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Delay Damages:  Proof of Delay
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Delay Damages: Proof of Delay

March 27, 2014 Construction Industry Legal Blog

Reading Time: 6 minutes


Are you a contractor or subcontractor who has taken on a job, agreed to have it completed by a certain date, and failed to meet that deadline due to an unforeseeable delay?  How about an owner that has been promised completion of a project by a specific date that was not met?  If they have done much business, everyone involved in the construction industry that fits within these categories should have answered in the affirmative.  Today, virtually every project has a tight budget and an aggressive schedule, and delays seem inevitable.  Under Florida law, when unexpected events occur that delay a project, damages are often awarded to compensate for the impact of the delay.  Damages are not recoverable, however, if the agreement indicates only an estimated time of completion or provides no liability for delays.[1]  These damages include, but are not limited to, compensating for:  increased material costs, increased labor costs due to increases in pay rates, increased labor costs due to loss of productivity, increased overhead, interest on unpaid funds, loss of bonding capacity, loss of profit on other work that could been undertaken but for the delayed job and costs of preparing the delay claim.  Delay claims have proliferated in recent years, and are currently one of the largest categories of claims participants in the construction process routinely make.  This Blog post will provide a general overview of establishing that a delay occurred, and is the first in a multi-part series explaining delay damages and their potential recovery.

Regarding contractors and subcontractors, to recover damages for a delay, the contractor or subcontractor must prove that a given delay extended the overall completion date.  One of the most effective means of proving the delay impact is through Critical Path Method (“CPM”) scheduling analysis.  Before discussing CPM scheduling analysis, the CPM scheduling technique must have been implemented prior to beginning work.

The CPM scheduling technique is so effective that Florida courts have recognized the importance of it in determining causation for delays.[2]  A CPM diagram consists of a graphic depiction of the sequence and duration of construction activities; showing the interdependencies and interrelationships of the activities in the construction project.  A CPM diagram is not only highly effective and efficient in proving damages, but will also better position a party seeking time extensions.[3]  More often than not, the CPM schedule is incorporated into all subcontractor agreements.  Failure to bind the subcontractor to the CPM schedule can expose the general contractor to delay damages from the subcontractor;[4] conversely, effectively binding a subcontractor to the CPM schedule allows the contractor to more easily recover delay damages from the subcontractor.[5]

Once a CPM schedule has been created and implemented, proof of delay of a project is typically shown through the use of an expert scheduling or delay consultant as part of the CPM schedule analysis.[6]  A thorough and proper document notation and preservation system is vital to proving a delay and collecting delay damages.  A CPM schedule analysis typically uses a three-stage approach:  1) determination of the as-planned or reference schedule; 2) determination of the as-built or historic schedule; and 3) analysis of the actual delay by reference to an as-adjusted schedule.  The as-planned or reference schedule is the contractor’s planned sequence and timing of various activities, and  the as-built schedule, created by the expert, is a historical record of how the project was built, including the sequences and timing of the various construction activities.  Once the as-built schedule is complete, delays are analyzed using an as-adjusted schedule.  The as-adjusted schedule is created by including delays or disruptions, evident from the as-built schedule, in the as-planned schedule.  Once the delays or disruptions are included, computer software will then calculate and visually depict variances to show the changes to the plan that result in the as-adjusted schedule.  It is the as-adjusted schedule that is used to determine the cause of the project delays.  When delays, or delaying events, are inserted into the as-planned schedule, the as-adjusted schedule shows the end date resulting from the event.

Once the cause of the delay has been determined, the expert, “who will likely be caught up in a ‘battle of experts’ and undergo rigorous cross-examination, must demonstrate four principle” things relating to the methodology used. [7]  The expert must demonstrate:  1) Why the expert chose the methodology employed to develop and support the claim; 2) Why the expert selected particular data to be relied upon and why the expert rejected other data; 3) Why the expert’s approach is a reliable and credible one; and 4) Why the methodology and data relied upon and approach of the opposing expert is wrong.[8]

More often than not, more than one event will delay completion of the project.  The claimant has the burden of 1) proving that the other party delayed the project, and 2) must segregate the delays caused by other parties from the delays caused by the claiming party.[9]  Failure to adequately meet these burdens will negate any recovery.  For example, if two delays occur concurrently, and both delays are on the critical path, neither party will be viewed as causing the delay and both will be denied recovery.  If there are concurrent delays, but only one party actually delays events on the critical path, the critical path delay will be viewed as stalling the project.  Sophisticated scheduling analyses allow experts to apportion delay damages resulting from concurrent delays.  While this may be confusing to a non-construction-oriented judge or jury, a scheduling consultant or expert can break down the delays and explanations into simple visual charts; allowing every person present in the courtroom to fully understand the effect of the delays.

Now that the burden of proving and establishing a delay has been met, the next step is calculating the damages.  Stay tuned for the rest of the series explaining the different methods for calculating and measuring delay damages.

 


[1] Caronte Enters., Inc. v. Berlin, 668 So. 2d 233 (Fla. 3d DCA 1996).

[2] White Constr. Co. v. State Dept. of Transp., 535 So. 2d 684 (Fla. 1st DCA 1988).

[3] See e.g., L.G. DeFelice & Son Inc. v. State, 313 N.Y.S.2d 21 (Ct. Cl. 1970).

[5] Illinois Structural Steel Corp. v. Pathman Constr. Co., 318 N.E.2d 232 (Ill. App. Ct. 1974).

[6] Florida Power Corp. v. Cresse, 413 So. 2d 1187 (Fla. 1982).

[7] Daniel T. Toomey & Mark R. Berry, The Scheduling Expert: A Primer on Preparing Direct and Cross, Construction Law., APRIL 1995, at 65-66.

[8] Id.

[9] Gesco, Inc. v. Edward L. Nezelek, Inc., 414 So. 2d 535 (Fla. 4th DCA 1982).

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