Friday, November 19, 2010
Delays: Time can, but doesn't alway, equal money
Time is almost always "of the essence" for construction projects. But that doesn't necessarily mean that every delay results in monetary loss. Absent "liquidated" damage agreements (i.e., each day of day = $x.xx), damages resulting from delays have be proven. The most undisputed aspect is extended field or general conditions (i.e., the costs of running the project for each delay day). The most disputed aspect is unallocated or underabsorbed home office overhead, typically calculated using the so-called "Eichleay" formula. But either way, the party claiming money damages because of delay must substantiate that they were delayed, that the delay was along the critical path of the work, that there were not other concurrent delays, and that the party claiming delay did not cause the delay or fail to mitigate its affects or its damages. Typically this will require some sort of Critical Path Method analysis. CPM analysis is the "standard" in federal procurement case law and is increasingly becoming so in other tribunals too; however, some courts, like Virginia's Supreme Court, recognize that delay damages are recoverable by any proven methodology involving admissible testimony, and so that may or may not involve true CPM analysis. As with most claim issues, the key is documentation, so if you are claiming delay you can substantiate your claim or if conversely you are rejecting a delay claim you can refute it.