Tag Archives: delay

CONSTRUCTION SCHEDULING IS AN IMPORTANT TOOL

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imagesConstruction scheduling is an important tool for planning, managing, and forecasting the performance of work on construction projects.   Generally CPM (critical path method) schedules, or schedules depicting the project’s critical path, are prepared beginning with the baseline schedule (the initial as-planned schedule) followed by schedule updates (perhaps monthly updates) as the work progresses.  Schedules identify milestone dates (such as the substantial completion date) as well as the dates and durations of construction activities / tasks.

 

Check out this chart for understanding key terms and meanings when it comes to CPM (critical path method) scheduling. 

 

Besides scheduling being a tool used for project management, schedules are helpful in assessing and measuring delays to the critical path, the acceleration of activities, and inefficiencies. 

 

Finally, check out this article for more information on the importance of understanding construction scheduling for strong project management.

 

 

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.

 

WALKING THAT MEASURED MILE TO PROVE AND CALCULATE LOST PRODUCTIVITY / INEFFICIENCY

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UnknownWhat is a lost productivity / inefficiency claim?  These are claims where a contractor claims it incurred increased labor (and, perhaps, equipment usage) because an event  (referred to as an impact) caused it to work inefficiently.  There needs to be a causal link between the cause of the impact and the increased labor costs.  See Appeals of—Fox Construction, Inc., ASBCA No. 55265, 08-1 BCPA 33810 (March 5, 2008).   Numerous factors can contribute to a contractor working inefficiently.  Oftentimes these claims are asserted by subcontractors associated with a delay to their scope of work or due to the manner in which the subcontractor’s work was sequenced.  The bottom line is that some impact (not attributable to the contractor asserting the claim) caused the contractor to work inefficiently and incur unplanned, increased labor cost (and/or equipment usage).

 

Lost productivity / inefficiency claims are very challenging claims to prove and calculate.  They require expert testimony to analyze cost reports, labor hours, and project documentation such as daily reports, etc. to determine the performance or production rate for a given scope of work.   But, remember, lost productivity / inefficiency claims also require a causal link between the impact and the increased costs meaning an expert needs to analyze project documentation to determine the impact and the causal link to the contractor’s increased costs.  Probably the most well received method to prove lost productivity / inefficiency is the measured mile methodology.

 

Measured Mile

 

The measured mile compares a period of productive work (the good period) with an unproductive period of the same work (bad period). “The measured mile approach provides a comparison of a production period that is impacted by a disruption with a production period that is not impacted.” Appeal of Bay West, Inc., ASBCA No. 54166, 07-1 BCA 33569 (April 25, 2007).  The period of productive work forms the contractor’s benchmark period of productivity.  Typically, this benchmark productivity is based on the number of man-hours during the productive period divided by the performance or production rate in that period to determine a productivity ratio.  This productivity ratio is compared to the productivity ratio during the impacted period in order to determine an unproductivity ratio that is multiplied by the unproductive performance or production rate to determine the number of unproductive man-hours.  Without determining a benchmark, the measured mile cannot be performed because there is nothing to compare the unproductive period of work to.

 

For instance, let’s take a rough hypothetical: 

 

Good Period — A contractor during a productive period installs 2500 feet  (or select another unit of production or performance) of “x” (you select the scope).  It takes the contractor 4000 labor hours to install 2500 feet of “x.” The number of labor hours (4000) divided by the production (2500 feet of “x”) gives a productivity ratio of 1.6. 

 

Bad Period — The same contractor gets impacted performing the same scope of “x.”  During this impacted period, the contractor installs 1500 feet of “x” with 4600 labor hours.  The number of labor hours (4600) divided by the production (1500 feet of “x”) gives a productivity ratio of 3.07. 

 

Calculating Lost Productivity — Subtracting the productivity ratio during the bad impacted period (3.07) with the productivity ratio during the good unimpacted period (1.6) gives an unproductivity ratio of 1.47.  This unproductivity ratio now allows you to determine the number of unproductive man-hours by multiplying the unproductivity ratio (1.47) by the unproductive performance (1500 feet of “x”) to give you 2205 unproductive man-hours.  The number of unproductive man-hours would then be multiplied by a supported labor rate plus burden to give you your unproductivity costs.

