In this issue:
· Delay Claims in Construction Cases: Common Pitfalls
· Managing Conflicts of Interest
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Delay Claims in Construction Cases: Common Pitfalls
By: Scott S. Aftuck, Esq.
Some of the most common disputes in construction cases relate to delay. However, delay claims tend to be some of the least understood and frequently confusing claims in the construction field. A clear understanding of the basic elements necessary to prove delay claims is invaluable in the processing of complex construction claims.
Much as it sounds, a delay claim on a construction project relates to a period of time for which the project has been extended or word has not been performed due to circumstances which were not anticipated when the parties entered into the construction contract. The most common causes of delay on a project include: differing site conditions; changes in requirements or design; weather; unavailability of labor, material or equipment; defective plans and specifications; and interference by the owner. Such delays will often force a contractor to extend its schedule to complete the work required under the contract, as well as to incur additional costs in the performance of said work. Generally, these costs may include: the costs of maintaining an idle work force and equipment; unabsorbed office overhead; lost efficiencies; and general conditions. However, in order to receive an extension of time for project completion, or to recover additional costs, the contractor must meet a number of prerequisites.
A delay must be excusable in order to be the basis for an extension of time or additional compensation. Categories of excusable delay are often determined in the contract and typically involve matters beyond the control of the contractor. Examples of excusable delay include design errors and omissions, owner initiated changes, unanticipated weather, and acts of God. A non-excusable delay is a delay for which the contractor has assumed the risk under the contract. Often, even if a delay appears to be excusable, it will be the responsibility of the contractor if it was foreseeable, but could have been prevented but for the acts of the contractor. The same is true if the delay was caused by the negligence of the contractor.
Delays may be further classified into compensable and non-compensable delays. If a delay is compensable, the contractor is entitled to recover compensation for the costs of the delay in addition to time extensions to complete the project. Most contracts will include classes of delay which are compensable. The general rule, however, is that if the delay could have been avoided by due care of one of the parties, the party which did not exercise such care is responsible for the additional costs.
The contractor may also be liable for the negligent acts of its subcontractors. If the negligent subcontractor is in the chain of privity with the contractor, the contractor cannot recover delay damages from the owner as those delays are the responsibility of the contractor. However, if the subcontractor has a direct contractual relationship with the owner of the project, the contractor may be able to recover damages as it was not in a position to prevent the delay. Additionally, in order to recover damages, a contractor must show a link between the delay and the resultant damage. Simply stating that there was a delay is not sufficient without showing a nexus between the delay and the damages.
Even if it is able to meet the foregoing criteria, a contractor will not be entitled to recover if there is a concurrent delay affecting completion of the project. A concurrent delay may be defined as a second, independent delay occurring during the same time period as the delay for which recovery is sought. If the party seeking increased compensation is ultimately responsible for the concurrent delay, he may not be able to recover any compensation for the initial delay.
Some courts, will allow the aggrieved party to attempt to apportion the responsibility for delay, thus allowing compensation to the contractor for the period of delay which was not its responsibility. See, e.g., Raymond Constructors v. United States, 411 F.2d 1277 (Ct. Cl. 1969). However, apportionment of delay is often difficult due to inadequate project documentation of the various delays. The best time in which a contractor can apportion delay is while the project is ongoing. Courts tend to find analyses made concurrent with the delays to be more reliable then after the fact analyses.
A contractor can do a number of things to make it easier for it to recover delay damages incurred on a project. The contractor should make sure the construction contract clearly defines items which the contractor will be able to recover. Additionally, each and every delay should be well documented during the course of the project. Notice that the delay is impacting the contractor should be given to the party with which it is in privity. Finally, if there is any portion of delay for which the contractor is responsible, it should seek to apportion the overall delay between the items it is responsible for and those for which it has no responsibility.
About the Author: Scott A. Aftuck is an attorney in the law firm of Haese, LLC, 70 Franklin Street, 9th Floor, Boston, MA 02110; Phone: (617) 428-0266. Copyright Ó 1999, Haese, LLC. First published in the firm’s Spring-Summer issue of their Legal Notes: “Building on the Law.” Reprinted here by ConstructionRisk.com with permission. All rights reserved by Haese, LLC.
