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

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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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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My children have been mad at Mother Nature over the past month.  One day ... jeans, turtle necks and jackets.  The next day ... shorts and flip-flops.  At least in the South we have not had to deal with 30 inches of snow like on the East Coast.  That kind of weather can cripple a construction project and cause months of delay to the schedule.

As Spring approaches, how do you address the impact of unusually severe weather?  Traditionally, the parties' construction contract will dictate who bears the risk of loss in these types of situations.  Here are some general rules:

• The contractor is usually entitled to additional contract time, but not additional compensation for weather delays.  The AIA contract documents provide that "if adverse weather conditions are the basis for a Claim for additional time, such Claim shall be documented by data substantiating that weather conditions were abnormal for the period of time, could not have been reasonably anticipated and had an adverse effect on the scheduled construction."  The ConsensusDOCs provide that "if the Contractor is delayed at any time in the commencement or progress of the Work by any cause beyond the control of the Contractor, the Contractor shall be entitled to an equitable extension of the Contract Time. Examples of causes beyond the control of the Contractor include, but are not limited to, the following: ... adverse weather conditions not reasonably anticipated ..."
• 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.  Having moved from Washington, D.C. to Nashville in 2006, I can appreciate this point.  The entire Middle Tennessee closes down, including the government and schools, at the slightest hint of snow (...exaggerated slightly ...), but it takes 30 inches in D.C. to paralyze the roads and commuters.  The point is that "unusually severe weather" on a Nashville construction site may be different than a site in the nation's capitol.
• 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.

As with most other issues involving time and money, the parties' contract will determine what happens when Mother Nature refuses to cooperate with your construction schedule.

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