With an increasing number of cities and counties now considering reopening for business, many contractors are feverishly thumbing through their construction contracts to determine what claim rights they have to seek compensation for those delays they’ve encountered.
DELAY CLAIMS AND AIA GENERAL CONDITIONS
The answer will vary depending on the controlling language of the agreement and general conditions as well as the circumstances of delay. For example, pursuant to the AIA A202-2017’s general conditions, a contractor may submit a claim for delay under the following circumstances:
(1) an act or neglect of the Owner or Architect, of an employee of either, or of a Separate Contractor; (2) by changes ordered in the Work; (3) by labor disputes, fire, unusual delay in deliveries, unavoidable casualties, adverse weather conditions documented in accordance with Section 188.8.131.52, or other causes beyond the Contractor’s control; (4) by delay authorized by the Owner pending mediation and binding dispute resolution; or (5) by other causes that the Contractor asserts, and the Architect determines, justify delay, then the Contract Time shall be extended for such reasonable time as the Architect may determine.
The events most likely to provide a basis for contractor’s delay claim during COVID-19 are “unusual delay in deliveries” and “other causes…that justify delay.” However, you should keep in mind, if a local or public authority has ordered a stoppage of work or ceases all county inspections of construction projects, the chance of contractor’s delay claim being deemed valid increases exponentially. While this is promising in terms of providing contractors relief due to delay, it is imperative contractors will have complied with the notice requirements of the applicable agreements and also taken steps to mitigate any damages or losses flowing from the delays to avoid waiving their rights to submit a claim.
Nevertheless, even when the contractual language and specific events surrounding the work check all the boxes for a contractor’s delay claim, the particular relief available to the contractor will vary.
Specifically, whether such a claim will provide additional compensation and time under the general conditions as opposed to allowing the contractor to terminate the contract entirely, will depend on whether the owner terminated or suspended the project and whether the particular action was taken pursuant to governmental mandate or at the option of the Owner. Obtaining the opinion of a construction expert would be smart at this point.
Generally, construction agreements provide owners with significant leeway in suspending or terminating projects to avoid or mitigate liability to contractors for these costs. As such, contractors would be wise to account for an owner’s leverage in these situations and refrain from assuming they will be compensated in full for any down time and re-mobilization costs.