Wednesday / July 2 , 2014
Orchestrating Your Forces For Delay Claims, Part 5 Of 5
Webinar – part 5 – Orchestrating Your Company’s Forces To Deal With Delays And Changes On A Construction Project
Transcript of Orchestrating Your Forces, Part 5 of 5.
Good afternoon guys and welcome to the fifth and final installment of our five-part series entitled orchestrating your organization’s forces to minimize the effects of delay on a construction project. My name is Steve Berkowitz, I am an attorney, we represent parties to construction contracts relating to everything involved in the construction project and that certainly does include delays. As we know they come up every once and again. This firm is counsel to the moment group. The moment group are schedulers and delay analysts, they consult parties to a construction contract regarding delays and the schedule impacts and they help schedule construction projects as I mentioned today is the fifth and final installment of our five-part series. So we have learned about orchestrating your organization’s forces, the various organizations in various departments. In your organization you have your field people, the people who are out in the consummate on the construction site. They have to be documenting what they’re seeing. They have to be preparing the necessary evidence that you’re going to need in order to prove your case or as we say in order to make yourself a worthy
adversary because the best way to avoid a confrontation is to be the strongest guy in the room and the way you become the strongest guy in the room is by having yourself well documented. Another department is your administrative department in your organization. You have the administrative people who are going to be checking the contract, checking for the deadlines, looking what you need to do in order to establish your entitlement. In addition we have the accounting people, they’re very important, they can do everything from providing an idea of when events happen
based on the bills to make sure that your company is being paid properly and is compensated for the work that it does. Then we have the schedulers that may
be in-house, it may be a subcontracted scheduler, but the schedules are extremely important because they are providing one of your best methods of contemporaneous documentation available. The schedule that was made at the time and submitted to the owner is excellent proof of what you expected to happen on the project and we’re going to talk about that in our live example today. And then in our second webinar we
discussed documentation and why it’s so important and how documentation can
change the whole equation we discussed who was going to be making the
documentation between the field people who are creating your contemporaneous
documents and your memos and you’re confirming reports to your administrative people who are sending out the necessary documentation required by the contract to establish your entitlement to the accounting people management and your schedulers. They all have their own obligations and duties to create documentation, when combined it is going to give your company the strength that it needs in a
negotiation we talked about. Why we need this documentation what the benefit of
contemporaneous documentation has the special legal relevance and legal
significance that a document that you can swear was made at the time the event was
current occurring not a year later when you’ve decided that you’ve been damaged
and you’re trying to make a delay claim. At that point you’re looking at things hindsight and documents that are created at the time the event is occurring have not only more relevance but more credibility. Not that you’re not credible but the fact that it was made at the time that the event was occurring gives the document special credibility in the legal field we talked in our third seminar.
We talked about the critical path and what things are on the critical path and what
things are not on the critical path so that you can make a determination as to whether or not impacts that occur in the field actually delayed you and create an
entitlement for damages. And in the fourth webinar we talked about evaluating your
claim making the determination of whether it is worth it for you to embark on this endeavor of making it delay claim and a claim for entitlement. We talked about looking at the contract, looking at the law and the first question we ask whenever we’re making a determination of what laws are going toa pply is who is the owner. That’s always the first and most relevant question – who the owner is because that determines which laws are going to apply and which laws are going to apply is going to determine whether or not you want to pursue your claim. And we also talked about what your actual damages are what you can be compensated for what you can’t be compensated for and in order to make those determinations you’re going to be looking at the contract and the law and in order to look at the law you need to know who the owner is so it all ties back together. Today we’re going to talk about a case which I was involved about probably 10 or 12 years ago, very interesting cases back scenario, and I will be happy to explain it to you right. I’m not going to use any names, I’m just going to say that we represented a general contractor and the owner was a school board so we’re going to talk about a general contractor and a school board this was a fairly big construction project with a school building built from the ground up and the public body which is the school board. We are going to call them the board. The board put the project out to bid and in
the project documents there was a start date of June first and it was even an alternate in the project documents that if the project couldn’t start on June first and instead had to start on July first there was a request for a price due to a delay in the start of the project so we later found out that the reason for that alternate was the fact that the board didn’t actually own the land on which the construction project was going to be built now. Remember, this is a public construction project and it was put out to bid in the public bidding forum and general contractor was awarded the contract and the contract was awarded with a June first start date and the contractor is preparing to begin performance of the contract and he finds out that arsenic has been discovered on the 42-acre site on which this school was going to be built. I said it’s a big school, it was a 42-acre site. The site used to be a peach farm and the peach farmers in order to get rid of the bugs on the peach forum they use arsenic and arsenic was discovered on the site and that caused the problem. The DEP came in and said you’ve got to remove one foot of soil across the entire site. Now removing one foot of the soil in your backyard is one thing and removing 42 acres is quite another thing.
