Understanding Entitlement to Delays and Proper Support

In a previous post, we discussed delays on construction projects including (1) critical versus non-critical delays, (2) excusable versus non-excusable delays, and (3) compensable versus non-compensable delays. We also reviewed the common methods of delay analysis include (1) the Total Cost Method, (2) the Modified Total Cost Approach, and (3) the Measured Mile Method.

Once you have determined the type of delay and the method to be used to analyze and quantify the delay, it is important to understand the type of documents/evidence needed to support your claim for delay.

If a party determines that they are entitled to some type of recovery for the delay, the party making a claim for delay, such as a contractor, must have the proper documentation/evidence to assist in proving entitlement for damages from the delay. Without the proper back-up, contractors are generally unable to recover all of the additional costs and expenses associated with the delays or, at best, recover only an “equitable” amount. Generally, damages must be proved with reasonable certainty and may not be based on speculation or conjecture. Thus, it is crucial for a party asserting a delay to have the proper documentation to support a delay claim, if the goal is to recover the damages associated with the delay. 

Courts routinely uphold an owner’s decision to demand sufficient backup documentation and other evidence to support a claim for payment, prior to submitting the claim to an owner. See generally In re Central States Mechanical, Inc., Case No. 09-12542, 2011 WL 1637991 (Bankr. D. Kan. Apr. 29, 2011) (collecting cases); Systemaire, Inc. v. St. Charles County, 432 S.W.3d 783 (Mo. App. 2014) (finding a genuine issue of material fact as to what documents were required under the construction documents prior to payment).

In general, the best backup documentation is that which is contemporaneous and continuous. If able to do so, parties should use the actual project records illustrating all modifications, delays, and related costs from the course of the project. 

The best documentation will include items that are contemporaneous with the delay event(s). Not every project will have the same documentation, as every project is different. To assist in proving a delay claim and related damages, some key documents may include:

• delay logs;
• delay notices;
• payroll records;
• time and material reports;
• diaries and witness statements;
• quality control and inspection reports;
• payment requisitions;
• dated progress photos and drone videos;
• daily, weekly, and monthly progress reports created at the time of the delay rather than those that may have been created after the fact; 
• project meeting minutes that were distributed to various parties as opposed to draft meeting minutes in a word processing software; subcontractor records of the delay;
• project schedules and any schedule updates;
• requests for information (RFIs);
• change orders and change order requests;
• construction change directives (CCDs);
• correspondence, such as letters, emails, and texts, between the project team;
• invoices and receipts for costs incurred due to delays; and
• any other documentation helping to establish the delay.

Any of these documents can assist in establishing and supporting a delay claim. While not every type of document is required, it is important to keep good project records contemporaneously with the Project so that you will have sufficient backup to support any delays.

Project records should also contain an adequate level of detail and be presented in a consistent format. These records should also be as specific as possible when a delay is encountered. For example, a contractor should clearly identify what is delaying the project, who is responsible for the delay, and which activities the delay is affecting.

Further, project documents should not contradict each other. For example, the project schedule should show the same actual start and finish date for an activity as reflected in the daily reports. It is imperative that the project team works together when documenting a delay so that all team members are on the same page to reduce the possibility of conflicting records/documents.

Maintaining documentation, including schedules, RFIs, notices, change orders, meeting minutes, progress reports, photos, emails, text messages, and other correspondence as well as all responses made or received is important to show the continuous communication between parties, despite the fact that this task can seem unmanageable. It is also a good idea to save these documents/records upon receipt in a manageable system so that you can focus on the Project while preserving your rights to any delay claims at a later date.

If you are experiencing a delay, it is good practice to place those responsible, such as an owner, on notice of delays. Be clear and direct in your documentation and communicate with the other parties immediately if you believe there is evidence of delays. It is also a good idea to submit all change orders for review and approval before proceeding with any changes or additional work that might cause delays.

Alternatively, a contractor can continue with the contract work in the face of delays caused by third parties, regardless of whether the contract requires written notice of delays or a delay claim. However, doing so may be at the contractor’s risk, as courts will not interfere with the terms of contracts made by competent parties, and generally hold parties to contract terms which require written notice and specific documentation of delay claims and claims for extras. See Razorback Contractors of Kansas, Inc. v. Board of County Com’rs of Johnson County, 43 Kan.App.2d 527, 227 P.3d 29 (2010) (rejecting contractor’s claim that substantial performance sufficed to preserve its claims, when the contract required written notice of claims for extra to be given to specific entities and within a specified time-period); see also T L James & Co. v. Traylor Bros., 294 F.3d 743 (5th Cir. 2002) (applying Louisiana law and denying a contractor’s claims for extra work due to contractor’s failure to follow terms of the contract and provide notice). Therefore, it is important to understand all relevant contract clauses concerning delays, such as notice requirements and certain methods for establishing delays.

The lack of documentation may not necessarily bar a delay claim.  However, depending on the jurisdiction, written modification provisions may be waived orally or by course of dealing. For example, some courts have held that, even if a subcontract requires that all change orders be authorized in writing, the requirement can be waived: “Habitual acceptance of work done on oral change orders in connection with a contract, and payment therefore, results in waiver of a contract clause providing that all orders must be signed.” Brockman v. Soltysiak, 49 S.W.3d 740, 745 (Mo. App. 2001); see also Missouri Dept. of Transp v. SAFECO Ins. Co., 97 S.W.3d 21, 36-37 (Mo. App. 2002) (subcontractor presented sufficient evidence that the general contractor had requested and agreed to extra work and that the subcontractor had performed it, thereby waiving the requirement in the subcontract that all change orders be approved by the contractor in writing).

Because construction project delays are common, project participants such as owners, sureties, and contractors will eventually be faced with some type of delay on a construction project. Thus, it is important to understand the different types of delay, whether it is compensable, and what information and project documentation is required to assist in proving entitlement to recovery for damages due to delays. It is very important to document the file and keep contemporaneous records of any potential delays so that when/if the time comes, you will have the required documentation to establish entitlement to damages.