My commute home last night took longer than usual. It was not excessive traffic, an accident, or a stalled car.  Rather, the cause of my delayed commute was a turtle: one single turtle crossing the road, holding up about 30 cars for what seemed like an eternity. (Never mind the fact that no one got out of their car to help the little guy!)

When we think of delays on a construction project, the first inquiry is to identify the turtle—the one party holding up progress or causing the delay. Many times, the parties’ contract will dictate whether the contractor can recover delay damages or will be limited to a time extension for delays beyond the contractor’s reasonable control.

In Sarasota County, Fla. v. Southern Underground Industries, Inc., 333 So. 3d 285 (Fla. 2d DCA 2022), the court recently held that a “no damages for delay” clause did not preclude an award of damages to the contractor following the County’s suspension of work.  In that case, the County issued a stop work order to the contractor installing a sanitary pipe and water line when an adjacent homeowner complained that vibration from the drilling caused damage to his home. The contractor secured an engineer’s report that concluded the damage was cosmetic only and that the vibration did not exceed the acceptable threshhold.  The adjacent homeowner rejected the contractor’s offer to fix the damages. Ultimately, the County continued the suspension of work for an additional two months while attempting to address the adjacent homeowner’s concerns.

The contractor sought additional compensation for the two extra months of suspension. The County rejected the claim, arguing that the “no damages for delay” clause in the parties’ contract precluded the award of delay damages. The court found in favor of the contractor, relying on an exception to the general rule:

Although “no damages for delay” clauses are recognized in the law, they will not be enforced in the face of governmental “fraud, bad faith, or active interference” with performance under the contract. The record supports the trial court’s finding that the County impeded work on the project, at [the contractor’s] expense, long after it was determined that it was safe to proceed with minimal damage to the adjacent homes.

What is “active interference”? While not explicitly defined in the Sarasota County case, it requires the showing of an affirmative willful act of the owner that unreasonably interferes with the contractor’s work.  Here are a few more lessons when dealing with a delay on a project:

  1. As a contractor, you need to first review your contracts for a “no damages for delay” clause. If one is present, then you will want to negotiate an “active interference” clause that defines what constitutes an active interference.
  2. An “active interference” could mean that the owner knows about the delay and still proceeds; or it could mean that the owner conceals or actively interferes by affirmative conduct.
  3. During performance, you should document the impact of the owner’s actions, including whether the owner failed in coordinating other trade contractors for which it alone is responsible.
  4. Even if your contract does not have an “active interference” exception, there may be a common law remedy of bad faith or negligence on the owner’s part, which causes the delays.  That would depend on your particular state.

In the end, active interference to overcome a “no damages for delay” clause involves more than a turtle crossing the road. The dispute will be decided on the express contract language and the offending conduct giving rise to the additional damages and delays.

Last month, the Armed Services Board of Contract Appeals held that a public contractor could not recover $100k in construction costs incurred following the government’s decision to close down a base in Tennessee due to COVID-19.

APTIM Federal Services, LLC (ASBCA No. 62982) involved a contractor who sought to recover $99,076 in operational costs incurred on a construction contract during a two-month period in 2020.  The commander of Arnold Air Force Base closed the base in an effort to mitigate the spread of COVID-19.  The contractor also sought 59 days of time extension for the period the project was inaccessible.

The government argued that under the Sovereign Acts Doctrine actions taken by the United States in its sovereign capacity shielded it from contractual liability for those acts, including the actions taken in response to the COVID-19 pandemic.   The administrative law judge agreed:

Here, [the contractor] was excluded from Arnold Air Force Base equally along with many other contractors by act of the base commander, in pursuit of a larger public health danger, which itself threatened a national security impact. This exclusion made performance of each party’s contractual obligations impossible during the time period at issue.

The judge found similarities between the COVID-19 shutdown and the decision in Conner Bros. Constr. Co., Inc. v. Geren, 550 F.3d 1368 (Fed. Cir. 2008), wherein a government contractor sought compensation for being barred from a military base for 41 days following the 9/11 terrorist attacks. In that case, the court held that the government’s actions were not directed at nullifying the contractor’s contract rights, but rather were directed “at larger national security interests” which was permissible.

