CONTRACTOR’S BURDEN WHEN IT COMES TO DELAY

When a contractor is challenging the assessment of liquidated damages, or arguing that it is entitled to extended general conditions, the contractor bears a burden of proof to establish there were excusable delays that impacted the critical path and, in certain scenarios, the delays were not concurrent with contractor-caused delay:

When delays are excusable, a contractor is entitled to a time extension, such that the government may not assess liquidated damages for those delays.  The government bears the initial burden of proving that the contractor failed to meet the contract completion date, and that the period of time for which the government assessed liquidated damages was correct. If the government makes such a showing, the burden shifts to the contractor to show that its failure to timely complete the work was excusable. To show an 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.”  “In addition, the unforeseeable cause must delay the overall contract completion; i.e., it must affect the critical path of performance.” Further, the contractor must show that there was no concurrent delay.

Ken Laster Co., ASBCA No. 61292, 2020 WL 5270322 (ASBCA 2020) (internal citations omitted).

Arguing delay without understanding your burden of proof obligations will be problematic, as the contractor in Ken Laster found out.  In this dispute, a contractor was issued task orders to repair, prepare and plaint certain floating structures pursuant to task orders.  The contractor was liable for liquidated damages if it did not timely complete the work.  The contractor completed the work 289 days late and the government assessed liquidated damages.  The contractor challenged the assessment of liquidated damages. However, the contractor did NOT show how anything it claimed the government did to delay completion impacted the critical path or that there was no concurrent delay.  Without such showing, the contractor was unable to establish that liquidated damages were improper as it was unable to show there was excusable delay or that the delay to the critical path it caused was concurrent with an owner-caused delay to the critical path.

Remember, if you are a contractor challenging the assessment of liquidated damages and/or claiming you are entitled to delay damages (extended general conditions), you have a burden of proof.  You will want to establish that there was excusable delay, i.e., owner-caused delay, that impacted the critical path of the project resulting in the delay to the completion date, and the excusable delay was not concurrent with delay you caused to the completion date.  This burden will routinely require expert opinion that will need to analyze schedules and contemporaneous project documentation to render these opinions (that there was excusable delay, the delay impacted the critical path, and in certain scenarios, the excusable delay was not concurrent).   It is important to note, however, that if you are able to establish there was concurrent delay, you would still typically be entitled to a time extension, however, you would not be entitled to compensation for the delay (extended general conditions).  But, the burden is still on you to establish there was concurrent delay.

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: COVID-19 CLAIM – PROVING CAUSATION

In certain jurisdictions, the number of people testing positive for COVID-19 is on the rise.  As this occurs, there is the possibility that a construction project will have to deal with one or more workers testing positive.  That is the current reality.   If the dialogue has not occurred before, now is the time to discuss any enhanced measures—above OSHA guidelines—that could be implemented to address this reality and mitigate the risk.  Part of the reality, though, is that regardless of the enhanced measures and mitigation, it is impossible to truly prevent this risk.

No one disputes COVID-19.  There may be a dispute as to whether COVID-19 constitutes a force majeure event or some other event, however, before you start labeling it, you still NEED TO PROVE the impact caused by COVID-19.  There needs to be a cause-and-effect relationship so you can address (i) how this impacted the critical path of your schedule and/or (ii) how this impacted labor productivity.  In other words, you need to prove causation.  Stating there was a delay or loss of productivity without establishing the cause-and-effect relationship (i.e, causation) provides no value because it does not support the production impact or time extension and, without either, there is no basis for additional compensation (even if you establish it should be deemed an excusable, compensable delay).

We have all read articles about how COVID-19 can impact a project.  This does not mean that all or any of these issues impacted your project.  If they did, and you are seeking a time extension and/or additional compensation, remember, it is your burden of proof to support the entitlement, both as to time and money.  This is not an easy task and, in many situations, the impact may be very difficult to actually prove.  But again, stating you have a COVID-19 impact without truly demonstrating causation will be, and should be, a claim that is denied.  If you need assistance putting together or evaluating a COVID-19 claim, make sure you work with experienced counsel and consultants to best package and present the claim.

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

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: CHARTING YOUR CONTRACTUAL RIGHTS WITH RESPECT TO THE CORONAVIRUS

As more and more information is being learned, and more and more industries are being impacted, it is likely that the construction industry will follow suit.  And, while impacts with the global supply chain may not yet be realized, impacts could begin with labor supply and, frankly, employers’ safety protocols dealing with the coronavirus.  One suggestion that should be implemented is a detailed chart, similar to the below, where you are charting rights and obligations under your contracts dealing with force majeure, notice, and project suspensions.  This is step one to make sure you are making prudent decisions, preserving rights, and making sure contractual obligations are being met.  Be proactive, not reactive.