 

If you are experiencing lost productivity / inefficiency, it is good practice to consult with a lawyer and expert in order to best prove and calculate your lost productivity / inefficiency.  Although this article focuses on the measured mile methodology, there are other methodologies that can be utilized based on the facts and circumstances of the project.    Just remember, these types of claims generally require expert testimony to prove.

 

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.

 

“NO DAMAGE FOR DELAY” PROVISIONS AND THE EXCEPTIONS

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UnknownContractors and subcontractors should be familiar with “no damage for delay” provisions.  These are contractual provisions that limit the contractor’s remedies for a delay to an extension of time ONLY, and disallow the contractor from being entitled to extended general conditions (overhead) for an otherwise excusable, compensable delay.   

 

There are numerous variations of the “no damage for delay” provision; however they usually contain language that provides as follows:

 

“The contractor’s sole and exclusive remedy for a delay, interference, or hindrance with its Work shall be an extension of time and contractor shall not be entitled to any damages for a delay, interference, or hindrance with its Work.”

 

 or

 

“The contractor shall not be entitled to any compensation whatsoever for any delay, interference, hindrance, acceleration, or inefficiency with its Work and its sole and exclusive remedy for any delay, interference, acceleration, or inefficiency with its Work shall be an extension of time.”

 

In Florida, “no damage for delay” provisions are enforceable on private and public projects.  However, there are EXCEPTIONS that would prevent the provision’s harsh application and entitle a contractor to its extended general conditions for an excusable, compensable delay.  These exceptions are fraud, willful concealment of foreseeable circumstances, and active interference.  See Triple R Paving, Inc. v. Broward County, 774 So.2d 50 (Fla. 4th DCA 2000).  In other words, if the hiring party (owner) does not willfully or knowingly delay construction, then the application of the “no damage for delay” provision will preclude the hired party (contractor) from recovering its extended general conditions associated with the delay.  See id.  On the other hand, if the hiring party does willfully or knowingly delay construction, then the hired party has an argument around the “no damage for delay” provision.

 

Even with a “no damage for delay” provision in the contract, it is imperative for the hired party (contractor) to properly and timely request additional time and money in accordance with the contract.  There are typically provisions that require the hired party (contractor) to notify the hiring party (owner) of delaying events or claims and to request time and money associated with the event or claim.  If a contractor fails to timely preserve its rights under the contract to seek additional time or money, it may preclude itself from recovering extended general conditions for a delay that would otherwise serve as an exception to the “no damage for delay” provision.  See Marriot Corp. v. Dasta Const. Co., 26 F.3d 1057 (11th Cir. 1994) (contractor’s failure to request time pursuant to the contract prevented it from recovering delay damages associated with an owner’s active interference).

 

On federal construction projects, “no damage for delay” provisions are perhaps less common based on Federal Acquisition Regulations (F.A.R.) that would otherwise entitle the contractor to recover delay-related damages if it properly and timely preserves its rights.  These “no damage for delay” provisions are more frequently found in subcontracts between the prime contractor and its subcontractors.  There is authority that would hold an unambiguous “no damage for delay” enforceable on federal construction projects:

 

“Nevertheless, given their potentially harsh effect, no damages for delay provisions should be strictly construed, but generally will be enforced, absent delay (1) not contemplated by the parties under the provision, (2) lasting an unreasonable period and thereby amounted to an abandonment of the contract, (3) caused by fraud or bad faith, or (4) amounting to active interference or gross negligence.”

Appeal of-The Clark Construction Group, Inc., GAOCAB No. 2003-1, 2004 WL 5462234 (November 23, 2004); accord Grunley Construction Co. v. Architect of the Capitol, GAOCAB No. 2009-1, 2010 WL 2561431 (June 16, 2010).

 

In drafting a “no damage for delay” provision, I always like to include language that specifically states that the application of the “no damage for delay” provision is not conditioned on the hired party (contractor) being granted additional time to substantially complete or finally complete the project.  I also like to include language that the hired party (contractor) understands this “no damage for delay” provision and has factored this provision into the contract amount.  It is important that this provision clearly reflects the intent because the hiring party will want to rely on this provision in the event there is a delaying event and it is a provision that will be strictly construed.

