When an Owner Delays the Job

No owner has the right to delay a job indefinitely. Any owner who insists on slowing or stopping work may be liable for damages. That’s true of any type of project, residential, commercial or public works. Law in many states makes it easier to collect damages when a public agency delays a job. For example:

Martin Brothers Contractors won a contract to remodel Crozet Hall, the main dining facility at Virginia Military Institute. Changes requested by VMI during construction delayed the work by 270 days. VMI paid in full for all changes and paid another $99,646.20 for delaying the job. Martin Brothers sued for an additional $330,596 in delay damages, including the cost of bringing suit. VMI’s response cited two contract clauses. The first allowed damages only for “unreasonable” delay. The second limited delay damages to costs incurred on site rather than the full cost of delay, which would include home office expense. VMI insisted that the 270-day delay was reasonable and that the claim for an additional $330,596 was beyond what the contract allowed. The Virginia Supreme Court (277 Va. 586) sided with Martin Brothers, citing Virginia Code § 2.2-4335 which voids any limit on a contractor's right to recover delay damages. It was an expensive lesson for VMI, nearly $1,600 per day of delay.

But any owner can be liable for delay. Be ready to raise the issue when:

• An error in the plans or specs isn’t (or can’t be) fixed promptly.
• An owner insists on multiple changes in the scope of work.
• Progress payments aren’t made when due.
• An owner or designer refuses to meet with you or make timely decisions.
• An owner wants you off the site for a few days (or weeks).
• An owner is tardy in requesting an approval or authorization.

When you sense that work is being slowed by an owner, advise the owner of your right to collect for delay. Don’t wait until project closeout. Put the basis for your claim in writing during the delay.

1. Explain fully the grounds for your claim,
2. Provide complete documentation supporting the claim,
3. Emphasize that you’re standing by, waiting to resume work,
4. Cite the day delay began and the duration, if known,
5. Specify the compensation requested, and
6. Document each element of the requested compensation.

Contractor claims for delay can include both direct overhead (job site) expense and a share of indirect (home office) overhead. On-site costs tend to be easier to calculate than home office (indirect overhead) costs. Your claim should include lost profit -- typically 15% of all delay expenses. Here are the cost categories to include in your claim for delay:

Direct Overhead

• Labor (with taxes, insurance and fringe benefits) for the idle work force,
• The fair rental cost of idle vehicles, tools and equipment,
• Facilities (temporary structures, water, power, toilets, etc.), sometimes called general conditions,
• The additional cost of bonds and insurance,
• Direct overhead costs of all subcontractors,
• Demobilization and re-mobilization costs.

Indirect Overhead

This includes the proportionate share of office rent, office supplies, office utilities, office equipment, advertising, professional fees, management salaries, technical services, estimating, selling, accounting, bookkeeping and clerical expense, business licenses, taxes (except income taxes) and insurance.

Protect yourself. On any job likely to run more than a few weeks, be sure your contract nails down a right to collect for delay by the owner. Construction Contract Writer has what you need – no matter the state and no matter the type of project. The trial version is free.