Best Practices Construction Law : Construction Lawyer & Attorney : Matthew DeVries : Stites & Harbison Law Firm : Green Building & LEED Litigation

Many delay, disruption, and loss of productivity claims are lost or substantially reduced in value because mistakes, errors and carelessness are reflected in the original schedule and plan of operations. The original schedule is often the first piece of documentation that the owner receives demonstrating the contractor’s professionalism in planning and management.

Contractors should pay great attention to the scheduling process and avoid many of the common mistakes that can lead to a loss of credibility on the project. It is impossible to list all of the possible initial scheduling mistakes, but the following is a list of defects in the initial schedule that some courts and boards of contract appeals have noted:

• No proof of the information used to prepare schedule
• Errors in technical logic
• Incomplete schedules
• Overlooking procurement of critical materials
• Failure to consider physical restraints
• Failure to consider weather restraints
• Failure to consider resources
• Failure to consider the economics of the sequencing
• Failure to consider uncertainty and risk in establishing durations
• Schedule does not “tie in” to the anticipated means and methods and/or estimate
• Logic intentionally deviates from the manner in which the contractor intends to build
• Elimination of float by increasing durations
• Unrealistic productivity or durations
• The schedule submitted to the owner was not used to build the project

Again, the schedule can often set the tone for the job. In court, it is the document that establishes the benchmark of all time related claims. As such, it has a tremendous impact on the judge and jury and influences the credibility they will attach to the evidence that follows.

Image: USACE Europe

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Yesterday, highway and bridge contractors in Tennessee received an alert from from TDOT officials about the affect of heavy rain in the area: "I'm sure most are aware of the anticipated rise in the Mississippi River, but could you please share with all that are working in the Mississippi River area and the backwater areas of the Mississippi that they may want to consider moving to higher ground in the next weeks. Thanks." 

The warning came with more details from the Army Corps of Engineers about excavation activities near a floodwall and the rising waters:

. . . [W]e have analyzed the construction excavation immediately adjacent to the floodwall and have determined that when the Memphis Gage reaches a reading of 38, with predicted additional rise, the excavation adjacent to the floodwall must be filled in. The Mississippi River will reach 38 sometime next week with significant additional rise forecasted. . . .

Based on the predicted stages, significant uplift pressures are possible for some distance from the wall. These excavations may also need to be filled in order to ensure the integrity of the flood risk reduction system. . . .

The river stages currently being predicted are historic in nature and will test our flood risk reduction systems at a new level.

What should a contractor do with such historic conditions and unusually severe weather affecting construction activities?  In Daewoo Eng’g & Constr. Co. v. U.S., 557 F.3d 1332 (Fed. Cir. 2009), the contractor involved in building a 53-mile road around the island of Babeldaob submitted to the Corps a claim for delays and additional costs incurred because of high humidity, rainy weather and moist soils encountered on the project. The contractor sought $13 million in additional costs incurred and more than $50 million for future costs not yet incurred. The government filed a counter-claim alleging fraud and other violations.

Although the appellate decision focuses on the government's claims, the lessons learned about delays stem from the trial court 's opinion.  The trial court criticized the contractor’s witnesses for lacking credibility.  The court concluded that the $50 million portion of the contractor’s claim addressing future costs was no more than “a claim to gain leverage against the United States [and] violates the principles on which Congress enacted the Contract Disputes Act.”  Apparently, the contractor was seeking a substantial modification of compaction requirements for embankment that would have greatly reduced problems for the contractor. In the court’s view, the $50 million in future costs was an inflated figure inserted into the claim as a ploy to expedite the Corps’ decision on whether to modify the compaction requirements.

The most notable lesson from Daewoo is that contractors should seek the guidance of experts to assist in calculating damages and to perform a schedule analysis for their claims.  You've read my tips on proving weather delays before, but they are worth repeating:

•  The contractor is usually entitled to additional contract time, but not additional compensation for weather delays. Here, the contract terms and specifications are key to understanding what relief is available. 
• Delays must be attributable to "unusually severe" weather or weather "not reasonably anticipated."  Of course, by its very nature, such a claim will be factually driven. The contractor should be prepared to establish this by reasonable documentation, such as weather data from the National Oceanic and Atmospheric Administration.
• Weather analysis should be geographically limited.  What may be characterized as "unusually severe weather" on a Memphis transportation project may be different than a site in another part of the country.
• The delays must actually impact the schedule.  While you may think that down-time due to weather should automatically entitle the contractor to a time extension, it will depend largely on the contract provision addressing weather delays. You will have to determine whether the inclement weather affected material delivery, access to the site, safety measures, etc.

Finally, get guidance from your experts as soon as possible.  What most likely doomed the Daewoo contractor was the difference in methodologies in assessing the claim.  Although the claim was originally prepared using in-house personnel, the outside experts hired for trial abandoned altogether the methodologies the contractor utilized in the claim. The trial court concluded that “the experts’ method resulted in an entirely different claim to the Government . . . [and] . . . the claim that was certified by the plaintiff’s project manager became an orphan during trial, supported by no one and barely acknowledged by plaintiff’s attorneys.”

Even on the smallest claims involving the calculation of damages, contractors should—at a minimum—seek the guidance of an expert on the most desirable methodology and should permit the expert to review the results prior to inclusion of them in the claim submitted to the public entity.