 

Conversely, if you trying to avoid the harsh consequences of a “no damage for delay” provision, it is advisable to consult with counsel that understands the recognized exceptions to the provision and can assist you in negotiating and presenting your claim based on these recognized exceptions.

 

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.

 

RECOVERING COMPENSATION FOR UNREASONABLE DELAYS UNDER THE SUSPENSION OF WORK CLAUSE

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UnknownFederal government construction contracts for fixed-price contracts contain a suspension of work clause found in F.A.R. 52.242-14 (a copy of this clause can be found at the bottom of this posting).   This clause allows the government, through the contracting officer, to order the suspension, interruption, or delay of the construction work.  This clause further permits the contractor to obtain an equitable adjustment for the increased costs it incurs associated with the delay / suspension of its work for an unreasonable period of time. George Sollitt Const. Co. v. U.S., 64 Fed.Cl. 229, 236-37 (Fed.Cl. 2005).  The unreasonableness of the delay / suspension depends on the actual circumstances of the project, but it is this finding of unreasonableness that triggers additional compensation to the contractor.  See id.   The test applied to determine whether the contractor is entitled to an equitable adjustment for additional compensation pursuant to the suspension of work clause is as follows:

 

 

 

 

1.  The delay must be of an unreasonable length extending the contract’s performance;
2.  The delay must be proximately caused by the government;
3.  The delay resulted in injury or damage to the contractor; and
4.  There is no concurrent delay caused by the contractor.

 

CEMS, Inc. v. U.S., 59 Fed.Cl. 168, 230 (Fed.Cl. 2003) quoting P.J. Dick, Inc. v. Principi, 324 F.3d 1364, 1375 (Fed.Cir. 2003).

 

As reflected above by the fourth factor, “even if the government has caused an unreasonable delay to the contract work, that delay will not be compensable if the contractor, or some other factor not chargeable to the government, has caused a delay concurrent with the government caused-delay.”  George Sollitt, 64 Fed.Cl. at 237.

 

This suspension of work clause is designed to make the contractor whole for unreasonable delays, but additional profit would be excluded from any additional compensation owed to the contractor.  See F.A.R. 52.242-14(b).

 

As mentioned in previous postings, contractors need to understand the clauses incorporated into their prime contract so they can appreciate how to best preserve their rights when they encounter a delaying event.  Also, understanding the clauses will enable the contractor to best present their request for equitable adjustment or claim in a manner that supports their position for additional compensation.

 

F.A.R. 52.242-14

Suspension of Work (APR 1984)

(a) The Contracting Officer may order the Contractor, in writing, to suspend, delay, or interrupt all or any part of the work of this contract for the period of time that the Contracting Officer determines appropriate for the convenience of the Government.

(b) If the performance of all or any part of the work is, for an unreasonable period of time, suspended, delayed, or interrupted (1) by an act of the Contracting Officer in the administration of this contract, or (2) by the Contracting Officer’s failure to act within the time specified in this contract (or within a reasonable time if not specified), an adjustment shall be made for any increase in the cost of performance of this contract (excluding profit) necessarily caused by the unreasonable suspension, delay, or interruption, and the contract modified in writing accordingly. However, no adjustment shall be made under this clause for any suspension, delay, or interruption to the extent that performance would have been so suspended, delayed, or interrupted by any other cause, including the fault or negligence of the Contractor, or for which an equitable adjustment is provided for or excluded under any other term or condition of this contract.

(c) A claim under this clause shall not be allowed (1) for any costs incurred more than 20 days before the Contractor shall have notified the Contracting Officer in writing of the act or failure to act involved (but this requirement shall not apply as to a claim resulting from a suspension order), and (2) unless the claim, in an amount stated, is asserted in writing as soon as practicable after the termination of the suspension, delay, or interruption, but not later than the date of final payment under the 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.