The APTIM decision expressly addresses the Sovereign Acts defense, which ultimately denied the contractor’s claim for additional compensation.  However, the case does establish implicitly that a work stoppage due to COVID-19 can support the basis for a time extension.

Last month, a construction worker died as a storm swept through a construction site in Lebanon, Indiana. The preliminary investigation determined that the contractor was on an elevated platform while working on an industrial warehouse that was under construction. The man and other workers were in the process of stopping due to approaching thunderstorms. While the platform was being lowered, strong winds knocked it over, leading to the man’s death.

Whether you are a developer, contractor or subcontractor/supplier, you undoubtedly understand that severe weather can add cost and time to project completion.  Indeed, that’s why force majeure clauses are generally included in parties’ contract.  While there are legal implications related to pursuing a claim for additional time or money, there are also practical considerations for both job site and the workers when a severe weather event occurs.

The following list was prepared by Jake Guimond at Assurance, and it gives nine steps to create a severe weather plan to protect your construction site and employees:

  1. Do this BEFORE a storm occurs; don’t wait until a storm is imminent, or worse, surprises you.
  2. Evaluate site-specific risks.
  3. Include emergency response, securing the jobsite, clean-up and trained personnel to assist with mitigating the damage.
  4. Make sure the plan covers all types of severe weather you may encounter in your area (e.g. strong winds, tornadoes, heavy rain, lightning, storms, etc.).
  5. Make sure all employees know and understand your jobsite severe weather plan.
  6. Have a process to notify all jobsite workers of impending severe weather or jobsite evacuation.
  7. Assign a jobsite foreman to perform a worker headcount during storm refuge and post-storm.
  8. Conduct post-storm job site evaluations.
  9. Identify and clearly mark locations for severe weather refuge.

In short, a risk management plan requires that you do it, you put it in writing, you train your leaders about it, and your practice it.

I have seven children. and two of them have flown the coop.  I also have two grandchildren who are ripe for spoiling. You see, grandchildren are a different type of kid, which means I get to treat them different than the kiddos living under my roof.  In construction, however, some courts have held that the type of contract delivery method do not change the treatment of the other contract clauses, such as the applicability of a differing site conditions clause.

Appeal of John C. Grimberg Co., Inc., ASBCA No. 58791 (Oct. 25, 2018) involved the construction of a biolab facility at Fort Detrick, Maryland. The contract was a design-build contract.  As is typical of a design-build contract, no unit prices for rock excavation were set for because the contractor’s foundation solution is not established at the time of award. Interestingly, this contractor had performed other contracts at Fort Detrick involving deep foundations that happened to be design-bid-build contracts containing unit prices for excavation.

During construction, the presence of incompetent rock forced the contractor to use more drilling rigs than anticipated.  This crowded the site and prevented scheduled commencement of grade beams and rough-in of underslab MEP work. By the time the contractor completed drilling piers, it had excavated nearly four times the amount it had anticipated in its proposal.  The contractor submitted a Request for Equitable Adjustment, alleging that it had encountered a Type I differing site condition—i.e, where the site differed materially from those represented by the government. The contracting officer denied the claim, and the contractor appealed.

To establish such a claim, a contractor must prove: (1) the conditions indicated in the contract differed materially from those actually encountered during performance; (2) the actual conditions were reasonably unforeseeable to the contractor at the time of bidding; (3) contractor reliance; and (4) damages.  In this case, the board rejected the government’s argument that the differing site conditions clause is applied more restrictively to a design-build contractor than in the design-bid-build context. The board reasoned:

The identical DSC clause is required to be included in fixed-price construction projects, whether the design-bid-build or design-build method of contracting is utilized. There is no justification for interpreting the clause differently in the design-build context. As appellant concedes, design risk is transferred to contractors in the design-bid context, but not the risk of DSCs. A design-builder does not forfeit its rights under the DSC clause to rely on solicitation representations of subsurface site conditions.

The board concluded the contractor had established Type I differing site conditions claim that the “quantities of rock encountered greatly exceeded the quantity reasonably foreseeable based on a fair reading of contractual indications, albeit the Project was constructed in highly-variable karst topography at the site.”

