cases such claims are routinely denied because there were an insufficient number of changes, contractor-caused concurrent delays, disruptions and inefficiencies and/or a general absence of evidence of causation and impact.”).

To best articulate how the cumulative impact theory has been defined, I want to include language directly from courts and board of contract appeals that have dealt with this theory.  This way the contractor knows how to best work with their experts with this definition in mind–and, yes, experts will be needed–to persuasively package and establish causation and damages stemming from the multitude of changes.  While many of these definitions are worded differently, you will see they have the same focus dealing with the unforeseeable ripple effect of the extensive changes.

Any contractor seeking an equitable adjustment from the Government must prove liability, causation, and resultant injury.  An impact claim—often characterized using other names, such as, “cumulative impact,” “ripple effect,” “loss of labor efficiency,” or “loss of productivity”—is based upon the theory that  individual compensable changes to a Contract, taken as a whole, can have such a disruptive effect on the contractor’s performance that the contractor has a compensable claim for costs in addition to the amounts of its individual change orders.

In order to recover on an impact claim, a contractor must do more than present evidence of the sheer number or scope of changes.  Nor is it sufficient to compare the cost of the work, as changed, to the original contract price.  A contractor must also present evidence of causation and impact. Cumulative impact claims are fact-intensive and require the contractor to substantiate its claims that its work was delayed or was performed in an inefficient, unproductive, or more costly manner as a result of the individual changes to the Contract. As one board observed, “[t]here must be testimony and contemporaneous documents evidencing the type and extent of disruption to the work, and a showing that the disruption resulted from Government actions.” 

Jackson Const. Co. v. United States, 62 Fed.Cl. 84, 103–04 (2004) (internal quotations omitted).

Or:

Because contractors are required to include known and generally foreseeable impacts on unchanged work in pricing the cost of a change, the term “cumulative impact” has come to mean, in a generic sense, the impact on unchanged work which is not attributable to any one change but flows from the synergy of the number and scope of changes issued on a project. The underlying theory is that numerous changes cause a cascading ripple-type of impact on performance time and efficiency which is too uncertain or diffuse to be readily discernable at the time of pricing each individual change.

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We do not question that such impacts from cumulative changes do, in some instances, occur and should be compensated. However, we are mindful that impacts, whether on changed or unchanged work, which flow directly from individual changes are, with few exceptions, legally compensated by the price negotiated for the change and, thus, should be excluded from recovery under a cumulative impact claim. We are also mindful that even when a compensable cumulative impact is found, proof of damages under a total cost approach (an approach often relied upon in this type of claim) is acceptable only where safeguards for its use have been clearly established. The total cost method is not favored, in part, because it is extremely difficult to assure that the contract is not transformed into a de facto cost reimbursement contract and that costs which should be borne by [the contractor] are excluded. Thus, we must carefully examine any claim of cumulative impact under a total cost approach to assure that the four factors generally recognized for its use have been met.

Mcmillin Bros. Constructors, Inc., EBCA No. 328-10-84, 91-1 BCA P 23351 (Aug. 31, 1990).

Or:

Cumulative impact is the unforeseeable disruption of productivity resulting from the “synergistic” effect of an undifferentiated group of changes. Cumulative impact is referred to as the “ripple effect” of changes on unchanged work that causes a decrease in productivity and is not analyzed in terms of spatial or temporal relationships. This phenomenon arises at the point the ripples caused by an indivisible body on two or more changes on the pond of a construction project sufficiently overlap and disturb the surface such that entitlement to recover additional costs resulting from the turbulence spontaneously erupts. This overlapping of the ripples is also described as the “synergistic effect” of accumulated changes. This effect is unforeseeable and indirect. Cumulative impact has also been described in terms of the fundamental alteration of the parties’ bargain resulting from changes. 

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Causation, in the context of a cumulative impact, can be an elusive commodity because the concept of cumulative impact is, in itself, somewhat amorphous. Several points relevant to cumulative impact and causation, however, are clear. First, the mere existence of numerous contract changes in and of themselves, whether or not the number of changes is considered to be reasonable or unreasonable and whether or not the changes resulted from defective specifications, establishes no right to recover cumulative impact costs. Consequently, contract changes alone, regardless of their number or nature combined with Government liability do not serve as a substitute for causation and do not necessarily give rise to cumulative impact damages. Second, it is clear that demonstrating an overrun in labor and the existence of numerous changes without some evidence linking the changes to the overrun is insufficient proof of causation. Finally, there must be some proof of a causal connection established showing that the undifferentiated group of contract changes affecting the changed and unchanged contract work resulted in the loss of productivity on that work. This proof may take the form of demonstrating that there are no other reasons for a loss of productivity for which the Government is not responsible. 

Appeal of Centex Bateson Const. Co., Inc., VABCA No. 4613, 99-1 BCA P 30153 (Dec. 3, 1998).

 

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.

