As the construction industry slowly recovers momentum and sales increase, there are increasing reports of labor shortages that are adversely effecting production and schedule. Many later-finishing trades complain that their work is being delayed, compressed and/or accelerated as a result. As anyone familiar with construction knows, “time is money.” Losses incurred as a result by blameless “follow on” trades towards the end of a delayed job must be absorbed or passed on to those responsible.
Companies delayed by a predecessor’s impacts are advised to keep these “Top 10” suggestions in mind in order to protect their right to additional time and/or money.
1. Do not sign a “no damage for delay” contract clause.
Many contracts contain “no damage for delay” clauses which state that one’s sole remedy in the event of a delay is a time extension. While there are legal exceptions in most jurisdictions, and some states like Ohio make such clauses unenforceable, it is best to avoid them in the first place.
2. Do provide timely notice of your claim.
Every contract requires timely notice of change orders and claims and many provide that a failure to do so means that an otherwise legitimate claim is waived. Provide written notice – early and often.
3. Do provide timely documentation of your claim.
Many contracts provide that once a claim is initially made, it must be documented (and sometimes certified) within a certain number of days after first notice. A failure to do so might undermine the claim.
4. Do request a time extension.
Sometimes contractors do not request a time extension because they know that it will not be granted. But a time extension should always be requested in the event of project delay. A failure to do so might undermine your request for additional money due to acceleration.
5. Do not sign off on a flawed schedule.
Sometimes owners refuse to pay draws until contractors sign unworkable schedules that they do not agree to. But regardless of the pressure applied, contractors should not “sign off” on unworkable schedules. At a minimum, you should reserve your rights and make a notation that your signature on the schedule is not your approval of it, or a waiver of your damages.
6. Do not sign an overly broad lien waiver.
Many lien waivers are now lengthy and waive more than lien rights for a particular draw. Some purport to waive all rights to additional compensation in the form of change orders or claims on the project. Do not waive rights for work which is still being debated or disputed.
7. Do not sign an overly broad change order.
A proper change order will only purport to waive all costs associated with that discrete “change in the work” that is the subject of the change order. However, some change orders try to waive all direct and indirect damages associated with “the project” through a particular date. Be careful not to sign a change order with overly broad form release language.
8. Do try to accurately track your costs.
All request for additional time and money will be criticized (by those being asked to pay) as being inadequately documented. But the better you contemporaneously document and track your costs, the more you can minimize the criticism of your damages calculations, particularly with respect to labor inefficiencies.
9. Do argue waiver if the contract has not been strictly followed.
Many provisions of thick construction contracts are disregarded as a practical matter by the parties during the complex construction process. Contractors who may have not done everything perfectly may be relieved of harsh results by arguing that an onerous clause was waived by an owner who also failed to comply with the contract.
10. Do know your deadlines for taking legal action.
Almost all claims will expire if timely action is not taken in accordance with the contract and any applicable statute of limitations. Do not let project inertia or prolonged settlement discussions or negotiations delay legal action until it is too late.
If you remember these Top Ten “Do’s” and “Don’ts” the next time you are adversely impacted by schedule delays, you will be in a much better position to protect your interests.