A common impediment to a successful project is often a delayed project. Once a delay occurs, a claim is likely to follow. Being knowledgeable of key delay concepts and the actions that can be taken once a delay is recognized can improve the chances of the claim being accepted. Even when the claim is not accepted and litigation/arbitration becomes necessary, taking the proper action during the project can greatly assist your legal counsel and the retained experts analyzing the delays.
When preparing a claim for schedule delays, it is important to differentiate between various types of delays – most importantly, between critical and non-critical path delays. Critical path delays are those delays to specific work activities that extend the overall project duration. Conversely, non-critical path delays are those delays to specific work activities that contain float; because these delays only consume available float—rather than extend the project duration—non-critical path delays are typically not the subject of a schedule delay claim. Depending on the nature and complexity of the project, determining whether a delay is a critical path delay may be obvious, or it could require a sophisticated critical path method schedule analysis.
Once the delay events have been properly identified, it is important to understand which delays warrant a time extension, and which delays also warrant additional compensation. Delays that warrant a time extension are commonly referred to as excusable delays. Generally, an excusable delay is a delay that is due to circumstances beyond the control of the contractor, such as certain weather events, owner directives, or design changes. Further, an excusable delay must not be related to a risk contractually assumed by the contractor. For some projects, the contract will determine whether a specific delay event can be considered excusable; in such instances, the contract should guide the preparation of the claim.
Showing a delay event is excusable is a key element of a schedule delay claim in that it supports the contractor’s request for a time extension and can defend against the owner’s claim for liquidated damages. However, just because a delay event is shown to be excusable doesn’t necessarily support a claim for additional compensation. Excusable delays can be broken down further into compensable delays, which merit additional compensation, and non-compensable delays, which do not. Compensable delays, which are often defined in the contract, are typically delays that are not the fault of the contractor, such as owner-directed changes.
Conversely, a delay that is excusable but non-compensable is typically a delay due to events beyond the control of both the contractor and owner, such as a force majeure event. Like excusable delays, the question of whether a delay is compensable or non-compensable may be a contractual issue. When the terms of the contract address the compensability of delays, the contract should guide the preparation of the claim.
A thorough schedule delay analysis for the purposes of preparing a claim should also consider contractor-caused delays and concurrent delays. Even in the event where a contractor suffers a delay considered to be excusable and compensable, a contractor-caused delay—concurrent or not—could preclude the contractor’s claim for additional compensation.
The task of identifying and classifying the various delays to be presented in the claim can be greatly aided through proper management of the project schedule. A project team that does this can be in a much better position to timely recognize delay events and respond with the necessary actions. Such actions can include, but are not limited to, the following:
- Provide proper notice of delay, as set forth in the contract.
- Document the delay, through project correspondence, daily reports/logs, photographs, etc., to support and substantiate a future change order request or claim.
- Assemble the relevant cost data to price the impact of the delay. When possible, it can be beneficial to begin tracking delay-related costs discreetly through new cost codes.
After substantiating the delay events that are the subject of the claim, the next step would be to value the financial impact to the project. As each project is unique, specific financial impacts will vary from project to project. However, certain cost categories commonly show up in delay claims, including, but not limited to, the following:
- Extended general conditions
- Additional labor and/or reduced labor productivity
- Home office overhead
- Idle equipment
- Cost escalation for material or labor
Unfortunately, delays are a common occurrence on capital projects and are one of the most common sources of disputes. Because of this, having a working knowledge of the contract, understanding the various types of delays, and taking the proper actions once delay events are recognized can all play a key role in how project delays are ultimately resolved.