Ultimately the decision is a good lesson for contractors to document “all of the facts, circumstances and contractual indications of subsurface conditions,” which is what the board relied upon in making its decision.  Another lesson learned is the importance of “reasonableness” when drafting or submitting claims.  Although the board found that two of the borings used by the contractor were unreasonable, it was “more reasonable” than the government’s analysis.  In the end, reasonableness matters.

If you have Googled, “Virginia Pay If Paid” or “Virginia Pay When Paid” or “Pay if Paid Enforceable” or “best construction lawyer ever“, then you likely have found your way here (that last one is mere puffery). Let’s cut to the chase—Virginia has joined 11 other states that have expressly prohibited “pay if paid” clauses in construction contracts.  If you have construction projects in Virginia, then read on.  If you want know whether your state prohibits these clauses, then read on.  If you want to know the difference between the words “if” and “when”, then read on.

What’s the difference?  There are a lot of resources out there explaining the difference between the two types of construction contract provisions, but I like to make it a little simpler:

  • pay when paid is simply a function of the timing of payment (i.e., when you are going to get paid…”Contractor shall pay Subcontractor within 15 days after receipt of payment from the Owner.”);
  • pay if paid is a function of whether you get paid (i.e., shifting the risk of nonpayment … “Payment from the Owner to the Contractor is a condition precedent to payment from the Contractor to the Subcontractor.”)

Generally, most states that have addressed the issue allow “pay if paid” clauses so long as there is clear and unambiguous language shifting the risk of non-payment to the subcontractor. Many require more than just “pay-if-paid” language in the parties’ contract.  For instance, you may be required to include the magic words “condition precedent” or “risk of nonpayment” as outlined below.  In these tight times, you can understand how important payment provisions are to the parties’ transaction, particularly where costs are escalating and projects may stall mid-performance due to financing issues or owner-default.

Does my state prohibit pay-if-paid clauses? Again, there are a lot of resources out there providing summaries on the current status of the law.  One of the best I have found was created by Levelset, which has a 50-State-Guide on pay-if-paid clauses.  According to Levelset, the following states have prohibited pay-if-paid clauses:

  • California
  • Kansas
  • Illinois
  • Indiana
  • Nevada
  • Montana
  • North Carolina
  • New York
  • South Carolina
  • Utah
  • Wisconsin

You can now add Virginia to that list!   On April 27, 2022, Virginia Governor Youngkin signed into law SB550, which expressly prohibits “pay-if-paid” clauses in construction contracts.  The law goes into effect January 1, 2023.

What does the Virginia law say?  The new law will require prime contractors to pay subcontractors within 60 days from receiving an invoice, or seven days after receiving payment from the owner, whichever is earlier. Interest penalties apply for late payment. The law is codified as party of Virginia’s Prompt Pay Act (Va. Code 2.2-435) and Virginia’s wage theft statute (Va. Code 11-4.6).  The law has more application than simply prohibiting “pay-if-paid” clauses—it addresses numerous other items best summarized by Virginia’s LIS bill-tracking site:

  • the law applies to both public contracts and private contracts where there is at least one general contractor and one subcontractor;
  • The law requires a payment clause that obligates the contractors to be liable for the entire amount owed to any subcontractor with which it contracts;
  • the law provides that a contractor shall not be liable for amounts otherwise reducible due to the subcontractor’s noncompliance with the terms of the contract;
  • however, the contractor must notify the subcontractor in writing of the contractor’s intent to withhold all or a part of the subcontractor’s payment with the reason for such nonpayment;
  • the law states that payment by the party contracting with the contractor shall not be a condition precedent to payment to any lower-tier subcontractor (i.e., this is the “pay if paid” prohibition); and
  • in the owner-contractor agreement, there must be a payment clause that requires (i) the owner to pay the general contractor within 60 days of receipt of an invoice following satisfactory completion of the work, and (ii) a higher-tier contractor to pay a lower-tier subcontractor within the earlier of 60 days of satisfactory completion of the work for which the subcontractor has invoiced or seven days after receipt of amounts paid by the owner to the general contractor for work performed

So what?  Some states have attempted, but failed, to enact similar protections, which happened in Tennessee a few years ago.  In other states, the prohibition has been decided by the courts, such as the California Supreme Court’s decision in Wm. R. Clarke Corp. v. Safeco Ins. Co. (1997), which held that “pay if paid” clauses are unenforceable because it essentially forces a subcontractor to waive or forfeit his constitutionally protected mechanics lien rights if the owner fails to pay the general contractor.

