Increased Workforce Is Not "Delay" - Massachusetts Appeals Court affirms subcontractor award despite no-damage-for-delay clause

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In Central Ceilings, Inc. v. Suffolk Construction Company, Inc., et al., - N.E.3d - 91 Mass.App.Ct. 231 (Mar. 29, 2017), the Massachusetts Appellate Court affirmed a $321,315 damages award against a general contractor in favor of a subcontractor.  The subcontractor claimed that as a result of the general contractor's mismanagement of the dormitory construction project (at Westfield State University) it was less productive and therefore incurred costs. 

Indeed the subcontractor, who installed exterior and interior wall systems, illustrated that properly sequencing its work "floor by floor, exterior to interior, building by building" was key to meeting its cost and time bid. The evidence presented showed that general contractor "struggled" coordinate the other trades who needed to complete their work before the subcontractor could begin, failed to timely survey the locations for the subcontractor to line up its panels, delayed making the building weather tight, among other delays.  The delays caused the subcontractor to perform costly extra work mobilizing and demobilizing and to incur project administration costs.  In addition, the subcontractor was not given extra time to do this work due to the looming liquidated damages that the general contractor would owe if the project was not completed on time (though the general contractor later attempted to dispute that the subcontractor had ever asked for extra time).  Instead the subcontractor was "compressed" and forced to assign, and pay for, extra personnel on the project. To support its claim, the subcontractor introduced an expert who opined, using the total cost method, that the loss was "best quantified through the impact it had on [the subcontractor's] manpower." After confirming the subcontractor's bid was "reasonable," he examined what the subcontractor actually spent to complete the project, what change orders were already paid, and concluded that the difference, $321,315, was the subcontractor's lost productivity.

In response, the general contractor pointed to the contract's no-damages-for-delay clause and asserted that the demanded recovery was wholly precluded. In pertinent part, the clause stated:

The Subcontractor agrees that it shall have no claim for money damages or additional compensation for delay no matter how caused, but for any delay or increase in the time required for performance of this Subcontract not due to the fault of the Subcontractor, the Subcontractor shall be entitled only to an extension of time for performance of its Work. Written notice of all claims for any extension of time shall be submitted to Contractor within ten (10) days of the date when Subcontractor knows (or should know) of the event which causes such delay, or such claim shall be considered waived by Subcontractor

The trial judge held, and the appellate court affirmed, that the unambiguous provision was inapplicable to the subcontractor's claim for two reasons.

First, the only remedy under the no-damages-for-delay clause was the extension of time but, here, no extensions were allowed in contravention to the agreement. The general contractor protested on appeal that no extension requests from the subcontractor were ever received, but the general contractor did not raise that issue at the trial court and the record belied that position anyway.  

Second, the trial court held and the appellate court affirmed that in strictly construing the draconian language of the clause, the subcontractor's damages claimed, lost productivity, were not "for delay" (precluded by the clause) but rather "it had been forced to increase its workforce due to the compression of the schedule occasioned by [the general contractor's] breaches" (not precluded by the clause). The trial court observed that the general contractor's "breaches did not affect [the subcontractor's] ability to complete its work on time . . . but, rather, with its ability to complete its work on budget."

Accordingly the award, and the total cost method for calculating the award, were affirmed.
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The author, Katharine Kohm, is a committee member for The Dispute Resolver. Katharine practices construction law and commercial litigation in Rhode Island and Massachusetts. She is an associate at Pierce Atwood, LLP in Providence, Rhode Island. She may be contacted at 401-490-3407 or kkohm@PierceAtwood.com.