 

ACTIVELY INTERFERING WITH ANOTHER’S PERFORMANCE GIVES RISE TO A BREACH OF CONTRACT

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A bedrock principle under contract law is that one party cannot actively hinder, interfere, obstruct, or delay another’s party’s performance.  Doing so can give rise to a breach of contract.

It is one of the most basic premises of contract law that where a party contracts for another to do a certain thing, he thereby impliedly promises that he will himself do nothing which will hinder or obstruct that other in doing the agreed thing. Indeed, if the situation is such that the co-operation of one party is a prerequisite to performance by the other, there is not only a condition implied in fact qualifying the promise of the latter, but also an implied promise by the former to give the necessary co-operation.

Harry Pepper & Associates, Inc. v. Hardrives Co., Inc., 528 So.2d 72, 74 (Fla. 4th DCA 1988) (citation omitted).

The ruling in Harry Pepper & Associates demonstrates what can happen if a contracting party actively hinders, interferes, obstructs, or delays the other party’s performance.  Here, a paving subcontractor walked off the project prior to performance.   At the time it walked off the job its work could not commence due to prior delays with predecessor activities, revised drawings had not been approved by the governing building department, change orders had not been issued to deal with different site conditions, and the subcontractor was not offered an increase in its original contract price.  For these reasons, it called it quits.  The general contractor claimed the subcontractor did not have the contractual right to walk off the project.  There was a no-damage-for-delay provision in the subcontract and the subcontractor’s only remedy for delays was extensions of time for delayed performance. The general contractor, therefore, sued the subcontractor for the additional costs incurred in hiring a replacement paving subcontractor.  Conversely, the subcontractor was not seeking additional costs due to the delays but simply the right to cancel the contract.

The appellate court, affirming the trial court, held that regardless of the no-damage-for-delay provision, it was rendered unenforceable by the active interference of the general contractor: “There is competent and substantial evidence in the record that the general contractor did not cooperate with the subcontractor and engaged in conduct which hindered or obstructed the performance of the contract.”  Harry Pepper & Associates, 528 So.2d at 74.

Remember, regardless of whether your contract addresses delays or production, a party that actively interferes, hinders, obstructs, or delays another’s performance can give rise to a breach of contract.

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.

 

QUICK NOTE: SIMPLE BUT THORNY ISSUE OF “CONCURRENT DELAY”

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The definition of “concurrent delay” seems simple, but it can give rise to thorny issues including misunderstandings, not truly digging into the causes of the alleged concurrent delay, and the lack of apportionment of the concurrent delay period.   This is why when dealing with any delay it is good practice to work with a scheduling consultant in conjunction with counsel that understands how to best prosecute or defend against delay-related claims.   This includes dealing with the simple but thorny issue of concurrent delay.   There is a difference between arguing concurrent delay and actually proving it or apportioning the time period that benefits your interests or allows you to understand the practicality of the delay period.

In a nutshell:

“If the contractor and the [owner] cause [independent] concurrent delays that affect the critical path of performance, neither party can recover delay-related damages unless the delays can be apportioned between the parties.”  K-Con Building Systems, Inc. v. U.S., 131 Fed.Cl. 275, 328 (Fed.Cl. 2017).   For there to be a concurrent delay, there needs to be independent delays by both the owner and contractor, and the independent delays needs to impact the critical path.  “If two delays occur at the same time and one is on the critical path and the other is not, then the delays should not be considered concurrent.”  CONBRIEF No. 2004-10, Concurrent Delay (2004).

Note that concurrent delay can occur in two different scenarios: (1) when both parties are responsible for delaying the same critical activity over the same period or (2) when each party delays a separate critical activity at the same time (there were multiple critical paths).  Both delays must be independent of one another.  In other words, the contractor’s delay cannot be as a result of, or contingent upon, the owner’s delay, or vice versa.

CONBRIEF No. 2005-12, Basic Analysis for Delay and Disruption Claims (2005)

For more on concurrent delay check here.  For more on understanding basic scheduling terms, check here.

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.

 

MUTUAL OR CONCURRENT DELAY CAUSED BY SUBCONTRACTORS

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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.

 

IS THE ENFORCEABILITY OF A NO-DAMAGE-FOR-DELAY PROVISION INAPPROPRIATE FOR SUMMARY JUDGMENT

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Is the enforceability of a no-damage-for-delay provision inappropriate for resolution on a summary judgment?  The recent decision in U.S. f/u/b/o Kingston Environmental Services, Inc. v. David Boland, Inc., 2019 WL 6178676 (D. Hawaii 2019), dealing with Florida law, suggests that it is inappropriate for a summary judgment resolution, particularly when there is a right to a jury trial.

