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A New Website on Delay Damages

August 19, 2013

delay damages website

Sometimes we want to share more information than could fit into an Ideas and Insights. With that in mind, we created DelayDamages.com. We hope to grow this new website into the most comprehensive resource on the topic of construction delay damages.

The website already has a lot of information on the following topics:

We’d love to hear your thoughts on this new website. Send an email to mark.nagata@traunerconsulting.com to let us know what you think or ask any questions about the topic. We look forward to hearing from you.

The Best Way to Prevent a Constructive Acceleration Claim

February 24, 2013

Constructive_accelerationOne reason why you want to give time extensions when time extensions are due is you don’t want to develop a situation where the contractor is entitled to a time extension, but the owner is refusing to provide one.

This can lead to a type of acceleration called, “constructive acceleration.” “Constructive” in this case meaning, “in effect.” Essentially, it’s an acceleration that is the result of the actions or behaviors of the parties. It would be in contrast, for example, to a directed acceleration.

In order to prove construction acceleration, the contractor must demonstrate five things:

  • The contractor has experienced what’s called an, “excusable delay.” An excusable delay is a delay for which the contractor is entitled to a time extension, usually a critical delay that’s not the fault and responsibility of the contractor.

  • The contractor then requests a time extension for that excusable delay.

  • The owner rejects or is silent as to whether a time extension will be provided. Because the contractor is not getting additional time to complete the work, the contractor is now concerned that they might be assessed liquidated damages. Or worse yet, that the owner might conclude that they are in fact in breach of the contract. Or the owner directs the contractor to finish the project by the original contract date without an extension.

  • The contractor, for that reason, gives notice to the owner that it will have to accelerate it’s work in order to finish the project by the originally contracted

  • The Most Important Question Owners Need to Ask When They Receive a Claim

    February 10, 2013

    Too often I hear this reason given for why there’s a claim on the project:

    “Contractors low ball their bids hoping to make money on changes.”

    I’m not going to tell you that that doesn’t happen. But I’m also not going to suggest to you that because they’ve done this, their claim has no merit.

    The contractor’s position could have merit, even though they low balled their bid with the idea they were going to make money on changes. So, the merits of the claim may be completely independent of the circumstances.

    There’s also a belief, and this is probably another common owner view of the world, that if I take a hard line on this claim, I’ll discourage other people from filing claims. Perhaps you may, but often I’ll hear this from an owner that’s used that philosophy as a basis for determining whether or not they’re going to fight the claim or not.

    In both these cases, the wrong question is being asked.

    The more important question is, “Does the claim have merit or not?” In other words, merit matters.

    Sometimes there’s a belief, mostly expressed by contractors, that owners will always find a reason not to pay a change. I often hear this mentioned when we talk about developers.

    I think it’s probably incorrect, but the bottom line is there’s a perception that some owners will always respond to the question of whether there’s a change or not with the word, “No.”

    Again, even if that’s your perception, and even if that is the owner’s position,

    The Common Issues You See In Construction Claims

    January 27, 2013

    Heart in HandsThere are several common issues we end up debating and that are often at the heart of a claim. These issues are:

    Proper Interpretation of the Contract

    Now, if the issue’s small, ultimately the interpretation issue can often be overcome, but if it’s associated with thousands, or worse, millions and millions of dollars in potential added costs, then the proper interpretation of the contract becomes a common bone of contention.

    Delays

    Delays are an issue in 99 percent of the claims I get involved with. It appears that it’s hard for the project team to answer questions related to delays, to come up with a way of measuring the delays that everybody can agree to, and that everybody can use as a basis for resolution of their differences.

    Inefficiency

    Efficiency has become more and more common of an issue. When I first started evaluating claims in 1985, inefficiencies were a rare component of a contractor’s claim. Now, it seems like virtually every claim I pick up has inefficiency as a significant component. If delays are hard to measure, inefficiencies are harder to measure.

    I was in a mediation last week, and the mediator said if delays are hard to resolve or measure, then inefficiencies are the square of that in terms of difficulty. I’m not sure I quite agree with the square part, but I would say that inefficiencies are typically more difficult to evaluate than delays.

    Acceleration

    Tying those two things together, delay and inefficiency, is the issue

    Weather and Construction: The Contract

    November 04, 2012

     In the following post, John Crane continues our series on Weather and Construction.

    The Contract

    In this Ideas & Insights, I will hopefully demonstrate that by providing the proper information and guidance in the contract documents, many common issues concerning weather can be eliminated.  Two examples of standard contract language are shown below to illustrate the questions that sometimes exist in a contract.

    The 2007 edition of the AIA-A201 standard agreement states:

    4.3.7.2  If adverse weather conditions are the basis for a Claim for additional time, such Claim shall be documented by data substantiating that weather conditions were abnormal for the period of time, could not have been reasonably anticipated and had an adverse effect on the scheduled construction.

    And, the recently issued ConsensusDOCS states:

    6.3.1  If the Contractor is delayed at any time in the commencement or progress of the Work by any cause beyond the control of the Contractor, the Contractor shall be entitled to an equitable extension of the Contract Time.  Examples of the causes beyond the control of the Contractor include…adverse weather conditions not reasonably anticipated; encountering Hazardous Materials…

    These clauses leave us with the question of what is considered to be “abnormal” or could have been “reasonably anticipated.”

    How Do We Determine What Is “Normal?”

