Construction Delay

What Is a Construction Delay?

Construction delays are instances where project events get pushed back to a later time than expected, usually from causes related to the weather conditions, budget, lack of communication, and poor scheduling. Delays in construction projects can be expensive since there is usually a construction loan involved, which charges interest.

To determine the impact on a delay, it must be classified correctly. There are commonly two basic types of construction delays:

• Compensable or Non-Compensable

A Compensable delay generally affords the delayed party additional time and money for the delay. As opposed to a non-Compensable delay, which provides no monetary relief but could provide extra time. To determine whether a delay is compensable or not, one must look at the contract language and the source and cause of the delay.

In general, non-compensable delays, include lightning strikes, fires, floods, labor disputes, and unusually severe weather, such as hurricanes. Whereas compensable delays arise when one of the parties is at fault, like owner interference delayed inspections or approvals, delayed change orders, defective designs, and if a contractor, subcontractor, or supplier to properly and timely perform on the project.

Who Is Responsible for the Risk of Delay?

Typically, the contract determines who bears the risk of delay. Factual circumstances of a delay in performance are judged on a case-by-case basis. Allocation of fault for construction delays may be dependent on factors such as: (1) contract clauses; (2) scheduling; (3) impact affecting the delay; and (4) case law. In Florida, it is completely legal for construction contracts to have “no-damages-for-delay” clauses, which deny compensation for a delay. If this clause is not present, then each party could be held responsible for the fallout from the delays that they make.

However, “no-damages-for-delay” clauses do not prevent every claim. Even though the clause is present, a party may be able to recover monetary damages if the other party fails to act in good faith, fails to deal fairly with the other, actively interferes with the project, withholds information and approvals, or otherwise actively impedes or willfully or knowingly delays the other party’s ability to timely perform. See Triple R Paving, Inc. v. Broward County, 774 So.2d 50 (Fla. 4th DCA 2001); Newberry Square Development Corp. v. Southern Landmark, Inc., 578 So.2d 750 (Fla. 1st DCA 1991).

Similarly, if the general contractor is delayed due to a subcontractor’s failure to work on time, and if the general contractor can prove financial loss or an increased cost, then the general contractor could be able to recover its damages from the subcontractor. See Tuttle/White Constructors, Inc. v. Montgomery Elevator Co., 38 So.2d 98 (Fla. 5th DCA 1980).

How to Prove a Delay

Proof of delay of a project is usually through the use of the “critical path method” (CPM) scheduling technique, or through a scheduling expert. These methods shed light on why a project was delayed or what the cause of the delay was.

Critical path refers to the longest series of work activities through the performance of the entire project. United States Fidelity & Guaranty Co. v. Orlando Utilities Commission, 564 F. Supp. 962, 968 (M.D. Fla. 1983). If there is a subcontractor who fails to perform work, and the critical path exceeds its finish date, it will be delayed. However, if some other subcontractor completes their work ahead of schedule, it can balance out the previous failure and therefore there is no delay. See Id.

The scheduling expert would testify to their analysis of the disputed schedule. They would determine the differences and similarities between the initial schedule and the adjusted schedule (the schedule after the delay or disruption).

How to Show Delay Damages

The purpose of awarding damages is like all other contract cases: to place the nonbreaching party in as good a position as they were, had the breach not occurred.

Owner Delay Damages

Depending on the circumstances, there can be multiple different ways an owner might recover monetary damages. There can be loss of profits, loss of rental value, increased financing costs, liquidated damages, and attorney’s fees. Loss of profits can be established so long as there is some standard which the number of damages can be adequately determined. W.W. Gay Mechanical Contractor, Inc. v. Wharfside Two, Ltd., 545 So.2d 1328, 1351 (Fla. 1989). Loss of rental revenue can be awarded if the owner can demonstrate the estimated income had the building been timely completed. Id.

Contractor Delay Damages

Generally, if a general contractor wants to sue a subcontractor for delay damages, then the contractor must prove that the subcontractor was the only one responsible for the delay. Central Florida Plastering & Development v. Sovran Construction Co., 679 So.2d 1226 (Fla. 5th DCA 1996). Contractors might also be able to recover damages from jobsite overhead, labor and material escalation, and loss of productivity. Jobsite overhead refers to the expenses that the general contractor continues to incur because of compensable delays, such as job-site supervision, utilities, and equipment rental. The general contractor may be entitled to labor and material escalation if, due to the delay, they are required to perform work in a higher wage period than anticipated, like inflation. Similarly, additional labor and equipment costs can be a part of the award by causing the contractor to need rental equipment for a longer period of time than expected. Loss of productivity is usually more difficult to prove because it is determined by employees working long hours and losing efficiency from compensating for a delay.

In Florida, the attorneys of RAK Law Firm specialize in construction delays and fight for their client’s rights, as well as offering a myriad of other legal services. If you have any questions or concerns arising from construction delays, please do not hesitate to contact us at (407)-437-0319.