Requesting Time
Extensions: To Wait or Not to Wait?
By
Mark Nagata
Construction contractors
struggle with the eternal question: “When is the right time to request a time
extension from the owner?” Even when the owner is clearly responsible for
critically delaying the project, they may be reluctant to submit a time
extension request right away.
The window for
submitting a time extension request can vary from during or directly after the
owner critically delays the project to after the project is complete. Contractors
often put off submitting a time extension request. The reasons may include
believing they can’t develop a convincing and properly documented request or
delaying the submission to “maintain a good working relationship” with the
owner.
The Consequences
Not requesting a time extension in a timely manner may have unintended contractual, financial, and delay-mitigation consequences. Potentially, these are:
·
Contractual: Most contracts contain
notice requirements that are imbedded within specific contract provisions, like
the time extension provision, that require the contractor to submit a request
for additional contract time within a specific time frame. By not submitting
within the required time frame, the contractor may waive its right to recover additional
compensation related to that delay. By waiting until the end of the
project and choosing not to submit a time extension request in accordance with
the contract, the contractor may inadvertently waive its right to recover extra
contract time and delay damages.
·
Financial: If the contractor can
demonstrate that the owner delayed the project and caused it to incur delay
damages (extended field office overhead, unabsorbed home office overhead, idle
labor, idle equipment, etc.), then resolving the issue now will avoid the need
for the contractor to finance the cost of these impacts.
By waiting until the end of the project, the
contract has effectively put itself into the position of having to decide to
either accelerate the project to finish on time using its own funds or
finishing late and running the risk of being charged liquidated damages. Simply
put, choosing to wait until the end of the project causes the contractor to
take on the substantial financial risk for the delay.
·
Delay Mitigation: If the contractor provides
immediate notification, a reasonable owner should recognize the situation and
work with the contractor to quickly identify the problem and resolve the
issue. Because impacts are generally much cheaper to mitigate and resolve
at the beginning of a project and tend to become more difficult and expensive
to resolve over time, an owner should see the wisdom in resolving the issue as
early as possible.
This approach is also more consistent with the intent of most contracts, which is to work as a team to achieve mutually beneficial outcomes. By waiting until the end of the project to request a time extension, the contractor gives the owner two options: (1) pay for the impact or (2) not pay for the impact.
When the owner has its completed project, it may opt for the latter, taking the position that the contractor did not follow the contract and, thereby, did not afford the owner with the ability to mitigate the impact. Therefore, to best protect your risk and retain the protection provided to you under the contract, don’t wait: request that time extension now.
Mark Nagata is a Director/Shareholder of Trauner Consulting Services, Inc. and is an expert in the areas of critical path method scheduling, delay and inefficiency analysis, and construction claim preparation and evaluation. He loves to get questions at mark.nagata@traunerconsulting.com.
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