One major lesson: WORDS MATTER.  It is important to understanding lien rights on a project, payment protections, and ultimately the risk of non-payment.  Review your contracts and understand your state’s law.

North Carolina Avenue is one of the hottest properties in Monopoly, says most of my kids.  And if you are a contractor or subcontractor in North Carolina, the law makers recently afforded you some additional protections to your lien rights.While many states prohibit prospective lien waivers—that is, an advanced waiver of lien rights usually included in a construction contract before the work is performed or the lien right arises—the General Assembly in North Carolina recently passed a new law that has some additional protections.

The law, effective March 1, 2022, states that a similar advanced or broad lien waiver as part of a progress payment is also not enforceable.  In other words, under the new law,  broad waivers exchanged for progress payments will be limited to the amount of payment that is actually received.  The statute provides:

(a) Provisions in lien waivers, releases, construction agreements as defined in G.S. 22B-1(f)(1), or design professional agreements as defined in G.S. 22B-1(f)(5) purporting to require a promisor to submit a waiver or release of liens or claims as a condition of receiving interim or progress payments due from a promisee under a construction agreement or design professional agreement are void and unenforceable unless limited to the specific interim or progress payment actually received by the promisor in exchange for the lien waiver.
(b) This section does not apply to the following:

(1) Lien waivers or releases for final payments.
(2) Agreements to settle and compromise disputed claims after the claim has been identified by the claimant in writing regardless of whether the promisor has initiated a civil action or arbitration proceeding.

N.C. Gen. Stat. § 22B-5

While “no lien right” contract provisions are unlawful in North Carolina, the new statute seeks to expand the protection to contractors and subcontractors being asked to waive lien rights unconditional through a specific date as part of the progress payment process.  Now, in North Carolina, it is more clear that a lien waiver is valid only for the payment actually received from the contractor or subcontractor.

On September 24, 2021, the Safer Federal Workforce Task Force released guidance detailing COVID-19 vaccination and other pandemic-related workplace safety requirements for federal contractors in accordance with the Executive Order issued by President Biden on September 9, 2021. The Executive Order broadly outlined which contractors were covered by the mandate, but contained few specific details of the requirements.


The guidance issued on September 24, 2021 answered many of the questions raised by federal contractors, including the following:

  • What does the guidance require?

Covered federal contractors are responsible for ensuring that all covered full-time or part-time contractor employees are fully vaccinated for COVID-19, unless the employee is legally entitled to an accommodation. The guidance also requires masking and physical distance in compliance with CDC guidelines at covered contractor workplaces, which is is a location the contractor controls at which an employee of a covered contractor is likely to be present at any point during the period of performance.

  • Which federal contractors have to comply with the mandate?

Covered federal contractors are those with contract language mandating adherence with the guidance. Agencies will be required to incorporate this language into renewals, extensions, or exercised options of existing contracts, as well as new solicitations and contracts issued, that are above the simplified acquisition threshold (currently $250,000) by October 15, 2021.

  • If I am a prime contractor, do I have any special obligations?

Yes, prime contractors must ensure that compliance clauses are incorporated into its contracts with subcontractors except those solely providing products.

  • I am a small business. Do I still have to comply?

Yes, all covered federal contractors and subcontractors must comply regardless of business size.

  • What is the deadline for compliance?

For covered federal contractors with active contracts, employees must be fully vaccinated by December 8, 2021. For covered federal contractors awarded new contracts (or options, renewals, or extensions), employees must be fully vaccinated by the first day of performance under the new contract, option, renewal, or extension.

  • Are there any exceptions to this deadline?

If a federal agency has an urgent need for work to be performed without there being time to fully vaccinate the contractor’s employees, then a federal contractor may seek approval for an exception. This exception will allow work to begin, but federal contractors will need to comply with vaccine mandates within 60 days. During the 60-day exception period, unvaccinated employees must comply with masking and physical distancing requirements.

  • Does the mandate apply to all employees of the federal contractor?