We later learned that the school board, and these are part of the facts, the school board put the obligation to remove that one foot of soil across the 42 acres site on the seller of the property. Remember, the school would put this job at the bid before they actually owned the property and then when the arsenic was discovered on the site and they found that they had to remove one foot of soil they made it a condition of their sale with the landowner that the landowner was going to have to remove the one foot of soil across the 42 acres which is a big endeavor. So needless to say, the project didn’t start on June first and as this summer went on, the general contractor wrote a letter to the school board and said “I know that I’ve been awarded the contract I’m letting you know that there are going to be costs if this project doesn’t start on June first. I can’t tell you what the costs are because we haven’t established a Notice to Proceed. We haven’t started establish the start date, but there are going to be costs”, and the school board said “We understand and we understand there may be costs and we may be willing to pay those costs”. They didn’t make an actual commitment because the contractor couldn’t tell them what the costs were. Eventually the project starts, and it doesn’t start on June first, it doesn’t start on July first as the alternate provided the project eventually starts on October first and
the contractor begins the project on October first reserving his rights but still not giving a price because he couldn’t tell the actual impact of this delayed start at that time his original schedule. Remember, we talked about how important schedules were and his
original schedule showed that he was going to have the building built and enclosed by December first and things occurred on the project eventually it didn’t happen so due to significant rains and as you could imagine a 42-acre site that has just recently had a foot of soil removed across the entire site is rather muddy, in the rains that occur
late in the year, and due to that he had problems accessing the site and it turned out he had to dig the footings in the dead of winter. Now anybody who has dough footings or has worked in an excavation knows that it’s a lot more difficult to dig dirt in the winter when it’s frozen solid and you have to remove piece you know large slabs of Earth which frozen solid, bye-bye front-end loader, as opposed to being able to do neatly dig soil in the footing. At the end of the project the contractor found out that he was indeed damaged and made a claim to the school board and the school board, what do you know, denied his claim so he ended up having to file suit. So what we did with that back scenario, we have to go through our analysis, so the first thing we look at is what is what for what documents do we have. We gathered the schedules and showed what he anticipated, when he anticipated that he was going to be able to certain processes and he was able to show when he actually was able to do
certain processes and obviously the delay at the beginning of the project is pretty easy to prove. There is no question that the project was delayed, the start didn’t come when it was supposed to as advertised for a June first. The permits were not issued until October first. He wasn’t allowed to dig footings, he couldn’t start the project, in addition the schedules showed how he was in fact impacted and the damages that resulted from that impact then, we looked at the critical path and how various time of year. It was very interesting to see how the weather and the different temperatures affected the critical path. But the entire process was a reconstruction of the project through the documents, but the most interesting thing is, we went through the situation and the first question we ask is who the owner is. We ask that question because we had to determine what was going to be our entitlement to compensation for the delay and this is a project in New Jersey and in New Jersey there is a well… First we looked at the contract and the contract, as often the contract says, is that there will be no damages awarded for a delay, you will only get an extension of time, you will not get compensation in a monetary sense, but we asked our question – who was the owner and the owner was a public school and they had their own set of laws so we looked into the public school laws and we saw that if we read this (I’m not going to read it out loud because it could take a little bit of time) but that basically causes which limit your damages to an extension of time in a public contract are void and contrary to public policy if the delay is due to the contracting units, negligence, bad faith, active interference, tortious conduct or other reasons unconsummated by the parties that delay the contractors performance and that’s underlined in the slide and bolded because that was the document that we were relying on. We said look when this job