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Managing Conflicts of Interest
By: Daniel J. Donohue, Esq.
A private company recently hired a consultant to get advice on upgrading its technology and improving its customer service. The consultant recommended that the company purchase additional systems to improve customer satisfaction. The company was so pleased with the consultant and its plan that it asked the consultant to a.) Submit a competitive proposal to compete for a contract to add the systems it recommended; and b.) Help the company evaluate the competing proposals, including its own. Concerned about the obvious potential conflict of interest, the consultant asks “Isn’t that illegal?” This month’s column explores the murky depths of such conflicts of interest in order to provide an answer.
What is a conflict of interest? Conflicts of interest arise in every type of business and we all deal with them every day. For example, when you ask a restaurant owner to recommend something from the menu, you know you are giving him a chance to push the slow-selling highest-priced dish to benefit the restaurant at your expense. If the owner does this, you probably will dine elsewhere in the future. Knowing this, a smart owner will not steer you wrong. Of course, you can avoid the conflict altogether by not asking for the owner’s advice. The drawback is that you will miss the advice of the person who has the most information about the restaurant.
Sometimes, people cannot even agree on the definition of a conflict of interest. Most definitions focus on at least two ingredients: 1.) a firm’s actual or potential financial interest in the outcome; and 2.) the actual or potential effect on the ability of that person or firm to render impartial advice. For example, those smartees at Harvard University define conflicts of interest affecting procurement by the University as follows: “[A]n individual is considered to have a conflict of interest when the individual, or any of his Family or Associates (i) has an existing or potential financial or other interest which impairs or might appear to impair the individual’s independence of judgment in the discharge of responsibilities to the University, or (ii) may receive a material, financial or other benefit from knowledge of information confidential to the University.” (On the World Wide Web at
The Federal Government has a similar definition, but it also wants to avoid giving one firm an undue competitive advantage over competing firms. Federal Acquisition Regulation (“FAR”) 9.501, concerning conflicts affecting an organization, has the following definition: “Organizational conflict of interest” means that because of other activities or relationships with other persons, a person is unable or potentially unable to render impartial assistance or advice to the Government, or the person’s objectivity in performing the contract work is or might be otherwise impaired, or a person has an unfair competitive advantage.” (See
As these examples show, most of us recognize that a financial interest in the outcome can affect the judgment of a person or firm, and it is well to have a policy to deal with this type of situation.
Dealing with Conflicts of Interest.
Managing conflicts of interest requires integrity and trust in your company’s personnel and policy. While many types of policies are possible, a good policy should at least include full disclosure and efforts to neutralize the conflict.
The mere existence of a potential conflict of interest should not automatically exclude a person or firm from participating in a particular business opportunity. Competition and quality might be impaired more by exclusion of a firm than by participation despite a conflict of interest.
The goals of a conflict of interest policy should be to identify potential conflicts of interest to senior management and to allow management to be mindful of the issue in making its decisions. The Harvard folks describe this situation this way: “If an individual believes that he or she may have a conflict of interest, the individual shall promptly and fully disclose the conflict to the Office of the General Counsel and shall refrain from participating in any way in the matter to which the conflict relates until the conflict question has been resolved. In some cases, it may be determined that, after full disclosure to those concerned, the University’s interests are best served by participation by the individual despite the conflict.” Similarly, the Federal Government requires the Contracting Officer to identify actual and potential conflicts of interest and to avoid, neutralize or mitigate the conflict. FAR 9.504(a). Mitigation efforts may include excluding a person or division of a company from further involvement in a procurement, or waiving the conflict where appropriate.
Thus, in our example, it was proper for the private company can allow its consultant to bid on a contract for equipment it recommended. The consultant did not get the work, though. It knew about more potential problems than other competitors, and so its price was much too high!
About the Author: Daniel J. Donohue specializes in government contracts and construction law. He is a shareholder in the Vienna, Virginia office of Wickwire Gavin, P.C. (703) 790-8750. Copyright Ó 1999, ESI International. This article was first published in ESI International’s November issue of ESI Horizons. (For more information on ESI see www.esi-intl.com)
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Copyright ã 1999, ConstructionRisk.com, LLC