Requesting Time Extensions: To Wait or Not to Wait?
Contractors struggle with the eternal question: “When is the right time to request a time extension from the owner?” Even when the owner is clearly responsible for critically delaying the project, they may be reluctant to submit a time extension request right away.
The window for submitting a time extension request can vary from during or directly after the owner critically delays the project to after the project is complete. Contractors often put off submitting a time extension request. The reasons may include believing they can’t develop a convincing and properly documented request or delaying the submission to “maintain a good working relationship” with the owner.
Not requesting a time extension in a timely manner may have unintended contractual, financial, and delay-mitigation consequences. Potentially, these are:
- Contractual: Most contracts contain notice requirements that are imbedded within specific contract provisions, like the time extension provision, that require the contractor to submit a request for additional contract time within a specific time frame. By not submitting within the required time frame, the contractor may waive its right to recover additional compensation related to that delay. By waiting until the end of the project and choosing not to submit a time extension request in accordance with the contract, the contractor may inadvertently waive its right to recover extra contract time and delay damages.
- Financial: If the contractor can demonstrate that the owner delayed the project and caused it to incur delay damages (extended field office overhead, unabsorbed home office overhead, idle labor, idle equipment, etc.), then resolving the issue now will avoid the need for the contractor to finance the cost of these impacts. By waiting until the end of the project, the contract has effectively put itself into the position of having to decide to either accelerate the project to finish on time using its own funds or finishing late and running the risk of being charged liquidated damages. Simply put, choosing to wait until the end of the project causes the contractor to take on the substantial financial risk for the delay.
- Delay Mitigation: If the contractor provides immediate notification, a reasonable owner should recognize the situation and work with the contractor to quickly identify the problem and resolve the issue. Because impacts are generally much cheaper to mitigate and resolve at the beginning of a project and tend to become more difficult and expensive to resolve over time, an owner should see the wisdom in resolving the issue as early as possible. This approach is also more consistent with the intent of most contracts, which is to work as a team to achieve mutually beneficial outcomes. By waiting until the end of the project to request a time extension, the contractor gives the owner two options: (1) pay for the impact or (2) not pay for the impact. When the owner has its completed project, it may opt for the latter, taking the position that the contractor did not follow the contract and, thereby, did not afford the owner with the ability to mitigate the impact. Therefore, to best protect your risk and retain the protection provided to you under the contract, don’t wait: request that time extension now.
Mark Nagata is a Director/Shareholder with Trauner Consulting Services, Inc. and provides both contractors and owners with preparation and evaluation of CPM schedules, time extension requests, and requests for additional compensation. Mark can be reached at email@example.com.