January 02, 2014
Author: James Landgraf, Esq.
Organization: Cureton Caplan, P.C.
A well-developed package of contract documents should address and describe responsibilities pertaining to the construction schedule and handling delays that may occur on the project.
The construction scheduling portion of the specifications will typically place primary responsibility on development of the construction schedule with the contractor(s). It will identify the format in which the schedule is to be prepared (CPM, bar charts or otherwise) and will identify the extent of detail required. It should also identify a process for updating the schedule as the project progresses to take into account “as-built” progress and to address the manner in which changes in the schedule may be needed.
The scheduling provisions may place the responsibility for physical preparation of the schedule (particularly if it is a detailed CPM schedule that is required) with an outside scheduling agency, the construction manager or the contractor, itself. The owner through its own personnel, the construction manager, or the architect will have approval powers with respect to the schedule. Properly drafted, this does not place scheduling within the responsibility of the owner, but is geared to a focus of logical sequences and whether or not the schedule will meet the ultimate end date and/or interim milestones.
Contractors must be alert to the scheduling responsibilities. The schedule serves a number of valuable purposes for the contractor including the benchmark against which to raise delay claims, the ability to memorialize its proposed sequence of work and creates a valuable administrative tool in dealing with its subcontractors, suppliers and own forces. Failure to properly consider the construction scheduling responsibilities can, conversely, lead to the inability of the contractor to establish entitlement for delays, create confusion in scheduling equipment and material supplies, manpower needs, coordination of subcontractors and its coordination with co-prime contractors, if any. Failure to abide by the construction scheduling responsibilities may also trigger the ability of the owner to withhold payments and, obviously, impose liquidated damages.
While development of the schedule, itself, creates an administrative task that is often considered superfluous by the contractor, it does create the ability of the contractor to maintain some control over its means, methods, coordination and sequencing. When the contractor is issuing its bid, it typically has a general sequence and logic in mind. It is that sequence and logic which the contractor then needs to memorialize by way of communication with the owner, coprime contractors, subcontractors, suppliers and the like.
Subcontractors also need to familiarize themselves with the construction schedule. It should be requested from the contractor at the outset of the work to assure that they know when their work is anticipated, when their materials are required, what work will be performed simultaneously and to assure that they are not being placed into an excessively constricted work area, sequence or duration. As with the contractor, the ability of the subcontractor to seek delay remedies will be controlled, at least in part, by the contractor’s construction schedule. As an example, if the contractor has submitted a schedule to the owner which has been accepted (or at least not rejected) showing that the subcontractor’s work is to occur in October and November, but due to the lack of preexistence work, the subcontractor cannot commence work until the dead of winter, the subcontractor has a much better argument for delays, increased costs, productivity claims and the like against the contractor and/or owner.
Since the owner typically has overall approval ability with regard to the schedule, when a schedule is submitted to the owner it should not simply be filed away. It should be analyzed, not only to assure that the work is being scheduled to occur within the contract durations, but also to determine whether or not the schedule makes sense and whether it is consistent with stated owner needs. Receipt and failure to object to or question a construction schedule can lead to the contractor’s ability to make claims for allegedly delayed work where it is clear that the work could never have been completed in the sequence or duration identified in the schedule.
Assuming the owner has reviewed and found the schedule to be acceptable, any claims for delay by the contractor need to be compared against the schedule to confirm whether or not the delay was simply the delay of a particular function or whether it had an impact on the overall job completion and/or critical path.
As indicated above, claims for delay by either the owner or the contractor are ultimately a product of comparing the as-built progress against the schedule. Delay claims by any party can have one or more ramifications. If the contractor and/or subcontractors beneath it have caused a delay to the project, the owner may have the ability to seek either liquidated damages (if established within the contract) or actual damages occasioned by a delay in the completion of the project or a stated milestone. Conversely, a delay by the owner may entitle the contractor to a time extension without further compensation and/or to damages associated with productivity losses, constructive acceleration, extended general conditions site overhead or extended home office overhead. Historically, many owners have attempted to avoid such claims by the inclusion of a “no damages for delay” clause that provides that where a contractor is delayed, the contractor’s sole remedy is a time extension. Those provisions have been enforced by the courts in New Jersey and other jurisdictions in instances where the delay is not occasioned by active interference by the owner or its representatives. Recently, on New Jersey public projects, statutory changes have held that such clauses are void as against public policy (N.J.S.A.18A:18A-41 (school boards) and N.J.S.A. 40A:11-19 (local public contracts)), unless they are phrased in such a fashion as to reflect specifically contemplated occurrences.
A properly drafted contractual relationship will address both delays by the contractor and by the owner. They may tend to limit damages or to establish a formula damages such as a liquidated damage clause. They may, as provided in the 1997 AIA forms, include mutual waivers of “consequential damages” which arguably include delay damages. They will include provision for non-compensable delays caused by force majeure in which the contract time is extended but is deemed non-compensable.