Delay, disruption and time extensions

Time is money in construction, for everyone. An owner whose building opens late loses rent or revenue and pays more interest. A contractor whose job runs long pays for supervision, site facilities, equipment and head office support for months it never priced, and may face liquidated damages. Subcontractors lose productivity when they cannot work in sequence. Delay claims are the largest and most complex construction claims, and they turn on the contract's time provisions, on notices given during the work and on the quality of the schedule. This lesson covers the legal framework: who bears delay, how time extensions are earned, liquidated damages, concurrent delay, acceleration and disruption. CON-210 covered schedule analysis; CON-420 covers delay claims in depth.

Types of delay

The law classifies delays by who is responsible and what remedy follows.

• Excusable and compensable delay: caused by the owner or those it is responsible for, such as late drawings, late access, owner changes or suspension. The contractor gets more time and its delay costs.
• Excusable but non-compensable delay: caused by events beyond either party's control, such as unusually severe weather, strikes not involving the contractor, or fire. The contractor gets more time but not money, and the owner cannot charge liquidated damages for that period.
• Non-excusable delay: caused by the contractor or those it is responsible for, such as its subcontractors and suppliers. No time and no money; the contractor may owe liquidated or actual damages.

Only delays that affect the completion date, typically delays to activities on the critical path, entitle a contractor to a time extension. A delay to an activity with float may cost money through disruption but does not usually extend the contract time. This is why a good schedule, updated regularly, is the most important evidence in any delay dispute.

Contract provisions on delay

Under A201-2017 § 8.3.1, the contract time is extended for delay caused by an act or neglect of the owner or architect, by changes ordered in the work, by labor disputes, fire, unusual delay in deliveries, unavoidable casualties, adverse weather conditions documented in accordance with § 15.1.6.2, or other causes beyond the contractor's control. Claims for extensions must follow Article 15, including notice within 21 days. Adverse weather claims require data showing the weather was abnormal for the period and had an adverse effect on the scheduled construction. On federal contracts, the Default clause at FAR 52.249-10 excuses delays from unforeseeable causes beyond the contractor's control, and the Suspension of Work clause at FAR 52.242-14 compensates unreasonable government-caused suspensions.

Written notice: the condition that decides most delay claims

Nearly every contract requires written notice of a delay within a short period after the contractor becomes aware of it, followed by particulars and a claim. Courts have increasingly treated these notice requirements as conditions precedent: if notice is not given in time and in the required form, the claim fails, however meritorious.

American courts are divided. Some enforce notice provisions strictly; others excuse late notice if the owner had actual knowledge and suffered no prejudice. Federal boards and the Court of Federal Claims often excuse late notice under the changes and differing site conditions clauses absent prejudice to the government, but the Contract Disputes Act requires a written claim to the contracting officer within six years of accrual, and claims above $100,000 must be certified. The safe course is formal written notice in the required form every time.

Liquidated damages

Liquidated damages are a fixed sum per day or week, stated in the contract, that the contractor pays the owner for each day of non-excusable delay after the completion date. They spare the owner from proving its actual losses and give the contractor a known exposure. They also usually operate as the owner's exclusive remedy for delay.

American courts enforce liquidated damages if, when the contract was made, actual damages were difficult to estimate and the amount was a reasonable forecast of them, following Restatement (Second) of Contracts § 356 and UCC § 2-718; an unreasonably large amount is a penalty and unenforceable. On federal contracts, FAR 11.502 and clause 52.211-12 govern liquidated damages for construction.

Liquidated damages cannot be charged for excusable delay, and an owner who causes delay may lose the right to them. If the owner's delay makes the completion date impossible and no time extension mechanism applies, the contractor may argue that time is at large, meaning the contractor must complete within a reasonable time and liquidated damages fall away. Extension clauses exist partly to prevent this result.

Concurrent delay

Concurrent delay occurs when two or more delays, one the owner's responsibility and one the contractor's, affect the critical path at the same time. Neither party can show that it alone caused the overall delay.

Most American courts and boards hold that, where delays are truly concurrent, the contractor gets a time extension (so no liquidated damages) but no delay damages, unless the delays can be apportioned. Federal boards will apportion where the record allows it. Expert schedule analysis is almost always required.

Acceleration and disruption

When a project falls behind, someone pays to catch up. Directed acceleration occurs when the owner orders the contractor to finish earlier than the contract requires, or to recover delay the owner caused; it is a change and is compensable. Constructive acceleration occurs when the contractor is entitled to an extension, asks for it, is refused, and is required to meet the original date, so it accelerates at its own cost to avoid liquidated damages. Courts recognize constructive acceleration claims where the contractor gave notice of the excusable delay, requested an extension, was refused and actually incurred acceleration costs.

Disruption is a loss of productivity, rather than a delay to completion: crews work out of sequence, trades stack in the same area, work is interrupted and restarted. Disruption is compensable when caused by the owner, but it is hard to prove. The preferred method is the measured mile: comparing productivity in an unaffected period or area with productivity in the disrupted period, on similar work, using the contractor's own records.

Head office overhead

Contractors also claim unabsorbed head office overhead for owner-caused delay: costs of the head office that would have been recovered from this project's revenue during the delay period. Several formulas exist. The Eichleay formula, developed by the US Armed Services Board of Contract Appeals in 1960 and used in federal contracting when the contractor was on standby and could not take other work, allocates overhead by the ratio of contract billings to total billings and divides by the days of performance.

On federal contracts, the Eichleay formula is the exclusive method for unabsorbed home office overhead when the government suspends or delays work and the contractor is on standby. State courts are divided on whether to accept Eichleay.