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Delay Claims from the Owner and Contractor’s Perspectives
Annual Program of theClaims Avoidance and Resolution Committee
of the Construction InstituteMarch 11, 2010 – Los Angeles
Delay Claims from the Owner and Contractor’s Perspectives
Claims Avoidance and Resolution CommitteeUnderstanding Claims Subcommittee
• Dennis M. Mac Bride, Chair - SEPTA
• Craig Lindquist – CCS Group, Inc.
• Patrick Watz – AECOM
• John (Jack) Chiaverini – Retired, Perini Corporation
AGENDA
• What is a Delay Claim?
• Contract Language Related to Delay
• Types of Delays
• Types of Damages
• Requirements for a Successful Claim
AGENDA
• Contractor’s Delay Claim Submission
• Owner’s Defense
• Owner’s Damages / Counterclaim
• Contractor’s Defense
• Case Study
What is a Delay Claim?
In simple terms:
Contractor: A request for compensation and/or time due to owner-caused delays
Owner: An assessment of liquidated damages or a claim for actual damages due to contractor-caused delays
Contract Language
• “Time is of the essence”
• Contract time of completion
• Contract milestones / Phasing
• Scheduling specifications (CPM or bar chart)
• Notice provisions
Contract Language• Time extension requests (time impact
analysis)
• Time extensions / change orders
• Liquidated damages
• “No damage for delay” clause
• Delays by other contractors clause
• Disputes clause
Types of DelaysExamples of Owner-Caused Delays
• Site access• Differing site conditions • Shop drawing approval• Design errors and omissions• Extra work / change orders • Failure by owner to timely provide materials• Changed conditions, e.g., working hour restrictions• Work suspension
Types of Delays
Examples of Contractor-Caused Delays
• Procurement/Submittal problems (material & equipment)
• Subcontractor delays• Lack of adequate resources (labor, material,
equipment)• Poor work sequencing• Lack of productivity• Rework• Financial difficulties
Types of Delays
Third-Party Delays
• Permit acquisition
• Utility relocations
• Adjacent contractors
• Government Actions/Inactions
Types of Delays - Analysis
• Excusable / Non-excusable delays
• Compensable / Non-compensable delays
• Force majeur (Beyond either party’s control)
• Concurrent delays
Examples of Contractor Delay DamagesRecoverable
• Field office overhead (General conditions)– Trailers, utilities, on-site supervision, etc.
• Added cost of work, e.g., winter work protection• Subcontractor pass through• Labor and material escalation• Acceleration
– Directed and constructive acceleration• Idle labor and equipment• Lost productivity (inefficiencies)• Insurance and bonding costs
Examples of Contractor Delay Damages
Not Recoverable (Depends on contract language)
• Home office overhead (G & A)– Delay vs. total suspension of work
• Lost opportunities– Lost business revenue, loss of bonding
capacity
• Legal and consultant fees
Owner DamagesLiquidated Damages• Described in contract• $ per day for each day substantial completion is
beyond the current contract completion date• Must be a reasonable estimate of damages and not a
penalty
Examples of Owner’s Actual Damages• Owner costs
– Lost revenue, interest on financing, project management, inspection, etc.
• Architect/Engineer costs/fees– Additional shop drawing reviews, rate escalation,
etc.• Construction Manager costs/fees
Requirements for a Successful Claim
The burden of proof is on the contractor
Requirements for a Successful Claim
Three elements needed:
• Liability (Entitlement)
• Causation
• Damages (Quantification)
Requirements for a Successful Claim
Liability• Contractual duties and obligations
– Notice provisions– Site access, accurate plans and specs– Adequate resources, workmanship
Causation• “Cause and effect”• Link between delay and damages
Damages• Substantiating documentation for extended
costs• Actual costs or daily rates
Contractor’s Delay Claim Submission
• Why the owner is responsible for delays and associated costs
• Schedule analysis
• Damages
• Substantiating documentation
• Transparency
Owner’s Defense
Determine Type of Delay:
Excusable Non-excusable
Owner-caused Force majeur Contractor-caused
CompensableNon-
compensableNon-compensable
Owner’s Defense
Identify Concurrent Delays:
Excusable
Caused by Owner and Contractor
Non-compensable
Owner’s Defense
• Liability Review - Contract terms
• Causation Review - Schedules, daily reports, shop drawing logs, meeting minutes, etc.
