Making Effective Delay Claims: It's About Time by American Subcontractors Association, Inc.
Every minute that a construction subcontracting firm unnecessarily spends de- or re-mobilizing on a project is a financial loss. The loss is more than just direct costs of labor and equipment rental/maintenance: Scheduling changes increase overhead costs. The subcontractor's primary method of recovering such costs is the claims process as outlined in the subcontract agreement, but language concerning claims often is confusing, or even contradictory. A new white paper produced by the American Subcontractors Association (ASA) clears up some of the misconceptions surrounding claims for delays, and explains the importance of subcontractors making such claims in a timely manner.
Understanding how the subcontract agreement recognizes valid claims is a critical first step. The white paper, "Scheduling Changes and Claims," explains how subcontracts identify schedule changes that are "excusable" or "compensable" vs. non-excusable or non-compensable. For example, subcontract language may make severe weather an "excusable" delay for which the subcontractor may make a claim, whereas delays caused by strikes are not excusable and cannot be the basis for a claim. Furthermore, a contract with a "no-damage-for-delay" clause may limit the subcontractor's claim to an extension of time but bar monetary compensation, even for excusable delays such as severe weather.
The white paper points out that the subcontract agreement is not always the final authority on what claims a subcontractor can make, despite language to the contrary in the agreement. If the client does not inform the subcontractor of schedule changes affecting the subcontractor's performance, for example, the subcontractor likely would be able to claim monetary damages, even if the subcontract agreement contained a no-damage-for-delay clause. The paper says: "In general, a party to a contract has a legal duty to avoid interfering with the efforts of other parties to fulfill their contract obligations. That duty, commonly called the implied duty of good faith and fair dealing, is implied in every contract, and, unlike most other implied contract terms, in rare circumstances can even override express contract terms."
Becoming educated about schedule changes for which valid claims can be made is a priority for every subcontractor, but perhaps even more important, according to ASA's white paper, is filing claims according to the claims process spelled out in the subcontract agreement. Subcontractors that fail to follow the process will make an otherwise valid claim invalid. Following certain general rules will help a subcontractor avoid making that mistake:
* Make bid prices contingent upon explicitly stated assumptions about the time and conditions for performance.
* Check the contract for flow-down clauses that could impact the claims process.
* Regularly apprise the client of potential schedule impacts as they come to your attention.
* File written claims, including contractually required requests for time extensions, as soon as possible after claims situations arise. Do not rely on verbal communication.
* Dedicate resources to good record-keeping, in particular detailed cost records that courts can use to measure damages for delays and disruptions.
© 2005 American Subcontractors Association, Inc.
Learn more about scheduling changes and claims.
American Subcontractors Association, Inc.,
1004 Duke Street
Alexandria, VA 22314-3588
Telephone: 703-684-3450
Fax: 703-836-3482
Web site: www.asaonline.com |