MILLER ACT – CONSIDERATIONS INVOLVING SUBCONTRACTOR WHEN GOVERNMENT ASSESSES LIQUIDATED DAMAGES

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imagesPrime contractors and subcontractors that work on federal construction projects often find themselves in the garden variety payment dispute dealing with (1) entitlement and liability for additional work and  (2) project delays, especially when the government assesses liquidated damages. These issues can put the prime contractor in the undesirable position because it may not have been paid for the additional work items and the government may be assessing liquidated damages against the prime contractor for the delays.

 

The case of U.S. ex rel. W.W. Gay Mechanical Contractor, Inc. v. Walbridge Aldinger Co., 2013 WL 5859456 (11th Cir. 2013), illustrates this garden variety construction payment dispute scenario between a subcontractor and prime contractor on a delayed federal project. This case involves a subcontractor asserting a Miller Act payment bond claim (pursuant to 40 U.S.C. s. 3133) against the prime contractor’s surety for unpaid retainage and additional work items, as well as a breach of contract claim against the prime contractor for the same amounts. The prime contractor argued that it was entitled to withhold payment from the subcontractor due to delays to the completion date of the project that the subcontractor was responsible for causing. In particular, the prime contractor was being assessed sizable liquidated damages from the government (Navy) and although it was appealing the liquidated damages exposure through the Contract Disputes Act, it wanted to offset monies that were owed to the subcontractor based on its potential liquidated damages exposure. The prime contractor relied on subcontract provisions that contained that “time is of the essence” as to the subcontractor’s performance; that it was entitled to withhold sums from the subcontractor for its breach of contract; and that the subcontractor may be liable for liquidated damages and other damages for causing delays in the progress of the project.

 

At the trial court level, the district court granted partial summary judgment in favor of the subcontractor finding that the subcontractor was entitled to payment for the retainage and additional work. Attorneys‘ fees were also granted to the subcontractor.

 

On appeal, the Eleventh Circuit first discussed the purpose of the Miller Act and what a party needs to do to assert a Miller Act claim:

 

“The MIller Act protects subcontractors on federal projects by requiring contractors to post a bond to ensure payment to their subcontractors. To establish a Miller claim, W.W. Gay [subcontractor] must show (1) that it supplied labor and materials for work in the particular contract at issue; (2) that it is unpaid; (3) that it had a good faith belief that the materials were for the specified work; and (4) that jurisdictional requisites are met.” Walbridge Aldinger, 2013 WL at *1 (internal citations omitted).

 

Irrespective of favorable contractual provisions, the Eleventh Circuit held that the prime contractor “has failed to produce more than a ‘scintilla of evidence’ that W.W. Gay’s alleged delays resulted in the liquidated damages assessed against it by the Navy.” Walbridge Aldinger, 2013 WL at *2.  Although the prime contractor tried to rely on deposition testimony that correspondence was sent to the subcontractor regarding the delays, this was not proof that the subcontractor actually caused delays to the project. This is especially true because the prime contractor was also arguing that the Navy caused delays to the project, i.e., the likely reason it was appealing the liquidated damages assessment.

 

The Eleventh Circuit further analyzed the issue of whether the subcontractor was entitled to monies for additional work pertaining to re-routing an underground storm pipe. The Court found that the record reflected that when the subcontractor learned of the issue regarding the planned location of the storm pipe it notified the prime contractor and the prime contractor directed the subcontractor to install the pipe in the planned location. The prime contractor then waited six weeks before sending a request for information to the government and the government responded telling the prime contractor to re-route the pipe. The prime contractor then directed the subcontractor to re-route the pipe (through the constructive change directive provision or CCD provision in the subcontract). The subcontractor then notified the prime contractor that it expects to get paid for this work and the prime contractor indicated it would pay. The government, however, only paid for a fraction of the additional work item. For this reason, the prime contractor argued that even though it directed the extra work it was only responsible for paying the subcontractor the amount allowed by “applicable provisions” of the prime contract (agreement with the government). In support of this, the prime contractor relied on the following language in its subcontract:

 