was put out to bid, we didn’t know that the school board didn’t own the land, be that arsenic was going to be discovered on the on the land, that the school was going to make the determination that they were going to put the burden of remediating the land on the seller of the land, who’s not a party to the contract, and by doing this we argued the school board gave up control, all control of the process and thereby the land clearing process thereby delaying us and interfering with the general contractor’s progress on the project and therefore we’re entitled to damages. Well, there was a lot of back and forth and emotions and so on and we eventually prevailed in the motion practice that we were allowed to put the issue to a jury of whether or not we were entitled to be compensated for the delay. So where do we look to find out whether we’re entitled to be compensated? Well, the first thing we look through is the contract because the contract is basically our Constitution. It’s like we have moved into another land, the land of the contract, and in the contract the terms of the contract dictate what your rights are, what you due process rights are, and you know whether you have a right to free speech and all that other good stuff but it’s different with the contract, it has different sort of terms. And we also looked at the statute which we just looked at to see to make it to the point where we were allowed to ask for particular damages. Now I set forth a cause of the contract which turned out to be pretty irrelevant. This is the cause it’s a typical clause in most contracts which puts a time limit on claims as requires the claims to be made within a certain amount of time from the occurrence which gives rise to the claim. This is always a battle and in our particular situation the school board argued that well a claim is a demand for compensation, and you didn’t give us a demand for compensation until the end of the project our response was well there was no way that we could have given you a demand for compensation because we did not know the impact of moving the project from a summer project to a winter project. As we’ve discussed in the past all construction projects are different that’s why that you need an estimate, and the unique nature of construction requires every project be built individually. Tt’s virtually impossible to predict what moving a project from the summer months to the winter months, particularly the beginning of the project before the project is enclosed, what that’s going to do, to not only cause the escalation of your materials but also to the productivity of your labor. We talked about digging in frozen soil as opposed to digging in soft soil and really the list goes on and on I’m sure we could all discuss different impacts which delays caused to a construction project but the argument was set whether or not we made our claim in a timely manner and the school board made the argument that since we did not provide our claim within 21 days of the date that the arsenic was discovered on the site, that we gave up our claim and we also didn’t make the claim within 21 days of when we were given the Notice to Proceed by which time the amount of delay caused by the school was clearly known. We argued that the school board did not sign the contract until they gave us the Notice to Proceed and that we had no obligation to make claim prior to that and that the claim was indeed made in the timely manner. In that we made the claim within a sufficient time from when we knew when our actual damages were, when they were actually realized.
Well it goes back and forth and really the purpose of this example was to show you how all the different parties at different departments in your organization are going to have to work together to deal with scenarios which could go on and on. I’m sure every listener to this broadcast could discuss their own scenario and their own claims but I hope that with this example has given you some thought as to how you should find out where to look to find out what the criteria to make your claim is going to be, what documents you’re going to need, what your entitlement is going to be. If you have any questions or would like to discuss any of these things, both my firm and the Moment Group can easily be found on the web and this will conclude our question-and-answer session if anybody has any questions they can feel free to type in the lower right-hand corner of your screen and I’ll be happy to answer any questions or at any time you’d like to you can contact my firm or the Moment Group and we’d be happy to discuss your situation in your particular claim. would like to thank you for your time and listening to our webinar and hopefully you’ve gotten something out of the five-part series we have presented. We will be presenting future webinars in the coming months and we will let you know about the time and the topics. I thank you very much for spending the time with me.