Documenting Construction DelaysAssociation of Construction and Development
June 4, 2014 — 2,260 views
Documenting Construction Delays
Contract Provisions of Construction Delay Agreements
Time is money. Construction delays can be costly for all parties involved. Customers can suffer from loss of profits due to the late completion of a project, while sub-contractors may face extra expenses to cover the cost of equipment rentals and the payment of laborers. Attorneys for construction companies need to be prepared to face construction delays and should try to include provisions that allocate liability for losses in the event of a construction delay.
Liquidated damages clauses may be useful in allocating the additional costs incurred by a construction delay. An attorney may wish to include a liquidated damages provision in a construction delay agreement that allocates costs to the party causing the delay. If the delay arises due to weather conditions or an “Act of God,” parties may want to stipulate that costs will be equally shared. Other delay causes that attorneys should discuss in a construction delay agreement include labor strikes, military efforts, change orders, loss of utilities, altered site conditions, OSHA violations and plan errors. Attorneys will also want to allocate responsibility for direct, indirect and impact costs arising from a delay in the completion of a construction project.
Provisions should also discuss the differences between excusable delays and non-excusable delays. Non-excusable delays may be those that are within the exclusive responsibility of a sub-contractor and arise due to equipment malfunctions, failure to properly train employees, underestimate of costs and poor management.
Handling Disputes Related to Construction Delays
Those who suffer additional costs as a result of a construction delay may wish to file a claim against the responsible party. The typical claim entails a request for liquidated damages. Liquidated damages refer to those that are difficult or impossible to ascertain. Liquidated damages entail specific costs and are awarded for each day that a construction project extends beyond the agreed-upon completion date. Parties suffering from losses as a result of a construction delay may also request actual damages. Actual damages are measurable costs and available when no liquidated damages provision exists in a construction delay agreement. Actual damages may refer to costs like overhead expenses, management costs, rental costs, profit losses and construction loan interest costs.
Accurate Recordkeeping and Scheduling of Construction Delays
Supervisors, secretaries, accountants and managers may need to carefully track costs associated with construction delays. A failure to maintain accurate records may prohibit a contractor from recovering costs related to a delay. The individual charged with the responsibility of recordkeeping should carefully assess the additional costs incurred by each party. Detailed records will make it easier for a party to recover costs in the event that a court must handle the case. An attorney for a construction company will also have greater negotiating power if he or she has access to thorough records. Construction firms may want to invest in a digital software keeping program or smartphone application that makes it easy for multiple parties to enter their individual costs associated with a project delay. Software programs and Excel spreadsheets can keep costs organized throughout a project.