Image: USACE Public Affairs

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I was tucking in my Power Ranger last night when he asked me, "Dad, if the clock is unplugged, does time stand still?" I was awed by the brilliant question by this six-year-old mind. "Of course not," I responded. "Okay, Dad. Goodnight." As simple as that, my genius went to sleep.

On a construction project, time is one of the most important variables that must be considered by the parties.  IT DOES NOT STAND STILL.  Here are some things to think about when allocating risk in the parties' agreement relating to time:

• Commencement Date.  Although the parties' agreement may define the Commencement Date, it is better to tie this date to when the contractor receives a Notice of Commencement from the owner.  An often-litigated issue is when the contractor actually begins the work on site and whether there were delays prior to commencement.  Try to clarify when the clock starts ticking for purposes of contract time.
• Liquidated Damages.  In the world of litigation, liquidates damages ("LDs") are a fruitful area of disputes.  The LD provisions in the prime contract are often incorporated into subcontract agreements so that delays caused by subcontractors will be grounds for the prime contractor to assert claims against the responsible subcontractor. As a practical matter, the contractor should make sure any changes by the owner or delays beyond the reasonable control of the contractor allow for a time extension in order to get relief from any assessment of LDs. 
• Scheduling Obligations.  Make sure you identify scheduling obligations, whether you are a prime contractor or subcontractor.  In some instances, you may not have a contractual obligation to maintain a critical path schedule, but you will want to do so nonetheless for claims support.  In other words, you will want to maintain an accurate schedule in order to pursue claims even if you are not contractually required to produce a schedule for the owner.
• Notice Provisions.  Time is also important from the perspective of providing notice of claims.  It is important to identify the notice provisions in the contract and outline them in a separate document.  When all your project members have access to this "notice" document, they can track the dates when notice should be given for particular events (i.e., notice of any delay affecting time of completion or the cost of the work shall be given within seven days of the event giving rise to the claim).  

These are just a few of the important "time " considerations on a construction project.  What tips do you have when discussing time?

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I woke up very early this morning so that I could get a jump start on all the work projects that need to get done before the Thanksgiving weekend.  As I tiptoed down the hallway, the rumbling little snores of 6 children made me smile.  Yep, I am thankful for many things ... but especially family and friends.  I wish you the best this Thanksgiving Holiday.

If you are traveling by vehicle this weekend, did you know that road construction projects in many states take a holiday, too?  For example, The Tennessee Department of Transportation is halting all lane closure activity on interstates and state highways in anticipation of higher traffic volumes this weekend from noon on Wednesday, November 24 until 6:00 a.m. Monday, November 29.

The lane closures certainly help alleviate some of the traffic congestion this week.  However, it will also impact all of the construction activities and project schedules.  When preparing the construction schedule for the holidays, here are a few tips: 

• Remember to include the public holidays and extended days. You would be surprised that regular holidays are sometimes left out of the schedule.  It is equally important to account for extended days, even where the public holiday may only be one day.
• Move critical tasks before or after the holidays. Distractions during this time will undoubtedly affect morale, concentration and longevity. People want to be with their families and productivity often suffers.
• Account for lighter days beginning the second week in December. While you don't have to write off the entire month of December, a realistic schedule of work allocates a lesser number of hours per day as your approach year end.
• Encourage your project team to hit goals during limited work times. The project manager is not going to get very far by pressuring the team with threats and commands. Instead, create an incentive for productivity—i.e., perhaps a shopping gift card or gift certificate for a restaurant.

Some project managers, consultants and experts allocate seven hours in a regular day because workers realistically are not productive for a full eight hours. The best way to ensure quality work from your construction employees during the holidays is to plan for the inevitable loss of productivity.

Image: amy.sept

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Earlier this week, I was talking with fellow attorney who does not practice construction law.  At one point in our conversation, he threw out a goocher of a question: "I know this is a hard question, but what do you think causes most of the disputes on a construction project?  I am sure there could be plenty of reasons for lawsuits, but are there some more to blame than others?"

Wow!  That is a hard one ... particularly because there could be so many different reasons for disputes on a construction project.  Here were my top three reaspons for disputes: 

1. Problems with the contract.  The written (or unwritten) contract is what guides the parties' expectations as to payment and performance.  The contract must clearly identify the rights and obligations of each player in the process, from developer, to designer, to contractor, to subcontractor and supplier.  More problems occur because an incomplete, vague or ambiguous "Scope of Work" in the agreement. A well-written contract that properly analyzes and allocates the risk on the project will often save heartache at the time of completion.
2. Problems with the people.  It is no secret that successful companies are driven by successful people.  The opposite is true as well: failing companies suffer from poor management and leadership.  When "people" are responsible for building "things,"  you have to realize that those "people" can cause problems during the construction process, whether you are talking about a loan officer, a design team, a project manager or supply deliveryman.
3. Problems with the unknown.  This is what I would call the "catch-all" category, as disputes often arise from events beyond one or more of the parties' control.  This woud include anything from unusually severe weather, to labor strikes, to differeing site conditions.  These "causes" often involve requests by the contractor for more time and/or money.

If you had to answer my colleague's question, what would you say?

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