Delay Claims and Extra Cost Claims on Public Works Projects and Government Contracts (Pt. 1)
Extra Time Claims and Extra Cost Claims On State, County, City, and Local Public Works Projects and Government Construction Contracts in California As is the case on private construction projects or contracts, there are many events on public works projects which make it necessary for a contractor or subcontractor to file claims for extra compensation or extra time to complete a project. Among these causes are unforeseen site conditions, changed conditions, inaccurate or incomplete plans, delays in responding to Requests for Information, delays in approval of shop drawings, lengthy change order decisions, suspension of the work, interference by other contractors or agents of the public entity, terminations for convenience and the like. Force account work can also be another type of claim. These events can lead to labor inefficiencies, material and labor price increases, disruption or interruption of the work and delays which can both increase the cost of the work, as well as the time needed to complete the entire job, if the tasks impacted are on the Critical Path. An increase in projected job costs often results from a change in the amount or nature of the work to be performed, decreased labor productivity or efficiency, acceleration, delay or suspension of the work, disruption to the work, lack of access, problems with the drawings, design errors, sequence changes, weather delays, changes in labor rates or material costs due the delay, idle time or stand by time, increased job site supervision or overhead costs, other delay damages and even - in some cases - increased home office overhead. Unlike private projects, however, on public works jobs there are typically many more hoops or obstacles for a contractor to jump through to make a valid claim, and many pitfalls where you can lose your rights to any claim for extra time or extra costs. While private contracts have some similar hoops and pitfalls, such as deadlines for providing notice of and for making a claim, on government contracts the notice and claims process is typically much more complex and your failures to strictly follow the notice and claims procedures much more likely to be fatal to your claims. This is because of the ancient legal doctrine of Sovereign Immunity, which disfavors or prohibits suits against the government, unless the Legislature has specifically allowed such claims, provided claims are made in a specified manner and time period. Whatever procedure the government has adopted thus must be very strictly followed by contractors on government jobs. Below are some steps to help you try to make valid enforceable claims against a public agency on a public works government contract in California! Step No. 1 Read your Contract and all Provisions re “Notice of Claims" Again, as with private construction jobs, most government contracts contain notice and claims provisions. However, because of the doctrine of Sovereign Immunity, failure to comply with these provisions is much more likely to be fatal to your claim. Thus, read the Notice and Claims provisions of your contract before you start work. Do Not wait until a claim arises until you have performed the extra work, or until the end of the job, as that may already be too late. These provisions may be found not in the contract itself, but may also be somewhere else in the Contract Documents, such as in the Specifications, the Project Manual, the California Green Book, or local modifications to the Green Book. In some cases there may also be an applicable statute or local ordinances as well. Sometimes interpreting or even finding these provisions can be very, very complex, and may require you to look at several documents to figure out what the claims procedures really are. If the procedures are not clear, consult an experienced construction attorney, so you are sure how to proceed promptly when these issues arise on the job. Step No. 2 Follow the Notice of Potential Claims Provisions in your Contract Documents Public Contracts also typically require you to promptly notify a public agency when an event occurs which might give rise to an extra cost or extra time claim. A contractor may be required to provide notice to the public entity before you do any extra work or incur costs or any substantial delay. (Of course, before doing any force account work or other extra work or changes to the work requested by the owner you still must have received a written change order or force account directive from the owner. If you fail to obtain such a written consent to a change, you may not be entitled to payment!) Examples of these provisions are notice requirements regarding unforeseen or changed job or site conditions, notice of when you are being delayed by the owner, the architect, or others, notice of when you believe you are being asked to perform work not required by the Contract Documents, and the like. The idea of requiring these notices is so the owner can try to evaluate and address the situation promptly, and hopefully try to avoid a claim against it. If you do not provide the required notice in a timely manner, the public entity may argue that it should not have to pay your claim at all, because they could have corrected the problem had you given them timely notice of the problem. These notice periods are often very, very short, sometimes just 1 – 3 days, so be aware of them and follow them. If you are being delayed on a Critical Path item, promptly notify the owner in writing as required. If you are being ordered to do extra work outside your contract, notify the owner in writing Now, and request written instructions. Keep proof that you notified the owner and when, such as fax receipts, certified mail receipts, etc. Step No. 3 Start Gathering Documentation to Support your Claim Immediately. If you have promptly notified the public entity of the problem and the potential claim, and there has not been a timely response, or if the owner denies the existence of the problem, or if you have been ordered in writing to proceed on a Force Account, Time and Materials over time or other basis, make sure to immediately start keeping track of the extra cost you are incurring and how this work has been, is, or may affect the Critical Path and the completion date / contract time. This may require you to code time and costs for the extra work as it is being done (e.g. claim #1, ________ , hrs, etc), and also assign material and subcontractor costs to that claim. Subcontractors should be required to do likewise. The labor and materials costs for the claim should also be completed and segregated out on your accounting system while the work is being done. If you wait until the end of the work on the claim item, or delay until the end of the job to assign and compile these costs, the Government may be able to challenge your after the fact calculations as being inaccurate or not properly documented. When the potential claim item may impact the Critical Path or the completion date, update your Critical Path Method or other schedules on a weekly or bi-weekly basis to reflect impacts and changes to the schedule. Keep all copies of all of your CPM or other schedules, even old ones. Also maintain accurate job logs or diaries to show what work was being done on each day, who was working (crew, subs, etc.), and what items of work were being delayed by what on each day. It is also a good practice, where the extra costs and delays are still within the owner’s control (e.g., continued slow responses to RFI’s, lack of decisions from owner or design professional etc) to send the owner or construction managers repeated reminders of the ongoing delays and extra costs.