Early Completion Delay - Complete the Job Early and Still Recover for Delay
Time is money. As a rule, the quicker a project is completed the less the contractor will spend on managing and administering the project. Completing early allows the contractor to utilize its equipment and management resources on more projects. Further, contractors can avoid escalating material prices by completing early.
The reverse is also true. Delayed or increased project durations result in additional administrative expenses, under utilization of equipment and management resources, and escalating material prices.
Though it is generally understood that a contractor may recover for delay when the delay is attributable to the project owner, it is notwidely known that the contractor may be able to recover for delay even when the project completes on or before the contract completion date. Understanding what an early completion delay is will aid the contractor in recovering damages should such a delay occur.
This article presents an overview of: (1) the difference between an ordinary delay claim and an early completion delay claim, (2) the legal basis for delay claims, and (3) the requirements for proving an early completion delay claim.
I. The Early Completion Delay Claim
The usual delay claim arises when the contractor plans to use all of the contract time, but a delay is caused by the owner which increases the duration of the project beyond the original completion date.
In contrast, the early completion delay claim arises when the contractor plans to complete the project before the contract completion date, the owner causes a delay which increases the duration beyond the contractor's planned completion date, but the project still finishes within the time allowed by the contract.
Both types of delay harm the contractor by increasing the period of time for which jobsite and home office overhead are expended. Both types of delay claims require the contractor to prove that the owner is responsible for the delay and the resulting damages.
II. The Basis for Recovery of Delay Damages
Generally, a contractor's right to recover delay damages arises when the other party to the contract causes the delay and the delay extends the overall duration of the project as provided in the contract.
The basis for recovery of delay damages is rooted in the contractor's right to finish the work in the time contemplated by the contract and the owner's breach of common law implied obligations that are part of every construction contract. These obligations include:
- The duty of good faith and fair dealing.
- The duty to cooperate in performing contract obligations.
- The implied warranty of the correctness of detailed design documents.
Under the implied obligation of cooperation, each party to a contract has an implied duty not to interfere or prevent the performance of the other party. California's recognition of this obligation in construction contracts traces back to 1924 with the court's opinion in Steel Tank & Pipe Co. of California v. Pacific Fire Extinguisher Co. There the court provided, “Each party to a contract impliedly agrees not to prevent the other from performing, or to render performance impossible by any act of his own.” (Steel Tank & Pipe Co. of California v. Pacific Fire Extinguisher Co. (1924) 69 Cal.App. 225, 229, 230 P. 978). Acts or conduct that violate this obligation are a breach of contract.
From this it follows that an owner has a duty not to delay the performance of the contractor. “It is…settled that, where delays are caused by [the owner's] breach, a contractor is not only excused from performance of a contract within the time specified, but is also entitled to damages.” (Kenworthy v. State (1965) 236 Cal.App.2d 378, 382, 46 Cal. Rptr. 396).
III. California Requirements to Recover for Early Completion Delay
Under California law, the contractor must establish the following elements to be successful in recovering damages attributable to early completion delay:
1. When the contractor entered into the contract, it reasonably intended to complete the work early.
2. The contractor had the capacity to complete the work early.
3. The contractor would have completed early but for the owner's delay.
(Howard Contracting, Inc, v. G.A. MacDonald Constr. Co. (1999) 71 Cal.App.4th 39, 54, 83 Cal. Rptr. 2d 590)(setting forth the three prong test from Interstate General Government Contractors v. West (Fed. Cir., 1993) 12 F.3d 1053).
The best way to prove the first element, the contractor's reasonable intent to complete the job early, is by submitting a schedule to the owner showing the contractor's early completion plan. That schedule must be submitted as soon as practical after the project is awarded to be effective proof that the contractor had this intention when the contract was entered into. Submitting a schedule has the additional benefit of giving the owner notice of the contractor's intention. (On federal projects, notifying the owner of intent to complete early is an additional requirement; see Blinderman Const. Co. Inc. v. U.S. (1997) 39 Fed.Cl. 529, 586-587).
The contractor's estimate can also be used to prove an intention to complete the project early. An estimate reflecting a planned duration for general conditions and supervision, which is less than the contract duration, shows an intention to complete early. On the other hand, an estimate showing a planned duration for general conditions equal to the contract duration shows the contractor lacked such intention.
The second element, the contractor's ability to meet his planned early completion date, requires proof that the contractor had a feasible plan (schedule) and sufficient manpower, material, equipment, and finances to achieve the planned early completion. The schedule submitted to the owner at the beginning of the job can be proof of the contractor's capacity to complete the work early, if it was man-loaded with resources that were actually available to the contractor.
On complicated projects the third element is the most tricky and requires careful documentation by the contractor during the progress of the work. Reliable schedule updates and detailed schedule analysis are usually essential.
Whether “the contractor would have completed early but for the owner's delay,” addresses the topic of concurrent delay. In general, the owner is not responsible for an early completion delay where there is concurrent delay not attributable to the owner.
For example, consider a structure project with footing construction on the project's critical path. The schedule reflects the contractor's plan to complete the project 14 days before the contract completion date. Just as footing excavation begins, the owner stops the work because the footing layout is being redesigned. At the same time it starts raining. It rains for 15 days. The owner finishes the redesign and hands it to the contractor just as it stops raining. Because footing construction is on the critical path the project has been delayed 15 days.
The rain delay is concurrent to the owner's design delay. “But for” the owner's delay, the contractor would nothave completed the project early because he would have still been delayed by rain. Thus, the contractor in this example cannot meet the requirements of the third element.
One final note: Delay claims, whether ordinary or based on early completion, are often hotly contested by owners. The more complicated the project becomes, the more expensive it becomes to negotiate and litigate these claims. Being alert to the nature and requirements of such claims will help contractors document their these claims. Being alert to the nature and requirements of such claims will help contractors document their claims, thereby reducing these costs.