Employees who work from home must be fully vaccinated, but do not have to comply with the masking or physical distancing requirements discussed below.  Employees who work outside must also be vaccinated.  However, the mandate does not apply to any employees who work outside of the United States or its outlying areas.

  • Do we have to verify employee’s vaccination documents?

Yes, covered federal contractors must review employees’ documentation to prove vaccination status.

  • What verification documents are acceptable?

 Covered federal contractors must require employees provide one of the following documents:

    1. a copy of the record of immunization from a health care provider or pharmacy;
    2. a copy of the employee’s COVID-19 Vaccination Record Card;
    3. a copy of immunization records from a public health or State immunization information system; or
    4. a copy of any other official documentation verifying vaccination that includes vaccine name, date(s) of administration, and name of the health care professional or clinic site who administered the vaccine.

Employers can accept digital copies of these records. For example, photographs, scanned documents, or PDFs are acceptable forms of proof.

  • What should a government contractor do if an employee has lost or does not have a copy of the required documentation?

Employees should be directed to obtain new copies or verification of their vaccination status. Employees should be able to obtain new copies of their vaccination card from their vaccination provider. If the vaccination provider is no longer operating, employees may contact their State or local health department’s immunization information system (IIS) for assistance.

  • Can we accept a recent antibody test from an employee to prove vaccination status?

No. Only the forms of vaccination documentation listed above may be accepted.

  • If an employee has previously had COVID-19, are they still required to be vaccinated?

Yes, employees are required to be vaccinated regardless of prior infection.

  • Do we still have to offer accommodations to unvaccinated individuals?

Yes, covered federal contractors will still need to accommodate employees with closely held religious beliefs or ADA-qualifying disabilities that inhibit their ability to receive a COVID-19 vaccine. Accommodations must also be offered to employees who are unable to wear masks due to an ADA-qualifying disability or closely held religious belief. If a joint employment situation between the covered federal contractor and the agency exists, the contractor should coordinate with the contracting officer or the contraction officer’s representative on accommodating the individual.

  • Do covered federal contractors still have to enforce other measures such as masking or social distancing?

Yes, there are differing requirements based on the location of the worksite.  The rules state that covered contractors must ensure that all individuals and visitors (regardless of vaccination status) comply with the published CDC guidance for masking at workplaces in areas of high or substantial community transmission. In areas with low or moderate community transmission, fully vaccinated individuals do not need to wear masks.

Fully vaccinated individuals do not need to practice social distancing, regardless of the level of community transmission.

Individuals who are not fully vaccinated must wear a mask indoors and in crowded outdoor settings or outdoor settings that require sustained close contact with other individuals who are not fully vaccinated regardless of the level of community transmission. These individuals should also maintain social distancing when possible.

When masks are required, the rules do require that masks be worn over the nose and mouth.

  • Are there any exceptions to the masking requirements?

Yes, masks will not be required if an individual who is not fully vaccinated is alone in an office with floor to ceiling walls and a closed door, in brief times when an individual is eating or drinking so long as physical distance of at least 6 feet is maintained, or if the individual obtains an accommodation pursuant to an ADA-qualifying disability or a sincerely held religious belief.

Covered federal contractors may also allow exceptions for employees who are engaging in activities in which masks may get wet, during high-intensity activities, or when wearing a mask would create a risk to workplace health, safety, or job duty as determined by a workplace risk assessment. These exceptions must be approved in writing by an authorized representative of the covered federal contractor.

Additionally, individuals may be asked to lower their masks for security identification purposes.

  • How are covered federal contractors expected to ensure compliance?

Covered federal contractors must designate a person or persons to coordinate the implementation of and compliance with the guidance and the other corresponding safety protocols (such as masking). These individuals are responsible for ensuring compliance with mask and social distancing requirements and obtaining the vaccination documentation. Additionally, these individuals must ensure that this information is presented to covered employees (explained below).

  • Are there any notice requirements?

Yes, covered federal contractors must post signs at entrances to covered workplaces that provides the information on safety protocols. These protocols must define the requirements for vaccinated and not fully vaccinated individuals, including any masking or social distancing requirements.

The designated individual is responsible for sharing the necessary information. In addition to postings at entrances, information can be presented via email, websites, memoranda, flyers, postings at job sites, or other means.