In this case, a prime contractor was hired on a federal construction project in Hawaii.  The prime contractor hired a subcontractor and the subcontractor sued the prime contractor and its surety under the Miller Act.  Of interest, the subcontractor was seeking to recover for the costs it incurred due to construction delays.  The prime contractor moved for summary judgment as to the no-damage-for-delay provision in the subcontract.  The no-damages-for-delay provision read as follows (and it is a well-written no-damage-for-delay provision):

The Subcontractor expressly agrees that the Contractor shall not be liable to the Subcontractor for any damages or additional costs, whether foreseeable or unforeseeable, resulting in whole or in part from a delay, hindrance, suspension, or acceleration of the commencement or execution of the Work, caused in whole or in part by the acts or omissions, whether negligent or not, of the Contractor including other subcontractors or material suppliers to the Project, its agents, employees, or third parties acting on behalf of the Contractor. The Subcontractor’s sole remedy for any such delay, hindrance, suspension, or acceleration shall be a noncompensable time extension.

It is well-settled in Florida that a no-damage-for-delay provision is enforceable.

But, there are three main exceptions to the enforceability of a no-damage-for-delay provision:  “if the delays were occasioned by [1] the [contractor]’s fraud, [2] concealment, or [3] active interference with [the subcontractor]’s performance under the contract.”  David Boland, Inc., 2019 WL at *3 (citation omitted).

Here, the prime contractor wanted the Court to enforce the no-damage-for-delay provision.  The subcontractor, no different than any other subcontractor, claimed that the exceptions to the enforceability of the no-damage-for-delay provision applied.   In addressing this issue, the Court noted: “At the outset, it bears emphasis that whether a party has actively interfered with another party’s contractual obligation is a question usually inappropriate for resolution at the summary judgment stage because the issue is highly case-specific and fact intensive.  David Boland, Inc., 2019 WL at *4 (internal quotation and citation omitted).

The Court found that the prime contractor and subcontractor disputed facts relevant to the enforceability of the no-damage-for-delay provision (shocker!) and a jury could find that the prime contractor knowingly delayed or actively interfered with the subcontractor’s performance.  Such facts included:

  • Correspondence between the prime contractor and government that the prime contractor was unresponsive;
  • Correspondence that the government noted that the prime contractors’ schedules were fatally flawed and unreliable because they contained erroneous logic ties, unrealistic activity durations, and inaccurate scopes of work;
  • Correspondence that the government noted that the prime contractor’s poor schedule management was a detriment to the job;
  • Correspondence that the government accused the prime contractor of deceitfully and unethically manipulating schedule logic and durations to eliminate its own delays; and
  • Testimony from the subcontractor that the prime contractor prevented the subcontractor from accessing planned construction areas, resolving issues to allow the subcontractor to proceed, and failing to complete other activities which disrupted and impacted the subcontractor’s performance.

Think about it.  Such facts can ultimately be found on any delayed project, particularly a project where the owner is claiming the contractor is liable for the delays while not recognizing its own delays.  Also, it is expected that the subcontractor would claim that but for the delays and impacts it was ready, willing, and able to productively proceed with its work.  Hence, all of the facts that the Court took into consideration as stating there to be a question of fact for the jury are facts that would seem to universally make the enforceability of the no-damage-for-delay provision a finder of fact (jury) question.

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.

 

 

PROVING IMPACTS TO CRITICAL PATH TO DEFEAT LIQUIDATED DAMAGES ASSESSMENT

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When a contractor is staring down the barrel of an owner’s assessment of liquidated damages, the burden will fall on the contractor to establish that the delay was attributable to the owner and the owner’s agents.  The contractor will want to do this not only to defeat the assessment of liquidated damages, but because it will want to establish that the delay caused it to incur extended field overhead (general conditions) for which the owner is responsible.   A contractor supports its burden by proving the impacts to its critical path.  “In general, proving an allegation of government-caused delays without a means of showing the critical path is a steep prospect.”  James Talcott Construction v. U.S., 2019 WL 1040383, *8 (Fed. Cl. 2019) (unreported opinion) (finding that because contractor did NOT present a critical path analysis it could not support its claim for delay caused by the government).

Avoiding the assessment of liquidated damages means the contractor needs to support that it encountered excusable delay and it is/was entitled to an extension of time to complete the project.

An excusable delay is one due to causes that are unforeseeable, beyond the contractor’s control, and not resulting from its fault or negligence.  The delay must be to overall contract completion, meaning ‘it must affect the critical path of performance.’  If the failure is excusable, then appellant [contractor] would be entitled to time extensions and thus remission of LDs [liquidated damages].

Appeal of – Maruf Sharif Construction Co.,ASBCA No. 61802, 2019 WL 410470 (2019) (internal citation and quotation omitted).

A contractor presenting a critical path analysis allocating delay may become imperative when seeking remission of a liquidated damages assessment and, potentially, proving its own entitlement to extended general conditions.  Again, the burden falls on the contractor; therefore, not proving the impacts to the critical path and the excusable delay the contractor should be entitled to will likely result in the contractor failing to carry its burden.

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.