• Damage Review– Receipts, invoices, cost reports, etc.– Reasonable estimates
___________________________________________
Owner Costs that Offset Contractor Damages:• Overhead paid as part of change orders during
the extended period• Liquidated or actual damages
Owner’s Damages / Counterclaim• Why the contractor is responsible for
delays and liquidated or actual damages
• Schedule analysis
• Damage calculations
• Substantiating documentation
Contractor’s Defense
• Contract Terms / Plans & Specs– Ambiguities, conflicts, errors & omissions
• Change orders, RFI’s, etc. – Effect on schedule and costs
• Schedule Analysis– Owner-caused delays– Concurrent delays
Delay ClaimCase Study
Case Study
This is the story of a construction project that was planned to be completed in 24 months.
Unfortunately, stuff happened and it was completed much later.
Because of this, the contractor incurred extra costs and requested additional compensation from the owner.
The following describes the process that was used to resolve this delay claim.
The As-Planned Schedule
(What was supposed to happen)
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24A M J J A S O N D J F M A M J J A S O N D J F M
1 Mobilize
Excavate & sheeting
Erect structural steel & pour mezzanine
Backfill & paving
Mechanical equipment
Gates & cashier booths
Elevators & escalators
Power & lighting
Finishes
Demobilize 10
9
2
Winter Winter
Case Study: Subway Station Expansion Project
7
8
3
4
5
6
Months
As-Planned
The As-Built Schedule
(What actually happened)
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N
Access Delay (1 month)
1 Mobilize
Differing Site Conditions (2 months)
Excavate & sheeting
Re-design Delay (2 months)
Erect structural steel & pour mezzanine
Backfill & paving
Mechanical equipment
Gates & cashier booths
Strike (1 month)
Elevators & escalators
Power & lighting
Rework (1 month)
Finishes
Demobilize 10
Lack of Progress (1
month longer than planned)
6
9
Extended Period = 8 months
7
8
Original Contract Period
As-Built
Delays
Case Study: Subway Station Expansion Project
3
4
5
2
Winter Winter
Months
The As-built Schedule shows that there were six delays that resulted in an eight month delay to the project.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N
P A Mobilize
Excavate
FinishesP = Planned
P Demobilize AA = Actual
Gates & cashier booths
As-Planned vs. As-Built
Mechanical equipment
P Power & lighting
Elevators &
ANew Labor Agreement
Backfill & paving
Erect structural steel & pour mezzanine
P
P
P
A
A
P
Months
<--- 8 month delay --->
P
A
AP
A
A
Extended Period
Case Study: Subway Station Expansion Project
A
Original Contract Period
P
Winter Winter
Because the project finished eight
months late, the contractor submitted
the following claim to the owner:
Cause for Added Costs MonthsMonthly
CostDamages Claimed
1Field Office Overhead (trailer, supervision, etc.)