  • Do covered federal contractors have to provide onsite vaccinations?

While federal contractors may choose to provide onsite vaccinations, the guidance doesn’t require it. At a minimum, covered federal contractors must ensure that employees are aware of convenient vaccination opportunities.

(Special thanks to MIke Rich, Amy Wilkes and Nafela Helou for this post!)

With the kids off for spring break this week, we nestled around the big screen for a family favorite. “The Great Oz has spoken! . . . Pay no attention to that man behind the curtain!” My littlest chuckled.

Just like the old man who couldn’t hide behind the curtain in The Wizard of Oz, contractors and subcontractors should be reminded that pre-bid documents, such as draft proposals and bid estimates, can’t be hidden behind the curtain of “trade secrets”.  This is especially true when there is a delay claim in dispute, according to a recent ruling by a trial court in New York County.

In WDF, Inc. v. City of New York,  No. 652478 (N.Y. Sup.) (Mar. 12, 2021), the contractor filed suit to recover damages from the City on numerous combined waste water treatment projects.  The contractor claimed that the City breached its contract by supplying incomplete and inaccurate contract documents, which allegedly caused delays and a two-year extension to the project completion.  The contractor’s $15.7 million delay claim included approximately $2.3 million for damages experienced by one of its subcontractors.

The dispute is currently in the discovery phase and the City filed a motion to compel the contractor’s internal pre-bid documents and bid estimates, as well as the subcontractor’s base documents. In the trial court’s order, Judge Borrok concluded that the contractor and subcontractor’s claims for unanticipated delay damages “affirmatively put in issue what it was they contemplated in formulating their bids.”  The court relied on an old 1979 case where another trial court rejected claims that pre-bid documents constituted undiscoverable trade secrets.

So what? The trial court’s decision is a good reminder for contractors and subcontractors to implement a document retention policy for maintaining its pre-bid documents and estimates.  Parties need to understand that these type of documents may be entirely relevant in the event of disputes, and the contractor will not be able to hide behind a curtain of “trade secrets” to keep the documents confidential.

What’s a goocher?  If you saw the movie, Stand By Me, then you know exactly what I mean.  And there are times when parties to a construction contract face a goocher.  Here’s what I mean…

In J. Clancy, Inc. v. Khan Comfort, LLC, the Supreme Court of South Dakota held that a missing time element in a construction contract did not invalidate the contract.  In other words, the court found that a contract existed—i.e., there was  meeting of the minds among the parties—despite the lack of a completion date or time of performance.

In this payment dispute between the owner of a hotel and a construction contractor, there did not appear to be a traditional construction contract executed by the parties.  However, there were numerous written documents such as a proposal, invoices, and change orders that had been either signed by or transmitted between the parties.  Based upon those documents, the trial court held that there was not an express written contract, but that there was a series of implied-in-fact contracts between the parties.

The appellate court disagreed and held that the contractor’s proposal, which was signed by the owner, was an unqualified acceptance of the parties’ agreement.  The owner’s subsequent payment of the initial deposit and the contractor’s immediate commencement of work evidenced the formation of a contract.

Here’s the goocher! The appellate court held that all essential terms of an express contract were present in the contractor’s proposal, despite the fact that there was not a time of performance.

The document listed the subject matter of the work to be performed, the quantity of materials to be ordered and installed, the price for the goods, and the parties’ payment terms. Missing from the September document was a timeline for completion of the work. This, however, is not fatal.

Relying on a South Dakota statute, the court concluded: ““If no time is specified for the performance of an act, a reasonable time is allowed.”

Whether you are dealing with a commercial or residential project and whether you are a contractor or owner, this case illustrates a few important concepts.  First, words matter. What you include in your contract will be important for avoiding a dispute, as well as determining the outcome after a dispute arises.  Second, time matters. While the court in this case found that the missing element of time was not fatal, in many states the words “Time is of the essence” in the construction contract is a material term that needs to be included if you want to enforce that time period. Finally, conduct matters. Both the trial court and appellate court found that the conduct of the parties were important, although the courts reached different conclusions.  Avoid these type of disputes by having a roadmap of risk allocation through a clear and unambiguous construction contract.