 

 

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: QUESTIONS AS TO THE FORCE MAJEURE IMPLICATIONS OF THE CORONAVIRUS? DO NOT HESITATE TO CONTACT ME!

If you have questions or concerns, and I am sure you do, as it pertains to the coronavirus and its force majeure implications on construction projects you are involved with, please do not hesitate to contact me or someone else that you trust can help.   Do NOT take a reactionary position and wait for things to get worse or for there to be more formalized suspensions in place, or impacts realized.  It is not worth it.  Please make sure you are undertaking efforts to know your contractual rights and options so that you can develop the best plans to preserve these rights and options.  Do it for you, your business, your personnel, and all the people you rely on in the performance of your work.  I remain here to assist in any way that I can to help you get through any delay, impact, and interruption the coronavirus and its force majeure implications may have on your business.

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.

 

BE PROACTIVE, NOT REACTIVE, TO PRESERVE FORCE MAJEURE RIGHTS REGARDING THE CORONAVIRUS

If you are involved in construction, NOW is the time to consider the potential force majeure impacts associated with the pandemic Coronavirus.  Things are beginning to drastically change on a minute-by-minute basis.  From travel restrictions, to the suspension or cancellation of events on an international level, to company-wide policies and restrictions, the global uncertainty has led to the possibility that a force majeure delay will occur.  Thinking otherwise is not being proactive.  The Coronavirus, and the impacts / delays associated therewith, is beyond anyone’s control.  Due to the uncertainty, it is hard to fathom at this time a reasonable challenge to someone’s reaction to this concern or their companywide response to the concern.

 

If you are a contractor, subcontractor, or even a supplier, my suggestions would be as follows:

  1. Revisit your contracts and see what type of force majeure language it has – anything relating to delays beyond your control or epidemics;
  2. Examine to see whether you have a basis for additional compensation AND additional time;
  3. Examine what type of notice you are required to provide for force majeure events;
  4. Be proactive – send notice now of the potentiality that this pandemic can impact / delay the job –no one should take offense to this letter as this pandemic has impacted all walks of life;
  5. If an impact occurs, send follow-up notice accordingly to ensure rights under the contract are preserved; and
  6. For future contracts, incorporate language that specifically addresses epidemics and pandemics now that the occurrence of this issue has become real.

If you are an owner, I would suggest that you also revisit your contract to reacquaint with the force majeure provisions and whether a force majeure provision allows for additional compensation and time.  This is important for you to deal with too.  You should also consult with your insurance broker to review policies in place to see whether you have insurance to cover losses associated with a pandemic.

If you need assistance with any of these activities, or want to inquire as to your rights, please give me a call.  You can also call my cell at (954) 295-6117.  Be proactive, not reactive, and having a contingency in place, determining a solution, and preserving rights is the right approach.  I remain here to help and to steer you in the best possible direction in light of this uncertainty.

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”

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

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

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 intensiveDavid 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.

 

 

DELAYS CAUSED WHEN GOVERNMENT (OWNER) PUSHES CONTRACTOR’S WORK INTO RAINY / ADVERSE WEATHER SEASON

There are a number of horizontal construction projects where a contractor’s sequence of work and schedule is predicated on avoiding the rainy season (or certain force majeure events).  The reason is that the rainy season will result in delays due to the inability to work (and work efficiently) during the adverse weather (including flooding caused by the weather).   If the work is pushed into the rainy season, is such delay compensable if the government (or owner) delayed the project that pushed work out into the rainy season?  It very well can be.

 

For example, in Meridian Engineering Co. v. U.S., 2019 WL 4594233 (Fed. Cl. 2019), a contractor was hired by the Army Corps of Engineers to construct a flood control project for a channel in Arizona. Due to delays, including those caused by the government, the project was pushed into the monsoon season, which caused additional delays largely due to flooding caused by the heavy rain.  One issue was whether such delays were compensable to the contractor – the government raised the argument that the contractor assumed the risk of potential flooding from the rainy season.  The Court found this argument unconvincing:

[The contractor’s] initial construction schedule planned for a completion of the channel invert work, a necessary step in protecting the site from flooding, to be completed by late June 2008…[M]any issues arose in the project’s early stages that led to cumulative substantial delay, including those caused by the government’s failure….The government cannot now claim that [the contractor] assumed the risk of flooding from monsoon season when the government was largely responsible for [the contractor’s] inability to complete the project prior to the beginning of the monsoon season.  Simply put, the government cannot escape liability for flood damages when the government is responsible for causing the contractor to be working during the flood-prone season.

Meridian Engineering, 2019 WL at *7 (internal citations omitted)

In other words, but for delays caused by the government, the contractor’s work would not have been pushed into the monsoon season.  The Court’s outcome, perhaps, would have been different if the contractor was the sole cause of delays that pushed the project into the monsoon season or the contractor’s original schedule was unrealistic to begin with.

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.