Total delay of eight months 8 $ 50,000 $ 400,000
2Labor Escalation after May 1st Labor Agreement
Delays to finish trades 8 $ 5,000
3 Idle Equipment Re-design delay 2 $ 10,000 $ 20,000
4 Winter Work Winter concrete (blankets, heaters, etc.) $ 10,000
5 Constructive Acceleration No time extension issued / threat of LD's $ 10,000
6 Lost ProductivityAdverse weather, out-of-sequence work, etc.
$ 10,000
7 Home Office Overhead Total delay of eight months 8 $ 20,000 $ 160,000
8 Consultant Fees Claim preparation $ 50,000
9 Interest @ 5% on Delayed Payments Job financing $ 33,250
10 Bond at 1.5% Eight month delay $ 10,474
$ 708,724
Claim Item
TOTAL CLAIM
Case Study: Subway Station Expansion ProjectContractor's Claim
Before analyzing the contractor’s
costs, the owner performed a Delay
Responsibility Analysis as follows:
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N
Access Delay (1 month)
1 Mobilize
Differing Site Conditions (2 months)
Excavate & sheeting
Re-design Delay (2 months)
Erect structural steel & pour platforms & mezzanine
Backfill & paving
Mechanical equipment
Gates & cashier booths
Strike (1 month)
Elevators & escalators
Power & lighting
Rework (1 month)
Finishes
Demobilize 10
Lack of Progress (1
month longer than planned)
6
9
Extended Period = 8 months
7
8
Original Contract Period
As-Built
Delays
Case Study: Subway Station Expansion Project
3
4
5
2
Winter Winter
Months
Delay Responsibility Analysis
Delay TypeAccess Delay
Differing Site Conditions
Re-design
Strike
Lack of Progress
Re-work
ResponsibilityOwner
Owner
Owner
Neither
Contractor
Contractor
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N
Access Delay
1 Mobilize
Differing Site Conditions
Excavate & sheeting
Re-design Delay
Erect structural steel & pour platforms & mezzanine
Backfill & paving
Mechanical equipment
Months Gates & cashier booths
Owner 5Strike
Contractor 2Elevators & escalators
Neither 18 Power & lighting
Rework
Finishes
Demobilize 10
8
2
Lack of Progress
Case Study: Subway Station Expansion Project
3
4
5
Months
Delay Responsibility
Analysis
Delay Responsibility
9
Extended Period = 8 monthsOriginal Contract Period
Winter Winter
6
7
New Labor Agreement
Based on its Delay Responsibility
Analysis, the owner apportioned the
contractor’s claimed costs and
estimated the contractor’s entitlement
to additional compensation as follows:
MonthsMonthly
CostDamages Claimed
MonthsMonthly
CostEstimate Reason
1Field Office Overhead (trailer, supervision, etc.)
8 $ 50,000 $ 400,000 5 $ 50,000 $ 250,000 Owner delay = 5 months
2Labor Escalation after May 1st Labor Agreement
8 $ 5,000 5 $ 3,125 Apportioned owner delay = 5/8
3 Idle Equipment 2 $ 10,000 $ 20,000 2 $ 10,000 $ 20,000 All costs substantiated
4 Winter Work $ 10,000 $ 10,000 All costs substantiated
5 Constructive Acceleration $ 10,000 $ 7,500 Some costs substantiated
6 Lost Productivity $ 10,000 $ - Causation not shown
7 Home Office Overhead 8 $ 20,000 $ 160,000 $ - Delay, not a work suspension
8 Consultant Fees $ 50,000 $ - Not part of the Work
9 Interest @ 5% on Delayed Payments $ 33,250 $ - Not substantiated
10 Bond at 1.5% $ 10,474 $ 4,359 Cost substantiated
Subtotal $ 294,984
$ (30,500)Contractor delay = 2 months
$ 708,724 $ 264,484
Owner's Estimate of EntitlementCase Study: Subway Station Expansion Project
Liquidated Damages @ $500 per day x 61
TOTAL ENTITLEMENT
Contractor's Claim
Claim Item
TOTAL CLAIM
The contractor requested more than $700,000 in additional compensation due to project delays.
The owner estimated that the contractor was entitled to approximately $260,000.
They negotiated a settlement somewhere in between . . .
. . . and everyone lived happily ever after.
THE END
Delay Claims from the Owner and Contractor’s Perspectives
Questions?
Delay Claims from the Owner and Contractor’s Perspectives
Additional Information
Construction Delay Claims, Third Edition, Barry B. Bramble & Michael T. Callahan, 1999
Construction Delays: Documenting Causes, Winning Claims, Recovering Costs, Theodore J. Trauner, 1990
Construction Scheduling: Preparation, Liability, and Claims, John M. Wickshire, Thomas J. Driscoll, Stephen B. Hurlbut, 2008
CPM in Construction Management, Seventh Edition, Fredric Plotnick & James O’Brien, 2009
Proving and Pricing Construction Claims, Robert F. Cushman, 2000
Recommended Practice No. 29R-03, Forensic Schedule Analysis, AACE International, 2007