    Whether I am an owner wishing to eliminate such questions or a contractor wanting to determine the number of “reasonably anticipated” weather days I need to plan for, there are references, such as data available from the National Oceanic and Atmospheric Administration (NOAA), that provide historical data that can

    Weather And Construction: What You Need To Know

    October 07, 2012

    Dealing with rain on construction projects.

    The following article starts our series focused on the questions and scenarios that stakeholders need to consider when dealing with weather in construction contract documents and project schedules.

    Wrestling in the Mud or Dancing in the Rain: Planning for Mother Nature

    At one time or another in our construction careers, many of us have worked on projects where some “troublemaker” just did whatever they wanted to do, regardless of the effect that their actions had on our work.  In some of those instances, it seemed that no matter how well we documented the issues, at the end of the day, we had a hard time coming up with an exact method to calculate how much of a problem the “troublemaker” caused.  Mother Nature often acts as just such a troublemaker and is quite capable of creating chaos on a construction project.  She can induce havoc on the project schedule and often is the catalyst for significant disputes between owners and contractors.

    Since I started work as a construction management consultant many years ago, there have been few projects that have crossed my desk that didn’t, to some extent, attempt to explain and measure the role Mother Nature played in a project finishing late.  Troubled projects often finish with a bucket full of puzzling “delays” or “impacts.”  The challenge of sorting out such complex delay claims

    Differing Site Conditions: To Be or Not to Be

    February 27, 2012

    Encountering unanticipated subsurface conditions while driving piles or excavating is a common occurrence in construction.  If a contractor encounters a differing site condition, the path to recovery of added costs is through the contract.  As a contractor, what information should be included in your differing site condition request to demonstrate entitlement to additional contract time and compensation for the differing site condition?  Conversely, as an owner, how should the request be evaluated to determine whether the contractor actually encountered a differing site condition?  While all projects are unique, there are some conditions that have to be met to prove entitlement to compensation and time extension for a differing site condition.  However, before identifying those conditions we must first identify what, in fact, constitutes a differing site condition.

    The Two Types of Differing Site Conditions

    Generally, there are two types of differing site conditions. The first type (Type 1) is usually defined as instances when the contractor encounters subsurface or latent physical conditions that differ materially from those indicated in the contract.

    An example of a Type 1 differing site condition may be when a contractor is driving piles and does not reach refusal at the elevations identified in the plans and specifications.

    The second type (Type 2) of a differing site condition is usually defined as instances when the contractor encounters unknown physical conditions of an unusual nature that differ materially from those ordinarily encountered and generally recognized as inherent in the work at the project’s location.

    An example of a Type 2 differing site

    ENR Discusses The Float Debate

    December 16, 2011

    enr float coverThe cover story of this week’s Engineering News Record features Bill Manginelli, Ted Trauner, and Brian Furniss. The article, “Why Sharing the Float is No Utopia, But Should Be,” gives a good overview on how owners, contractors, and consultants in the construction industry view the issue of float ownership. It serves as a good follow up to the article that was posted in last month’s Ideas & Insights.

    The issue hits mailboxes on December 19th. But Ideas & Insights readers can see the entire article at this link.

    Who Owns the Float?

    November 16, 2011

    The concept of float is important to the understanding of CPM scheduling on construction projects.

    Theodore J. Trauner, Jr., PE, William A. Manginelli, and Brian Furniss recently collaborated on an article entitled, “Why Owners and Contractors Should Share the Float.”

    The detailed article touches on many topics including float’s definition, the different types of float, “float ownership” contract provisions, and addresses the question of “who should own the float.” If you are interested in the topic of planning and scheduling or would like to learn more about float, this article is worth reading.

    The American College of Construction Lawyers and Thomson Reuters have graciously permitted us to share this article with our readers. You can access the article at this link (Why Owners and Contractors Should Share the Float Article Reprint).

    The article is reprinted with permission from the Journal of the American College of Construction Lawyers, Volume 5, Number 2, Summer 2001, copyright 2011 Thomson Reuters. Further reproduction of without permission of the publisher is prohibited. For addition information about this publication, please visit west.thomson.com.

     

    Update on How Different State DOTs Approach the Compensation of Home Office Overhead

    August 30, 2011

    In 2003, the National Cooperative Highway Research Program published the results of a synthesis study we conducted entitled, “Compensation for Contractors’ Home Office Overhead.” The complete synthesis study can be downloaded at this link. The study summarized State DOT’s practices regarding compensation for home office overhead.

    In the synthesis study, each state’s practices were grouped as the Avoidance, Compliance, or Proactive Model. Of the twenty-six states that responded to our questionnaire:

    • Five states reported that they never paid for home office overhead (Avoidance Model)
    • Thirteen of the states paid for home office overhead based primarily on court and board precedent (Compliance Model).
    • Eight of the states responded that they address payment of home office overhead in their standard specifications (Proactive Model)

    In the Synthesis Study’s concluding remarks, we stated:

    “Over the next few years, it might also be worthwhile to structure a study of the Florida, Ohio, and California approaches to evaluate whether any have succeeded in achieving the objectives for owners and contractors as discussed in this synthesis.”

    Recently, AASHTO’s Subcommittee on Construction, Contract Administration Section, followed up with these states to get a sense of the effectiveness of their procedures, whether there were any updates to them, and where these procedures could be found. Here is a brief summary of each state’s responses as outlined in AASHTO’s document.

    Ohio Department of Transportation (ODOT)

    AASHTO’s follow-up states that ODOT “developed a procedure that may be applied simply without an audit, and without debating and negotiating allowable overhead cost on each contract.” They

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