What Are Delay Damages?

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Although the term “delay damages” is often referred to in construction change order requests, requests for equitable adjustments, and claims, it is often misunderstood or not properly defined. So, what exactly are “delay damages?”

Unfortunately, the answer to this question is not as simple as you may think. It’s reasonable to conclude that the term “delay damages” is simply defined as “damages that are caused by delay.” But this definition depends on the how one defines the term “delay.”

For example, when the term “delay” is defined as only critical project delay (a delay that is responsible for extending the project’s duration), then the term “delay damages” is often narrowly defined as only the damages that result from the project’s extended duration.

The damages that would result from a critical delay include the following full complement of delay damages:

Extended field office overhead
Unabsorbed home office overhead
Liquidated damages
Idle labor and equipment costs
Labor and material cost escalation
Other costs

If delay is defined as both critical and non-critical delay (a delay that is not the cause of an extended project duration), then some, not all, of the potential delay damages above may be recoverable. Because a non-critical delay does not extend the project’s duration, extended field overhead costs, unabsorbed home office overhead costs, and liquidated damages wouldn’t apply. However, contractors and subcontractors may still incur idle, escalation, and other delay-related costs for non-critical delays.

Note that the concept of delay damages applies to both contractors and owners alike. Subcontractors can also incur delay damages; however, their calculation and recovery of delay damages, similar to contractors, are dependent on the language in their contracts.

A more detailed discussion of the different types of delay damages will be the subject of future postings – stay tuned.