“Contractor may, without invalidating the Subcontract or any bond given hereunder, order extra and/or additional work, deletions, or other modifications to the Work, such changes to be effective only upon written order of Contractor. Any adjustment to the Subcontract Price or the time for completion of the Work shall be made in accordance with the applicable provisions of the Agreement between Owner and Contractor and the lump sum or unit prices set forth in Exhibit E or, in the absence of such provisions on an agreed, equitable basis. Notwithstanding any inability to agree upon any adjustment or the basis for an adjustment, Subcontractor shall, if directed by Contractor, nevertheless proceed in accordance with the order, and the Subcontract shall be adjusted as reasonably determined by the Contractor with any dispute to be resolved after the completion of the Work. If requested by the Contractor, the Subcontractor shall perform extra work on a time and material basis, and the Subcontract price shall be adjusted based on time records and materials checked by the Contractor on a daily basis.”

 

Yet, the prime contractor never advised what “applicable provisions” of the prime contract supported its argument. Thus, the Eleventh Circuit maintained that the subcontractor should be entitled to be paid for its work on a time and materials basis based on time sheets per the very provision the prime contractor relied upon. Notably, the Eleventh Circuit minimized the significance of the contractual language by stating:

 

“Even assuming that the interpretation of the contract raises issues of material fact, Walbridge is still liable, as the district court found, under the duty of good faith and fair dealing implied in all contracts. Walbridge ordered W.W. Gay to install the storm pipe despite the problem that W.W. Gay had promptly called to Walbridge’s attention; Walbridge then waited six weeks to ask the Navy for advice; and after W.W. Gay had already finished installing the pipe, Walbridge ordered W.W. Gay to reroute the pipe. W.W. Gay understandably insisted that it receive full compensation for its work, and Walbridge accepted, or at least manipulatively encouraged, this expectation. Moreover, the only reason that the Navy did not pay for W.W. Gay’s work is because of Walbridge’s initial error in judgment. Thus, Walbridge cannot now invoke the Navy’s refusal to pay to avoid its obligations to W.W. Gay.” Walbridge Aldinger, 2013 WL at *5.

 

 

CONSIDERATIONS:

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  • It’s hard to play both sides of the fence. In this case, the prime contractor wanted to play both sides by arguing on one hand that the Navy (government) caused delays it was assessing liquidated damages for and on the other side arguing that the subcontractor caused delays. It takes more than “conjecture” or argument to establish an actual delay. If a party argues delay, it needs to prove the delay (to the critical path that contributed to the overall delay to the project’s schedule) and not just that it “may” have caused delay or that it “could” have caused the delay based on the outcome of the dispute with the government over the assessment of liquidated damages. If the prime contractor wants to employ this tactic, it should include a provision that would allow it and its surety to withhold sums for any potential delay, although unsupportable, if the government assesses liquidated damages until the government’s assessment of liquidated has been resolved and that all claims between the parties regarding such sums shall be stayed pending the resolution. Naturally, such a clause needs to be ironed out with much more specificity and thoroughly considered because there are pros and cons to the provision including whether such a provision would be enforceable against a Miller Act surety (considering suits against the surety must be filed within a year from the subcontractor’s final furnishing). Otherwise, playing both sides can be challenging unless the prime contractor is taking the position with supportable schedule analysis that the subcontractor actually caused delays to the critical path.

 

  • The entitlement to additional work items is a common dispute between subcontractors and prime contractors. Thus, it is important to ensure that there are good notice provisions in the subcontract and that the subcontract clearly specifies what a subcontractor needs to do to be entitled to additional work. In this case, the subcontractor did send notice and was directed to proceed with the work and maintained time sheets verifying its additional work amounts. Too often subcontractors do not keep track of such amounts on a time and materials basis as specified in the subcontract and/or fail to submit timely notice.

 

  • The Eleventh Circuit’s discussion of the implied obligation of good faith and fair dealing is an interesting discussion. The reason being is that it creates an argument that a subcontractor could be entitled to additional work items even if it did not truly comply with contractual provisions, especially if the subcontractor was directed to perform the work pursuant to a construction change directive or another provision.

 

For more information on the a Miller Act payment bond, please see https://floridaconstru.wpengine.com/522/ and https://floridaconstru.wpengine.com/an-argument-to-recover-attorneys-fees-against-a-miller-act-payment-bond/

 

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.