Construction and Procurement Law News, Q3 2015
In Gilchrist Constr. Co., LLC v. Louisiana Dep’t of Trans. and Dev., a Louisiana appellate court recently confirmed that a contractor was able to demonstrate delay damages due to a critical path delay based on increased work requirements even though the contractor was ultimately able to finish the project ahead of schedule. The project involved the widening of an interstate highway for the Louisiana Department of Transportation and Development. Gilchrist, the contractor, finished the project ahead of schedule and was paid the contract price, including additional compensation for change orders and an early completion bonus. The principal issue was the recoverability of delay costs for a dispute concerning the scope of work and what the contractor alleged to be the state’s gross miscalculation of the quantity of embankment required for the project. Gilchrist alleged that, but for the state’s gross miscalculation, it would have bid 180 more days. The trial court rendered judgment in favor of Gilchrist, and the state appealed.
The principal issue on appeal was whether Gilchrist properly proved that it incurred delay damages because of the increased quantities of embankment and lime used for the project. A cost-plus-time bidding procedure was used to bid and award the project, which takes into account not only the contract amount but also the contract time required for completion. The contract amount bid was the summation of the quantities shown in the Schedule of Items in the contract multiplied by the unit prices. The records established that (1) Gilchrist placed over sixty thousand cubic yards of additional embankment material (forty percent increase) than what was advertised in the requests for proposal; (2) Gilchrist accomplished the items of work required to complete the project in less time than was bid or required under the contract; (3) the state paid Gilchrist for the additional embankment materials, and (4) Gilchrist was also paid the maximum amount possible as an early completion bonus. The state argued that under the terms of the contract, Gilchrist was fully and completely compensated for any additional work caused by the increased quantities of embankment and lime. Gilchrist, however, asserted that it had incurred damages due to the delay in the project caused by placement of extra material, despite being compensated for the extra quantities.
Critical to determining whether Gilchrist was entitled to such compensation was a determination whether Gilchrist sufficiently proved that the increased quantities actually delayed the project. As proof that a delay of the project occurred due to the forty percent increase in embankment and thirty percent increase in lime, Gilchrist used its initial, baseline Critical Path Method (“CPM”) schedule to show that the placement of the extra material delayed the project by 180 days. The state argued that the way by which Gilchrist used the baseline schedule to calculate whether the project was delayed was improper and incorrect. The contract contained a provision regarding CPM scheduling requiring submission of schedules in a prescribed method. Because the CPM schedule was not updated by Gilchrist in advance of the extra quantities being incorporated into the work, one of the state’s scheduling experts rejected the retroactive calculation of the time impact using the baseline schedule. The expert testified that the best and most proper evidence of the facts was the culmination of all the updated CPM schedules prepared by Gilchrist as the work progressed. The only evidence of the 180-day delay claimed by Gilchrist was the impacted CPM schedules Gilchrist generated based on modifications of the baseline schedule.
There was testimony at trial that it had always been Gilchrist’s intention to finish the project early. The production rate calculated for purposes of Gilchrist’s bid and the actual production rate that occurred in performing the work were quite close and both greatly exceeded the production rate projected in the baseline schedule. Gilchrist put on testimony that it performed the embankment work at the accelerated production rate because of the state’s refusal to grant any extra time for the additional quantities of embankment, and that it was compelled to increase its production rate to avoid the threat of liquidated damages in the event that the extra quantities caused it to fall behind schedule.
The appellate court found that the trial court did not err in accepting the impacted baseline as evidence of delay caused by the increased quantities of embankment and lime. This holding is not found in all jurisdictions; other courts have held that because a contractor failed to follow the schedule specification, it could not support its delay claim. In this case, both the lower court and the appellate court determined that Gilchrist sufficiently proved that its planned early completion of the project was delayed due to increased quantities of material. Gilchrist was, therefore, entitled to recover the damages it incurred as a result of the delay.
The court found that whether the contractor’s increased production rate was a result of trying to avoid the threat of incurring liquidated damages or was simply a manifestation of Gilchrist’s intention to complete as early as possible, the fact remains that the contractor performed the work at a rate that was faster than required by contract. In the construction industry, a contractor has the right to finish early, so long as that plan is expressed in advance of performing the work, generally through a baseline schedule showing early completion. Contractors should keep this principle in mind—that even if it completes a project ahead of the requirements in a contract, it may be entitled to damages resulting from the delays caused by the Owner to an early completion schedule.