November 07, 2005

Claims of concurrent delay are used as both a sword and a shield in fighting delay claims. A contractor may use concurrency to defend against a claim for liquidated damages by an owner, while an owner may use it to ward off the contractor’s pursuit of delay costs. The question of what is truly a concurrent delay, however, is facing heightened scrutiny. Not surprisingly, this grows out of the developing trend by courts and arbitration panels to require and rely upon more sophisticated delay analyses in order to prove or defend against delay claims. Recently, the United States Court of Federal Claims addressed the concept of concurrent delay in R.P. Wallace, Inc. v. U.S. 63 Fed. Cl. 402 (2004).

Factual Background

In R.P. Wallace, the Navy entered into a contract for Wallace to renovate a Naval Support Facility in New Orleans. As part of the contract, Wallace agreed to furnish and install specially designed windows consistent with the aesthetic characteristics of the existing facility, but sufficient to withstand winds of up to 160 miles per hour. The contractor was slow in starting its work, so that several months into the project, little progress had been made towards project completion. By that time, the contractor was substantially behind on its submittals and other activities, including its delivery of the window submittal.

When the window submittals were finally turned in, the contractor and the Navy determined that the design requirements for the windows could not be met and the design needed to be changed. The changes were implemented; but the project was delayed, partly because of the changes to the windows and partly because of the contractor’s own lack of performance.

The contractor submitted a claim for release of the liquidated damages that were held against it. Wallace argued that even though it may have been responsible for certain delays, the government’s change in the design was a concurrent delay to any contractor-caused delays, thus precluding the assessment of liquidated damages. In evaluating the claim, the court addressed the question of whether all of the delays in the project were excusable, even if they could be apportioned between the contractor and the government.

The court first noted that in order for a contractor to prove excusable delay, the contractor must prove that the excusable event proximately caused a delay to the overall completion of the contract, i.e., the delay affected activities on the critical path. The court stated that the contractor was entitled to only so much of a time extension as the excusable cause actually delayed performance.

Delay Analysis by Court

The court then drew an important distinction between “concurrent delay” and “sequential delay.” Concurrent delay occurs where the delay can be attributed simultaneously to the actions of both the government/ owner and the contractor. Sequential delay, on the other hand, is based on delay events that do not occur simultaneously, but occur at distinct and intermittent periods. The court found that in the case of concurrent delay, the contractor’s delayed performance is excused but the contractor is not entitled to an adjustment in the contract price; in other words, the contractor is entitled to a time extension, but is not entitled to additional money. With sequential delay, however, the delay is apportioned between the government/owner and the contractor.

In R. P. Wallace, the court rejected the contractor’s concurrent delay argument and the delay claim conclusions offered by the contractor’s expert witness. Instead, the court performed its own “windows analysis” by evaluating select periods in the project to determine who was responsible for the delay during each of those designated periods and how that delay affected the overall project completion. This typically requires a CPM schedule analysis to be able to allocate the delay appropriately among the various parties during each of the selected periods. Without such an analysis, it is often difficult to assign responsibility and therefore, the delay claim may be denied. Based on this analysis, the court was able to apportion delay between the government and Wallace in light of who it believed was responsible for the delay during the period of time evaluated.

Comment

The Wallace decision emphasizes the need for a contractor to develop a realistic baseline schedule and maintain regular and accurate update schedules for each of its projects. The reason for doing this is to address delay events as they occur in an effort to avoid claims at the end of the project and to make necessary scheduling, sequencing and performance adjustments as early as possible during the course of work. Similarly, accurate and timely updates can assist in meeting the contractor’s notice obligations. Moreover, in the event a delay claim arises, these schedules will be critical for proving any request for additional time or money relating to a delay event.